What Is the Middle Market Employer's Obligation
West, Kathyrn Z., Risk Management
Employers looking to hold down employee benefit and payroll costs can avoid these expenses with contract labor, subcontractors, leased workers or freelancers. While these arrangements go by different names and have different insurance implications, they are commonplace at companies of all sizes. True, if you do the math, you can save some benefit costs by paying a worker on a project basis. But when it comes to workers' compensation, it pays to be careful. As a state statute, workers' compensation is a mandated coverage. Employers who don't provide coverage parallel to their particular state statute may have significant exposures and penalties.
A Case for Comp
"Workers' compensation is a common problem for many middle market employers," says Dan Goldapp, chief executive of Acordia of Minnesota. Acordia, an insurance brokerage that specializes in serving the risk management and insurance needs of middle market companies, draws on the experience of its offices across the United States. "Workers' compensation statutes vary from state to state on issues that can have an important impact on how a business handles the risks encountered with contract labor or subcontractor agreements."
Consider the construction company that works with a cast of subcontractors or the trucking company that enlists a network of owner operators. Such business practices may be commonplace for these particular industries, but that may not exempt a company from a given state's workers' compensation compliance requirements.
"How a particular state treats contract labor can be very important," says John Moore, director of marketing for Acordia in Minneapolis. In the case of trucking owner operators who cross one state line after another, he suggests that the workers' compensation rules for each state where the operations are conducted be examined. Construction companies should be advised that some states have entire sections of their workers' compensation regulations devoted to subcontracting.
For a complete, state-by-state run-down on workers' compensation, the U.S. Chamber of Commerce produces "The Analysis of Workers' Compensation Laws" on an annual basis. (For information, call 202-463-5533.) This will provide middle market employers with a quick reference for the particular regulations required in the states in which they do business. In addition, an insurance broker can alert a company to some of the intricacies and advise what coverage should be provided. …