Discussion:Independent contractor covered under client's W/C

this doesn't make him an employee

although all you'd have to do is tell the insurance carrier that it wasn't the employer's water closet, but the I/Cs own. You can't provide tools of the trade if you're going to treat them as I/Cs.

Have your client collect certificates of insurance from their independent contractors. Your clients insurance carrier will reduce the premiums. It is best to establish proceedures which ensure ICs cannot be paid unless valid current certificates are on file. Every worker's comp audit I have ever participated in inquired about subcontractor payments.

Since the Worker's Compensation laws were originally passed to cover EMPLOYEES injuried on the job to begin with, I really think that an non-employee would be excluded from coverage under most policies; so I just don't understand this coverage.

That's the reason I asked if there is a special policy or something you buy now of you want to cover IC's. If there is, and if that's the policy the non-profit is talking about (or perhaps a special rider is involved), then obviously that would NOT be a piece of evidence against you on a reclassification attempt.

"WHO IS COVERED BY THE VIRGINIA WORKERS' COMPENSATION ACT?

-- Employees of an independent contractor or sub-contractor who are doing the same kind of work as those who are contracting for the work."

Given the above language, and the practice of every single worker's compensation insurance auditor with whom I have dealt. Having ICs covered under your policy should not be any kind of red flag to the IRS. In fact, here in Virginia they are required to be covered.

The following are generally not considered employees:--

 Individuals who are properly classified as independent contractors under Virginia law (unless they specifically and formally choose to be included in their own workers' compensation insurance policy). 

Of course the next section down states the above. So they aren't required to be. Got to love the government. When being audited, it is important to understand the distinction. The employees of a plumbing contractor working for a general construction contractor can seek compensation under the GC'c policy. The same plumbing employees, working for the same plumbing contractor contracting with my boss the hotel owner cannot seek compensation under the owner who is contracting the work's policy.

I have one lawn maintenance contractor that had to get W/C coverage on himself to the tune of $2,000 a year because the guy he did most of his work for required him to have a certificate.

I have one lawn maintenance contractor that had to get W/C coverage on himself to the tune of $2,000 a year because the guy he did most of his work for required him to have a certificate.

Natalie, I would be interested in what services your not for profit provides. 100k seems like a big area to explore whether more attention should be paid to sub classifying IC'c as either liability producing or not.

Client does sports clinics for kids. The contractors help out at these clinics.

From the site http://hawaii.gov/labor/dcd/aboutwc.shtml:

The statutory "presumption" places on the employer the burden of producing substantial evidence to the contrary to rebut a claim for a covered work injury.

from http://hawaii.gov/labor/ui/documents/ind_contr_init.pdf:

"The ABC Test establishes a presumption of employment unless it is shown that the three conditions it lists exist. All three conditions are necessary to defeat the presumption. The following language of HRS §383-6 sets forth the ABC Test: Services performed by an individual for wages or under any contract of hire shall be deemed to be employment subject to this chapter irrespective of whether the common law relationship of master and servant exists unless and until it is shown to the satisfaction of the department of labor and industrial relations that: (a) The individual has been and will continue to be free from control or direction over the performance of such service, both under the individual’s contract of hire and in fact; and (b) The service is either outside the usual course of the business for which the service is performed or that the service is performed outside of all the places of business of the enterprise for which the service is performed; and (c) The individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the contract of service."

You can judge for yourself whether a finding of an employee employer relationship under Hawaiian (?) law meets the same criteria as for the IRS. The "presumption" seems to be a steep though not insurmountable obstacle.

Usually negotiating with auditors depends not just on what the code says, but how the commissioners and courts tend to implement the code. Good luck. The last link above is the official legal analysis used to make the determinations.

Good luck. For construction contractors, finding an expert who can lock horns with the auditors and lend useful advice about what does and does not make a difference with the commissioners, and insurance carriers can save large amounts of money. I used to work with a guy who that's all he did.

"Independent contractor. 32 H. 373. Third-party general contractors are not immune to common law negligence actions by employees of their subcontractors. 54 H. 578, 513 P.2d 156"

At least they get W9s for everyone. Client is going to review the issue.