Tag Archive for: workers’ compensation

"workers' compensation" written on a notepad sitting next to money on a desk

your workers’ compensation policy annual carrier audit

Workers’ compensation insurance coverage is an important part of business protection for any employer. But have you heard of a workers’ compensation policy audit? Here’s what you need to know about your workers’ comp policy audit.

why do you need workers’ compensation policies?

So, what is workers’ comp, and why do you need it as an employer?

Workers’ compensation is “insurance, paid by employers, providing wage replacement and medical benefits to employees who are injured during the course of working for the insured.”

Why do you need workers’ comp insurance? Well, there are a couple of reasons, First, investing in workers’ compensation helps businesses avoid hefty costs of an employee’s medical expenses and lost wages following a workplace injury or illness.

If an employer failed to have workers’ compensation (which is a criminal offense according to Section 3700.5 of the California Labor Code), they’d be responsible for all medical expenses out of pocket—which, depending on the illness or injury, could cause significant financial harm to their business.

Moreover, workers’ compensation wages and benefits are provided in exchange for removing the employee’s right to file a lawsuit against their employer.

what is a workers’ compensation audit?

A workers’ compensation audit is an annual review of records. These audits are requested by an insurance company to verify that your business has paid the correct premium for workers’ compensation insurance.

how does a workers’ compensation audit work?

Workers’ comp audits can be conducted:

  • In-person
  • Over the phone
  • By mail

How your audit is conducted depends on your auditor and business type. 

Moreover, audits “determine if the payroll and class codes quoted at inception accurately reflect the actual payroll and scope of work performed during the policy period. Audits also ensure that sub-contractors had their own coverage in place.”

If records don’t match up, the price of the workers’ comp insurance will be adjusted for the policy year.

why do you need a workers’ compensation audit?

So, why do you need a workers’ compensation audit as a business owner?

As mentioned above, your initial workers’ comp premium estimate may not always match the actual payroll and scope of work for your business. Depending on a variety of factors throughout the year, this payroll figure might actually land below or above your estimate.

A workers’ comp audit is necessary—and is actually required by most state regulators—so that adjustments to the initial premium can be made if necessary.

how to prepare for an audit

Now you know what a workers’ compensation insurance audit is, how it works, and why you need one. Let’s briefly discuss how to prepare.

  1. Gather Your Records: Your auditor will, of course, need access to your financial data for the policy period (Think: General business information, payroll records, insurance records, cash disbursement records, etc.)
  2. Revise Job Descriptions: Workers’ comp premiums are determined by the risk that your employees face at work and on payroll. Revising employee job descriptions, and knowing what each role does thoroughly, is a great way to help prepare for an audit.
  3. Ask Questions: When the time comes for your audit, don’t be afraid to ask questions. Review all documents clearly and only provide the information requested, as to not create additional work for your auditor.

Infographic of your workers’ compensation policy annual carrier audit

Interested in learning more? Read on for information about workers’ compensation in the hybrid workforce.

construction worker sitting on job site injured

how to avoid the most common workplace injuries

Between 2015 and 2019, workplace injuries kept workers out of work for more than 17 million days when looking at 1.5 million workers’ compensation claims. That’s right—we said 17 million days, according to The Travelers Injury Impact Report. Workplace injuries are an employer’s biggest nightmare for a variety of reasons.

Let’s chat about how to avoid the most common workplace injuries and what they are.

what are the most common workplace injuries?

The most common workplace injuries across all employees and industries were ranked as follows:

  • Overexertion
  • Slips, trips, and falls
  • Struck by an object
  • Motor vehicle accidents

Moreover, for first-year employees, cuts, punctures, and being caught in or between hazards also accounted for a significant portion of injuries.

how to avoid workplace injuries

At benchmark, we bring these statistics to light to provide businesses with an understanding of what is happening (or can happen) in their workplaces. 

We’d like to help your business avoid workplace injuries by discussing four tips on how to avoid them. Check them out below.

prioritize a safety-first culture

In your business, it’s important that your employees know safety is a priority. Implementing a solid safety program will look different for each industry; however, your safety program will likely include safety meetings, tests, the proper safety equipment and tools necessary to complete work, and of course, safety training.

When you implement a safety program, it should be your number one priority to do everything in your power to prevent employees from getting injured or sick. (Yes, this includes making sure all of your carpets have non-slip grip or are secured to the floor to prevent slips!)

stabilize your employee population

Accidents happen more frequently when businesses don’t have adequate staffing levels. One way that you can avoid injuries in the workplace is by ensuring you have a stable employee population.

Why? Overworked employees are more likely to suffer from exhaustion, which can lead to cutting corners to make ends meet. A solution could be hiring part-time or even seasonal staff to help prevent these common workplace injuries.

implement a safety-incentive program

Most employees just want to know that they’re valued and to be recognized for their efforts. A great way to do so, while also increasing workplace safety, is by implementing a safety-incentive program.

In fact, the Occupational Safety and Health Administration, more commonly known as OSHA, recommends safety-incentive programs, which reward “workers for reporting near-misses or hazards.”

