Workers Comp Call or Email – #1 for 2017 Is No Surprise

December 14, 2017 By JL Risk Management Consultants

Most Popular Workers Comp Call or Email We Received in 2017

The Workers Comp call or email we received most in 2017 actually came from Risk Managers or business owners.

Wikimedia Public License – Redrum0486

The company had a premium audit coming up in the next few weeks or days. Some of the calls or emails came in when the premium auditor was onsite for the yearly premium audit.

The employer works with subcontractors and was concerned that the IRS Form 1099 subcontractors were going to be counted as workers.. The premium auditor had often informed the Risk Manager or business owner that even though the subcontractor had their own policy, they were still going to count them as employees. (Wow, what?)

The employer had provided Certificates of Insurance (certs) for all subcontractors to the premium auditor. Why would the subcontractors then be counted as employees? One of the red flags in this situation is if the premium auditor says all subcontractors are to be counted as employees, not just certain ones.

Why would the premium auditor do this if they have a cert if front of them? The answer is Ghost Policies. A ghost policy comes from a business owner that buys a policy for just themselves and then excepts (removes themselves) as the business owner from the policy. Some states have ruled these policies are fine. Most do not allow them.

We receive at least one call per week or more from a small contractor looking for a ghost policy. We are not agents so we tell them to check with their local agent that has procured policies for them in the past. Experienced workers comp premium auditors can see ghost policies from a mile away.

We recently (since July) had received a number of calls where the premium auditor would not accept any certs. That is not necessarily correct unless all the certs you have are ghost polices. The now-defunct Jim Walter Homes had a way to take care of certs that were unique and were a win-win-win for the insurance carrier, employer, and subcontractor.

An additional recommendation comes from dealing with expired or questionable certs. The article in this link contains a method to combat having expired certs that takes just a few minutes of an employer’s time.

If you want to know who is a subcontractor and who is an employee, the article at this link covers it very well.

My final recommendation is to be aware of the Ladder of Insurance where you may be insuring workers that your company may not even be aware they are your employees.

One wonders what will be the most popular subject for the 2018 Workers Comp call or email.

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Subcontractors And Statutory Employees IRS Publication 15-A

July 23, 2015 By JL Risk Management Consultants

Subcontractors And Statutory Employees

Classifying Subcontractors And Statutory Employees can be a difficult task for any business. A great publication on employee classification is IRS Publication 15-A (PDF File) along with this IRS webpage.

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This is not to be confused with classification codes.

One of the more informative sections from the IRS webpage on subcontractors and employees is below:

The person performing the services may be –

A confusing area which we receive a large amount of emails concerns statutory employees/nonemployees. The below helpful sections are from Publication 15-A mentioned previously.

If you are having to make the decision how to classify employees, downloading the publication may help you make the proper determination.

From Publication 15-A

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If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes.

1. A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.

2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.

3. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.

4. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson’s principal business activity. See Salesperson in section 2.

Statutory Nonemployees

There are three categories of statutory nonemployees:

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direct sellers, licensed real estate agents, and certain companion sitters.

Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if:

Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked,

and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes.

Direct sellers. Direct sellers include persons falling within any of the following three groups.

1. Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment.

2. Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment.

3. Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting.

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Licensed real estate agents.

This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output.

Companion Sitters

Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled.

A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis.

Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes.

—

Subcontractors and statutory employees were covered by an earlier article from the DOL under the FLSA.

*Please note that I am a ChFC and can provide this advice. However, checking with your accountant before making such classifications may be a good idea.

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Subcontractors FLSA – Department of Labor v IRS

July 21, 2015 By JL Risk Management Consultants

Department of Labor v IRS – Subcontractors FLSA

IRS guide to subcontractors FLSA vs Department of Labor. The FLSA (Fair Labor Standards Act) was enumerated by the Department of Labor’s (DOL)) interpretation of recent Supreme Court decisions.

Wikipedia commons – U.S. Department of Labor

We received two emails on Monday with questions on how to determine the status of (what the employer thought were) subcontractors.

The DOL under the FLSA basically says the Supreme Court did not have a “one-size-fits-all” definition of whether a worker or group of workers are to be considered employees or a contractor.

After reading the DOL’s interpretation, one may want to look to the IRS for a better explanation and definition of a subcontractor.

