Posted by Gabe Solomon on May 14, 2020 6:00:00 AM
Contractors Workers’ Compensation Insurance coverage and its cost is a topic that is debated quite heavily inside larger, live event AV companies.
On one side of the debate, we hear from AV companies that they don't provide workers’ comp insurance for contractors. On the other hand, we hear from contractors that they don't have workers’ comp insurance; the AV company is covering it.
Which is it, who is paying for it, and why do we need workers’ comp insurance anyway? If you find yourself having this debate in your office, don't worry. We are here to help you settle it once and for all.
What Is Workers’ Comp Insurance
Workers’ Comp Insurance covers ANYONE who is employed or contracted to work with your company’s medical and disability expenses related to work-related illness and on-the-job injuries.
Who Should Carry Workers’ Comp Insurance
From a legal perspective of who is required to carry workers’ comp insurance, regulations are defined by individual states for W2s and 1099s. Each state law is different. You should contact or research details with your state's department of labor for specific information, or partner with a service that can offer you expert-level advice for various jurisdictions.
You will find in your research that some states do not require independent contractors to carry workers’ comp. Though this is not a state requirement, it is entirely legal for AV companies to have this as a requirement to be hired for a contract. This practice is becoming more common, particularly in the AV industry, as venues may not permit uncovered individuals on-site unless they can demonstrate acceptable coverage.
Where we see most discrepancies is with sole proprietors, single owner-operators, or partners in the company. If you fall into one of those categories, your state may allow you to exempt yourself from the need to carry workers’ comp insurance. However, as we stated above, it is legal and becoming more common that, regardless of state rules, the hiring AV company requires you to carry workers’ comp to remove their risk and expense of coverage for non-carrying contractors.
Who Pays For Workers’ Comp Insurance
In any case where an AV company hires an independent contractor and the contractor does not carry workers’ comp insurance, the cost of premiums for the contractor will fall back onto the AV company. This often adds a surprise extra expense that was not anticipated.
If the independent contractor has a valid certificate of insurance showing adequate workers’ comp coverage, then the AV company will, in most cases, not be charged for that contractor's workers’ comp insurance.
Why Workers’ Comp Insurance Is Important
Risk liability of independent contractors can quickly become a hot topic, especially in the CFO's office. One simple injury can cost an AV company tens of thousands of dollars in a claim for a contractor not carrying workers’ comp insurance. It's for this main reason that more and more AV companies are transitioning to require all independent contractors to have workers’ comp insurance before they can contract with their organization.
Here are two key reasons why AV companies should ensure contractors are carrying their own insurance or are partnered with a service like Mertzcrew to facilitate this process for them:
- It Protects Your Business During Work-Related Injury Claims
In the event an injury happens on a job-site that involves or was caused by a contractor and a lawsuit is the result of it, a contractor who has its own workers’ comp insurance will lower your risk and exposure in the situation. Remember, if a contractor does not carry workers comp insurance in this situation, then the exposure and risk fall fully on the company that contracted them.
- Outsourcing Can Simplify Managing The Process
Tracking tens and hundreds of contractor insurance details throughout the year can be challenging and stressful, especially when trying to ensure the process is consistent throughout the organization. Outsourcing this to a service that makes sure a contractor is properly insured and setup compliantly to work with your company brings your company peace-of-mind and consistency to your contractor management process.
Are you ready to settle this debate in your office?
Do you want a consistent and straightforward way to ensure you’re compliantly working with your freelance workforce with the peace of mind that they're correctly insured with access to easy reporting and transparency of payments?
Then schedule a 15-minute call with Mertzcrew to learn if our service is the right fit to support your AV company.