Work-related stress may cause workers comp claims.

Claim Scenario: Workers Comp. Benefits Awarded for Stress

In a recent ruling, an employee was awarded workers comp benefits for stress. We want to share claim scenario details and court rulings as it could affect your law firm’s insurance.  The following is a recently issued ruling on work comp. A policy that awarded benefits to a paralegal for health problems related to stress:

A second-grade teacher should receive limited workers compensation benefits for health problems she says she suffered while working in a stressful classroom, a Pennsylvania court has ruled.

Shirley Hilton worked for the Philadelphia law firm from November 2018 to March 2019. On her last day at the firm, she suffered heart palpitations, headaches, dizziness, and nausea “as a result of a tough day with her challenging work environment,” according to the ruling.

Ms. Hilton went that afternoon to a regularly scheduled appointment with a doctor who had treated her for some time. The doctor’s office called Ms. Hilton’s firm that day and told the partners that she would not be returning to work because of the firm’s “overly stressful environment,” court records show.

A doctor appointed by the law firm treated Ms. Hilton and “made her return” to her regular job in May 2019. Still, she worked only four days upon her return and was not paid beyond the firm’s March date.

In June 2019, the law firm reassigned Ms. Hilton to another position, which she characterized as being quiet with “excellent work… going on,” records show. However, Ms. Hilton did not begin work that September because she said she was still undergoing treatment for the job-related stress she suffered at her previous position.

Ms. Hilton filed a workers comp claim for work injuries she suffered in March 2019, including vocal cord injury, aggravation of pre-existing lupus, heart murmur, and court records show.

A workers comp judge granted Ms. Hilton’s petition after finding her testimony was credible in describing “serious behavioral problems” at the law firm that caused her injuries, records show.

The Pennsylvania Workers’ Compensation Appeal Board affirmed the benefit award, and the Philadelphia law firm appealed.

A three-judge panel of the Pennsylvania Commonwealth Court affirmed Ms. Hilton’s benefit award on Tuesday. Still, it reversed a portion of the appeals board decision that would have allowed her to receive ongoing benefits.

The appellate court found that testimony from Ms. Hilton’s physician credibly established that she suffered injuries from working at a law firm, including exacerbating her pre-existing lupus in March 2019.

However, the doctor testified that Ms. Hilton was not disabled from working as a paralegal “as long as she did not work somewhere like her former frim,” records show. Therefore, the appellate court granted benefits to Ms. Hilton only from March 2019 to September 2019, when she could have begun working at the less stressful firm or position.

Employee forging a business document.

What is employee dishonesty insurance coverage?

Employee dishonesty insurance can be one of the most important coverages firms can purchase. Why? Fraud and embezzlement instigated by employees are on the rise in the small business workplace. According, Small businesses are especially vulnerable, especially those who cannot absorb large losses or cannot afford extensive precautions and safeguards.

Employee dishonesty insurance coverage sometimes referred to as fidelity bond, crime coverage, or crime fidelity insurance, is a type of business insurance that protects a small business employer from a financial loss due to fraudulent acts conducted by an employee group. The financial loss can be caused by an employee’s theft of property, money, or securities owned by a small business.

Coverage

Stand-alone employee dishonesty  coverage policies are designed to cover forgery, alteration, unauthorized electronic funds transfers, credit card fraud, computer fraud, money order fraud, and counterfeit fraud. These business insurance crime coverage policies not only protect the small business owner, but employees defined in the policy, such as current or former employees, trustees, members, partners, directors, temporary employees, and seasonal employees, may also be protected.

Endorsements

Endorsements can also be added to employee dishonesty insurance coverage policies. For example, a third-party endorsement can be added, extending coverage to a client that you’re performing services for under a written contract. Under this endorsement, the policy will compensate for damage or loss to the property, money, or securities leased or owned by a client due to theft by your employee. Basically, this third-party endorsement modifies the employee dishonesty policy to include client premises coverage. An endorsement can also be added to cover an Employee Retirement Income Security (ERISA) bond.

