Workers Compensation for Subcontractors: Will You Be Charged?

Workers Compensation for Subcontractors

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If your business has a workers’ compensation policy and you use subcontractors on a frequent basis, will you be charged for an injury? The answer, it depends on the task and if they have coverage.

Who is Considered a Subcontractor?

A subcontractor refers to an individual or company that carries out a task or provides a service on behalf of another business. In technical terms, it means that they are considered 1099 employees and aren’t on your weekly payroll. But this isn’t always clear and many businesses may fall into a gray area.  Just because someone says they are a 1099 subcontractor doesn’t make it so. The courts may find they are actually an employee.  It all depends in various circumstances. 

Why Would Your Business Be Charged for Subcontractors?

Implied Coverage

Hiring a subcontractor without confirming their workers’ compensation coverage may expose your business to liability for both their injury expenses and any unpaid premiums to your workers’ compensation carrier.

If your subcontractors are independent, you should ensure they provide you with an insurance certificate before starting work.  When a subcontractor provides proof of insurance it removes liability in almost every case. This should be part of the contract agreed upon by both parties prior to work commencing. A Certificate of Insurance (COI) is a form that shows proof that a company or person has their own work comp coverage.

Breaking Down the Subcontractor Contract

Creating a precise and efficient contract is the best way to protect your business and your subcontractors. This allows each side to understand the exact scope of the project they will be hired, what is expected of them, and clear up workers compensation confusion.

One of the most important things to have documented in the contract is insurance coverage. Have your subcontractor provide a current certificate of insurance (COI) that shows exactly what coverages they currently carry. If they don’t have workers’ compensation coverage listed you need to put something in the contract where either you agree to provide this coverage or that it will be excluded and the subcontractor is aware of this distinction.

Things to include in a contract:

  • Start and end dates of the project
  • The overall scope of the project
  • Payment schedule
  • Insurance currently in place for both parties
  • Any other details specific to the project
  • Signature and dates of both parties

When it comes to workers compensation for subcontractors, collaborate with legal counsel and a workers’ compensation expert to ensure your contract is meticulously crafted, preventing potential increases in workers’ compensation premiums.

*The information contained in this document is for informational purposes only. It is not intended to be a substitute for professional, legal, or insurance advice.