The bottom line of analyzing the employment situation “is to determine the underlying economic reality of the situation and whether the individual is economically dependent on the supposed employer.” – Subcontractors are in a way economically dependent on their contractor so this is confusing.

The factors that the Supreme Court has considered significant, although no single one is regarded as controlling are:

(1) the extent to which the worker’s services are an integral part of the employer’s business (examples: Does the worker play an integral role in the business by performing the primary type of work that the employer performs for his customers or clients? Does the worker perform a discrete job that is one part of the business’ overall process of production? Does the worker supervise any of the company’s employees?); This one, after reading it many times, kind of makes sense.
Wikimedia commons – Carol M. Highsmith
(2) the permanency of the relationship (example: How long has the worker worked for the same company?); – I have known subcontractors that worked for their contractors for 30+ years.
(3) the amount of the worker’s investment in facilities and equipment (examples: Is the worker reimbursed for any purchases or materials, supplies, etc.? Does the worker use his or her own tools or equipment?); – There are many contractors that charge some of their materials back to the contractor.
(4) the nature and degree of control by the principal (examples: Who decides on what hours to be worked? Who is responsible for quality control? Does the worker work for any other company(s)? Who sets the pay rate?); The IRS also lists this one in their advice on subcontractor/employee determination.
(5) the worker’s opportunities for profit and loss (examples: Did the worker make any investments such as insurance or bonding? Can the worker earn a profit by performing the job more efficiently or exercising managerial skill or suffer a loss of capital investment?); and Certificates of insurance would take care of this one.

(6) the level of skill required in performing the job and the amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent enterprise (examples: Does the worker perform routine tasks requiring little training? Does the worker advertise independently via yellow pages, business cards, etc.? Does the worker have a separate business site?). This one makes sense.

The FSLA decision and the DOL’s interpretation does make sense of what can be a very confusing matter. Four of the six in the list do make sense.

Two Employee Subcontractors FLSA Shaking Hands

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One area that seems to be the most confusing is the long-term business relationship between a contractor and subcontractor. The above list seems to hint at the longer the relationship, the more likely the contractor is actually an employee.

The amount of control of the contractor over the subcontractor would seem to be the most important factor.

©J&L Risk Management Inc Copyright Notice

Massachusetts And Independent Contractor Determination

August 20, 2014 By JL Risk Management Consultants

Massachusetts And Independent Contractor

The Massachusetts has an interesting take on independent contractors. One of the hottest topics that still generates interests over the years is the subcontractor vs. employee debate.

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Many states have publicized cracking down on “1099 employees.”Massachusetts has a landmark case that has been used for determining whether or not a workers is considered an independent contractor or employee.The list is comprehensive in nature, yet concise enough to be a listed here:

the extent of control exercised by the employer over the details of the work
whether the worker was engaged in a distinct occupation or business
whether, in the locality, the type of work usually proceeded under the direction of an employer or by an unsupervised specialist
the skill required for the occupation
whether the employer or the worker supplied the tools and place of work
the length of time of the working relationship
the method of payment
whether the work was part of the regular business of the employer
whether the parties believed that they were creating an employment relationship
whether the alleged employer constituted a business

The Massachusetts case referred to is MacTavish v. O’Connor Lumber Co., 6 Mass. Workers’ Comp. Rep. 174, 177 (1992).

The IRS website will be revisited tomorrow to see if there has been any updates to their website on independent contractors.

©J&L Risk Management Inc Copyright Notice

Certificates of Insurance With Wrong Info Can Ruin Your Business

June 4, 2014 By JL Risk Management Consultants

Certificates of Insurance Are Critical Documents

Certificates of insurance known in the Workers Compensation community as “certs” can wreck your business’s budget and possibly Mod (E-Mod or X-Mod) if not handled properly. This is a follow-up article to yesterday’s Employee Misclassification conundrum. We receive calls and emails frequently from employers with this scenario had:

Picture of old Certificates of Insurance paper

by JMWinkworth wikimedia.org

A recent large premium audit bill
Sub-contractors
Certificates of Insurance from sub-contractors
Shown them to the premium auditor

The premium auditor had rejected the certificates of insurance as the certificate of insurance had:

Wrong dates of coverage
Wrong company name – must be exact
Expired cert
Coverage no longer applies
Unreadable – this occurs more often than one may think
Insurance company no longer in existence
Not a valid certificate of insurance form
Wrong state of coverage
Workers Comp coverage not indicated
And the list goes on and on…..

