A general rule of thumb:
If you have employees, you are required to purchase Worker’s Compensation Insurance for your business.
Worker’s Compensation Insurance covers your business when an employee is injured on the job and it is required by law. This insurance provides coverage for an employee if he or she is injured on the job and provides medical expense coverage, disability, rehabilitation, life insurance, and lost wages. Worker’s Compensation coverage protects the employer as well as the employee. If an employee is injured on the job, Worker’s Compensation could be their only means of remuneration. Further, the employee cannot sue the employer for further damages, unless the employer was extremely negligent regarding the employee’s work safety.
Without Worker’s Compensation insurance, the employee could be entitled to as much as three times the amount for which he would have been awarded under a Worker’s Compensation insurance policy. Plus, the employee is allowed to sue the employer for damages. There are also tremendous fines from the NH Department of Labor for not carrying Worker’s Compensation to cover your employees, whether an employee is injured or not.
One of the biggest misconceptions about Worker’s Compensation is that you are not responsible for the injuries sustained by an independent contractor while he or she is working for you. If the independent contractor does not have Worker’s Compensation insurance coverage for their own employees, you could be responsible to provide Worker’s Compensation for those employees. You also need to be aware that the NH Department of Labor (NHDL) has rules regarding independent contractors. Do not fall into the assumption that all independent contractors are not employees. The NHDL has 7 questions to help you determine a true employee’s status and if you must provide Worker’s Compensation for this employee.
The 7 questions that the NHDL uses to determine a worker’s true status are:
- The person possesses or has applied for a federal employer identification number or social security number, or in the alternative, has agreed in writing to carry out the responsibilities imposed on employers under this chapter.
- The person has control and discretion over the means and manner of performance of the work, in that the result of the work, rather than the means or manner by which the work is performed, is the primary element bargained for by the employer.
- The person has control over the time when the work is performed, and the time of performance is not dictated by the employer. However, this shall not prohibit the employer from reaching an agreement with the person as to completion schedule, range of work hours, and maximum number of work hours to be provided by the person, and in the case of entertainment, the time such entertainment is to be presented.
- The person hires and pays the person’s assistants, if any, and to the extent such assistants are employees, supervises the details of the assistants’ work.
- The person holds himself or herself out to be in business for himself or herself or is registered with the state as a business and the person has continuing or recurring business liabilities or obligations.
- The person is responsible for satisfactory completion of work and may be held contractually responsible for failure to complete the work.
- The person is not required to work exclusively for the employer.
“No” answers to the questions, indicate that an employer – employee relationship exists and Worker’s Compensation insurance must be provided. If you do have an independent contractor situation, make sure you obtain a certificate of insurance showing that the independent contractor carries his own Worker’s Compensation insurance. You should also you receive a bill for services rendered before you pay because the bill will further prove the independent contractor status of your relationship. Employees don’t normally provide invoices to their employer for work done.
Another caution is that up to three owners/officers of the business have the option of excluding themselves from Worker’s Compensation insurance. If you decide not to carry Worker’s Compensation coverage as an owner/officer, make sure to carry health and disability insurances that will cover you in case of a work-related accident. Some health insurance companies exclude this coverage for self-employed business owners.
We at Brownell Insurance are very well-versed in New Hampshire laws regarding Workmen’s Compensation Insurance. Please call us at our Londonderry office @ 603–437–1992 or at our Hampton office @ 603–296–0077. We are glad to help you with any of your Workmen’s Compensation’s questions or concerns. Help is just a phone call away.
