Most employers have a pretty good understanding of Kentucky’s Workers’ Compensation Act. Most know they must accord certain benefits to employees who suffer disabling work-related injuries. Medical expenses and continued wages are among them.

An employer’s liability under the act is well founded. Employers should provide financial support to an injured employee while disabled from work. No doubt, this assistance can be expensive. But that shouldn’t matter. Any employer worth his salt should care more for the injured employee’s recovery than for the costs of the recovery. Employers should appreciate the employee’s sacrifice and try to help that person any way they can.

However, workers’ comp liability does not end with employees. In certain cases, an employer can have workers’ comp liability to others, including people working for another business. Since there is no employment relationship in these cases, no employer wants to take on this additional liability. To avoid this liability, employers must be aware of the situations that create exposure. And they also need to know what to do to get around it.

There are two situations that give rise to additional liability.

Independent contractor

The first situation comes up when an employer hires an independent contractor, usually to fix a specific problem. A copy machine won’t work, or a toilet backs up. As a general rule, employers don’t have workers’ comp liability to independent contractors. However, if an employer contracts with someone who does not legally qualify as an independent contractor, there is liability. Resolving this issue can be troublesome.

The common definition of the term “independent contractor” is simple enough. It’s someone who provides a specific service during a scheduled period for a defined price. Unfortunately, the legal definition is not so simple. The legal definition is more a process than a definition. It calls for an analysis of various factors that are present in each case. On many occasions, the legal definition gets down to a judgment call.

On occasion, the determination is an easy one. For example, most would agree that a plumber or an electrician would qualify as an independent contractor. But what about an individual hired to clean the offices on Tuesdays and Thursdays? Or a person hired to cut the grass? These guys certainly provide a specific service during a scheduled period for a defined price. Yet they may not qualify as independent contractors.

Another business

The second situation comes into play when an employer contracts with another business to perform “regular and recurrent work” in the employer’s operations. These situations come up in the construction and manufacturing industry. A general contractor hires a subcontractor to perform some of the construction work. Or, a manufacturer contracts with a company to perform regular and recurrent maintenance on production equipment. In each of these cases, the employer must assume workers’ comp liability to all employees who perform under those contracts.

Employers should also note that these situations also give rise to another type of liability — for additional workers’ comp premiums. Under most workers’ comp policies, the carrier has the right to charge additional premiums for an employer’s potential exposure. Since these situations create potential exposure, an employer can expect to pay more for coverage.

However, employers need not despair. There is a simple solution to all of this liability. If you engage an independent contractor or another business under these circumstances, make sure everyone is covered under a current workers’ comp policy. If everyone is covered, the employer is off the hook.

 

 

Printed in Four Rivers Business Journal (Paducah Sun), December 2008.