ARE WASHINGTON EMPLOYERS REQUIRED TO HAVE WORKERS’ COMPENSATION COVERAGE WHEN THEY HIRE INDEPENDENT CONTRACTORS AS DRIVERS?
By Jim A. Underwood, Attorney at Law
Beginning January 1, 2023, some Washington employers are required to provide workers’ compensation coverage for drivers they hire even if those drivers are properly classified as and considered to be independent contractors.[1] This may surprise some Washington employees in the transportation sector that hire properly classified independent contractors because independent contractors are generally exempt from an employer’s workers’ compensation coverage requirements[2] However, Washington’s longstanding workers’ compensation exemption for independent contractors has evolved along with the development of the “gig worker” to alter this traditional relationship in the unique and modern transportation sector.
Since 2023, workers’ compensation coverage is now required in Washington for Transportation Network Companies (TNCs) that hire rideshare drivers.[3] TNCs can be a corporation, partnership, sole proprietorship, or other entity operating in Washington that uses a digital network, such as an online-enabled or mobile app, to connect passengers with drivers for prearranged rides.[4] Examples of well-known TNCs are UBER and Lyft because these businesses engage drivers using digital networks to coordinate transportation between rideshare drivers and passengers using the driver’s personal vehicles. [5] From a workers’ compensation coverage perspective, it does not matter whether TNCs’ drivers are properly classified and legally considered independent contractors for other purposes.
The Washington Department of Labor and Industries (Department) requires that TNCs provide workers’ compensation coverage for their rideshare drivers during dispatch and passenger platform times; meaning when the driver travels from a dispatch location to a passenger pick-up location and when the driver is transporting one or more passengers on a trip within Washington.[6] The Department also provides rideshare drivers with certain rights and protections and enforces these protections pursuant to RCW 49.46.[7]
TNCs are required to pay the Department’s assessed workers’ compensation premiums for their rideshare drivers in accordance with RCW 51.16.035.[8] TNCs are also required to comply with the Department’s other legal requirements to avoid the risk of potential adverse enforcement action, penalties, and other civil liability.[9]
Employers that are considered to be TNCs are subject to these legal requirements, obligations, and risks. If a covered employer fails to recognize and appropriately address these issues prospectively, it is likely that it also failed to keep appropriate business records, pay required workers’ compensation premium payments, and follow other legal requirements. As a result, practical business and legal risks will arise and need to be addressed.
Engaging legal counsel early for appropriate consultation and individual advise helps employers assess their workers’ compensation needs and obligations to ensure appropriate steps are taken to ensure legal compliance with applicable Department rules, regulations, and applicable law. In the event the Department begins enforcement action, effective legal counsel can ensure employers are able to successfully respond to and defend any adverse Department action to mitigate risk and come to a fair and appropriate resolution of any dispute. Our Washington practice group at Reinisch Willson PC is here to assist Washington employers at any stage regarding all workers’ compensation matters.
[2] See RCW 51.08.070; See RCW 51.08.180; See RCW 51.08.181; See RCW 51.08.195.
[3] See id.
[4] See RCW 46.04.652; See RCW 49.46.300.
[5] See id.
[6] See RCW 49.46.300; WAC 296-128-99010; https://lni.wa.gov/workers-rights/industry-specific-requirements/transportation-network-company-drivers-rights/workers-compensation; https://lni.wa.gov/workers-rights/industry-specific-requirements/transportation-network-company-drivers-rights/.
[7] See id.; See RCW 49.46.320.
[8] See RCW 51.16.250.
[9] See id.; See RCW 49.46.