What type of my employees do I have to insure under Workers' Compensation?

Let us say you have different types of employees and contractors utilized for a wide variety of tasks, projects, and services.  At what point, you may wonder, do these associations cross the line of establishing an employer/employee relationship?  Is it strictly full time w2 payroll employees?  Do permanent part time w2 payroll employees qualify?  What about 'per diem' employees who work on a project basis or 1099 contractors?  Do they have to be included?  The list of questions and scenarios goes on and on with possibilities.  Let's run through a few scenarios which will help to clarify real world situations for you!

Do both my w2 payroll full-time and part-time w2 payroll have to be included in Workers' Compensation coverage?

By law a business with employees must be added to coverage.  There are possibly exceptions if the employees have partial ownership or if they are sole proprietors.

Are my 1099 employee contractors eligible for coverage?

Workers' Compensation is not specified purely by W-2 payroll status or 1099 payment as 1099 employees may still require Workers' Compensation as well.  W-2 & 1099 are forms of payment and does not determine an employment relationship.

What does determine if there is an employer/employee relationship and we must include an employee on insurance?

You have to ask yourself a series of questions first and critically analyze your relationship, the duties, and control.

If the 1099 employees qualify for the following they must be covered under the WC as well:

-  Do they solely work for your client?

- Does the employer provide training or materials to perform their job functions (computer, car, reimbursements, etc).

- Is it a specific project or an ongoing employment?

- Does the 1099 worker work out of their own office or out of the employer's office?

- Does the employer or 1099 employee determine their hrs worked and when projects are due?

If you answered yes to ANY of the above questions you may have to add the individual to insurance.

The notion of 'direct and control' comes into play.  If the employer has the right to make decisions in the above areas that affects the contractor they are considered an employee.

What about out of state employees?

You may have recently hired out of state employees or opened up a new office in another state.  There are certain Workers' Compensation insurance companies who license in many or majority of states.  We can help you with these out of state employees who you may be having difficulties with in your current coverage carrier.

What happens if I don't purchase Workers' Compensation for these employees?

Ignoring the Workers' Compensation is a serious situation in California.  There are large fines from the State Regulation and you can be held liable for the full cost of the medical claims any injuries and any lawsuits.  It is a much better decision to purchase the coverage and provide the security for your employees and yourself.

Related Pages:

Penalties for not offering California Workers Comp Insurance
How to get the best Workers Comp rate
Different approaches to Workers Comp

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