Workers’ Compensation Insurance
Whether your Arizona company is engaged in the Construction Industry, the Retail or Wholesale Sector, the Professional or Consulting Field, or one of many different businesses that make up the Arizona economy, one thing that is an absolute is that if your company has employees, then having Arizona Workers Compensation Insurance is not only a must, it is the law in Arizona.
Workers’ Compensation insurance provides coverage for your employees’ medical expenses and at least some portion of their lost wages if they are injured on the job. In most states, it is a requirement for companies to purchase worker’s compensation insurance for their employees. Worker’s compensation insurance is a form of state-regulated, no-fault liability insurance which covers employees’ medical expenses, lost wages, rehabilitation services, and death resulting from a work-related injury or illness. If an employee is injured in the workplace, regardless of fault, they are then eligible for worker’s compensation benefits. When an injury or illness occurs while performing one’s job duties or conducting an employer’s business, employees are entitled to receive worker’s compensation benefits. Additionally, this coverage protects an employer from being sued by an injured worker in most cases. Please note that each state has a different set of rules regarding worker’s compensation, so it is important that you discuss these differences with your insurance broker to be sure you are in compliance.
When sitting down with our current or potential clients to discuss their business liability insurance needs in Phoenix, it immediately becomes very obvious that this is one part of the insurance program that they are really uncomfortable discussing. The fact of the matter is that if this type of Phoenix business insurance coverage is not thoroughly discussed regarding all employee’s duties to be sure that all the appropriate classification codes that apply will be included on their policy, it could come back to negatively affect the company with regard to premiums and risk evaluation.
Many times after we present the client with a quote for workers’ compensation insurance with all the different codes they will be using for the next year and what their rates will be, they will say, I will just hire independent contractors and simply 1099 them, therefore, I won’t have to pay for any AZ Workers’ Compensation insurance. Please be advised, it is not that simple. Workers’ Comp carriers have very strict guidelines on what constitutes an independent contractor versus an employee. Here are some guidelines on what constitutes an employee and what constitutes an Independent Contractor:
1) Their relationship is one that is continuous with the employer.
2) They can quit at any point and will not face any liability for doing so.
3) Their schedule is set about where, how, and when they go to work.
4) All their materials and tools are supplied by the employer.
5) All their training is supplied by the employer
1) They maintain their own tools; also, they can supervise, hire, and pay assistants.
2) They can set their own work schedule and work when they decide it’s best for them.
3) The work they are doing for you is the same as they perform for others.
4) For the work they perform, it can make them money or lose them money.
5) They have a business license.
Now, please understand that these are only guidelines, and each worker’s comp carrier will have their own rules with regard to how independent contractors are classified. We suggest that you reach out to the carrier and request a clear set of guidelines from them regarding the use of independent contractors, so your company will not have any surprises when you receive your worker’s compensation premium invoices.
PJO Insurance Brokerage has access to several workers’ comp carriers and has markets for those hard to place companies in the construction industry. We invite you to either call or email us, and let PJO Insurance Brokerage find the right carrier to fit your company’s workers’ comp needs.