If The Sub-contractor I Hired Doesn't Have Workmans Comp - General Discussion - Contractor Talk

If The Sub-contractor I Hired Doesn't Have Workmans Comp

 
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Old 11-01-2012, 07:16 PM   #1
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If The Sub-contractor I Hired Doesn't Have Workmans Comp


I just did a small renovation Job in Boston MA, job is finished and inspector is signing off next week. Come to find out, the sub I hired to do most of the work only has liability insurance and not workman's comp. My father was saying at the end of the year when we do taxes we will be charged and have to pay his workman's comp? or a prorated portion of it? Can this sub-contractor I hired just go and apply/purchase workmans comp and then issue me a letter a long with his w-9 before I issue him his last payment? I do not want to run into this situation during tax season next year. I am just looking for some general insight on this and how most of you go about checking for insurance and such before you hire these guys.
Thanks!

James

Last edited by Lincoln101; 11-01-2012 at 07:17 PM. Reason: typo
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Old 11-01-2012, 07:17 PM   #2
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


Not likely. They'll ask for proof of coverage during the time you employeed him.

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Old 11-01-2012, 07:37 PM   #3
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


Why was a certificate of WC not asked for and secured prior to him starting any work?
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Old 11-01-2012, 07:39 PM   #4
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


tax time and insurance audit time are 2 different things
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Old 11-01-2012, 07:43 PM   #5
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


I have to carry a dummy policy for that reason.
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Old 11-01-2012, 07:50 PM   #6
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


You're stuck paying comp on the bill.

Try to minimize the bill. Have the sub bill you separately for materials. You will need documentation so he should show on each invoice you paid the amount of the invoice for materials and the amount for labor.

The insurance company is not required to accept that but you can try. If you lose you will be paying wc at the standard wage rate but on the entire amount of the bill. That is why it is so important to insure your subs carry insurance.
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Old 11-01-2012, 10:53 PM   #7
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


My father is the GC, I sold these clients the condo and then helped with the renovation work, coordinated a few local subs to bid the work and was referred a guy from someone at my office. I asked originally if he had insurance and workmans comp and he said yes, I don't do this as often as my father which is probably why I didn't ask for copies of all this. He has liability insurance and did when we were running the job but just wasn't covered by workmans comp. The job was small $5,050 total labor and materials..So as I sit here withholding his last payment of $1,750 I'm trying to figure out if I need to take this up with the insurance company or if I'll just have to pay his bill regardless. Lesson learned if anything. I've only cut this sub checks for $1,500 and we've completed the job entirely.
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Old 11-01-2012, 10:56 PM   #8
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


You'll have to pay, but WC on $1500 shouldn't be too painful.
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Old 11-01-2012, 11:43 PM   #9
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


If the sub is a sole proprietor and has no employees, he would be exempt from WC in MA. If that's the case, he can provide you with documentation It's called by different names in different states, but often something like an "affidavit of exemption for worker's compensation insurance"
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Old 11-02-2012, 12:34 AM   #10
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


Quote:
Originally Posted by Lincoln101 View Post
I just did a small renovation Job in Boston MA, job is finished and inspector is signing off next week. Come to find out, the sub I hired to do most of the work only has liability insurance and not workman's comp. My father was saying at the end of the year when we do taxes we will be charged and have to pay his workman's comp? or a prorated portion of it? Can this sub-contractor I hired just go and apply/purchase workmans comp and then issue me a letter a long with his w-9 before I issue him his last payment? I do not want to run into this situation during tax season next year. I am just looking for some general insight on this and how most of you go about checking for insurance and such before you hire these guys.
Thanks!

James
If he has employees he must have comp if not then he does not have to have it and you do not need to be concerned with it.
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Old 11-02-2012, 06:04 AM   #11
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


Quote:
Originally Posted by Lincoln101 View Post
My father is the GC, I sold these clients the condo and then helped with the renovation work, coordinated a few local subs to bid the work and was referred a guy from someone at my office. I asked originally if he had insurance and workmans comp and he said yes, I don't do this as often as my father which is probably why I didn't ask for copies of all this. He has liability insurance and did when we were running the job but just wasn't covered by workmans comp. The job was small $5,050 total labor and materials..So as I sit here withholding his last payment of $1,750 I'm trying to figure out if I need to take this up with the insurance company or if I'll just have to pay his bill regardless. Lesson learned if anything. I've only cut this sub checks for $1,500 and we've completed the job entirely.
I figure I pay the insurance people way too much money as it is so let them work it out. If you have to pay you still have his last check to do it with and be done with it.

You might think about having a subcontractor work sheet doc.

In it should be Insurance requirements which has to be received by your office before any work is done. Also, never have the sub hand it to you, his/her insurance co. should fax it or email it directly to you.
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Old 11-02-2012, 08:05 AM   #12
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


Lot's to consider here. As Tom pointed out, taxes and comp are separate concerns. If they don't have WC your annual audit should reveal that and you will pay unless you have a certificate.

You cannot buy a policy and back date it to cover your butt after the fact. He either had coverage at the time and can prove it or he did not and you will pay. FWIW, with our carrier if I show an invoice with labor and materials separated they will charge premium on just the labor. Your results may vary.

You also need to consider your agreement with the sub. Did you specifically require he be insured properly before settling on his price? Adding stipulations after the fact would be a bit low.

If it's agreed before hand you are within your rights to deduct the cost. If you just deduct it because you just found out it's going to cost you then you may have an upset sub. And understandably so.

As Rob points out, it won't be that expensive and the cost will help you remember next time.

Good Luck
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Old 11-02-2012, 05:06 PM   #13
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


If you don't carry WC then you not gonna get audited for that... if you do carry, you will have to pay I think $100 for every $1,000 for a general trade, but if its a roofing crew or framing crew, you will pay through the A$$...
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Old 11-02-2012, 07:36 PM   #14
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Re: If The Sub-contractor I Hired Doesn't Have Workmans Comp


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If you don't carry WC then you not gonna get audited for that... if you do carry, you will have to pay I think $100 for every $1,000 for a general trade, but if its a roofing crew or framing crew, you will pay through the A$$...
As I wrote earlier, MA is one of the states where sole proprietors with no employees may opt out of WC (most states allow this). If the "sub" that the OP was talking about is a legitimate subcontractor, he should be able to provide the appropriate paperwork. If he has employees or is a OMS using the "subcontractor dodge", then the GC will likely be on the hook for the premium. That premium varies tremendously by trade. For a while, we were paying $17/$100 of wages for painters and less than have of that for carpentry and general labor. I think carpentry, general is still less than 10%.

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