1099 Not Insured

Debookkeeper

Well- now I learned something. The insurance laws vary by state. In Connecticut WC is required if you have 1 or more employee - not required for the owners though. We are not required to provide WC for subcontractors, you just get screwed if you hire a sub (with employees) who doesn't carry it, hence our rule being we only hire subs who comply with the required laws - which is our peace of mind.

born and raised in CT - I need to travel!

Double-A

I put my self in the shoes of the insurance company for a minute, and this is what I come up with.

I'm gonna cover a contractor, with four employees, 3 office, one estimator. I charge ***x dollars for this.

Then the contractor tells me he would like to cover two workers that work in the field for him part-time and also work for others part time.

OK, are these W-2 or 1099 workers? W-2, fine, that will be *** dollars more.

Workers that are 1099 however, I stop and think a minute. I have to assume, as a principal of my business model, that this contractor has done his 'due diligence' for his four W-2 employees.

In fact, as a matter of course, if needed I can change the terms of this policy to ensure this. Company Safety policy in place, proper training documents in place, company procedures for accident reporting in place, etc. Those that are required by OSHA, I can just not worry about. Those not required by OSHA or anyone else, well, I can write into the policy.

However, for 1099 workers, since, by definition, they are independent workers, with a separate liability structure in the eyes of the law, present me with no recourse to mitigate my risk exposure if I were to include them as covered in my policy to this contractor.

They work for more than one company. They, not my client, are responsible for their own 'due diligence'. My contractor can't control that. So, I have to just trust them. This seems like bad business to me. I can never get all the facts concerning these 1099 workers, because they are not my customer. Since I have not entered into any contractual arrangement with them, I have no assurances that they operate in a reasonable, safe manner, in accordance with all applicable laws, etc.

Now, my contractor says he'll pay their premiums if I put them on the policy. I inform him I'll gladly take his money but will not under any circumstance pay a claim that involves them.

Now, I can understand my contractor customer being upset that I take his money for these 1099 workers, full well knowing I will never pay a claim on these said workers. But, then again, we don't have to write them into the policy, either. This is the contractors decision now. He has all the facts.

Waste the money for coverage he and his 1099 workers can never use, or save that money and don't include them? What's a good business choice here?

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Double-A

Food for thought.

Part time employee and labor burden.

Assuming $10.00/hour @ 20 hours/week.

FIT, FICA, State (assume same as fed withholding) = ~$31.30 week. So take home is roughly $168.70.

Employers part is ~ $15.30 (FICA) + $12.00 U/I = $227.30 a week gross cost per man.

So, you pay an extra $27.30 for an employee a week, vs. a 1099 worker.
27.30
x52 (number of weeks in a year)
-------
1419.6
x2 (we're talking two employess, so double this number)
--------
2839.2

$2839.2 / 2080 (one man year in hours) = 1.365 or $1.37 per hour to labor burden if you only have one person producing income and only bill 2080 hours a year. (always take your figures back to 1 man hour, then share it amoung all your income producers.)

Two men here working in field so they share this, so roughly $0.69 per man bump in billing.

I'm tired, and probably forgot something or overlooked the obvious here. Feel free to correct me.

In fact, this really seems like it should be wrong. But, I just can't see where it is wrong. Hell, for sixty-nine cents per hour rate increase, why would you even want to waste time on a 1099 worker? This has got to be wrong someplace.

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Gordo

Yeah, I've seen this too. Seems as if there is a disconnect b/t the law makers and the insurance company in this instance (rare because the two usually go hand in hand).

Shell did you see yesterdays paper about the 2,500 Ford workers that are getting laid off? A state board of contractors rep was there suggesting that everybody become a contractor (they highly suggested purchasing a licence). Literally, two pages (front and page three) were dedicated to these folks going into contracting. No other job source leads were talked about.

Looks like some hacking is around the corner.

Double-A. I was with you then I lost you.

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Looks like some pros were here.

