Defining the Employee
The real question when considering workers’ compensation insurance is determining who qualifies as an “employee.” By definition, an employee is someone hired to perform services under the direction and control of another person or company, known as “the employer.” Since each state defines what constitutes an employer, Jessica must determine the exact relationship her business has with her hired help. A rule of thumb is an employer is any person or entity who gives direction to and exercises control over a worker.
Workers’ compensation is intended only to cover employees, so it’s important to define the difference between an employee and an independent contractor. An independent contractor makes an agreement with a person to provide a service, but remains in control of the work performed. These specific services should be bound by written and signed agreements.
Hiring an independent contractor can be beneficial because you don’t have to withhold federal, state and Social Security taxes, or pay for unemployment or workers’ compensation insurance. In fact, facility owners don’t have to offer much of anything to independent contractors, except for what’s agreed to in the contract.
Also, keep in mind that when you hire a licensed contractor or vendor, you assume the work and materials will be of high quality and the workers involved will be competent. This is true in most cases. However, misfortune can happen to even the most reputable company. Accidents that result in property damage or injury to your clients, employees or the general public are known to occur. Hiring contractors that have proper insurance coverage is imperative to protect your business. Get references from past clients, and request a certificate of general liability and workers’ compensation insurance.
Remember, when hiring any employee, follow your state’s statutes and purchase adequate workers’ compensation insurance to protect your business from staff-related injury or illness claims. When hiring licensed independent contractors or subcontractors, ensure they carry adequate insurance to reduce your liability in vendor-exposure claims.
Hiring friends and family may be less expensive in the short run. However, if they are injured or cause damage to your facility, it could become more costly and cause hard feelings. Be aware of the business aspects of running your facility in a professional manner.