Workers’ Compensation Insurance: What Is It and Who Needs It?
In the last of our blogs about all the different types of insurance that affect commercial contractors and their owner/developer clients, we’ll take a look at workers’ compensation insurance. From an historic point of few, workers’ comp was developed in the early 20th century to protect businesses from being sued by injured workers, and doing the right thing by injured workers and their families. Today, modern workers’ compensation laws provide fairly comprehensive and specific benefits to workers who suffer workplace injury or illness. Benefits include medical expenses, death benefits, lost wages, and vocational rehabilitation. On the face of it, that sounds simple enough, but from this point on, workers’ comp gets much more complicated.
Workers’ Compensation Differs From State to State, and Employee to Employee
Workers’ compensation coverage is state-mandated by statutes, so it varies from state to state. Therefore, a national company has different coverage and policies in each state where it does business. Workers’ comp insurance rates are set based on occupational risk, and as you can imagine, the construction trades are at higher risk for jobsite injuries than most other types of businesses. Just to make things more complicated, each employee, based on the risk factor of their job, is classified and assigned a risk rating. For example, administrative support personnel for a construction company who work in an office environment are rated at less risk than workers who spend most of their time at jobsites. Only an insurance agent experienced in workers’ comp law in your state can help you figure this all out.
Workers’ compensation insurance is a significant cost to companies; therefore incentives exist to have a safety program in place to prevent work-related injuries. Over time, companies earn what is called a loss ratio (injuries/losses divided by premiums). Come renewal time, a loss ratio under 50% gives a company strong negotiating leverage to lower premiums with the insurer.
Workers’ Compensation Law in Florida
Florida law requires an employer in the construction industry who employs one or more part or full-time employees to obtain workers’ compensation coverage. Sole proprietors, partners, members of a limited liability company (LLC) who own at least 10% of the business, and corporate officers are considered employees. Corporate officers, and members of an LLC who own at least 10% of the business, may elect to exempt themselves from the coverage requirements.
A construction industry contractor, who sub-contracts all or part of their work, must obtain proof of workers’ compensation coverage or a Certificate of Election to be exempt from all sub-contractors, prior to work being done. If the sub-contractor is not covered or exempt, for purposes of workers’ compensation coverage, the sub-contractor’s employees shall become the employees of the contractor. The general contractor’s responsibility is to pay workers’ compensation benefits to the sub-contractor and its employees.
An employer in the non-construction industry who employs four or more part or full-time employees must obtain workers’ compensation coverage. Corporate officers and members of an LLC who own at least 10% of the business are considered employees, unless they elect to exempt themselves from the coverage requirements. Sole proprietors and partners in the non-construction industry are not considered to be employees unless they elect to be employees.
Failure to carry workers’ compensation insurance or otherwise meet the state’s regulations in this regard can leave an employer exposed not only to paying these benefits out of pocket, but also to paying penalties levied by the state.
GSD Contracting’s Exceptional Safety Record is an Advantage For Our Clients
When bidding for a contract, general contractors have to cover their overhead or cost of doing business. Workers’ comp insurance is one of those costs. Because of the safety program we’ve had in place for years, we’ve earned an exceptionally low loss ratio that, in turn, makes our workers’ comp rates lower than most commercial contractors. That’s a savings we can pass on when bidding on your contract. Contact us at 954-961-4222 or online if you’d like to know more about workers’ comp and our track record.