Question:
Ken,
I was wondering if you can provide any information about workers comp. from a
business owners standpoint. What kind of coverage is necessary if you are the
sole employee of your company and you sub contract your work?
Answer:
For this one I asked one of my attorneys who happens to sell insurance. Here is
his answer.
In general, New York State employers are required by statute to obtain worker's
compensation insurance to protect their employees for costs associated with
disease and/or injuries arising out of occupational hazards. The NY Worker's
Compensation Law is intended to provide an injured employee with compensation
and reimbursement for medical expenses regardless of fault. This means that the
courts do not look at fault to determine liability for a job related accident.
Coverage applies to employer-employee relationships, as well as situations
involving independent contractors, both general-sub and sub-sub business
relationships. The rules are similar, yet slightly modified, in a situation
involving independent contractors subbing out work to other persons. A
contractor is liable for injuries to employees of its subcontractor when the
subcontractor has not secured the required coverage and such injury ariseis out
of and in the course of a hazardous employment. In theory, the law requires
subcontractors to maintain WC coverage for their employees, but provides an
added layer of protection for those who fail to do so. If a contractor is
determined to be liable for payments on behalf of an uninsured subcontractor,
the contractor being held primarily liable for the injuries and costs arising
out of the hazardous employment may recover the amount of such compensation
from the subcontractor primarily liable therefore. In summary, a general
contractor is liable for injuries sustained by employees of its non insured
subcontractors. There are three main exceptions to this rule, however. First,
if one owns property and hires someone to build on it, the owner is not
considered a general contractor, and therefore, would not be held liable for
any monies awarded the injured employee. Second, the contractor, to be held
liable for such compensation to the employees of an uninsured subcontractor,
must itself be under contract to do the work. And third, a sole
officer/director/shareholder of a corporation, a self employed person, or a
partner who is employed by a contractor and is injured or dies in the course of
employment, is not entitled to WC benefits from the contractor or the
contractor's carrier. If a corporation has two executive officers/directors who
are the only shareholders, the result is the same. So if you are a contractor
with at least one employee (not an officer, director or shareholder of the
company), and sub out work to other contractors, New York State law requires
you to maintain a worker's compensation policy to protect your employees, as
well as employees of anyone you sub work out to from potential claims. If
someone you subcontract work out to does not have coverage, your carrier will
be held primarily liable for compensation awards to injured employees of the
subcontractor, but will have the right to seek indemnification in a third party
action against the uninsured contractor for any monies paid out. If you have
any questions or concerns, or need to take out a worker's compensation policy,
please contact Joe Ranaldo at the number below.
As a sole employee and if you are a stock holder NYS will waive the workers
comp requirement. You must apply to the workers comp board for a waiver and
they will issue you a letter waiving the requirement.
As for subs the same holds true, but if you are a corp. you must get proof of
workers comp or a copy of the waiver letter for you files. If not they are
considered an employee and then you are required to have workers comp.
Wayne M. Wahrsager
New York Merchants Protective Co, Inc.
Ken Kirschenbaum, Esq
Attorney At Law