The Importance of Requiring Worker’s Comp Insurance for Every Contractor

According to the US Occupational Safety and Health Administration 2013 statistics, there are, on average, more than 12 work-related fatalities per day. On the same year, one in 25 workers got work-related injuries. That’s why these workers must have the protection of Worker’s Comp Insurance. They are the ones who need the benefits from the insurance more.

Usually, a state will require an employer to get Worker’s Compensation insurance. But this is not always the case. An exemption from this would be one-person operations. But, whether it is required by law or not, it is still recommended for general contractors and project owners to require their hired subcontractors to have this insurance.

A construction project commonly involves three parties: the owner, the one who pays for the project; an independent contractor or a general contractor, hired by the owner to execute the work; and the subcontractors, hired by the contractor to do parts of the work. These three’s relationships are different from their employees.

While most states necessitate the employers to provide their employees Worker’s Compensation benefits, the laws also delimit who is considered an employee. Even though a worker is working on a property, if he is not considered an employee by the law, then the owner does not have the responsibility to provide Worker’s Compensation benefits. There are different criteria being used by the states to ascertain if the two have an employee-employer relationship. Similar criteria are used by the Internal Revenue Service.

A construction worker is not usually considered by the state to be an employee of the owner. However, this does not hold true about the employees of subcontractors and independent contractors. Subcontractors of the proprietor who suffer from work-related injuries claim Worker’s Compensation benefits from the contractors who hired them following the contractors’ policies. State judges often conclude that these workers are considered as employees of the hiring contractors, but not of independent contractors.

Moreover, an independent contractor who hires a subcontractor is required by many state laws to provide Workers’ Compensation benefits to the employees of the sub if the insurance is not provided by the sub. If the sub or one of their employees is injured, they collect the benefits, even if that was not intended by the hiring contractors. When the insurance companies find out that uninsured subs worked for an independent contractor, additional premiums will be charged to the independent contractor.

The worst case would be if both the sub and the independent contractor neglected to provide Worker’s Compensation benefits. This would result to the absence of the benefits that the injured workers are entitled to, and not to mention the legal issues. Their sensible course of action would be to sue the project owner. They will seek compensation for the hiring contractor’s neglect or for negligence in maintaining workers’ safety in the site. And because they are not considered employees of the project owners, their policies regarding Worker’s Compensation would be of no use. The owners will have to turn to their liability insurance company for their defense and payment.

These are the reasons why it is important for project owners to demand their contractors, subs, or anyone working on the job to have their Workers’ Compensation insurance. The same is true for independent contractors hiring subs. Project owners may want to transfer the responsibility of verification of the subs’ insurance to the independent contractor. They may also require the independent contractors to absolve the project owners from the lawsuits arising from work-related injuries.

Because working in construction is dangerous, it is important for every worker on the job to carry their own Workers’ Compensation insurance even if the law does not require it.

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2 comments on “The Importance of Requiring Worker’s Comp Insurance for Every Contractor”

  1. Khandoker Hirok Reply

    Insurance is the most important things of our professional working life. If the works is hard and dangerous so insurance is must.

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