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A common question is:  “Why do I have to include my subcontracted payroll on my Workers’ Compensation policy – they’re 1099 employees?” 

This is a good question.   Without going into too much detail, the degree of control (e.g. ability to hire/fire, advise where to go and instruct what to do, etc.)  a contractor has over their Subs creates an employer/employee relationship under the Workers’ Compensation law.  For Work Comp purposes, whether the labor is paid using a W2 or 1099 (for tax purposes) doesn’t matter in determining an employer/employee relationship. 

The way to avoid a charge for subcontracted labor is quite simple – make certain they have their own Workers’ Compensation Coverage.   If you Sub out Electrical work and your subs have Work Comp (WC) coverage it will have zero affect on your WC Premium.   All of your Subs should provide a Certificate of Insurance (illustrating proof of WC)  to you and a renewal copy each year. 

If you are in a situation where you have to hire an uninsured sub, their payroll (based on the duties they perform) will be rated on your WC policy at the time of audit, and charged to you.  So, it is best contact your agent, let them know the type of work the sub will be performing and obtain the rate (per $100 of payroll) so that you can bid the project properly and not get hit with an audit surprise at the end of policy term. 

This requirement goes beyond just contracting work.  Let’s say a Restaurant/Bar owner has weekend entertainment (a band, DJ, etc. ).  If they are injured while performing, they will more than likely be considered an employee at the time of injury.  Since the Restaurant/Bar Owner's Insurance Carrier will have to respond (e.g. pay for the injury), they want to collect an appropriate premium for the exposure.

Hopefully this post is helpful.  If it is, and you'd like to clarify your WC requirement for your Subs, the "Share" button below includes an email and gmail option to share.



posted by Dan Hebbeln: dan@hebbeln-ins.com
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Chesterfield, MO 63005
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