Exclusions

Some typical exclusions in an employee dishonesty insurance policy include math errors or omissions, accounting errors and omissions, vandalism, government seizure or destruction of business property, profit and loss restatement, theft by the policyholder, and loss of income that would have been realized without damage or loss to property, money, or security.

Attorney writing a contract.

What is valuable papers and records coverage?

Many law firms don’t realize that valuable papers and records coverage may be vital to your firm’s business operations. You may be relying less and less on hard copies of your valuable papers and records and transitioning to electronic filing instead. Even so, your hard copies still need to be protected in case you experience a catastrophic loss, like a fire or a natural disaster.

Although you may have some existing coverage for valuable papers with a personal property form or standard business owners policy, this coverage is fairly limited and may not be adequate to meet your needs.

This is where valuable papers and records coverage can help you rebuild your business after a loss. To put it into perspective, analyze your business needs, and see what it would cost to replace your records:

  • Would you need to hire temporary employees to help replace the papers?
  • How many hours of work would it take to replace the papers?
  • Would you need to obtain original versions?
  • Would you need to recreate original work, like home inspections, surveys, or maps?

If you consider the actual costs, you may realize you need more coverage than you currently have.

What is Considered a Valuable Paper?

Valuable papers are documents that are critical to your business and do not have duplicates. A policy may say it covers “written or printed documents, manuscripts and records,” which could include invoices, client lists, contracts, loan documents, and medical or employee records.

Valuable papers generally do not include money, data records, securities, and records stored electronically, so ensure you have additional coverage for those things.

Valuable Papers Coverage

The preferred method to insure valuable papers is to purchase valuable papers coverage and, if the value of your accounts receivable justifies it, purchasing accounts receivable insurance. If your business handles most accounts receivable payments electronically, accounts receivable insurance would not be necessary for you to consider.

Valuable papers insurance offers two types of coverage:

  1. A blanket limit of insurance is offered for valuable papers and records that can be replaced. The limit should be high enough to cover the research cost and replacement of the papers after sustaining the worst possible loss.
  2. Individual amounts of insurance are provided for items that cannot be replaced, like one-of-a-kind historical documents or first edition books. The amount of insurance provided reflects the appraised value of the item. Each item should be reappraised every two or three years to keep up with inflation and market conditions, and the insurance amounts should be adjusted accordingly.

Program of Records Protection

Establish a program of records protection at your business to ensure the safety of your valuable records. Analyze your exposure to potential losses like flood, fire, or theft, and protect your records accordingly.

This could mean storing all important records in fire- and theft-proof locked files when not in use or your business is closed. Return the records to storage promptly after you use them.

Give special protection to rare or irreplaceable books and documents. They may need protection from light, humidity, or insects.

You can also store copies of valuable papers in a second location and transfer them frequently. Be sure the second location is far enough away from your primary location to avoid the same loss or risk.

Law firms need umbrella liability insurance.

Umbrella Liability Insurance – 5 Things to Know

An umbrella liability policy provides an insured with an “umbrella” of liability protection over the primary liability insurance. Most umbrella insurers require you to purchase primary insurance coverage before selling you an umbrella policy, such as general liability insurance, auto liability insurance, workers compensation, or employer liability insurance.

Your umbrella policy can provide coverage:

  • over the primary liability insurance carried by the insured if the primary insurance is exhausted by a loss;
  • of liability exposures for which there is no primary insurance; or
  • when the primary policy contains an exclusion that is not similarly excluded under the umbrella policy.

1. Individual judgment and individual risk Umbrella liability insurance policies are largely a matter of the insurer’s judgment, and rating is almost entirely a matter of individual judgment, not only from insurer to insurer but also from individual risk. Many of the umbrella provisions are negotiable with most underwriters.

