As employers, we have a legal responsibility to our employees to provide a safe workplace. Our industry is inherently dangerous and in some cases highly regulated. We have federal, state and in some cases local regulations to comply with. It’s a daunting task to be in business and no simple matter to create a safe work environment. However, even if we comply with every regulation that has ever been written to the letter, this does not mean that accidents will not happen.


Accidents happen. We don't know when or where, but they will happen to all of us at one time or another. They will also happen to our employees and to our subcontractors. This means that even though we thought we had done all we could to make a safe workplace, someone will still get hurt. You as a business owner can be held liable for those injuries. You can be sued by an injured worker;  held responsible for medical bills, lost wages, short or long term disability; the list goes on and on.

It doesn’t end here either. The ripple effects can mean that you lose your business and perhaps even the personal property you and your family own. This can put your family into bankruptcy.

SO WHAT CAN YOU DO?
Well, you can do the same thing you do to cover your home and your vehicles, you can buy insurance. In this case, it’s a special type of insurance called workers’ compensation.

 Workers’ compensation works a bit differently than most insurance, however. In most cases, it doesn't seek to assign fault for the casualty or loss.  It acts to protect employers from lawsuits that might result from workplace accidents, and it provides medical care and monetary compensation for lost income to the injured. It covers workers on the job, no matter where they are, onsite, traveling between sites, going to the supply house. It covers employee’s injuries resulting from auto accidents while that employee is on company business and it covers work-related illnesses.

Workers’ compensation provides payments to workers that are injured, without regard to who was to blame in the accident. It pays for time lost from work and for medical and rehabilitation services. In the event of death, it will provide death benefits to surviving spouses and dependants.

Every state has different laws that govern how workers’ compensation works. Some states do not require workers’ compensation insurance; others require it only for certain types of workers.  Some states require it, but allow exemptions from the requirement. To find out if your state requires workers’ compensation or allows exemptions, check with your state’s workers’ compensation board.

Workers’ compensation is an agreement between workers and their employers. Workers receive prompt, effective medical treatment for on-the-job injuries or illnesses, no matter who is at fault. In return, they are prevented from suing employers over those injuries. 

SO WHO PAYS FOR WORKERS’ COMPENSATION INSURANCE AND WHERE CAN YOU BUY IT?
In most states, the employer is required to pay for insurance to cover their employees. This insurance is purchased from a workers’ compensation insurance company (or carrier). Contact your insurance agent to see if they offer workers’ compensation insurance. If they don't, ask if they can recommend another agent or carrier. There are some states that require employers to purchase workers’ compensation insurance through a state-operated fund.

WHAT ARE THE RISKS OF NOT HAVING WC?
The risks associated with not having workers’ compensation insurance are going to vary some from state to state, but for the most part, it boils down to one thing: Your butt. You risk losing what you have worked so hard to create and to do with your business. Read on for some specifics.

MISCLASSIFYING AN INDEPENDENT CONTRACTOR AS AN EMPLOYEE. 
Hiring employees and misclassifying them as independent contractors is a big risk. Your state's workers’ compensation board will investigate any claims, and if your independent contractor doesn't have proper coverage or any coverage, they are coming after you, the contractor. When they do, your carrier will be notified and that will almost certainly lead to an audit to be sure they have been collecting all the premiums they are due. If they decide you have been hiring independent contractors that are really just misclassified employees, they will bill you for those premiums due them. In addition, if your state's workers’ compensation board feels this was done on purpose, they can refer the case to the local district attorney for prosecution under your state's insurance fraud laws.

NOT KNOWING WHO IS ON THE JOB.
If you hire an independent contractor and he has employees, be sure you know who they are and if they are properly covered by the independent contractor's workers’ compensation policy. In addition, you should have a subcontractor agreement that requires them to have proper classification and coverage for everyone that will come on that job site.

YOUR CLIENTS GET SUED.
If someone is hurt on a jobsite at a client's home, and no one involved has Worker's compensation coverage, the only recourse the injured might have is to sue the homeowner and their home owner's insurance carrier to cover their medical bills and lost wages. This can turn a bad situation into a nightmare.

YOU CAN LOSE YOUR BUSINESS AND MORE.
After the insurance company gets sued you can bet they are coming after you to recoup their losses. If they have their way, they will wind up owning the major assets of your business. If you have loans and put up collateral, you can lose that as well because being sued is expensive, and probably more of an expense than a small business can afford. This means possibly defaulting on your loans and losing any collateral used to secure those loans.

YOUR FAMILY MAY PAY AS WELL.
“Looking out for number one” means taking care of yourself and your family. You can't take care of your family very well if your business is going down the tubes due to law suits. Drawing a paycheck from a business that is bankrupt is hard to do, and your family can start feeling the pinch.

MITIGATING RISKS
You can avoid all these risks and pitfalls by doing something really simple, like paying attention to your state's laws regarding Worker's compensation and the requirement to carry insurance. Make sure you and all of your employees are properly classified. Demand workers’ compensation certificates from your subcontractors if you use them, and know who is on the job at all times and if they are covered.

Create and use a good subcontractor agreement that has strong language on this subject. It should at the least require that everyone visiting the site associated with that subcontractor is covered by workers’ compensation insurance or they are barred from that job site.

Don’t risk your company or your family’s welfare for your schedule. If your subcontractor has not given you a workers’ compensation certificate of coverage and a signed subcontractor agreement, get a new subcontractor if you have to, but do not let that sub start work. Period.

DON'T PUT IT OFF
 One accident is all it takes to get into serious trouble fast. You can't control what your employees do on the job site every moment of the working day. Nor can you control the forces of nature, or just plain bad luck. By covering yourself and your employees properly, you are doing yourself, your employees, clients and subcontractors a big favor. You are being a responsible business owner. You are also doing the industry a big favor by running your business properly.

Disclaimer -The information in this article is presented on an as-is basis. The information is believed to be accurate as of the date it was written, but is not, in any way intended to be a comprehensive or complete guide nor an analysis of available benefits. Furthermore, this article does not and will not reflect subsequent changes in the law.

Please contact an attorney licensed to practice in the jurisdiction in which you do business for a full review and opinion of any given state's laws on workers compensation.