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The Ladder of Insurance(c) will always move non-covered claims up another rung to the first level of Workers Comp insurance available for the claim. There is a method for verifying a certificate of insurance when your company first receives it. The dilemma is how do you know if the certificate continues to be valid after the initial receipt or validity check?

The situations where an invalid certificate of insurance seems to occur most often involves the construction or temporary service industries. The sub-contractor or temporary service agency may not pay their premiums resulting in a policy cancellation. Their carrier has not the obligation, with a few exceptions, to inform your company of the cancellation.

There are a few methods to make sure that any type of sub-contractor policy cancellation will also involve the carrier or sub-contractor letting your company know of the non-coverage situation.

Many companies are now agreeing to cover the sub-contractor under their insurance only to find out the premium bill for that decision is now very huge.

©J&L Risk Management Inc Copyright Notice

IRS Assists in Subcontractor vs Employee Determination

January 17, 2013 By JL Risk Management Consultants

Subcontractor vs Employee Determination

Determining whether someone that assists your company is an employee or subcontractor can be tedious as best.

There are many articles in this blog that cover subcontractors including the Ladder of Insurance (c).

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The Internal Revenue Service has a great series of videos for small business including one for making this determination. Lesson 6 is the one that one that covers subcontractors.

Even though each state has a definite set of laws on employees/subcontractors, the IRS website covers the comparison very thoroughly in easy to understand modules.

Below is the complete IRS webpage on subcontractors and employees.The IRS, of course, is mainly concerned with withholding taxes. However, the guide can be used for a quick reference on employee/subcontractor determinations. The IRS last updated the info below on 1/10/13.

Independent Contractor (Self-Employed) or Employee?

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It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.

Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Select the Scenario that Applies to You:

I am an independent contractor or in business for myself. If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center.
I hire or contract with individuals to provide services to my business
If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are.

Determining Whether the Individuals Providing Services are Employees or Independent Subcontractors

Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be –

An independent contractor – full definition
An employee (common-law employee)
A statutory employee
A statutory nonemployee

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Picture Of Gavel Subcontractor In Court Room

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Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

Form SS-8

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If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.

Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).

Employment Tax Obligations

Once a determination is made (whether by the business or by the IRS), the next step is filing the appropriate forms and paying the associated taxes.

Forms and associated taxes for independent contractors
Forms and associated taxes for employees

Employment Tax Guidelines

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There are specific employment tax guidelines that must be followed for certain industries.

Misclassification of Employees as Subcontractors

Consequences of Treating an Employee as an Independent Contractor

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). See Internal Revenue Code section 3509 for more information.

Relief Provisions

If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Publication 1976, Section 530 Employment Tax Relief Requirements (PDF) for more information.

Misclassified Workers Can File Social Security Tax Form

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Workers who believe they have been improperly classified as independent contractors by an employer can use Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation. See the full article Misclassified Workers to File New Social Security Tax Form for more information.

Voluntary Classification Settlement Program

The Voluntary Classification Settlement Program (VCSP) is a new optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future tax periods for employment tax purposes with partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers (or a class or group of workers) as employees. To participate in this new voluntary program, the taxpayer must meet certain eligibility requirements, apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.

References/Related Topics

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Proper Worker Classification (Audio)
Virtual Small Business Tax Workshop – Lesson 6
The Virtual Small Business Tax Workshop is composed of nine interactive lessons designed to help new small business owners learn their tax rights and responsibilities. See Lesson 6 for information on how to identify an employee versus an independent contractor.
IRS Internal Training: Employee/Independent Contractor (PDF)
This manual provides you with the tools to make correct determinations of worker classifications. It discusses facts that may indicate the existence of an independent contractor or an employer-employee relationship. This training manual is a guide and is not legally binding.
Form SS-8 (PDF)
Publication 15-A (PDF) has detailed guidance including information for specific industries.
Publication 15-B supplements Circular E (Pub. 15), Employer’s Tax Guide, and Publication 15-A, Employer’s Supplemental Tax Guide. It contains specialized and detailed information on the employment tax treatment of fringe benefits.
Businesses with Employees
Hiring Employees
Know Who You’re Hiring – Independent Contractor (Self-employed) vs. Employee

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit theTax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

Page Last Reviewed or Updated: 10-Jan-2013

©J&L Risk Management Inc Copyright Notice

Make Sure Your Policy Payroll Matches Your Budget Forecast

December 4, 2012 By JL Risk Management Consultants

Does Your Policy Payroll Match Your Budget Forecast?

