workers’ compensation in the hybrid workforce: your complete guide
Over the past two years, more employees have become comfortable with working remotely. In fact, Nationwide reports that “83% of employees who can work remotely said they would like to continue doing so… while 32% want to work from home full time.”
The bottom line? Remote work is here to stay—or at least on a hybrid model.
Remote and hybrid work, however, brings up questions about workers’ compensation. Questions we frequently receive from clients/employers include:
- Do I need workers’ compensation for my remote workers?
- What limitations occur with remote, out-of-state employees?
- Can my premium become less expensive with remote workers?
- If an injury occurs, what proof can be used in a remote setting to make a worker’s comp claim?
do I need workers’ compensation for remote employees?
The short answer is yes.
Employers must provide workers’ compensation for ALL of their employees. This means coverage for employees whether they are:
- In office
- Hybrid, or
- In the field
All employees must have coverage in case of an injury.
If an employee is uninsured for some reason and faces an injury, civil or criminal penalties could be directed toward the employer who failed to provide coverage.
Common remote injuries or exposures include:
- Slips, trips, and/or falls
- Ergonomic injuries (for example, back pain from sitting at a computer desk all day)
how does workers’ compensation work for 1099 independent contractors?
As previously mentioned, your workers’ compensation policies must cover all of your employees. (Yes, this includes your 1099 independent contractors!)
The caveat, however, is that 1099 independent contractors should have their own workers’ comp that they can use if they are injured on the job. This is part of what classifies them as true independent contractors.
While your workers’ compensation will cover an independent contractor in case of injury, as an employer, you may not want to cover that injury.
Let’s paint a picture: Say you hire someone to fix the loose entryway door of your company’s building. Then, the door falls on the 1099 worker and injures them. Their own workers’ compensation insurance would ideally cover the cost of the injury—not yours.
what can you do to protect yourself as an employer?
When hiring an independent contractor, make sure you’re asking the right questions to avoid costly mistakes.
Verifying a certificate of insurance (COI) ensures that the workers you hire are covered in case of an on-the-job accident.
how do i know if my workers are 1099 independent contractors?
We’ve all just filed our taxes (aren’t you glad that’s over!?) However, this means it’s now audit season. During this time, it’s especially important for employers with remote employees to make sure they have all of their ducks in a line.
But how do you know if your remote workers are 1099 independent contractors or standard employees? The ABC test.
In order to be considered a 1099 independent contractor, the worker must meet all three criteria of the ABC test:
ABC test criteria
- “The worker is free from the control and direction of the hiring entity in connection with the performance of the work, under the contract for the performance of the work.
- The worker performs work that is outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade occupation or business of the same nature as that involved in the work performed.”
Read on to learn more about AB-5 as it relates to workers’ compensation.
Moreover, business owners must be aware of Assembly Bill 5 (AB-5) worker classification changes. This way, you can avoid paying workers’ comp for independent contractors who should have their own coverage—and therefore, avoid an employment development department (EDD) misclassification audit.
No one wants an audit!
what does workers’ compensation actually cover?
For remote workers, most policies and carriers will have the same workers’ compensation coverage compared to in-office workers.
According to the California Department of Industrial Relations (DIR), workers’ compensation typically covers basic benefits, including:
- Medical care
- Temporary disability benefits
- Permanent disability benefits
- Supplemental job displacement benefits
- A return-to-work supplement, and
- Death benefits
There are, however, differences in premiums and rates for employers depending on a couple of factors, which include:
- Industry of work
- Employee payroll
- Number of employees per class code within industry
An important factor to note, however, is the new ‘telecommuting’ class code that was created as a result of increasing remote work: Class code 8871.
class code 8871
Class Code 8871, or “Clerical Telecommuter Employees” is currently in effect in California.
According to Vantreo, in order to fall into class code 8871, an employee must:
- “Spend more than 50% of their time performing clerical duties from a clerical work area located within their home or any other office space away from any location of their employer
- Spend the remainder of their time engaged in clerical duties at the employer’s place of business.”
what compensation limitations are there for out-of-state employees?
Now more than ever, a fluid workspace brings more work environment options. Gone are the days when an employee must reside in the same state as the company they work for.
For example, it’s possible for an employer to have employees living in California, Texas, and Georgia simultaneously!
However, if a company has the same policies for all employees, with some employees working in another state, they are at risk for liability exposure. It’s important to know how to avoid liability exposure.
how to avoid liability exposure
In order to avoid liability exposure when employing workers from different states, it’s important to understand what factors need to be considered if an injury occurs. This includes:
- What state the company is located in
- What state the injury occurs in
- What state the employee resides in
Most of the time, in the case of an injury claim, the answer to all of the three questions above is the same state.
While it depends on the state, some states have extraterritorial provisions which would include injuries that occur outside of the state boundaries (again, it depends on the state).
Another way to avoid liability exposure is to make sure the proper state is listed in the workers’ compensation policy. If the employer purchases coverage in separate states but lists each on record, there will be a lower risk of liability exposure.
how can businesses protect remote workers from occupational hazards?
Businesses can protect their remote workers from occupational injuries (and therefore lower the risk of workers’ comp claims being filed against them) by implementing the following practices:
- Establish work hours to reduce false claims that occur outside of working hours
- Make sure workstations are set up ergonomically
- Conduct regular employer-employee check-ins
- Create a clear remote work policy for employees to follow to avoid injury
- Take injury and illness reports seriously
how does a remote employee provide proof of injury?
So, a remote employee is injured “on the job.” How do they prove it?
This is where remote work and workers’ compensation can get tricky. In general, remote employees who file workers’ compensation claims can expect more questions and explanations needed to prove a work-related injury.
In addition to higher levels of investigation, if a false claim is suspected, an applicant’s attorney might need to get involved.
can my premium become less expensive with remote workers?
In short, no.
It is not necessarily less expensive to insure a remote worker. There is a rating code used to determine your premium for remote and hybrid workers, and this rate typically runs the same for an in-office employee.
If you’re looking to find a way to save on insurance premiums, read our article on how to stabilize or reduce your insurance costs.
It’s also important to note that the high amount of work-from-home employees has created a vulnerable spot for companies with cyber attacks. Read on to learn how to educate your team to avoid email scams.