Reducing Claims Risk from Subcontractors

Recent legislation eliminating the issuance of Certifi cates of Non-Coverage (CNC cards) has prompted business owners to take a closer

look at the question of whether subcontractors working with their businesses ar

e employees.

  

Why Does It Matter?

Why Does It Matter?

Generally, if an employer-employee relationship exists between you and your uninsured subcontractor, your business may be liable for

benef ts to the subcontractor if an on the job injury occurs. If there is a risk of a claim against you for a subcontractor or its employees,

CompSource must charge you additional premium for this risk.

Is Your Subcontractor an Employee?

Is Your Subcontractor an Employee?

Even though legislation eliminating the issuance of Certif cates of Non-Coverage is new, the factors concerning whether an individual

is an employee or an independent subcontractor have remained the same for years. Generally, a subcontractor is an independent

contractor and not an employee when they perform work and are free to determine the manner and method of the work to be

performed, free from your control and direction, except as to the result or product of the work. Just as we have in the past, when

CompSource Oklahoma reviews whether a subcontractor may be an employee we look at:

•

The nature of the contract between the employer and the employee/contractor;

•

The degree of control exercised by the employer as to the details of the work performed or the independence of the

  

employee/contractor—ex. supervision, scheduling work hours, etc.;

•

Whether the employee/contractor is engaged in an occupation or business that is distinct from that of the employer,

  

and whether the employee/contractor carries on its occupation or business for others;

•

Whether it is the custom of the local area where the work was done that the type of work is usually done under the

  

supervision of the employer or by an unsupervised specialist;

•

Whether the work performed required skill, and if so, to what extent—ex. licenses, special education required, etc.;

•

Whether the employer or the employee/contractor supplies the instrumentalities, tools and the place of work for the

  

person doing the work;

•

The length of time employee/contractor was employed;

•

The method of payment to the employee/contractor;

•

Whether the work was part of the regular business of the employer—if so, the business may be “necessary and integral”

  

and the employer would bear the risk of workers’ compensation liability;

•

What the parties believed at the time they agreed on the work to be performed; and

•

Whether either party had the right to terminate the relationship without liability to the other.

These are the same factors used by the Workers’ Compensation Court in cases where the

employer

alleges the claimant was an

employer

alleges

the

claimant

was an

employer

independent subcontractor and the

claimant

alleges they were an employee. No one factor is determinative of the status of the worker,

claimant

alleges

they

were an employee.

No one

factor

is

determinativ

e of

the

status

of

the

worker,

claimant

and they must be reviewed on a case-by-case basis.

Although a subcontractor may be independent and not an employee of your business, you could still be found liable for claims of your

subcontractor’s employees

if that subcontractor is uninsured. That is, the law assigns secondary liability to you if the business of the

subcontractor’s employees

if

that

subcontractor

is

uninsur

ed.

That is,

the

law

assigns

secondar

y liability

to you if

the

business

of the

subcontractor’s employees

subcontractor is: a) necessary and integral to your business and b) the subcontractor fails to obtain proper coverage for its employees.

How Can You Reduce Your Business’ Risk?

It is important that you carefully review your status with each uninsured subcontractor you intend to use. The safest way to protect

your business from these claims and additional premium is to require certif cates of workers’ compensation insurance from your

subcontractors before the job begins.

CompSource remains committed to working with and educating you on the risk of workers’ compensation claims. Please contact us if

you would like additional assistance with subcontractor issues.