Your policy payroll should match up with your budget forecast. Payroll and certain benefits – known as remuneration among the Workers Comp premium auditors – should match your budget for your next policy year. Just copying the payroll figures from your last years’ audit may result in giving your Workers Comp carrier having free use of your $$.

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This is a very prevalent situation as employers are shrinking their payrolls and laying off workers in a very down economy. If your company has shrunk or your payrolls have declined, do not just allow the carrier to copy last years’ audit as a baseline. For instance if your company has reduced its payroll by 18%, why would you have to pay the extra 18%?

This is a hotly debated item as often your agent may tell your company that it will be all refunded or credited back to your company at audit. Why would you wait 13 – 14 months to recover what you knew was going to occur at policy inception? The 13 – 14 month figure includes 12 months for the policy to expire and then 60 days for the audit and the results of the premium audit to concluded and reported by the carrier.

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This makes your projected budgets even more important when talking with your agent about your upfront policy premiums. If you do not have an exact budget prepared approximately 45 days before your fiscal end of year, your company will not have very much leverage or substantiating documentation.

You may wish to even throw in a graph of how your company is projecting your next fiscal years’ payroll numbers. As they say, a picture paints a thousand words – so do graphs.

Your agent and the carrier’s underwriter will require more than a verbal estimation. This is when Excel(R) can be very helpful along with your accounting package such as QuickBooks(R).

The same applies if your company decides to use temporary workers or subcontractors instead of regular employees. Using subcontractors invokes a new set of rules on whether or not they are actually employees.

©J&L Risk Management Inc Copyright Notice

Safety and EMods – Highlights From My Presentation From Today

October 10, 2012 By JL Risk Management Consultants

Presentation Highlights – Safety and EMods Are Very Related

How Safety and EMods intermingle was the basis for most of the highlights from my presentation. The NC Mid State Safety Council was kind enough to ask me to do a presentation on how safety programs impact an employer’s bottom line from a Workers Comp standpoint. I am the Treasurer for the organization.

The highlights from my presentation were (you may want to print this one):

Safety Departments can be easily scored by their E-Mods. It is the same as a personal credit score but much harder to improve quickly.
Self Insureds do have an EMod, better known as an LDF (Loss Development Factor). If your company is self insured and does not have an LDF, you are operating a blind WC budget
Due to the economy, there are now temporary employment agencies that may not have their WC policy in force. In this case, the employer will often get stuck with the bill if a temporary employee is injured on the job.
Subcontractors that are operating without a valid insurance policy or with an expired policy actually become employees as the Workers Comp courts are going to go up the Ladder of Insurance (c) to make sure the injured employee will receive WC benefits
Calling the carrier (not the agent) that is listed on the WC certificate of insurance is a good idea just to make sure there is coverage in place for temporary agencies and subcontractors
Do not use your company’s Workers Comp funds to pursue a fraud prosecution.
Workers Comp supplements paid to an injured employee will only make them much more resistant to return to
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work
The Four Ways To Cut Work Comp Costs from a claims standpoint are:
- Filing First Report of Injury to carrier immediately
- Medical treatment network in place
- Return to Work program in place
- Treat the injured employee as if they are still on the job as they are still your employee
North Carolina Scheduled Rating Plan – discounts are available if a great safety program is in place and your carrier understands your company’s safety measures
An example of how not having a medical network in place = $1.1 million dollar claim
The new NCCI split points can be a benefit or a curse to a safety program
- High EMod companies are going to take a hit
- Lower Emod companies will experience a benefit
- Safety programs and professionals will be worth their weight in gold for the next few years
Bottom Line – Safety is going to be heavily judged by their WC E-Mod even though the safety department may not be involved in some of the WC decisions

On Premium Audits, Subcontractors Can Cost $$ Without Proper Planning

September 30, 2011 By JL Risk Management Consultants

Subcontractors Need to Supply Certificates Of Insurance

I have posted on this subject very often. Subcontractors and Workers Compensation insurance are the most visited parts of this blog. Feel free to use the search box on the right and search for subcontractors to see all of the articles. This is an article that I wrote 12 years ago. It is still relevant today.

