Learn about Montana workers’ compensation exemption laws, including independent contractor status, exemption certificate requirements, and penalties for non-compliance.
Montana workers’ compensation laws can be complex, especially when it comes to understanding who is exempt from coverage. Certain workers, such as independent contractors, may not be required to carry workers’ comp insurance, but this exemption comes with specific rules and requirements.
In this article, we’ll explore the various exemptions under Montana’s workers’ compensation laws, including which workers are exempt, how independent contractor status is determined, and the penalties for misclassification and non-compliance to ensure both workers and employers understand the consequences of failing to meet the state’s requirements.
Whether you’re an employer, employee, or independent contractor, understanding these exemptions is crucial to avoiding costly fines and ensuring you’re properly protected in the event of a workplace injury.
Who is exempt from workers’ comp in Montana?
Under Montana law, the following types of workers are exempt from workers’ compensation coverage unless their employer chooses to provide it:
- Employees covered by federal laws for injury, occupational disease, or death
- Household or domestic employees
- Casual employees (those performing irregular or incidental work)
- Dependent family members of the employer (eligible for exemption under federal tax law)
- Employees of businesses owned at least 51% by enrolled tribal members and operating within Indian reservations
- Real estate, securities, or insurance salespersons paid solely by commission without guaranteed minimum earnings
- Direct sellers (as defined by U.S. tax law § 3508)
- Individuals performing services solely for aid or sustenance (except certain volunteers)
- Railroad employees engaged in interstate commerce (excluding construction work)
- Officials at amateur athletic events (e.g., timers, referees, umpires, judges)
- Cosmetologists and barbers (under specific Montana state laws)
- Ordained, commissioned, or licensed ministers and members of religious orders performing church-related services
- Spouses employed by their employer (exempt based on marital status under federal tax law)
- Officers or managers of ditch companies
- Petroleum land professionals (independent contractors under a specific contract)
- Sole proprietors, working partners, and members of member-managed LLCs or LLPs
- Jockeys, horse trainers, assistant trainers, exercise persons, or pony persons licensed by the board of horseracing
- Corporate officers or managers of quasi-public or private corporations or manager-managed LLCs who meet certain conditions (e.g., ownership or family relations)
- Musicians performing under a written contract
- Companionship or respite care providers employed directly by a family member or legal guardian
- Intrastate or interstate common/contract motor carriers employed by brokers or freight forwarders
- Individuals holding independent contractor exemption certificates
- Athletes engaged in contact sports for teams or clubs (e.g., football, hockey, rugby, boxing)
- Newspaper carriers and freelance correspondents
In most cases, these workers are typically excluded from mandatory workers’ compensation coverage in Montana unless the employer or worker elects to opt into the system.
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What is the difference between an independent contractor and an employee in Montana?
In Montana, the distinction between an independent contractor and an employee primarily revolves around the level of control and the nature of the work relationship.
Independent contractors
An independent contractor in Montana is a person who provides services as part of their own occupation or business and meets the following criteria:
- Freedom from control. The individual is free from control or direction in how they perform their services, both according to a contract and in practice. This means the hiring entity does not dictate how, when, or where the work is done. Instead, the contractor determines these aspects independently.
- Independently established business. The contractor operates their own established trade, occupation, profession, or business. They typically provide their own tools, set their own hours, and offer their services to multiple clients.
Additionally, an independent contractor in Montana must obtain either:
- An independent contractor exemption certificate (ICEC), which legally confirms their status as an independent contractor and exempts them from workers’ compensation coverage, or
- Self-elected coverage under a Montana workers’ compensation insurance policy, allowing them to cover themselves voluntarily under the workers’ comp system.
Please note that anyone who performs services outside of their own fixed business location, such as in construction or trucking, is required to obtain an ICEC unless they’ve self-elected workers’ compensation coverage. This requirement applies to sole proprietors, partners, and working members of limited liability companies (LLCs).
Employees
An employee in Montana is someone who works under the direction and control of their employer. The employer dictates how the work should be performed, when the employee must work, and where the work is conducted. Employees are also typically provided with the tools and equipment needed for their job, and they’re compensated based on wages or salaries, often paid hourly or with other specific terms of employment.
Unlike independent contractors, employees are entitled to certain protections under state laws, including workers’ compensation, which provides various types of benefits after a workplace injury or occupational illness.
What is an independent contractor exemption certificate in Montana?
An independent contractor exemption certificate (ICEC) is a document issued by the Montana Department of Labor and Industry that officially certifies an individual as an independent contractor rather than an employee. This certification allows the individual to be exempt from workers’ compensation coverage provided by the hiring company, as they’re recognized as operating their own independent business.
With an ICEC, independent contractors are responsible for their own insurance, taxes, and business liabilities, and they waive their right to workers’ compensation benefits provided to employees.
Contractors must apply to be an independent contractor by submitting an Application for Independent Contractor Exemption Certificate to the Montana Department of Labor and Industry, providing proof that they meet the independent contractor criteria. The certificate is valid for 2 years and must be renewed to remain effective.
Can someone be called an independent contractor but really be an employee?
Yes, in Montana, someone could be misclassified as an independent contractor when they are, in fact, an employee. Misclassification occurs when an employer labels a worker as an independent contractor to avoid providing employee benefits, such as workers’ compensation, unemployment insurance, or other legal protections, while still exercising control over the worker as if they were an employee.
Fortunately, there are laws in place to discourage this practice. In Montana, both independent contractors and hiring agents can be fined up to $5,000 per violation for failing to comply with independent contractor exemption certificate (ICEC) requirements.
For independent contractors, penalties include:
- Working without a valid ICEC
- Using a revoked or suspended certificate
- Transferring their ICEC to another person
- Misrepresenting independent contractor status
For hiring agents, penalties apply for:
- Misclassifying employees as independent contractors by exerting control that creates an employer-employee relationship
- Forcing employees to claim independent contractor status to avoid benefits like workers’ compensation
These fines are intended to prevent the misuse of independent contractor status and protect workers’ rights.
Get help from an experienced Montana workers’ compensation attorney
If you’ve been injured on the job in Montana and are facing challenges with your workers’ comp claim, seeking professional legal help can make all the difference.
The skilled Great Falls work injury attorneys at Murphy Law Firm have over 75 years of combined experience helping injured workers get maximum compensation for their injuries. We can review your claim, explain your rights, and walk you through your legal options to help you make the best decision for your situation.