2. Underlying coverage A requirement for underlying liability limits of $1 million is common. For insureds with severe advertising or another personal injury, or other special liability exposures, underlying coverage with high limits in these areas may also be required if these exposures are included in the umbrella coverage. Umbrella policy conditions usually call for maintenance of the underlying coverage, with the umbrella insurer’s part in a loss being determined as if the underlying contract were in force, even if it’s not. The only exception is when an underlying policy is totally exhausted by payment of the loss, in which case, the umbrella policy “drops down” to replace the exhausted underlying protection. Drop-down coverage also may become effective when the primary insurer is insolvent.

3. Defense coverage A significant variation in policies has to do with defense coverage; almost all umbrella liability contracts have provisions that, in effect, protect the right of the umbrella insurer to take over or participate in defense of a claim that may involve it. These policies include defense coverage for uninsured exposures, the authors say, even when the loss doesn’t appear likely to involve the umbrella contract. Also, some contracts include defense coverage of losses when, because the underlying insurance is exhausted by the loss payment, the umbrella policy comes in as primary coverage. Some policies include defense and appeal costs within the coverage limits, while others provide them as supplementary payments outside the coverage limits.

4. Additional insured Any additional insured under any policy of underlying insurance is automatically an insured under the umbrella policy. But the coverage isn’t any broader than the coverage provided by the underlying insurance. If the underlying insurer or the insured elects not to appeal a judgment over the retained limit, the umbrella insurer reserves the right to do so at its own expense. The umbrella insurer also pays for taxable court costs, pre-and post-judgment interest, and disbursements associated with the appeal.

5. Indemnity policy or pay-on-behalf-of policy Indemnity policies don’t require the insurer to make payment to the insured until the insured has first made payment for covered damages or expenses. The language requires you to use your own money to pay for damages and defense and then seek reimbursement. With a pay-on-behalf-of policy, the insurer promises to pay damages on behalf of the insured. This means that the insured doesn’t have first to make payment and then seek reimbursement from the insurer. The insurer normally pays expenses for defense as they are incurred if the umbrella insurer has taken over the defense role, even with a pay-on-behalf-of policy.

6. Common exclusions The Commercial Liability Umbrella Form excludes certain coverages that apply to specific situations. The following are only a few of the exclusions provided in the form. For more information, refer to the form itself and the detailed analysis provided by the authors.

  • Liquor liability
  • Workers compensation, employers liability, and employment-related practices
  • Pollution
  • Aircraft or watercraft, and racing activities
  • Recall of products, work, or impaired property
  • Electronic data

Cyber security is vital for law firms.

Cyber Security Tips for Law Firms

Cyber security is becoming increasingly important as more and more businesses are attacked every day. Law firms aren’t immune so it’s important to protect your practice with insurance and proper company policies.

Broadband and information technology are powerful tools for small businesses to reach new markets and increase sales and productivity. However, cybersecurity threats are real, and businesses must implement the best tools and tactics to protect themselves, their customers, and their data. Here are ten key cybersecurity tips to protect your law firm:

1. Train employees in security principles. Establish basic security practices and policies for employees, such as requiring strong passwords and establish appropriate Internet use guidelines that detail penalties for violating company cybersecurity policies. Establish rules of behavior describing how to handle and protect customer information and other vital data.

2. Protect information, computers, and networks from cyber-attacks. Keep clean machines: having the latest security software, web browser, and operating system are the best defenses against viruses, malware, and other online threats. Set antivirus software to run a scan after each update. Install other key software updates as soon as they are available.

3. Provide firewall security for your Internet connection. A firewall is a set of related programs that prevent outsiders from accessing data on a private network. Make sure the operating system’s firewall is enabled, or install free firewall software available online. If employees work from home, ensure that a firewall protects their home system(s).

4. Create a mobile device action plan. Mobile devices can create significant security and management challenges, especially if they hold confidential information or access the corporate network. Require users to password-protect their devices, encrypt their data, and install security apps to prevent criminals from stealing information while the phone is on public networks. Be sure to set reporting procedures for lost or stolen equipment.

5. Make backup copies of important business data and information—regularly backup the data on all computers. Critical data includes word processing documents, electronic spreadsheets, databases, financial files, human resources files, and accounts receivable/payable files. Backup data automatically if possible, or at least weekly, and store the copies either offsite or in the cloud.