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One of the facets of doing business in today’s economy is subcontracting out part of your work product.We have seen so many employers having to pay a claim for a worker they never knew even existed and was never on their payroll.

Most State WC Boards will climb the ladder of insurance. If a subcontractor does not have proper WC coverage, the State WC Boards will look to the contractors up the ladder to provide WC coverage for an injured employee. Most states have a sub-section of the WC laws that apply just to subcontractors.

If a subcontractor your company is using has subcontracted out some of their work, you may easily have three of four layers of employees that you never knew existed on your WC policy.

Your WC carrier can technically deny coverage on a claim where the subcontractor did not cover their employee. We have seen a main/primary contractor have to pay or share in a WC payment right out of company funds in this type of situation.

Most states require employers to have WC coverage beginning with a minimum number of employees. The minimum number of employees in a company that has subcontractors may be an unknown factor.

Companies have been fined for not having WC insurance when they thought they had only one or two employees! If your company has less than the minimum required by the State, and you do not have WC insurance, once again you may be sharing in a subcontractor’s WC claim right out of company funds.

Wikimedia Commons – Hloom Templates

When you work with subcontractors always:

Obtain certificates of insurance from all subcontractors who have their own WC policy. Look over the certificates very closely. Make sure the policies do not expire before the end of the subcontract.
Avoid using uninsured subcontractors?? We have been asked at conferences, presentations, and during consultations with our clients if their company should avoid using uninsured subcontractors. We usually advise an employer to go over all of the costs and benefits and then make a business decision.
Remember to factor in the cost of covering an uninsured contractor into your company’s contract with the subcontractor. The cost may be very hard to quantify. The avoidance of paying a claim for an uninsured subcontractor’s employee will be well worth the time spent.
When you have any type of payroll audit, make sure the auditor knows these people are subs with their own WC insurance. Your company could be paying for a subcontractor’s WC coverage when the subcontractor already has coverage in place.

Subcontractor vs Employee – Insider IRS Guide Great Explanations

September 4, 2010 By JL Risk Management Consultants

IRS Guide To Subcontractor vs Employee Determination

I was going to reprint the IRS’s guide to Subcontractor vs Employee. Lately, we receive this type of question more than the Premium Audit Bill inquiries. I then came across The Training Manual used by the Internal Revenue Service for separating employees and subcontractors. It is a public document.

Picture Of IRS Subcontractor vs Employee Building

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The .PDF file is here It is a 160 page guide for auditors and other IRS personnel. Reading the guide may be a little tedious, but the concepts covered are very informative on subcontractors and employees. The time spent on the guide will be well worth it when considering who/what companies are subcontractors.

The main consideration from what I have read is the control the contractor has over the subcontractor. If the contractor has a large amount of control then the contractor could be viewed as an employee. This will be a new item for months to come as the states crackdown on employers that are paying employees as contractors.

The state tax and the workers compensation commissions are beginning to pursue the employers that have non-payroll employees.

I will still print the short version in the next post.

Maine Makes Solid Subcontractor Rules For Workers Compensation

May 27, 2010 By JL Risk Management Consultants

Maine Solid Subcontractor Rules

The state of Maine makes solid subcontractor rules for Workers Compensation.The State of Maine has come up with a novel plan to identify companies/individuals that are construction subcontractors and not employees. The twelve rules for an business entity to be considered a subcontractor are spelled out in the: (more on this in the next post)

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APPLICATION FOR PREDETERMINATION OF CONSTRUCTION SUBCONTRACTOR TO ESTABLISH A REBUTTABLE PRESUMPTION

A “construction subcontractor” is defined as a person who performs construction work on a construction site for a hiring agent if the person satisfies all of the following criteria:

(1) The person possesses or has applied for a federal employer identification number or social security number or has agreed in writing to carry out the responsibilities imposed on employers under this chapter;

(2) The person has control and discretion over the means and manner of performance of the construction work, in that the result of the work, rather than the means or manner by which the work is performed, is the primary element bargained for by the hiring agent;

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(3) The person has control over the time when the work is performed and the time of performance is not dictated by the hiring agent. Nothing in this paragraph prohibits the hiring agent from reaching an agreement with the person as to a completion schedule, range of work hours and maximum number of work hours to be provided by the person;

