Workman's Compensation

[jaylectricity]

I've been on my own and by myself for about a decade now. I've never had Workman's Comp. I considered getting it at one point until my insurance agent told me that I wouldn't actually be covered in case of injury, but I'd just have the certificate to give other businesses to show that I had it. It was something like $500 a year.

Only occasionally have I ever had to deal with contractors who asked me about it, but it's come up twice in the last two weeks. Their contention is that if I don't have workman's comp they have to pay an extra percentage of what they paid me to their own insurance company. My contention is that I don't include workman's comp in my overhead expenses, so they are already saving that money when they pay me for work. If I were to get workman's comp I would have to start charging more. But in my estimation, the one or two contractors that are asking for it should be the ones to foot the bill, not the homeowners who don't need it.

What's the best way to explain this to these contractors? Should I do the math and see if spreading out $250 to each contractor throughout the year saves them money and makes me extra money? One of the contractors is good for maybe $7000 a year, the other one is closer to $20,000. Maybe I should just have them pay the premium upfront? If there's anybody who could ask for something like that without coming off as a scam artist, it would probably be me. I prefer honesty. Or should I just add an extra $100 to their jobs all year and consider it a profit after I've paid the workman's comp for them?

 

[Little Bill]

Not sure about all states, but here we can get a exemption from WC if there are no employees. Just have to apply to the State and get it. Cost about $50-$60 for the state part plus the business license cost which you should already have. You then tell whoever is asking you to get WC to look up your waiver or you can get them a copy.
Waste of money, IMO, to carry WC if you're a sole proprietor with no employees.

 

[jaylectricity]

I might be so inclined to pay less than $100 for some sort of waiver, but I don't know if they have that here.

Point is, as a sole proprietor, I don't even DBA as anything, nobody should have to pay extra for paying me. To me, if a GC has to pay his insurance company for using me because I don't have insurance, then that means that I'm covered by their insurance.

If any of our MA members had the state law that allows/compels this I'd like to see it. Please include the statute chapter and number.

 

[electrofelon]

Not sure about all states, but here we can get a exemption from WC if there are no employees.

Yes like that here in NY too. However, that is different that what (I think) the OP is talking about. In NY, it seems that GC's can be forced by the WC board to cover subs that do not have WC, even if the subs are are not required to have it for themselves.

 

[kwired]

Point is, as a sole proprietor, I don't even DBA as anything, nobody should have to pay extra for paying me. To me, if a GC has to pay his insurance company for using me because I don't have insurance, then that means that I'm covered by their insurance.

If you ever get into a situation where you would try to make a claim, I can assure you they will do whatever they can do to get out of paying the claim when they find out you didn't need to be covered by the GC, but will still charge the GC extra for including you when they do an annual audit on the GC (claim or no claim during the audit period).:ashamed:

Those policies charge you an estimated premium, monthly, every three months, six months, etc. then at the end of one year of the policy term, they do an audit and see what you have for employees, subcontractors, how much payroll was, earnings, etc. and determine what the exposure was and either refund you overages or bill you if you were short at the end of the year.

 

[jaylectricity]

If you ever get into a situation where you would try to make a claim, I can assure you they will do whatever they can do to get out of paying the claim when they find out you didn't need to be covered by the GC, but will still charge the GC extra for including you when they do an annual audit on the GC (claim or no claim during the audit period).:ashamed:

Well that's my point. I'm not trying to defraud them. I am simply saying, if I don't legally need to have workman's comp, then they should not be charging their client extra for me. If they insist on charging their client extra for me, then that means that they are assuming responsibility for me.

If I charge their client extra because I'm forced to buy insurance, then there's no reason why they would think they need to cover me as I've purchased my own insurance.

So I would not make a claim against them unless I didn't charge their client extra and they insisted on collecting insurance money for me from their client.

Did you think I was suggesting just charging my clients more for the insurance and then just not buying the insurance?

