Knowing the Difference: Employee vs Subcontractor

Do you have employees without knowing it? How could you not know, right? They obviously aren’t working for you without your knowledge.  You know they are there.  You just might not know that they are an employee of yours.

Due to the fact that employers are expected to do and provide certain things for employees, it’s important to know.  As a business owner, it’s your obligation to find out exactly what constitutes an employee and the requirements you are responsible for in your state, county, or municipality.

What Makes an Employee?

In order to know what you are required to do, first you have to know how your governing entities (such as your state’s Department of Labor) define an “employee”.   How does your state classify family members who work for you?  Does it matter if your workers are full or part time, or only work for you on an occasional basis?  Are you required to implement scheduled meal periods or mandatory breaks?  Are you subject to minimum wage and overtime laws?  Will you be responsible for the quality of the work they perform?  And, of course, are you required to provide Workers’ Compensation coverage?

Let’s look at an example:

You accept a job washing a roof on a large home.  Due to the size and shape of the residence, you will need to walk the roof to clean it properly. You decide to ask your nephew to come that day to be your grounds man.  He arrives at your job site promptly at 8 a.m. as you asked him to do.  He performs tasks all day at your direction, feeding you hose, adjusting your psi, switching your tank from wash to rinse, watching your run-off, and watering down the plants that may be affected.  At the end of the day, while you check in with your customer, he cleans up all your tools and gives the sidewalks and driveway a final rinse.  You pay him the promised $100.00 for the day’s work.

Guess what.  He’s an employee!

It is important to understand that paying someone via Form 1099 does not absolve you from compliance with wage, labor and workers comp laws. 

Regardless of your method of payment to your employees, workers, helpers, or so-called “subs”, if they are working on your project on a schedule you implement, if they are working under your supervision, and if you are providing them with the tools and equipment to do the job, they are most likely considered your employees.  Another indication of employment may be whether you pay them a wage. Regardless whether it is hourly, daily, weekly, or whether you pay a flat fee for a particular job.

An independent contractor, in contrast, might possess his own tools and equipment for performing the duties of his trade, work without direct supervision, make the same services available to the general public, and perform the services under his own entity name, and may (or should) have their own General Liability insurance.

With regard to the General Liability coverage we provide, anyone on your jobsite that represents your business and performs duties under your supervision, using your tools and equipment is considered your employee and is, therefore, covered by your policy for liability as spelled out in your policy language. For more information on our exclusive program, new discounts, or friendlier payment plans, call 1-800-878-3808. Our agents would be happy to discuss your current coverage, review your policy, or get you a free quote, fast!

Since we do not provide Workers’ Compensation coverage you may need, we can’t advise whether you’re required to carry it.  However, we can point you in the direction of resources that may help you find the answers you need.  Below are some suggested websites and phone numbers where you may be able to find the answers you need.

Find Your State’s Requirements at the Links Below:

Alabamahttps://labor.alabama.gov/wc334-242-2868
Arizonawww.ica.state.az.us/602-542-1839
Arkansaswww.awcc.state.ar.us/501-682-3930
Californiawww.dir.ca.gov/dwc/Call your district office
Coloradohttps://www.colorado.gov/pacific/cdle/dwc 303-318-8700
Connecticuthttps://wcc.state.ct.us 203-596-4207
Delawarehttps://dia.delawareworks.com/workers-comp  302-761-8200
Floridawww.myfloridacfo.com/division/wc 800-742-2214
Georgiahttps://sbwc.georgia.gov 800-533-0682
Idahohttps://iic.idaho.gov/  208-334-6000
Illinoiswww.iwcc.il.gov 815-987-7292
Indianawww.in.gov/wcb317-232-7101
Iowahttps://www.iowaworkforcedevelopment.gov 515-281-5387
Kansaswww.dol.ks.gov/workcomp/ 816-889-2481
Kentuckywww.labor.ky.gov/workersclaims/ 502-564-5467
Louisianawww.laworks.net/WorkersComp/OWC504-736-8606
Mainewww.maine.gov/wcb/ 207-287-7097
Marylandwww.wcc.state.md.us/ 410-864-5297
Massachusettswww.mass.gov/lwd/workers-compensation/ 617-626-5075
Michiganwww.michigan.gov/wca 810-760-2618
Minnesotawww.dli.mn.gov/workcom 952-897-1737
Mississippiwww.mwcc.state.ms.us 601-987-4200
Missouriwww.labor.mo.gov/dwc   573-751-4231
Nebraskawww.doi.nebraska.gov/wc/402-471-2201
Nevadawww.dirweb.state.nv.us/wcs/employer.htm702-486-9080
New Hampshirehttp://www.nh.gov/labor/workers-comp/603-271-3176
New Jerseywww.lwd.dol.state.nj.us/labor/wc609-292-2515
New Mexicowww.workerscomp.state.nm.us/employers.php505-841-6200
New Yorkwww.wcb.ny.gov/content/main/onthejob/WCLawIntro.jsp518-462-8880
North Carolinawww.ic.nc.gov/employers.html919-807-2501
North Dakotawww.nd.gov/risk/workers-compensation701-328-7584
Ohiowww.bwc.ohio.gov/employer/default.asp800-644-6292
Oklahomawww.ok.gov/oid/Consumers/Workers’_Compensation/405-521-2828
Oregonwww.cbs.state.or.us/wcd/communications/emp_info.html503-947-7585
Pennsylvaniawww.portal.state.pa.us/portal/server.pt/community717-772-4447
Rhode Islandwww.dlt.ri.gov/wc/401-462-8100
South Carolinawww.wcc.sc.gov/welcomeandoverview/lawsregulations803-737-5700
South Dakotawww.dlr.sd.gov/workerscomp/605-773-3681
Tennesseewww.tn.gov/workforce/section/injuries-at-work844-224-5818
Texaswww.tdi.state.tx.us/wc/employer/index.html512-676-6000
Utahhttp://www.laborcommission.utah.gov/801-530-6800
Vermonthttp://labor.vermont.gov/802-828-4301
Virginiahttp://vwc.state.va.us/877-664-2566
Washingtonwww.lni.wa.gov/ClaimsIns/Insurance/Learn/360-902-5226
West Virginiahttp://www.wvlabor.com304-558-7890
Wisconsinhttps://dwd.wisconsin.gov/wc/608-266-1340
Wyomingwww.wyomingworkforce.org/businesses/workerscomp307-777-6763

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