What are the liabilities of hiring someone without workers comp?

Question

I work with a handyman guy who has general liability insurance but I don't think he has worker's comp. What am I exposing myself to liability wise? He does all sorts of interior and exterior work and inspect homes for me. If he falls off a ladder or breaks his leg while working on my property, am I liable for his medical payments, and am I exposed to any other liability assuming he becomes disabled? What if it's an unknown deficiency of the house that causes his injury like roof collapsed? I carry standard home owners insurance. Also, what happens if his other workers hurt themselves on my property? I'm assuming none of them carry worker's comp as well might not even carry liability insurance.

Jill F. · Answer

I've wondered about this too, in Ohio you would only have 'workers compensation' for your own direct w-2 employees.

If you hired a company or a handyman that is not incorporated (for example a sole propriator or an LLC), then you are required to 1099 them if you pay them over $600 in a year but you are not an employer, you are a customer. The company is responsible for maintaining their own workers compensation coverage for employees but I don't believe that an owner/operator is required to provide themselves with worker's compensation insurance. I'm not sure if you as a property owner would be found negligent in court if you contracted with a legal company and one of their employees was injured at your property and the company you hired did not have worker's compensation insurance. Would you be considered negligent or partially negligent for not checking? (I don't know). Additionally, I have read that (in Ohio) if the injured party is found to be more than 50% responsible for the accident then they can't recover damages in ohio in most cases.

In Ohio, there is not a state level licensing requirement for contractors other than HVAC, electrical, and plumbing.  GCs and 'remodelers' sometimes need to register with a particular county or city but there is no licensing requirement. For roofing, most of the cities around here only require a permit for a more than 20% replacement; So in the tragic thread where the tenant/roofer was hurt, in Ohio, he would not have had to be licensed and no permit would have been required for the job. Further around here, many (probably most) plumbing and hvac companies pretty flagrantly ignore county permitting requirements for routine replacements of water heaters and furnaces and the like and even for more extensive remodeling work permitting requirements are often ignored. Just a couple of days ago there was a parking garage collapse at a Lakewood apartment building where no permits had been pulled and contractors were on site when it happened. Who is more culpable, the company providing the service or the purchaser of the service? (I think probably the former but I'm sure there is going to be blame for everyone in this situation); fortunately in this case no one was hurt, but 24 cars were buried in the collapse and the apartment building was evacuated. It's going to be expensive.

States like Ohio don't want to 'over regulate' small business owner/operators but when a small business owner/operator is hurt the rules seem kind of murky when there is no insurance to pay for a serious injury or  damage.

Bruce Woodruff · Answer

Perfect timing since there is someone else now wishing she had asked this question: https://www.biggerpockets.com/...

Yes you are liable for everything that happens. If the Business Owner/Contr does not have Workers Comp on his employees and they get hurt, it will be on you. The injured persons lawyer will come after you for all medical damages plus lost wages, and if they are disabled and cannot work for the rest of their life, guess who the jury will make pay? You.

And then there are the legal penalties.......

Just hire a good GC that is licensed/bonded/insured. Check him out to make sure coverages are adequate and current.

John Mocker · Answer

Allen,

You need to review with your agent and attorney the Workers Comp. laws in KS.  If that handyman injures himself doing work for you his attorney will likely attempt to file a Workers Comp. claim.  At that point the State Worker Comp. board will have to determine if "at the time of the accident" if that person was an employee of yours.  They will probably review:

1. how was the person paid (hourly, weekly, monthly, or by the completed job

2. did they have insurance

3. do they work for others

4. who directed the work

5. who supplied the tools & materials

etc....

If that person is deemed to be an employee, then you will be responsible for what Workers Comp would pay (lost earnings & medical bills normally).  If they are not deemed to be an employee, the next thing to be determined is are you any way at fault for the accident (ie. condition of the property contributed to it, you required them to work in unsafe conditions, etc.)

Waylon Zook · Answer

@Allen L. I am in IN and run a small construction business. Since my dad and i are both owners we can legally operate without workmans comp however if we have employees we are required to carry for them.

IN has a state specific form that I need to fill out and pay for each year indicating that I as an owner am exempt from workmans comp.

The state you are in may have different laws.

Bruce Woodruff · Answer

You certainly can be held liable.

https://pennygeeks.com/blog/am...

Bruce Woodruff · Answer

Right, the license has nothing to do with Workers Comp. Just saying that you should only hire licensed contractors anyway. In cases where they need one that is.

Ryan Seib · Answer

In some states everyone has workers comp by default through a state uninsured employers fund. If a business owner fails to buy insurance, workers comp still covers losses, but the business owner has to pay penalties and could be subject to jail time and so on. Also the workers comp statutes in some states only protect the direct employer, not a client of the employer, from a lawsuit. So the workers comp system actually functions to limit claims by employees against employers. If you are not the employer, then someone else's employees may have claims against you. Workers comp will not cover those unless you are able to qualify as an employer by definition. That could happen if you work with a temp agency for example.

So in short the failure of a business you hire to obtain workers comp could be a problem in some states. In general, you are only indirectly affected by it because you are choosing to hire a company that probably cuts corners.

Bruce Woodruff · Answer

@Allen L. Plus where I come from (Cali) everyone has to be licensed....flooring guys, painters, tile guys, counters, everyone. Although I am generally not fan of too much Government interference, I think in this case it protects the consumer. And of course puts a lot of money in the coffers....

Allen L. · Answer

@Bruce Woodruff I get hiring someone that has general liability insurance and workers comp, but why does it matter if he’s licensed? If I need permit pulled I’ll work with a licensed contractor but for the most part my rehabs are cosmetic.

What are the liabilities of hiring someone without workers comp?

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