Workers’ Compensation, Is Your Business Covered?

Workers’ compensation was originally created to assure workers who suffer an on-the-job accident would get necessary medical treatment and receive a percentage of their wages while recovering. However, some saw this as a biased system. If covered by the correct workers’ compensation, employers see many benefits, including having their expenses limited to medical treatment, wage losses, disfigurement, and, when applicable, permanent disability or death benefits and not facing a negligence lawsuit.

With the increase of the freelance economy in the U.S., many employers don’t know what they need to provide in the way of workers’ compensation to their contractors.

Workers’ compensation laws are governed by the individual states rather than the federal government, which means business owners need to research the workers compensation laws in their area by either viewing the state’s website which clearly lists workers compensation rules. They can also seek advice from an insurance agent about the legal obligations.

Many states can carry out an IRS test that determines whether someone working for a company should be deemed as an employee or as an independent contractor. This helps clarify who needs to be looked after under workers’ compensation and who needs to hold their own workers’ compensation.

Bill Feldhaus, retired professor of risk management at Georgia State University’s Robinson College of Business, recommends that business owners ask their contractors for evidence of their own workers compensation insurance.

“It’s very critical that you clarify who is assuming the workers’ compensation obligation if they get hurt on the job…if your company really does not want to take on that obligation, you might spell out in their contract that you’re not assuming state workers’ comp responsibility.”

Workers compensation can be a huge expense that many companies want to avoid. Erik Stenson, founding principal of ABD Insurance & Financial Services, recommends that an employer who doesn’t provide workers compensation should get freelancers to sign a contract that, in the case of an accident, the company is held harmless. Employers should also hire contractors who provide proof of their own workers’ compensation or find contractors through an employment agency that provides workers’ compensation.

This makes sure businesses and employers are prepared and covered for the worst possible situation. Without any prior legal agreement regarding workers compensation, the court often sides with the contractor if he or she sues the business for damages after an accident.

[Image via Shutterstock]

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