Who Must Carry Workers’ Comp Insurance?

Video Transcript

Hi, this is Jerry with Barbary Insurance Brokerage, and today I’m here to talk about who must carry workers compensation coverage. Most states require workers compensation by law. Some states do allow people to opt out of the system if they can prove financial responsibility. However, that’s a very few states, two or three in the country. If you have employees, you probably are required to carry workers compensation. So, the first question is what is an employee? An employee can be a full-time employee, but it can also be a part-time employee. It could be a temporary employee. It can be a seasonal employee. And a lot of people seem to think that just because somebody isn’t a full-time employee they don’t need to have workers compensation coverage on them. Another thing is that, often, the way you pay your employee doesn’t impact whether or not they are considered an employee. You can 1099 somebody and have them withhold their own taxes and still be required to carry workers compensation coverage on them. Tax law and workers compensation law do not track with each other. They’re completely unrelated. If you control the work environment, if you tell somebody they have to be there at a certain time, if you tell them when they can come and go, if you supervise them, if you provide them with the tools of their trade, if you provide them with a place to work, you probably have an employee. An independent contractor, which would be the other situation where you don’t need to carry workers compensation, is really somebody who owns their own business. So, they control their working hours. They control how they get the job done. They’re the people that you give a project to and they give you a complete project back. They’re usually completely unsupervised by you. So, if you have somebody that fits into the definition of an employee, you probably need to carry workers compensation coverage.