THURSDAY, OCTOBER 1, 2015
WORKERS COMPENSATION INSURANCE
When do you need a workers compensation insurance policy in NC?
When does someone working for you need coverage?
What is an independent contractor?
These questions have some cut and dry answers and some are fuzzy at best.
To answer the first question depends upon your legal status. If you are structured as a corporation, of any type, then the law requires you to carry WC insurance if there is a total of three including the officers even if they elect to be excluded. In a corporation any officer can "elect" to be excluded from coverage and only the employee(s) can be covered. If your structure is an LLC, Partnership or Sole Proprietor then the total must be three employees in excess of the members, partners, or owners. Members, partners and owners are are automatically excluded from coverage in these type of structures. The rules change somewhat if you are a general contractor hiring sub-contractors to perform work in a three party contract but that discussion is too lengthy for now.
To answer the second question is not so easy. The best way to explain this is dependent upon the definition of an "employee" as determed by the NC Industrial Commission and the N.C. workers compensation statutes. It does not matter how you pay someone or if you consider them an independent contractor and give them a 1099 form. It comes down to exercise and degree of control. Basically, if you exert a lot of control over how the work is to be performed, supply the tools or equipment for the task, and control the work hours the person(s) will most likely be considered an employee. If you do not have enough employees to qualify for a WC policy then injuries to an employee can be litigated in Civil Court. The WC laws were established to protect both employees and employers so that court proceedings can be minimized or eliminated.
A true independent contractor is someone that can come and go at will, has their own business and/or employees, has their own tools or equipment, can perform work without the supervision of others, is not solely dependent upon you for their income, and does work for others on a regular basis. Unless the independent contractor is performing work that is integral and required for your business to operate then workers compensation should not be a concern of yours.
For example...I hire a roofing contractor to put a new roof on my house or my commercial building. I would not be held liable for the workers injuries in the normal course of work performed. If I know of an inherent danger and do not disclose that and someone were injured I could be held liable for negligence and that would be a liability claim, not a WC claim.
The discussion of general contractors and sub-contractor relationships and two party vs. three party contracts, written or implied, is another topic of discussion that will be addresed at a later time.
The bottom line is this...if you have someone that has WC coverage working for you the better off you will be in the long run because the burden of proof will ultimately be decided by someone else and your ability to challenge the decision could be difficult and expensive for you to prove one way or the other.