Workers Comp. & Employers Liability

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.

Why Workers’ Compensation Matters in the Horse Industry

Equine businesses are physical businesses. Grooms handle young horses, staff drive tractors and load trailers, working students muck out and ride, and everybody spends their day around animals that can weigh half a tonne and move without warning. That combination makes Workers’ Compensation one of the most important policies a barn will ever buy, and one of the most frequently neglected.

Workers’ Compensation provides benefits to employees who are injured or become ill during the course of, or due to, their employment. Employers Liability sits alongside it and responds to employment-related injury claims that fall outside the statutory compensation system. Together they protect the people who work for you and, just as importantly, protect the business from claims it could not otherwise absorb.

Who Counts as an Employee at a Barn

The hardest question in practice is rarely whether you need coverage — it is who the coverage has to include. A few situations recur constantly in equine operations and deserve to be flagged before an auditor or a claim raises them for you:

• Boarders trading labour for board. A boarder who cleans stalls in exchange for part of their stall rent creates a Workers’ Compensation issue. No money changes hands, but the trade has a value and is considered remuneration. The boarding stable would need Workers’ Compensation coverage, and the value of the board being exchanged should be declared on your payroll reports.
• Accommodation in exchange for work. The same principle applies to anyone receiving a place to live in return for cleaning stalls or doing other jobs around the ranch. The value of that housing is remuneration.
• Working students and part-time help. The insurance requirement in California is mandatory even where you have only one part-time employee.
• Out-of-state operations. Companies based outside California with employees hired in California must also carry California Workers’ Compensation Insurance.
• Unlicensed subcontractors. The Labor Code requires that any subcontractor without an active, valid contractor’s license be treated as an employee rather than an independent contractor.

Keeping Your Records Audit-Ready

Workers’ Compensation is an audited policy, which means the premium you finally pay is based on what your records show rather than on what you estimated at inception. Barns that keep clean records are rarely surprised at audit; barns that do not, frequently are.

A straightforward routine covers most of it. Keep accurate payroll records that include the declared value of any non-cash remuneration such as board or accommodation traded for work. Where a job requires a license, request a copy for your files. Obtain original Certificates of Workers’ Compensation Insurance, addressed to you, from every contractor and subcontractor who has employees or who subcontracts any portion of their work onward. If proper documentation is not maintained and presented to the auditors, we are obligated to charge premium for any liability that may exist under your Workers’ Compensation policy — so the paperwork is not an administrative formality, it is a direct cost.

Where Workers’ Compensation Sits in Your Wider Programme

Workers’ Compensation covers your employees. It does not cover the horses in your care or the members of the public on your property, and assuming otherwise is how gaps appear. A working equine business usually needs several policies operating together:

• Care, Custody & Control for non-owned horses that are boarded, trained or transported by you — the horses your general liability policy excludes.
• Equine Commercial Liability for injury or property damage suffered by third parties arising from your operations.
• A Farm and Ranch Commercial Package for the barns, structures, tack, equipment and vehicles used in the business.
• Excess or umbrella liability above the underlying policies where the exposures justify it.

Note that a family horse business relying on the personal liability section of a Homeowner policy has no cover at all for business pursuits, which are excluded. If you employ anyone, board anyone else’s horse or teach on your property, that structure needs revisiting.

Not Sure Where a Worker Falls?

If you are unsure whether someone working at your facility is an independent contractor or your employee, the safest course is to ask before the question is decided for you. Equine Insurance, a division of Parker General Insurance, has spent over 40 years working with farms, stables and training operations, and our agents can review how your staffing is structured and what your payroll reporting needs to show.

To start a review, request a free quote, complete the trainers and stable liability questionnaire, or read our frequently asked questions for more on equine business coverage.