As a small business
owner, you may think that your company of 3-4 employees is so small that you do
not need to have Workers’ Compensation Insurance. However, you may be surprised
to learn that many states require by law that employers provide workers’
compensation benefits to their employees.
Let’s
start with the basics. What is an employee? “Employee” means any person who
receives payment from an employer for the performance of any work or service
while engaged in any employment under any appointment or contract for hire or
apprenticeship, express or implied, oral or written, whether lawfully or
unlawfully employed, and includes, but is not limited to aliens and minors.
What
is Workers’ Compensation Insurance? It is a mandatory type of insurance that
typically covers medical costs and a portion of lost wages for an injured or
ill employee as a result of their employment. Injured workers receive benefits
regardless of who was at fault in the accident.
Here
are some important reasons why you need Workers’ Comp. insurance:
1.) It is required in most states. Although requirements vary by state,
generally all small business are required to have some form of coverage.
Certain states have allocated state funds for workers’ comp. insurance whereas
others can obtain their coverage from a local agent or carrier.
2.) It allows injured workers to get the help that they need. This
safety net gives injured employees the benefit of having medical coverage and
wage replacement benefits that they may need as a result of experiencing a
workplace injury.
3.) It protects your business. Having workers’ comp. insurance allows a
business to be protected from the financial harm that would result from having
to cover the real cost of medical expenses that comes with a workers’
compensation claim. Having the proper coverage allows for the reduction of
costly claims.
Perhaps you are wondering,
“What about if I am an independent contractor, or as an employer have
independent contractors under me?
Firstly, an independent contractor is not considered
an employee if:
“a. The independent contractor maintains a separate business
with his or her own work facility, truck, equipment, materials, or similar
accommodations;
b.
The independent contractor holds or has applied for a federal employer
identification number, unless the independent contractor is a sole proprietor
who is not required to obtain a federal employer identification number under
state or federal requirements;
c. The
independent contractor performs or agrees to perform specific services or work
for specific amounts of money and controls the means of performing the services
or work;
d.
The independent contractor incurs the principal expenses related to the service
or work that he or she performs or agrees to perform;
e. The independent contractor is responsible for
the satisfactory completion of work or services that he or she performs or
agrees to perform and is or could be held liable for a failure to complete the
work or services;
f. The
independent contractor receives compensation for work or services performed for
a commission or on a per-job or competitive-bid basis and not on any other
basis;
g. The
independent contractor may realize a profit or suffer a loss in connection with
performing work or services;
h.
The independent contractor has continuing or recurring business liabilities or
obligations; and
i. The
success or failure of the independent contractor's business depends on the
relationship of business receipts to expenditures.”
While employers
themselves are not required to provide insurance for independent contractors,
most, if not all, states require that each individual independent contractor
carry their own form of workers’ compensation insurance. This helps your
business avoid liability if a contractor is injured during the course of employment.
It is in your best interest to hire independent contractors only after you have received record of
their coverage that they hold.
Although
Workers’ Compensation Insurance can be confusing, it is always best to make
sure that you as an employer or employee are protected. An attorney can answer
any questions or confusion that you may have and guide you in the best way to
protect yourself and your employees.
***The information contained in this blog post is meant to be informational only and does not constitute legal advice. If you have questions regarding your small business and Workers’ Comp. insurance please reach out to an attorney or use our contact information below to schedule a free consultation with Marcie Baker.***
Sources: https://www.employers.com/blog/2016/three-reasons-why-you-need-workers-compensation-insurance/
https://www.findlaw.com/injury/workers-compensation/what-is-workers-compensation-insurance.html
No comments:
Post a Comment