(4) The person hires and pays the person’s assistants, if any, and, to the extent such assistants are employees, supervises the details of the assistants’ work;

(5) The person purports to be in business for that person’s self;

(6) The person has continuing or recurring construction business liabilities or obligations;

(7) The success or failure of the person’s construction business depends on the relationship of business receipts to expenditures;

(8) The person receives compensation for construction work or services performed and remuneration is not determined unilaterally by the hiring agent;

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(9) The person is responsible in the first instance for the main expenses related to the service or construction work performed; however, nothing in this paragraph prohibits the hiring agent from providing the supplies or materials necessary to perform the work;

(10) The person is responsible for satisfactory completion of the work and may be held contractually responsible for failure to complete the work;

(11) The person supplies the principal tools and instruments used in the work, except that the hiring agent may furnish tools or instruments that are unique to the hiring agent’s special requirements or are located on the hiring agent’s premises; and

(12) The person is not required to work exclusively for the hiring agent.

A “hiring agent” is defined as a person that hires or contracts with a person to perform construction work, but excludes an owner or occupant of real property who hires a person or persons to perform construction work on that real property.

Workers Comp Subcontractors Jurisdiction Question

March 27, 2010 By JL Risk Management Consultants

Workers Comp Subcontractors Jurisdiction

The Jurisdiction of Workers Comp subcontractors WC coverage. A question asked by a peer always draws my attention. I received this question from one of my peers in the Workers Comp world.

Inspecting Workers Comp Subcontractors list

Wikimedia Commons – Amanda Bicknell

A client of ours uses subcontractors as a part of their construction contracts. The subcontractors have provided valid certificates on insurance for Workers Comp coverage for any of their employees. The subcontractors sometimes cross state lines into another state to take materials to a landfill and to pick up materials.

The premium auditor has billed the client for a large sum of $ as they have said that part of the job involves another state that is not on the certificates of insurance. Can the carrier charge the client premium for their subcontractors as they are operating out of state for part of their job? Who would have the responsibility if a claim was filed in the other state if there was an injury?

Woman Workers Comp Subcontractors Doing Bills

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I will answer this in two parts – one today and one tomorrow. There are many variables to examine to see if the premium should be charged to the client or to the subcontractors. If there are no out of state provisions on the certificates of insurance then a premium auditor will charge the main contractor for Workers Compensation insurance in another state. I am not inferring that the auditor would be correct, but one could not fault them for adding in a risk premium.

However, there are many particulars such as in which state the certificates cover and what state are they crossing over into to dump and obtain materials. This is definitely one for a premium review for the employer.

I will address what would likely happen if there was an injury in the non-covered state. Trucking companies have to address this very often. We have to thank Mr. Walsh for the next post.

Three Areas of Workers’ Compensation Concern In My Presentation

September 18, 2007 By JL Risk Management Consultants

Workers Comp Concern = Three Areas

I have been out of action for about a week, as this is the end of our tax season. There were three areas that raised the most concern in my presentation at the North Carolina Mid State Safety Council. I will go over each of them over the next few days. Those were:

Vector Graphic of Hands Carrying Insurance Three Areas Shield check

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Subcontractors
Temporary Agencies
Subrogation

The first area, Subcontractors, has three areas of concern from what I have seen –

The Ladder of Workers Comp Insurance – Workers Compensation courts will move up the ladder of contractors until a company is found to have insurance. If your subcontractor does not have insurance for their employees, you may be stuck for a claim. If your subcontractor subcontracts out their work, if the 2nd level subcontractor and your primary subcontractor does not have insurance coverage, then your company may have to pay benefits to a employee you have never met. This happens more than one might think. Workers Compensation Judges are going to find the responsible party by going up the ladder of insurance until coverage for the injured employee is located.
Certificates of Insurance – A subcontractor may provide you with a Workers Comp Certificate of Insurance. Many companies just take the Certificate of Insurance on its face value. If for some reason the cert is no good, you may be stuck with a claim.
Who is a subcontractor? The IRS has some great rules on who is a subcontractor and who is not. You may want to review them for your Workers Comp subcontractor situation. The link is here This is a good place to start. Each state’s Workers Comp laws has a set of rules for contractors. The IRS website is a good overall guide.

Next time – Temporary Agencies