Grumpy

This may be true, however it was the manner that you did it which made it offensive.

Grumpy

How? Do you really have to ask? Seriously?

Here is how: A) Becuase in the original post that you quoted which was from me from months ago, I was stating a loop hole which is exploited by many. B) Because in this topic of discussion I was not explaining what some do, but was explaining what I do. I try to do everythign legit and I want to pay for those who work for me. I do not avoid paying by exploiting the loop hole I originally described in the thread you quoted.

Grumpy

Why not? If I pay for coverage, and they charge me for coverage, then the guys should be covered.

I can understand if they said "These guys will not be covered, therefore you will not be charged and you are operating at your own risk." I would understand that. That makes total absolute sence to me. HOWEVER for them to say "We will take your money for insuring them, but we will NOT insure them." Where is the logic?

If I am paying for coverage, I want coverage. Plain and simple. If I am not covered for something, anything at all, I do not want to pay for it.



BTW As it turns out this is only the restrictions of some insurance companies. I have asked of this question to a few other companies and even my current company, and it seems like only some insurance companies have this exclusion.

Double-A

So, did I screw the pooch or did everyone besides Gordo just pass over my post?

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

Mike Finley

Grumpy - How are you paying for coverage on guys who are being 1099.

WC is based on pay roll, you have no pay roll for someone you are 1099ing, therefore you are not paying any WC on them. IL appears to have the same WC laws as we do in CO so what am I missing? From what I understand you are not paying WC on them and they aren't covered anyways.

As I think someone already said, pay them as part-time employees. They are only your employees on the days they are working for you, the rest of the time they can do what they want, just as they are doing now.

Mike Finley

I don't see how that is possible because it violates the tax rules.

Tscarborough

They can not be 1099 and carried on your insurance. That is plain and simple, no need to even argue the point. If you want to pay their insurance, cut them a seperate check so they can carry their own.

maj

C'mon fellas......... Haven't you noticed what I've been trying to say here!!




EXACTLY WHAT YOU GUYS HAVE JUST SAID...........BUT.............




Grumpy WANTS to pay the insurance company for non-coverage!

Go figure!

__________________
The views expressed in this post are merely opinions of named poster and in no way shall be deemed meaningful by members of the herd. By no means does anything posted by named poster mean a damn thing for anyone else partaking in this thread.

Tscarborough

He needs to pay his 1099s so they can carry their own insurance. They can not ride in on his rate.

Debookkeeper

Is it possible he is thinking of the general liability? At audit time, as we all know, the insurance company bases your rates on how much you pay in subs... but then again, they have to have their own insurance. So technically they are taking your money for having subs - but for GL - not WC.. I don't know... this isn't adding up.

maj

Nope... WC.....And you're right....... it doesn't add up.

Everyone so far has been trying to help out Grumpy, but he is dead set on paying for coverage the insurance companies already told him they won't cover.

__________________
The views expressed in this post are merely opinions of named poster and in no way shall be deemed meaningful by members of the herd. By no means does anything posted by named poster mean a damn thing for anyone else partaking in this thread.

CHB70

NO Grumpy's problem is that at the end of the year when he gets his audit the insurance company is going to make him pay for his non employed, 1099ers, subs etc. etc. BUT THEY ARE NOT COVERED BY THE POLICY HE HAS TO PAY FOR.

Debookkeeper

Well then that has to be how the insurance law is in that state. Most don't have to pay wc on our subs - we just get penalized for using a sub who doesn't have it himself - so it is totally avoidable by only using subs who carry their own insurance.

Sounds like the insurace companies in Grumpys state are lining someones pockets if they can do that!

Shellbuilder

I did not see that, unbelievable!
Regarding the original question, I believe if push comes to shove the 1099er will be paid by the insurance company. I also believe the original poster is a huge gambler constantly using uninsured subs , calling them employees one minute and business owners the next. It would be easier to go to Vegas than run a business this way.

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