Procuring insurance for each and every one of your employees can be a costly thing. That is why it’s important to understand who is defined as an employee under workers comp law. By understanding the requirements of the law, you can not only properly protect your business and employees, but avoid heavy fines.
Most often, anyone working for a for-profit business will be deemed an employee of the business and therefore must be covered by a workers compensation policy. This rule generally applies unless the services they provide to the organization are excluded under the worker compensation law. For insurance purposes, the term employee refers to anyone who performs day labor or is a leased employee, borrowed employee, part-time employee, unpaid volunteer, and subcontractors.
There are a number of factors which go into whether or not a person must be considered as an employee under workers compensation law. If the business meets the criteria below and the individual hired can’t be considered an independent contractors OR the work performed is not exempt from the WCL, then the business must obtain a workers compensation insurance policy.
Right to control
The level of control a person has when they are talking to someone who performs a task is a central issue when trying to determine the employer-employee relationship. If someone is in control in the way in which work is done or how it is performed, he is an owner and the one doing the work is the employee. If the person controlling the labor is truly independent then they work under their own operating contract.
Character of Work Is the Same as Employer
If work is being done that is consistent with the primary work of the business indicates that the labor is being done by and employee. Work performed by a person different than the work of the hiring business indicates that the task is performed by an independent contractor. An example is someone who installs granite for a contractor would be an employee of the contractor. On the other hand, if someone is hired specifically for one job and not daily tasks then they would be an independent contractor.
Method of Payment
Employees are usually paid hourly, daily, weekly, or monthly. Employment is indicated if the hiring business withholds taxes and provides other benefits. A business paying cash to a worker also indicates that they are an employee under workers comp law. If payment is made on a project in its entirety – this might be an indication of an independent contractor.
A business that provides equipment or materials for use indicates a worker employee relationship.
Hiring and Firing
If a business has the authority to hire or fire workers then an employee is performing work. An independent contractor on the other hand has control over the time allotted to do the work and cannot be fired by the method of performing the work he chooses – just as long as he meets the contractual agreements.
All employees must be covered by workers compensation law. Hopefully this segment of our blog helped clear up any confusion as to who an employee would be. If you still have any questions please feel free to contact our insurance professionals today.