Workers Compensation Insurance

I recently had a frustrating conversation with my Workers Compensation insurance vendor. I don't really need WC insurance for myself, but I do for my son's wages, and on occasion my customers will ask if I have it. A few clients have requested I provide a certificate of insurance for a project. Last week I learned why this is so important.

It all centers around the definition of the word employee. I am an employee of White Light Computing, in addition to my ownership in the company. As the company president I get paid a modest salary. For each US$1000 of salary I get paid, the company pays US$0.80 in premium for the insurance in case I get hurt on the job and cannot perform my duties as a software developer. Just in case you are wondering, roofers are one of the most expensive jobs to insure: approximately US13.00+ per US$1000 salary. So we have it cheap.

The annual audit arrives and the paperwork I fill out asks me the usual questions about the business, how many employees, and how much I pay them. This year I also had to provide details about subcontractors and how much I paid them. Previous years asked if I had subcontractors, but never the amount of money involved.

This triggered a long discussion with the auditing department. They asked me to get certificates of insurance from each of the subcontractors. Several of them are just moonlighting at night and won't have the coverage, but I do business with a couple of companies. So I spent an enormous amount of time documenting my subcontractors, the work they did, the time periods when they worked, and tracked down as many of the certificates as I could. I hate wasting time on this administrivia. Frankly it would have been better financially to pay the extra premium and spent all this time billing on projects that are way more fun to work on, but the principle of the matter is this: I dislike insurance companies and certainly don't want them double-dipping on me and the companies I have hired.

The reason I had to do all this work is to not get charged the extra premium because the insurance company was going to consider each subcontractor as an employee. They did not care if my contract states they are not employees of my company and responsible for their own taxes, insurance, etc. They did not care that I do not have them on my payroll and that my payroll service has never paid them a dime. They only care that they *can* charge me a premium and it is my responsibility to prove otherwise. Guilty until proven innocent. Their definition of employee is anyone I pay and cannot prove they have their own Workers Compensation policy.

I asked them a simple question: if one of my subcontractors was hurt while working on their site (not mine), would I be able to make a claim? The answer really was not unexpected, but really seems unbalanced. "Sir, it does not matter where they were hurt, they are subcontractors, not employees, and thus we would fight to the death to not pay the claim." I thanked them for the clarification and double-talk. They were also kind enough to inform me that I would find all their competitors do the exact same thing. Having written software for the WC industry I know how bad employers get the short end of the stick.

Let's review the rules of the insurance game: business owners always lose and there is absolutely no way to play the game where you can win, or have it even fair. Thanks for the clarification, not!

So for all the employees out there who read my humble writings - be thankful for your job and all the little things your employer does on your behalf that lowers the profitability of the company you work for, and ultimately lowers the wages you can get paid. For all the business owners and independent folk: I know, nothing new here. Just me having another stressful business moment.