If you subcontract work, double-check the contract’s provisions on which party pays for workers’ compensation coverage. If you don’t, you may find your organization on the hook for injuries to the subcontractor’s employees.
Be especially careful when the contract says your organization will deduct the cost of workers’ comp premiums from the amount due if the subcontractor doesn’t submit proof of insurance coverage. That implies you’ll provide coverage if the subcontractor doesn’t. And that can spell big trouble if you don’t add those employees to your policy.
A far safer move: Demand proof of coverage as a precondition to working as a subcontractor. That way, it’s the subcontractor’s responsibility, not yours.
Recent case: A subcontractor working with Doug Connor Inc. hired a man to drive a truck from Florida to New Orleans as part of Hurricane Katrina cleanup efforts. The driver was injured when part of the load fell on him.
The contract stated that if the subcontractor didn’t provide proof of insurance, Doug Connor would subtract the cost of coverage from the amount due based on its own insurance rate. The workers’ comp judge ruled the contract provisions made the contractor liable for the driver’s injuries. (Sanseviro v. Doug Connor Inc., 13 FLWCLB 205, 2006)
Final tip: Watch out for boilerplate language in subcontracts, especially if the subcontractor supplies the document. It’s wise to have an experienced attorney review your contracts.