Are you my subcontractor?


Remember this book? So Sweet. So Innocent.

And if children ran their own businesses, there probably would be a lot less law and regulation in our country… And a lot more nap time. And snacks. And recess.


Let’s not kid ourselves though. This is 2017. We need laws. We need regulation (to an extent).

We need protection for American businesses to grow and prosper.

Workers Compensation laws were created just for that purpose. Purchasing this type of insurance policy not only gives the employer relief knowing they have protection should an unforeseen injury happen to one of their employees, it also gives the employee a sense of relief knowing they will be justly compensated should something happen to them on the job.


Each state has its own laws to help employers determine if they are required to purchase workers compensation. Washington, DC, for example, mandates each employer with JUST ONE employee to provide this coverage. Other states only require this coverage if there are 3 or more. Check with your Trusted Choice insurance agent to learn more about state specific requirements.


This. My friends. Is the MILLION DOLLAR QUESTION. 

Many businesses hire independent contractors, also known as 1099’s. The IRS claims  “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done”.  The problem is-if a worker,whom you deemed to be an independent contractor, injures himself on the job, chances are, they may come after your company for damages. How to protect yourself from unwarranted law suits:

  • ALWAYS require a certificate of insurance from ALL subcontractors. In this certificate, be sure the subcontractor shows proof of insurance for workers compensation. VERY IMPORTANT: Be sure it is noted on the certificate that the subcontractor himself is included in his workers compensation policy. Many times, a contractor will show proof of Workers Compensation insurance for his employees, but if he injures himself on the job-chances are he may seek damages under YOUR policy. 
  • Inquire about other jobs the subcontractor may be doing. If the subcontractor is only working for you (with no other jobs), chances are a court of law will deem this subcontractor as an employee-EVEN IF YOU PROVIDE THEM A 1099.
  • Maintain these certificates on file until at least the end of the policy term. You will most likely be audited and need to show proof of subcontractor coverages.

Considering the above, a cleaning crew that routinely cleans your home would NOT be considered an employee. The cleaning crew, presumably, has other clients and should have their own workers compensation insurance. A babysitter would most likely be categorized in the same manner-as an independent contractor, offering their services to many other families. A nanny, however, would absolutely be considered your employee. Even if you are engaged in a nanny share-the nanny is taking care of your child-acting as your employee. In states that mandate employers carry workers compensation insurance for one or more employees (Washington, DC being one of them), a workers compensation policy must be purchased. In states like NJ, a minimum workers compensation limit is included in your homeowner policy. Again, it is best to check with your Trusted Choice insurance agent to confirm if workers compensation insurance is needed, and if you currently have any coverage under your homeowner policy.


Go directly to jail. Do no pass go. Do not collect $200. 

Not exactly.

  1. If the state in which you conduct business finds you do not currently carry the mandated workers compensation insurance, you can incur a very LARGE fine. In fact, New Jersey fines employers $5,000 for the first 10 days, and an additional $5,000 for each 10 day period.
  2. If, upon audit, the insurance company finds you did not provide accurate coverage per the certificate of insurance provided by the subcontractors, you could be reclassified. This reclassification may result in a higher rate per payroll dollar and ultimately a very large audit premium.
  3. Should an employee is injured on the job and you do not have workers compensation coverage in place, YOU personally could be responsible for the loss wages, medical payments, etc. Sometimes a state will actually require the individual pay three times the penalty due to the negligence of not purchasing the initial policy.


  • Can your subcontractors provide a certificate of insurance providing proof of workers compensation insurance for not just their employees but also themselves?
  • Does that subcontractor work solely for you? Or does he have other jobs?
  • Can you provide those certificates of insurance upon audit?

Answer those three questions and you, my friend…can NAP. SNACK and PLAY all day long.


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