I just started selling off my rentals, and in doing so I have to employ a team of workers to fix up the houses, nothing crazy, but people are working on ladders and occasionally using saws.
My question is what type of insurance do you have to protect yourself if an hourly worker is hurt on the job? I have talked to my insurance agent, and there are quite a bit of different options. I have a crew of 4 guys working, that are being paid hourly, and I would like to hear peoples thoughts on the types of insurance they have, or recommend, and also how did you structure your workers (1099 vs employee) everything I read says it is very difficult for a 1099 employee to hold up in court if they work normal hours, and use your tools.
All information is appreciated!
If you hire a company to do the repairs and they pay the employees then you need to see proof that the company has General Liability, Business Auto, and especially WORKERS COMPENSATION.
If you are paying the workers directly I feel that you need to have a workers comp. policy in force. If you are treating them as subcontractors but paying them hourly, there is a good chance that, if they get injured their Attorney will try to get it covered by Workers compensation. Then it goes to the state workers compensation board to determine if they were employees under the state workers comp. laws.
If they are determined to be employees and you have no Workers Compensation coverage, you would probably be facing fines and you would be liable for the Workers Comp. benefits that the injured employee would have been entitled to.
You should check with a local attorney and agent that are experienced in the construction industry if you are going to continue to pay them as 1099's. There are ways to set up your relationships with the subcontractors that make it less likely that they will be deemed to be employees. Things like:
- who directs the work
- are there contracts in place for the work
- how are the contractors paid (it is generally better to pay them on a job basis and from an invoice they present)
- who provides the tools
- do they have their own insurance
- do they advertise
- do they work for others
Those are just some of the tests that could be used. The workers comp. boards are not the only ones with tests of who is a subcontractor. The IRS, State Labor boards, etc. also will evaluate the question of employee vs independent contractor. Since there is more tax revenue from them being an employee those entities have tightened the tests they use.