When Buying Work Comp Consider Whether Independent Contractors and Volunteers Are Covered

Figuring out who is considered a covered employee for purposes of workers’ compensation often is a tricky matter and sometimes a source of litigation when the subject of a claim. Each jurisdiction varies and each case is evaluated on its own merits. That said there are similar basic principles to reference in most jurisdictions in making the determination.

The vast majority of employees in a typical employee/employer relationship are covered. For example, checkers at a grocery store, factory workers, fast food workers and hospital nurses are generally all covered. Very small employers with perhaps 3-5 or fewer employees are not always required by law to carry workers’ compensation insurance. Owners and corporate officers often are allowed to opt out of coverage.

Independent contractors and subcontractors seem to create the most questions. Employers should require proof of workers’ compensation insurance when hiring independent contractors. If the contractor proves ultimately to be uninsured, chances are the employer hiring the contractor will become responsible for the injuries of the contactor’s employees then referred to as statutory employees. The same goes for hiring an individual who presents as a sole independent contractor as often happens for example in the long-haul trucking industry.

Consider these circumstances when evaluating an employee/employer relationship:

1. Who has direction and control of the work being done?

2. Who has the right to hire or fire workers?

3. Who is paying workers and from whose account?

4. Who owns the equipment used in performing the job?

5. Are taxes withheld upon payment?

6. Is the work being done normally performed by this employer?

Volunteers can at times be considered employees and allowed benefits when there is some consideration provided to the volunteer for services, including meals, transportation or room and board. Loaned or borrowed employees also may create a special set of circumstances in considering the employer/employee relationship.

Usually exempt and not considered employees are causal employees – those earning less than a certain dollar amount for example, $1,500 annually, domestic staff and farm laborers.

Generally speaking, employees covered by federal employer’s legislation (Railroad Workers, Longshoreman and Harbor Workers Act and Jones Act) are exempt or not covered by state workers’ compensation statutes. (workersxzcompxzkit)

Understanding the differences in all of these situations is important both in the application process and purchase of workers’ compensation insurance as well as when it comes time to consider payment of a claim.

Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: Robert_Elliott@ReduceYourWorkersComp.com or 860-553-6604.

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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.