 

[Fulthrotl]

Well that's my point. I'm not trying to defraud them. I am simply saying, if I don't legally need to have workman's comp, then they should not be charging their client extra for me. If they insist on charging their client extra for me, then that means that they are assuming responsibility for me.

workers comp in calif. doesn't cover the owner. just the employees.

you can check on the state website, and they will state who is the
carrier, but it's not required unless i employ someone.

that "charging more" because of you just sounds like trying to shake
some more money out of the customer with a bogus charge.

if i hire a licensed contractor to sub for me, he covers his own people
with workers comp. not me.

as long as my contract is with a licensed contractor, i am not liable
for workers comp on his employees. if he doesn't have any, it's his
butt.

 

[jaylectricity]

workers comp in calif. doesn't cover the owner. just the employees.

you can check on the state website, and they will state who is the
carrier, but it's not required unless i employ someone.

that "charging more" because of you just sounds like trying to shake
some more money out of the customer with a bogus charge.

if i hire a licensed contractor to sub for me, he covers his own people
with workers comp. not me.

as long as my contract is with a licensed contractor, i am not liable
for workers comp on his employees. if he doesn't have any, it's his
butt.

Again...how is it bogus to charge a customer for a business expense you incur solely because that customer needs it?

The only reason I need to buy insurance is because my customer would have to pay his insurance more if I don't have it.

Sounds like a him problem, not a me problem.

 

[jaylectricity]

I suppose you believe that I have to pay the rental of a scissor lift out of my pocket because the customer needs it and I should just have a scissor lift at my disposal.

 

[electrofelon]

Again...how is it bogus to charge a customer for a business expense you incur solely because that customer needs it?

I dont think it is unreasonable. You are not legally required to have WC coverage, but WC can make the GC cover you, that is what is unreasonable and needs to be challenged in the courts, IMO.

 

[goldstar]

WC has been an insurance company requirement as far back as I can remember. Now, as I understand it, if you are set up as a sole proprietor and you don't do any work for GC's then you don't need WC. Once you do work for a GC as a sub then somebody has to pay the WC (either you or the GC). If you decide to have the GC pay it you'll probably end up not doing much work for that GC. In addition, since 2014 (I think), any company that you do work for where the contracted or billed price is over $600.00 will have to issue you a 1099. If you're not registered with the Fed and have a tax then you'll have to provide
your SS #.

Insurance companies base the WC premiums on the company's payroll. If you've set yourself up as an LLC or an S-corp and you're the president or CEO then you're an employee of the company. In my case I set up as an LLC. I don't have a payroll, per say, but I do take a "draw" on a monthly basis. The insurance company bases the WC premiums on my annual draw.

If YOU hire any subs and you pay them more than $600.00 in a given year you will have to issue a Federal 1099 for misc. income to those contractors :

https://www.irs.gov/pub/irs-pdf/f1099msc.pdf .

By the same token, any GC's you work for will have to do the same for your compensation.

Bear in mind, if a GC (or a company that is your customer for that matter) hires you to do a job and you carry your own WC insurance they will end up issuing a 1099 for the full value of the contracted work (materials, equipment rentals, etc.). If you choose to have the GC pay for the WC then you are basically a regular employee and not a contracted employee and he will not only have to pay the WC but will have to put you on his payroll, pay payroll taxes, etc. In that case you'll have to have him buy and pay for the material and equipment rentals, etc.

I know it stinks but that's the way insurance companies and the IRS have it set up.

 

[kwired]

Well that's my point. I'm not trying to defraud them. I am simply saying, if I don't legally need to have workman's comp, then they should not be charging their client extra for me. If they insist on charging their client extra for me, then that means that they are assuming responsibility for me.

If I charge their client extra because I'm forced to buy insurance, then there's no reason why they would think they need to cover me as I've purchased my own insurance.

So I would not make a claim against them unless I didn't charge their client extra and they insisted on collecting insurance money for me from their client.

Did you think I was suggesting just charging my clients more for the insurance and then just not buying the insurance?

I was just pointing out that insurance companies are legalized scam artists to some extent. They will use any technicality they can to avoid paying a potential claim. Should you be in a position to make a claim anything they find that disqualifies you to take that claim will be looked into.

