Workmans' Compensation Law

[Dick Seibert]

Has anybody found a way around the problem of small working subcontractors that are themselves exempt from Workmans' Compensation Insurance by virtue of having no employees, and the general contractor being held liable for employment taxes on the entire amount of their subcontracts? As it is, we can't afford to subcontract work to small, working subcontractors, unless somebody figures out a legal workaround. The usual solution is the subcontractor buys a policy that he can never use just to be able to give the general a certificate, but this is dumb because the sub can't use the insurance if he wanted to (unless he's incorporated and pays himself a salary), and I have one that refuses to do so. He claims that I am the only general that he works for that is making an issue of this.

[Peter Bush CGR, CGB]

Dick, in Tennessee we use an I-18. See attachment.


I-18

[Fred]

Dick:
Are you kidding! Why is the home owner not charged for the the entire contract amount on work I do as a GP since I'm exempt also and have no employee's?
Fred

[Dick Seibert]

Peter:

Thanks, I have downloaded and printed out the form, and will run it by the Comp people in California.

Fred:

Don't give them any ideas!

[Stephen Hazlett]

Dick,

In Ohio what happens is the following-----

the sub makes his initial application to Workers Comp and it costs about $50 to open an account.Twice a year WC will send the sub an updated valid cert.If the sub has no employees he never pays another nickel to WC---but every 6 months he will continue to recieve updated certs.
unless the sub has been paying himself a straight wage and paying WC based on that wage he will never collect if injured.

If the sub did this & had an additional liability policy I would not be too concerned.The liability policy for an artisan contractor working alone is not very expensive.

[Dick Seibert]

Steve:

That's the unfair part of all of this, Subs are being forced to buy a policy that they can't possibly use if they do get hurt. I am going to be calling the State on this, and I'll tell them what Tennessee, Ohio and Texas are doing. I am even going to try submitting Tennessee's Form I 18 and see if it can be modified for California.

[Dick Seibert]

I guess I've got a solution. My Compensation Broker says to download the page from the Contactors' Board website wherein the contractor states that he is exempt, have the sub fill out a declaration that he doesn't hire any employees on your projects and have him sign that he is exempt from the law, and hope that the auditor accepts it. I have made several copies of Peter's Tennessee form (thanks Peter) and am going to use it.

[Peter Bush]

Glad I could help, Dick. My insurance auditor is the one who turned me on to the I-18 Forms. I have been using them for several years now.

[Dick Seibert]

Peter:

A lot of people are going to be quite surprised to get Tennessee forms to fill out here in California. Especially when I tell them that Tennessee is way ahead of on this one. They'll drop their Chardonnay glasses. Thanks again Peter, this is the kind of help that makes coming to these forums profitable for all of us.

[Lance Sniatkowski]

Dick,

The only way around it here in Cali is called corporation. Let me know what you find out because I want to hire BUT WC costs are ridiculous!

[Lance Sniatkowski]

I am having trouble downloading the I-18 form. Dick can you please email it to me? Thanx!

[Dick Seibert]

Lance:

I had problems also, it comes up beautiful on the computer but it doesn't print out. I downloaded it to Visioneer and printed it from there. It is shown as a .max file and I can't seem to change the extension and you need PaperPort to open a .max. If you have PaperPort let me know, and I'll send it to you, otherwise e-mail me your fax number and I'll fax it to you.

Incorporation won't help, but the only way around the 52% workman’s' Comp rates is to just not hire anybody under $22 an hour. The Insurance companies have found that the majority of the claims are from low paid people that earn less than $22 an hour. Why do think there are so many paper contractors subcontracting everything? With our new upcoming Framing Carpentry and Finish Carpentry license classifications we are in effect licensing carpenters so everybody can work for himself and avoid the Workmans' Compensation laws.

The real problem here is twofold, 1) Slackers that don’t want to work and file claims for soft tissue injuries that can neither be proven or dissproven, and 2) The horrendous costs of the Medical Industry. I have read that 50% the underlying cost of everything that we buy is rooted in medical costs. Form the medical costs of the miners that mine the steel going into cars to the guys cutting trees for our houses, 50% of everything is traceable to the medical industry. I’ve also read that medical doctor incompetence kills more Americans every year than all the deaths attributed to drugs, tobacco and alcohol combined, but we aren’t doing anything about this corrupt industry that is ripping us all of and destroying us economically. And they say we contractors rip people off and they need to regulate us!

[GaryR&R]

Dick,

One way to get around it, is to have your customer pay the electrician, plumber, etc. directly. Add your subs markup to your lump sum contract, or if you are doing cost plus show it as supervisory fee. I know it works for guys here because they do it all the time. I personally never did it that way. I always pay the subs. But it sounds like a good idea. Here in NY a sole proprietor can waive Workers Comp, also members of a Corp or LLC can also waive Workers Comp, but only if there are two or less Corporate members.

Here is the problem, let’s say a two member Corporation that is a licensed contractor and has taken the Comp waiver hires a sub, an electrician who is a one man show, no employees and he himself also has a Comp waive. The Contractor will still be liable for the sub regardless of these waivers. The waivers are a joke. If you want to sleep at night everyone involved must be covered. Make sure you get a copy of your subs certificate. But here we are back at square one. I know one electrician who wants to be paid directly by the customer. It also eliminates the 1099.

It’s funny, (not really laughing) but my accountant has met many accounts who practice in California and he said they are screaming out there about this mess. I really don’t think there is a way around it except what I have mentioned.

Any other thoughts on this would be great.

Regards, Gary