WHEN WE LOOK FOR SOMEONE to do a maintenance/repair job for us, occasionally we come across a self-employed licensed contractor (or even an unlicensed one) who seems qualified and willing and affordable — except that they don’t have workers compensation insurance. (A small contractor who has no employees is legally exempt from the requirement to carry workers comp.)
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This post discusses how to proceed in such a case.…
First of all, anyone can find out whether or not a contractor is licensed and has workers compensation insurance by going to:
https://cslb.ca.gov/OnlineServices/CheckLicenseII/CheckLicense.aspx
and then navigating to the detail page for that particular contractor.
Any third-party workers on our premises who are not otherwise enrolled in workers comp insurance will be covered under Mishkon’s own workers comp policy, as long as we make sure to add that person’s total earnings to the annual audit during the following April. We are obligated to do so. According to Karen Lundin, our Account Manager for the Church & Casualty Insurance Agency (6/7/21 email to our executive director), “If you contract labor, they will basically be covered by your Work Comp policy, and their coverage will be added to the policy premium at the audit.” Not only did Jennifer Nguyen at Church & Casualty confirm this arrangement for me by phone on 12/27/21, but also our bookkeeper confirmed it the same day via email.
This procedure protects both the worker and Mishkon. Because that worker is temporarily doing stuff for us, if they get injured on the job, Mishkon won’t be liable for any injury-related costs — because workers comp will cover them instead.
Added Cost
How much of an impact on the bottom line does workers comp make? Ms Lundin told me at the end of December 2021: “This is only an estimate, but based on … $2,600 in labor, you should figure around an additional $90 in premium.” I.e., about a 3.5% net increase in the labor cost.
You may wonder why a small contractor does not get their own workers comp policy. The answer is that apparently it’s pretty expensive. When I asked one to do so (before I fully understood the protocol), I was told that it would cost an additional $800/day — many times higher than what it would cost under Mishkon's policy.
I’m blogging about this procedure because apparently it is not widely known. For example, on 1/14/22, our treasurer wrote: “Since when do we pay additional Workers Comp for outside vendors? We've never done that in the past to the best of my knowledge.” Similarly, another former treasurer who does property management was unaware of the arrangement until I mentioned it last week.
When comparing bids, of course the net bid price should be adjusted to reflect the sum total of that bid plus the additional workers comp premium. However, that total has been known to be less expensive than a competing bid from a larger contractor. (Any contractor that’s large enough to have employees is required to carry its own workers comp insurance — and then they pass along that overhead in their quoted prices.)
Internal Procedure
After completion of the work, upon submitting the invoice, the B&G Committee chair or the Administrator needs to alert the bookkeeper that for this job, a workers comp premium will be due eventually. As Vivienne wrote on 12/27/21, “I will just need to make sure I keep a copy of the bill to go along with the other information needed for their yearly audit.”
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