The beauty of outsourcing work to independent contractors is that you get the benefit of the services and no responsibilities, except for timely payment, right? While you might need workers’ compensation insurance in case your employees are injured on the job, you have no such responsibility toward your independent contractors, right? If the independent contractor sustains in an injury while on your premises doing work for you, well that’s their problem, isn’t it? Isn’t that why you’re using independent contractors?  Well, if you believe that, I am sorry to be the bearer of bad news. In fact, you may still have responsibilities, and you can still be liable, if you’re not careful. Want to know why–and how you can be careful?

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 So, first let’s just review what happens when your employees are injured while working for you. If you’re doing what you’re supposed to be doing, you have workers’ compensation insurance and you follow all the workers’ compensation statutes in the state(s) where you employ people. Your employee files a workers’ comp claim, and s/he receives medical coverage and coverage for any lost wages through the workers comp claim. If your employee disagrees with your insurance carrier’s determination s/he can bring a claim in workers’ comp court. In most cases, that is your employee’s sole remedy–unless s/he or your insurance carrier can prove that the injury was due to an intentional act or omission on your part.

What happens when the worker you have hired, that you believe is an independent contractor is injured? The short answer: It depends… Do you love that answer as much as I do? Seriously though, the answer depends on some specifics.

If you have correctly classified the worker as an independent contractor, you do not have to worry about workers’ compensation issues, but you still aren’t off the hook. You may actually have more troubles. Why? With very few and rare exceptions, an employee’s sole remedy for work-related injuries is the workers’ comp. The employee cannot bring a third-party lawsuit, so you’re most likely not facing exorbitant legal fees and  five, six or even seven-figure judgments or settlements. An independent contractor has no such impediment. So an injured independent contractor who  can show: a) a causal connection between that your actions or omissions  and the injury; and b) that your actions and omissions amounted to negligence might result in you havaing to defend a lawsuit.  Now, of course, the employee might not have much of a case.  However, you are still expending signficant resources defending the case, even if you ultimately get the claim dismissed.

Suppose you have mis-classified your worker, who should have been classified as an employee all along and  you have no workers’ comp coverage at all?  Now, you’ve likely bought yourself a different kind of lawsuit. The worker can sue on the basis of the misclassification. That claim may raise the lack of workers’ compensation as one issue but also carries the possibilities of unpaid overtime and other benefits.

Now, just in case I haven’t given you a big enough headache, let’s add one more wrinkle. Suppose you hire a company to do some work for your business. That company is an independent contractor, and it brings its own employees onto your premises. Suppose one of those employees gets injured while doing work on your premises. On the one hand, that worker’s sole recourse against the independent contractor– his/her employer– is a workers’ comp claim. But s/he may have a viable third-party lawsuit against you, if s/he can connect your negligent or wilful misconduct to the injury in question–unless you and the independent contractor are a joint employer of that employee. When might that happen? One common example would be when the independent contractor is a staffing company and the worker in question is a temporary employee provided by the staffing company. This is one reason why some businesses actually want to be joint employers.

So, right about now  you might be feeling, once again, that you are caught between a rock and a hard place, no matter what you do. Actually, you can do something. See what I did there, giving you this gloom and doom, then swooping in to offer hope and encouragement? Seriously though, if I didn’t warn you of these possibilities, you wouldn’t see the need to do anything–until it’s too late, so I wouldn’t be doing you any favors there, would I? OK, I’m back. No more rambling. How might you avoid these scenarios? You can start with the following:

1. Review classifications of all your workers. You saw that one coming, right?
2. Have written contracts with all your properly classified independent contractors and require them to carry general liability, workers compensation and any other relevant insurance;
3. Require your independent contractors provide you with a certificate of insurance, and consider requiring that you be named as an additional insured.
4. Make sure you are carrying workers compensation insurance — even if you have or believe you have– no actual employees. Many insurance companies will charge fairly low premiums under this scenario, and at least you can’t get in trouble for not carrying workers’ comp coverage in the event you are held to have misclassified one or more workers.
5. And, of course, consult with in-house counsel or competent employment counsel. No post is complete without this one is it?