Worker’s Compensation provides benefits to employees who are injured or become ill during the course of or due to employment.

In California, every employer is required to carry insurance to cover the cost of occupational injuries and illnesses. This insurance requirement is mandatory even if you have only one part-time employee. Companies based out of state with employees hired in California must also have California Workers’ Compensation Insurance.

State law requires that business owners have Workers’ Compensation Insurance for most situations where they pay or otherwise compensate employees for their work.

Determining who is an employee, however, can be challenging. Some employers might feel that the person they have hired is an independent contractor and that no coverage is needed for that person.

Several factors are considered in determining who is an employee and who is an independent contractor.

California courts and state agencies typically use a number of tests to determine whether an individual is an employee or an independent contractor. A crucial factor in determining employment status is the employer’s right to direct and control the work being performed. If you have the right to control the manner and means of the work performed, the courts have routinely decided that the “independent contractor” is actually your “employee”.

There are many other considerations, but the answer to any one factor does not necessarily determine status. Among them, whether the person performing the service:

• Has the right to terminate the relationship at will.
• Is engaged in a distinct occupation or business.
• Has voluntarily chosen the burdens and benefits of self-employment.
• Has the skill required in the particular occupation.
• Supplies the instrumentalities, tools, the work location, and carries the license or certificate required to perform the work.
• Has the right to hire and terminate others.
• Is paid by the time worked, or by piece rate.
• Works under the direction of the employer or by a specialist without supervision.

Other factors include:

• Whether the services are a part of the regular business of the employer.
• Whether the parties believe that they are creating the relationship of employer/employee or employer/independent contractor.

If there are questions, the Labor Code assumes a worker is an employee for workers’ compensation purposes. The burden of proof to support the independent contractor status of a worker falls on the employer. The Labor Code also requires that any subcontractor who does not have an active valid contractor’s license be treated as an employee, not an independent contractor. However, even though a worker may have a valid license, the worker may still be an employee depending on the factors as discussed above.

A good rule of thumb: as an employer, always protect yourself.

• If certain jobs require a license, request a copy for your records.
• Obtain original Certificates of Workers’ Compensation Insurance addressed to you from all contractors and subcontractors who have employees or who, in turn, subcontract any portion of their work.

If proper documentation is not maintained and presented to our auditors, we are obligated to charge premium for any liability that may exist under your workers’ compensation insurance policy.

If you are unsure of your worker’s status as either an independent contractor or your employee, please contact Equine Insurance.