In this crazy time of the COVID-19, it is not the time to cut corners to your detriment. While well intentioned contractors are always attempting to keep costs down to make a profit, they make some mistakes regarding workers’ compensation insurance.
Most common mistakes are:
- Certifying with the Contractors License Board that they do not need workers’ compensation insurance as they have no employees when they may have employees or use day laborers. .
- Not checking the sub-contractors to make sure they are properly licensed and or insured.
- Letting a sub-contractor who does not have workers’ compensation insurance bring an employee on the job.
- Hiring workers off the books or for cash.
The California Business and Profession Code sets up the standards and requirements of Licensed Contractors. I am sure that you are aware of the requirements that a licensed contractor with employees must have workers’ compensation insurance. What you may not know is that if you do not have workers’ compensation insurance and you have employees, your license is revoked by operation of law. You are not licensed anymore! You may not think that you have employees, however, again, by operation of law, if you hire an unlicensed individual to perform work, they are your employee. In addition, if you hire a licensed contractor to perform work and they have employees and do not have workers’ compensation insurance, the contractor and its employees become your employees for purposes of workers’ compensation.
To be safe, you must check the license of every subcontractor you hire. If their profile says that they do not have workers’ compensation insurance, they cannot bring employees onto the job. This task is time consuming, however, you need to protect yourself.
Even if you have workers’ compensation insurance, another problem that occurs is hiring either day laborers or having workers that are paid cash. There are frequently many reasons for doing this. You just hire a guy for a day or two and do not want to go through the hassle of putting them on the payroll or the worker asks to be paid cash because of immigration status or other problems. (no good deed goes unpunished) This not only leads to possible insurance fraud for failing to report payroll, it also sets you up for a wage and hour claim with the Department of Labor. Frequently after leaving your employ, these individuals go to a legal clinic and are advise of how to file a complaint. They will complain about not receiving rest breaks or meal breaks. They will also complain about not receiving overtime pay and not receiving a pay stub. There are significant penalties that go along with all these violations.
If you hire someone as a sub that does not have a license, they become your employee by operation of law. This also creates a problem if there is an injury. If a workers’ compensation claim is filed, the client or homeowner can be joined as the employer if you do not have workers’ compensation insurance.
I have seen situations where a homeowner obtains a contractor’s license information from the Contractors License Board, waits until the end of the job and then refuses to pay the contractor claiming that the contractor brought employees onto the job and since they certified that they didn’t have employees and no workers’ compensation, their license is revoked.
It is always better to be safe than sorry.
Recap on what to do:
- Only use licensed subcontractors: If you do not know a sub, check them out at the CLSB. If they do not have workers’ compensation coverage, do not let them bring an employee on the job.
- Keep the license information for all subs as your workers compensation carrier will charge premium for any sub that you cannot verify is licensed.
- Do not pay cash to employees. It will come back to bite you. However, if you do, report all payroll to your workers’ compensation carrier even if cash.
- Keep timecards for all employees showing lunch breaks. Have the employees sign the timecards.
- Make sure employees have 15-minute breaks both morning and afternoon and have it documented