According to OSHA, effective safety-incentive programs can “provide positive reinforcement for reporting illnesses and injuries,” making the workplace a safer environment altogether.

invest in insurance

Insurance is one of the most important things a business owner can invest in to keep their business safe. The types of insurance your specific business might need will vary depending on your industry, state, and business itself. However, some common types of insurance include:

  • Commercial Property Insurance
  • Cyber Liability Insurance
  • Commercial Auto Insurance
  • Workers’ Compensation Insurance
  • General Liability Insurance

infographic on How to Avoid the Most Common Workplace Injuries

Speak with a professional—like our team at benchmark commercial insurance—to learn what types of insurance you need to keep your business protected. Read on for your complete guide on workers’ compensation in the hybrid workforce.

construction worker

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
  • Remote
  • 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

  1. “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.
  2. The worker performs work that is outside the usual course of the hiring entity’s business. 
  3. 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.

Let’s discuss.

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:

  1. Establish work hours to reduce false claims that occur outside of working hours
  2. Make sure workstations are set up ergonomically
  3. Conduct regular employer-employee check-ins
  4. Create a clear remote work policy for employees to follow to avoid injury
  5. 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.

workers compensation in the hybrid workforce is vital

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.

AB 5 & Workers' Compensation Explained

ab 5 & workers’ compensation explained

We partnered with John Milikowsky, the founder and managing attorney of Milikowsky Tax Law to discuss Assembly Bill 5 and how it correlates with Workers’ Compensation. John is a seasoned tax lawyer who understands the ins and outs of government agency audits. Through his experience working with hundreds of EDD, CSLB, and IRS audit cases, John and his team of experts understand how to protect business owners in the face of an audit. Get to know the Milikowsky Tax Law office here.  

what does assembly bill 5 mean for companies?

Assembly Bill 5 (AB-5) is a federal law that passed in January 2020 that introduced further regulations for independent contractor classification.  Previously, there was only the 13-Factor Borello Test. Under AB-5, the ABC test is used to set the standard for worker classification. All workers are considered W-2 employees unless they meet all three of the following criteria according to the California Labor Workforce Development Agency:  

  1. “The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade occupation or business of the same nature that is involved in the work performed.” 

Let’s unpack the three criteria. First, when it comes to your 1099 independent contractors, employers cannot hold control over workers. Examples of areas businesses can control workers, intentionally or unintentionally include: 

  • Uniforms 
  • Your company’s business card with your independent contractor’s name on it
  • Requiring the independent contractor work specific hours 
  • Accepting money from a customer and then paying your contractor 

Generally, if you employ an independent contractor, they function as an independent business. The worker has the freedom to work when they choose, and how they choose within the parameters of their contractual agreement. Independent contractors should receive money directly from the third party that is receiving their services. 

The second element is that your company’s services and the services of independent contractors should be different. If an independent contractor is providing your core services, the second element cannot be met. 

For example, let’s say you own a plumbing company that hires both W-2 and independent contractor plumbers. They both provide the same services and do not meet the second criteria of the ABC test. However, a residential plumbing company hired for a commercial job may decide to hire a specialized commercial plumber. Since the residential plumbing company typically does not do commercial work, they might qualify under the second element of the ABC test to distinguish between what the contractor does and what your company does. 

The third element is that the contractor has to have an independent trade or business. The EDD generally requires a business license, and potentially an EIN number. Having a corporation or an LLC is a great added bonus. The independent contractor should have entrepreneurial risk in their company to show that they have an independent business. 

what does that mean for workers’ compensation? 

Workers’ compensation carriers are indifferent to the distinction between an independent contractor and a W-2 employee. As far as they’re concerned, if you’re on a job and your work product is under the control of the insured, then that employee is a covered employee. 

This process typically comes to light during the annual audit at the end of the workers’ compensation policy. The insurance company will ask, “do you hire independent contractors?” If the answer is yes, and that independent contractor cannot prove that they have their own workers’ comp coverage, then the carrier will pay heavy fines and penalties for that exposure because ultimately, there’s coverage there.

what happens when a workers’ compensation carrier finds an independent contractor? 

In the construction industry, when a workers’ compensation carrier identifies an independent contractor, the Contractor and State Licensing Board (CSLB), EDD, Labor Commissioner, and OSHA, will descend upon a job site and start asking questions of everyone on site. If the government agency finds people who are independent contractors without a license, that potentially becomes a criminal issue, and also a rise for an EDD audit. 

if a carrier finds a misclassification on the stateside for payroll, how does that affect the audit on the workers’ comp side?

At that point, the workers’ compensation policy auditor will determine the value of compensation paid to that supposed independent contractor. They then will charge the employer the premium for the wages related to that relationship. This occurs whether or not the employer or policyholder knew that their policy was not limited to covering only W-2 employees. If any insured or uninsured independent contractors wanted to, they could make claims on the employing companies’ workers’ compensation policy.

This creates liability for the hiring company. Business owners who have any doubts about whether a worker is an independent contractor or not should be sure to do their research and make sure that they meet the three elements of the ABC test. As previously advised, limit your liability because anybody can file a claim against your business. The workers’ compensation carrier then would have to make that determination. Learn more about what you need to know about changes in tax codes here