6. Control physical access to your computers and create user accounts for each employee. Prevent access or use of business computers by unauthorized individuals. Laptops can be straightforward targets for theft or lost, so lock them up when unattended. Make sure a separate user account is created for each employee and require strong passwords. Administrative privileges should only be given to trusted IT staff and key personnel.

7. Secure your Wi-Fi networks. If you have a Wi-Fi network for your workplace, make sure it is secure, encrypted, and hidden. To hide your Wi-Fi network, set up your wireless access point or router, so it does not broadcast the network name, known as the Service Set Identifier (SSID). Password protect access to the router.

8. Employ best practices on payment cards. Work with banks or processors to ensure the most trusted and validated tools and anti-fraud services are being used. You may also have additional security obligations under agreements with your bank or processor. Isolate payment systems from other, less secure programs and don’t use the same computer to process payments and surf the Internet.

9. Limit employee access to data and information, and limit authority to install the software. Do not provide anyone employee with access to all data systems. Employees should only be given access to the specific data systems they need for their jobs and should not install any software without permission.

10. Passwords and authentication. Require employees to use unique passwords and change passwords every three months. Consider implementing multifactor authentication that requires additional information beyond a password to gain entry. Check with your vendors that handle sensitive data, especially financial institutions, to see if they offer multifactor authentication for your account.

EDP Insurance Coverage protects law firms

What is EDP insurance coverage?

So many law firms are computer-dependent, and EDP insurance coverage is a necessity. Rather than insuring the computers as pieces of office or manufacturing equipment, the Electronic Data Processing (EDP) form responds to the need to protect hardware, software, media, and other exposures unique to this equipment. Coverage is available for hacking (unauthorized computer system access), virus damage, power shortages, overload, and outages.

There isn’t a standard form for providing Electronic Data Processing or Computer coverage. Because many insurers offer so many different forms, businesses seeking coverage must take extra care to understand what is covered.

Any commercial operation that owns and/or uses computers and other data processing equipment is eligible for EDP insurance coverage. Commonly a policy covers hardware, media, programs/applications, data records, proprietary programs, loss of income, and (on- or off-site) Website servers.

How the EDP insurance coverage applies depends upon the policy definitions of key terms, including “computer hacking,” “computer virus,” “data records,” “media,” “telecommunications equipment,” and others. EDP policies have many defined terms because technology is dynamic. Liberal use of specific policy language helps to preserve an EDP policy’s intended coverage.

Typically, coverage is provided against a specific list of events that can cause a tangible loss to electronic equipment. Different coverage applies to major areas of EDP, such as hardware, software, and Website servers. Covered businesses usually must comply with certain provisions to qualify for coverage, such as properly creating and storing backup programs.

There are certain types of property that, generally, are ineligible for coverage under an EDP policy, such as:

  • Hardcopy accounts, bills, evidence of debt, records, abstracts, deeds, manuscripts, program documentation, and similar property
  • Portable computers that are stolen or that disappear.
  • Any property used for illegal transportation or that is contraband.
  • Any property that is leased or rented to others
  • Currency, food stamps, lottery tickets, money, notes, and securities
  • Property held for sale.

One area that a business must pay attention to is how losses are settled. Are claims handled according to the lost equipment’s current value (Actual Cash Value – ACV) or according to what is necessary to replace the property? Settlement based on ACV can be a problem for companies that don’t regularly upgrade their EDP equipment. Technology changes so fast that payment for equipment purchased years ago is far less than needed to secure new equipment. On the other hand, replacement cost coverage would not be as critical for a firm that regularly changes equipment as damaged property would likely be newer.

Learn the basics of first aid for your firm.

Law Firm First Aid Basics

First aid is important emergency care administered by trained individuals for an injury or sudden illness before emergency medical treatment is available. All injuries should be treated since seemingly unimportant ones, i.e., splinters or puncture wounds can result in infection. Proper first aid can also help your law firm prevent large workers comp claims.

