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  1. #1
    Join Date
    Jul 2009

    Question Does Workers Comp Cover Business Owners

    My question involves workers compensation law for the state of: North Carolina. I've started a cleaning business with a partner - we are co-owners. We are licensed, bonded and insured. We applied to do apartment move outs at a pretty good sized apartment complex and were told that they would not even consider us without carrying WC. We explained to the lady that there was just the two of us and under NC law we were exempt and she said the management company insisted on it anyway. I asked around on some of the professional cleaning forums and was told by several people that the policy (ghost) was useless as it did not cover the owners. Is this true and if so how do we go about getting these jobs without it? I don't want to go over the apt manager's head but I think she may have been misinformed. Is it true that we would not be covered as we are not technically employees?


  2. #2
    Join Date
    Mar 2008

    Default Re: Does Workers Comp Cover Business Owners

    I owned an "auto repair & Tire wholesale/resale" business in NY, and I handled issues with the WC policy, as well as accidents involving WC, as well as issues with subcontractors. Although NY rules may not be exactly the same as NC rules, there are much similarities.

    - Yes, it's true, when I set up my company, I can elect to "exempt" partners from WC because I purchased a very comprehensive health insurance package, so if I'm injured, I'm covered. I exempted myself.

    - In our business, we use many subcontractors to do work on our customers cars, from electrical to transmission repairs. WC does an annual audit, and in this audit, we are required to submit a list of:

    -- Names of subcontractors we use.
    -- The WC policy numbers for each of them.

    - What happens in the audit if we hired a subcontractor who told us he does not have a WC policy because the partners are exempt?? Well, our WC carrier would have us tally up the dollar value of all his billings and apply the WC rate to them as if the they were our workers. One year, I got a humongus added billing because some of my subcontractors for one reason or another had no WC policies.

    - Some subcontractors come to work at our site, and what happens if they are injured, and they get taken to the hospital directly as it happened once?? The hospital finance office wants to know what they were doing, and where they were working at. The injured subcontractor with no WC coverage gave them my name, my firm's name and the hospital wanted to send ME the bill (eventually turned out to be over $25,000) to pay unless he is covered under my WC policy.

    - What does my WC carrier have to say about all this?? Unless this injured worker is on my payroll, they will not pay. But I said "wait a minute, I get surcharged in the annual audit". The answer "so what, your should only be dealing with subcontractors with WC policies".

    - What did I finally do?? My lawyer had no answer. I put his guy on the payroll so I can pay a few hundred in "employment taxes", and then gave the hospital MY WC policy number and get the hospital off my back.

    - What's the bottom line?? People doing work in my place should either be employees covered under MY WC policy, or subcontractors under THEIR WC policy. If they were working on my site, there is NO WC coverage, because the subcontractor is exempt, then my firm is responsible, and under NY State laws, the person holding the title of President or Treasurer is futhermore held PERSONALLY responsible if MY firm goes bankrupt because of this. So, do they mean business?? I think so.

    And if NC has similar rules as NY, what are the consequences to the management company hiring you with NO WC policy??

    1) The management company WC carrier would compute how much they paid you and surcharge the managmement firm's WC as if you were on their payroll. They'll get to pay the premium and get NO coverage as I pointed out above. It's only a penalty.

    2) If you got injured doing a move-out, the WC carrier doesn't want to hear anything about it, and the hospital would call the management company up and say "hey, where do you want us to mail the bill"??

    3) If the management company is financially unable to pay, if it's a large bill that bankrupted it, then the owner of it is personally responsible.

    Believe me, I went through this nightmare, and if the head of the management company should be fired if he does not insist on WC policies for all subcontractors.

    Now, do you believe them if they tell you they want YOU to be covered??

  3. #3
    Join Date
    Dec 2007

    Default Re: Does Workers Comp Cover Business Owners

    Although you may not have employees, the complex would be very unwise to contract with you without your having some type of liability insurance that would protect them if you were injured during the course of performing duties under your contract. Contact your attorney or accountant.

  4. #4
    Join Date
    Jul 2007

    Default Re: Does Workers Comp Cover Business Owners

    The management company can implement what ever policies it believes are in its best interest. It may consider any business too small for WC insurance to be too risky to do business with simply because it is too small. There's not much you can do to change their requirements. However, it is also not unreasonable to wonder if a lower level employee has misunderstood the policy. I'd try to get a clarification in the least agressive way you can devise to approach it.

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