In the construction and mechanical industries workers compensation insurance (workers comp) can be a severe expense.  Considering the current New York State crackdown (Check out this CNN Money Article) on workers compensation fraud, knowing whether the individuals on your job site are truly independent contractors or not can mean Serious Bucks to your business.

Make Them Get Their Own Workers Comp Policy

So as a General Contractor, how do you know who is really considered an independent contractor?  Unfortunately two answers that the workers comp board won’t accept include:

• Because that’s what he/she told me they were
• Because he/she doesn’t work for me

The following was taken directly from the New York State Workers Compensation website.

Identifying an Independent Contractor

1. Obtain a Federal Employer Identification Number from the Federal Internal Revenue Service (IRS) or have filed business or self-employment income tax returns with the IRS based on work or service performed the previous calendar year;
2. Maintain a separate business establishment;
3. Perform work that is different than the primary work of the hiring business and perform work for other businesses;
4. Operate under a specific contract, and is responsible for satisfactory performance of work and is subject to profit or loss in performing the specific work under such contract, and be in a position to succeed or fail if the business’s expenses exceed income.
5. Obtain a liability insurance policy (and if appropriate, workers’ compensation and disability benefits insurance policies) under its own legal business name and Federal Employer Identification Number;
6. Have recurring business liabilities and obligations;
7. Have its own advertising such as commercials, listing in phone book and/or business cards;
8. Provide all equipment and materials necessary to fulfill the contract;
9. Control the time and manner in which the work is to be done; and
10. The individual works under his/her own operating permit, contract or authority.

If you are General Contractor and you have people working on your job-site that do not meet all these requirements AND you are not paying workers comp premiums for them… Don’t be surprised if come Audit time you get hit with a huge bill.  These workers comp auditors are not messing around.

I’m a General Contractor, What Can I Do To Protect My Business?

You have three options:

1. Pay the workers comp premiums spread out over the course of the year so your business doesn’t feel such a drastic hit from the Audit Bill.
2. Don’t have that individual work on your job site.  Find someone that meets the requirements above.
3. Have the individual purchase their own workers comp policy and have them provide you with a certificate and proof of payment.  This way you don’t have to pay workers comp premiums and he/she gets to continue working on your job.

I would choose option 3.

Disclaimer:

This article is for informational purposely only. There is no legal advice being suggested or proffered and the author assumes no responsibility or liability for the actions take or not taken by the readers based upon such information.

Thank you,

Ryan H.

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