Follow these procedures before medical help arrives:

BLEEDING from lacerations, etc., is the most visible result of an injury. We have between 5-6 quarts of blood in our bodies. Most people can lose a small amount of blood, but if a quart or more is quickly lost, it could lead to shock and/or death. Treat bleeding by elevating the wound, using a clean cloth, and applying pressure with your hand until the bleeding stops. Never use a tourniquet (or similar device) to control blood flow except in response to an extreme emergency, such as a severed arm or leg.

UNCONSCIOUSNESS – Determine responsiveness by gently tapping the victim and asking, “Are you ok?” If no response and the victim is not breathing or has no pulse, begin CPR, and seek medical aid.

SHOCK – If not treated quickly, shock can threaten the life of a victim. Shock occurs when the body’s important functions are threatened by not getting enough blood or when major organs and tissues don’t receive enough oxygen. Symptoms include pale or bluish skin color, cold to the touch, vomiting, dull and sunken eyes, and unusual thirst. Shock requires medical treatment to be reversed. Prevent the loss of body heat by covering the victim with blankets.

Before administering the Heimlich maneuver, CHOKING first asks the victim to cough, speak, or breathe. If the victim can do none of these, stand behind the victim, locate the bottom rib with your hand, move your hand across the abdomen, make a fist and place the side of your thumb on the stomach. Position your other hand over your fist and press into the victim’s stomach with a quick upward thrust until the food or object is dislodged.

BURNS – There are many different types of burns, such as thermal, chemical, electrical, or contact burns. Each of these can occur differently, but treatment for them is very similar. First, run cold water over the burn for a minimum of 30 minutes. Flushing the burn takes priority over calling for help. If clothing is stuck to the burn, don’t try to remove it. Instead, cut or tear the clothing from the burn area. Cover with a clean, cotton material or leave uncovered if none is available. Do not scrub or apply any soap, ointment, or home remedies.

HEAT EXHAUSTION AND STROKE  — Heat exhaustion and heat stroke are two different things, although they are commonly confused as the same condition. Heat exhaustion occurs due to loss of body fluids and salts where there is poor air circulation. The body reacts by increasing heart rate and blood circulation. Symptoms include fatigue, dizziness, and disorientation, normal skin temperature but a damp and clammy feeling. Treat by moving the victim to a cool spot and encourage the drinking of cool water and rest. Heatstroke occurs when the body’s sweat glands have shut down. Symptoms include confusion, collapse, unconsciousness, and fever with dry, mottled skin. Immediately move the victim to a cool place and pour cool water over the victim.

HYPOTHERMIA can be life-threatening. Symptoms include: lower than normal body temperature, shivering, apathy, disorientation, drowsiness, and eventually unconsciousness. Immediately move the victim into a nearby shelter, remove wet clothes, and replace them with dry clothes or blankets.

POISONING – Move the victim away from the poison, then provide treatment. If it’s in solid form, i.e., pills, remove it from the victim’s mouth using a clean cloth wrapped around your finger. If it’s gas, use a respirator to protect yourself, then move them to fresh air. If it is corrosive, remove the clothing and flush it with water for 30 minutes. Have the container or label with you when calling for medical help.

FIRST-AID SUPPLIES should reflect the kinds of injuries that may occur and must be stored in an area where they are easily accessible. An automated external defibrillator (AED) should be considered when selecting first-aid supplies and equipment.

GOOD SAMARITAN LAWS – Most states have enacted Good Samaritan Laws to encourage people to help others in emergencies. These laws give legal protection to people who provide emergency care to ill or injured persons.

Insurance defense costs impact claim payouts.

Insurance Defense Costs

It’s important to understand how the defense costs work on your insurance policy because it can dramatically impact how claims are paid.

Did you know that a liability policy, part of any typical business insurance policy or commercial insurance coverage, has two distinct obligations? If it is general liability, product liability, or professional liability insurance policy, a liability insurance policy is designed to protect you against your legal obligation to pay others because you have hurt them and/or have damaged their property.

