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Are your employees properly covered?

In order to save money, a number of new businesses are resorting to using independent contractors and temporary employees to handle many of the operations the business needs in order to function. While workers’ compensation insurance can be pricey, it is a necessary expense for many businesses.

However, when does an employer need to provide insurance? This is a question that many employers choose to avoid, as if it were some sort of luxury that the business does not need. The reality is, employees can get injured in a number of ways, and it is required under California law that employers provide workers compensation insurance for employees in the event of an accident. 

However, there are a number of employers who, intentionally or not, can misclassify employees as independent contractors. Not only can this mistake have important tax implications, it can leave an employer vulnerable to personal injury lawsuits. So how is an employer supposed to know the difference between an independent contractor and an employee?

The Internal Revenue Service (IRS) has a comprehensive test to determine whether a worker is an independent contractor or an employee, and a number of courts have adopted this test to determine if the same applies for workers’ compensation purposes. The test examines several aspects of the employer-employee relationship, including the worker’s specific duties, how much control an employer exerts over the process, and the length of the contract between the worker and the employer, to name a few.

Employers with questions over whether their respective relationships should contact an experienced attorney to ensure they are on the right path. 

Source: “Workers’ Compensation: Is your business covered?” June 22, 2014

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