Now when it comes to having your own WC policy for your company, if you have no employees to cover you will get a refund after the annual audit. It won't be a 100% refund but will still be a significant refund, so it isn't actually costing you what you see up front, and may still be worth it to have to make it easier to contract with GC's.

 

[electrofelon]

If you choose to have the GC pay for the WC then you are basically a regular employee and not a contracted employee and he will not only have to pay the WC but will have to put you on his payroll, pay payroll taxes, etc. In that case you'll have to have him buy and pay for the material and equipment rentals, etc.

I do not believe that is correct. WC and empolyee/subcontractor are independent things. The fact that the WC board can make a GC pay for workers comp on a sub is odd, but doesnt force that sub into the employee category.

 

[kwired]

I do not believe that is correct. WC and empolyee/subcontractor are independent things. The fact that the WC board can make a GC pay for workers comp on a sub is odd, but doesnt force that sub into the employee category.

I think you are right, but also think it opens that door a little further toward the sub being considered an employee, even to the point they may need to withhold social security and medicare or pay unemployment taxes.

 

[growler]

If you choose to have the GC pay for the WC then you are basically a regular employee and not a contracted employee and he will not only have to pay the WC but will have to put you on his payroll, pay payroll taxes, etc. In that case you'll have to have him buy and pay for the material and equipment rentals, etc.

As far as I know that's not really true. You can hire a sub that doesn't have workman's comp insurance and not have them on the payroll.

Where they get you is that the GC has to pay the full amount of the 1099 as labor. Jay says that he gets around $27K from these contractors and we all know that at least some of that is expenses,materials, fuel and other overhead and not wages. I don't know what rate they pay but even at 10% , $27K on a 1099 is $2700.00 the GCs would have to fork over to the WC carrier.

It would be a lot cheaper for everyone for Jay to get his own insurance. Where it gets tricky is if he ever hires any help (even part time ) or subs out anything.

 

[active1]

If you were a corp. and took a payroll income then you may be eligible for workers comp.

I've herd of owners getting into a similar situation with paying the state unemployment on their income.
The state wants thee unemployment money but doesn't want to pay a claim on an owner not working.
Just depends on the type of business entity and state.

Especially if you have the same home & business address, phone number, and supervisor name it can cause instant red flags and issues that a typical employee doesn't have.

 

[goldstar]

I do not believe that is correct. WC and empolyee/subcontractor are independent things. The fact that the WC board can make a GC pay for workers comp on a sub is odd, but doesnt force that sub into the employee category.

Let me try to explain myself a little better. In either case you're an employee. You're either a sub-contracted employee where you pay your own State and Fed taxes and have your own insurances or you're a regular employee where the GC (or your employer in that case) has to provide that for you. If you know of any other type of employee (aside from a casual labor type employee that is paid under $600.00 in a given year) please let us know. I'm not aware of any and I don't think it's a State issue but rather a Federal one.

 

[growler]

Let me try to explain myself a little better. In either case you're an employee. You're either a sub-contracted employee where you pay your own State and Fed taxes and have your own insurances or you're a regular employee where the GC (or your employer in that case) has to provide that for you.

I don't think so. As a sub contractor you are not considered an employee.

If you don't get paid as a sub contractor just try going to the labor board with a complaint. Try demanding overtime pay. You sub contracted as a business and you are on your own.

 

[electrofelon]

I don't think so. As a sub contractor you are not considered an employee.

Right. Take me, I am a member of an LLC. I do some sub work. I am not an employee of the GC (or business), nor am I an employee of my LLC. Of course if we use the term "employee" loosely as someone who does some work, then all bets are off, but we should stick to the technical/legal terms here to avoid confusion.

 

[goldstar]

I don't think so. As a sub contractor you are not considered an employee.

If you don't get paid as a sub contractor just try going to the labor board with a complaint. Try demanding overtime pay. You sub contracted as a business and you are on your own.

You can call it whatever you like. If you're set up as an LLC or sole prop, at the end of the year that company (or GC) will be sending you a 1099. If you don't want to consider yourself an employee by your terminology then so be it. The Fed still wants to know how much any company paid you, be it for your labor or for materials you supplied or both. If they have different terminologies in other parts of the country so be it.