The policy also defends you against claims or lawsuits. In addition to paying claims, the policies will also pay for the associated defense costs and court fees until proven you are not negligent or the applicable policy is not responsible.

What Is Covered Under an Insurance Policy Defense Costs?

Defense costs generally include:

  • Attorney fees (including the cost of legal staff and expenses)
  • Court costs of the applicable jurisdiction
  • Costs of filing necessary legal papers
  • If applicable, the costs of expert witnesses.
  • Costs associated with investigation, etc.

How Are Defense Costs Handled?

Defense Coverage can be offered in two ways. It can be provided as part of the insurance policy’s liability limit or as a separate coverage.  You must read your policy carefully because the method has a huge impact on your insurance protection. Let’s say that Policy A and Policy B both provide liability insurance limits of $1,000,000;

Policy A provides defense coverage within the insurance limits

Policy B provides defense coverage outside of the insurance limits

Now let’s see what can happen:

Example: a client sues ABC law firm. The client slipped on a wet floor inside the office, sustaining back and wrist injuries.  The damages (medical and rehab costs) totaled $850,000, and the defense costs were $400,000. Here’s how each policy would handle the costs:

Expense Policy A Policy B
Defense Cost $400,000 $400,000
Damages $850,000 $850,000
Total Damages $1,250,000 $1,250,000
Total Paid $1,000,000 $1,250,000
  Client Obligation   $250,000  $0

If ABC Law Firms’ protection worked like Policy A, ABC would be responsible for paying the remainder of the damages because the defense costs worked towards exhausting their $1,000,000 insurance limit. Policy B’s method of providing coverage outside of the insurance limit offers the most protection. If you’re not sure how your policy handles your legal defense’s cost, you can give our office a call to find out more.

Do law firms need workers compensation

Common Workers Compensation Questions for Law Firms

If you are looking to start a new law firm, you might have some workers compensation questions. Is it needed? How does the audit work? How can I minimize premiums?  Below we have put together a summary of the top worker’s compensation questions and a brief answer to each.

Do I have to carry workers’ compensation insurance if I don’t have employees?

If you have a one-person company, you may be operating in a state that does not require that you maintain workers’ compensation coverage. However, contracts, licensing boards, or other regulations may require that you carry workers’ compensation insurance. Why? In many states, unless a company can show that subcontractors carry their own workers’ compensation insurance, subcontractors will be automatically covered under the hiring company’s policy, at the hiring company’s expense.

Do I still need workers’ comp insurance if I use contractors instead of employees?

Contract employees, leased employees, and some other work-for-hire situations may be exempt from workers’ compensation requirements, but some state laws require companies to cover 1099 contractors. When you hire independent contractors to do work for you, you should require that they carry their own workers’ compensation or assume that you will have to pay an additional premium to cover the subcontractor on your own policy.

Do I have to pay for workers’ comp coverage for myself?

In some states, owners, officers, partners, and other company principals can exclude themselves from their own companies’ workers’ compensation coverage. If you’ve got good health insurance and disability insurance policies, consider your risk low, and want to save on premiums, this may be a good choice for you.

What if I want to cancel my workers’ comp policy?

In virtually every state, the insurance company can charge and retain a minimum premium when a workers’ compensation policy is canceled. So, if you buy a workers’ compensation policy and cancel it two months later, you will still owe the minimum premium, which can be much more than the cost of two months of coverage. In some states, the minimum premium can run from several hundred dollars to more than $1,000. So, read the fine print before you decide to cancel your workers’ compensation policy, and be sure it will actually save you money.

What’s a premium audit?

Your workers’ compensation premium depends on the number of people you employ and what risk classifications those employees fall into, based on each person’s scope of employment. Your carrier will conduct an annual premium audit to determine these numbers and set your company’s workers’ compensation insurance premium for the policy period accordingly. It is important to note that during the audit period, the carrier may adjust the premiums and findings from the current period and make that adjustment retroactive to cover the employees and risk classifications incurred during your previous policy period.

What can I do to minimize my premium?

Audit mistakes can cause you to lose coverage or unnecessarily inflate your company’s workers’ compensation insurance premium, so it’s important to prepare. Designate a knowledgeable contact person for the auditor who is familiar with your employees’ work. Be sure to provide accurate and detailed information because, without it, the auditor may assume the worst-case scenario for risk exposure and increase your premium. Review your payroll documents to ensure that they will allow the auditor to readily break out overtime pay and discount it back to straight time, as is allowed in most (but not all) states’ workers’ compensation rules. Your payroll records should also reflect each employee’s actual hours in each of the different workplace exposure categories. Otherwise, all of the employee’s payroll will go into the most expensive classification applicable. If your company uses 1099 subcontractors, show the certificates of insurance documenting that they have their own workers’ compensation insurance.

What if I have employees in multiple states?

It is essential to break down your payroll by state. If you do not provide the insurance company with accurate information about payroll you have in each state where work is done, the insurance company will likely not pay claims that occur in unreported states, even if the total payroll on your report is accurate. Be sure the person handling the audit in your office is aware of and has access to accurate information on out-of-state payroll and that the audit is fully completed.

Do independent contractors need workers compensation insurance?

Employee or Independent Contractor

There are times when a law firm needs to hire an independent contractor. So how do you know if they should be covered on your workers compensation insurance policy? Under the Workers’ Compensation Law, most individuals providing services to a for-profit business will be deemed employees of that business. The employer must cover them for workers’ compensation insurance. This applies unless those services are specifically excluded as employment under the WCL.

For workers’ compensation insurance purposes, the term employee generally includes day labor, leased employees, borrowed employees, part-time employees, unpaid volunteers (including family members), and most subcontractors.

Many factors are used to decide whether an individual is an employee under the Workers’ Compensation Law. If a business meets any of the criteria listed below, and the individual hired does not meet the criteria listed under independent contractors or the services rendered are not specifically exempted as employment under the WCL, then that business must obtain a workers’ compensation insurance policy.

The factors that are considered to determine whether an individual is an employee within the meaning of the WCL and thus must be provided with workers’ compensation insurance coverage by the employer include:

Right to Control– The degree of direction and control a person or organization exercises over someone they contract with to perform a task is always a central issue in determining an employer-employee relationship. A person or organization controlling how the work is to be performed indicates that an employee performs the task. If the person doing the labor controls the time and manner in which the work is to be done, this may indicate that an independent contractor is doing the task. If an individual is truly independent, the individual generally works under his/her own operating permit, contract, or authority.

The character of Work Is the Same as Employer– Work being done that is consistent with the hiring business’s primary work indicates that an employee is doing the labor. Work done by a person different from the primary work of the hiring business may indicate an independent contractor is performing the task. (For example, someone installing shingles for a roofer is generally considered the employee of that roofer. Conversely, a plumber hired on a one-time basis to fix a broken pipe for a retail store owner is generally considered an independent contractor)

Method of Payment– Employees tend to be paid wages on an hourly, daily. Weekly or monthly basis. Naturally, employment is indicated if the hiring business withholds taxes and/or provides other employee benefits (Unemployment Insurance, health insurance, pensions, FICA, etc.) Whether the labor is paid using a W2 or 1099 Form for tax purposes does not matter determining an employer/employee relationship for workers’ compensation purposes. A business paying cash to an individual for services usually indicates that the individual is an employee. Payment made for the performance of the task as a whole may indicate an independent contractor is doing the task.

Furnishing Equipment/Materials– A business providing the equipment and/or materials used by people in performing the work indicates an employer-employee relationship.

Right to Hire/Fire– A business retaining the authority to hire and fire the individuals performing the work indicates an employee performs the work. An independent contractor retains a degree of control over the time when the work is to be accomplished and is not subject to be discharged by the hiring entity because of the method he chooses to perform the work. Naturally, an independent contractor’s services may be terminated if the services rendered do not meet contractual requirements)

All factors may be considered, and no one factor alone determines whether a person will be considered an employee under the WCL.