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:

Alabama https://labor.alabama.gov/wc 334-242-2868
Arizona www.ica.state.az.us/ 602-542-1839
Arkansas www.awcc.state.ar.us/ 501-682-3930
California www.dir.ca.gov/dwc/ Call your district office
Colorado https://www.colorado.gov/pacific/cdle/dwc 303-318-8700
Connecticut https://wcc.state.ct.us 203-596-4207
Delaware https://dia.delawareworks.com/workers-comp  302-761-8200
Florida www.myfloridacfo.com/division/wc 800-742-2214
Georgia https://sbwc.georgia.gov 800-533-0682
Idaho https://iic.idaho.gov/  208-334-6000
Illinois www.iwcc.il.gov 815-987-7292
Indiana www.in.gov/wcb 317-232-7101
Iowa https://www.iowaworkforcedevelopment.gov 515-281-5387
Kansas www.dol.ks.gov/workcomp/ 816-889-2481
Kentucky www.labor.ky.gov/workersclaims/ 502-564-5467
Louisiana www.laworks.net/WorkersComp/OWC 504-736-8606
Maine www.maine.gov/wcb/ 207-287-7097
Maryland www.wcc.state.md.us/ 410-864-5297
Massachusetts www.mass.gov/lwd/workers-compensation/ 617-626-5075
Michigan www.michigan.gov/wca 810-760-2618
Minnesota www.dli.mn.gov/workcom 952-897-1737
Mississippi www.mwcc.state.ms.us 601-987-4200
Missouri www.labor.mo.gov/dwc   573-751-4231
Nebraska www.doi.nebraska.gov/wc/ 402-471-2201
Nevada www.dirweb.state.nv.us/wcs/employer.htm 702-486-9080
New Hampshire http://www.nh.gov/labor/workers-comp/ 603-271-3176
New Jersey www.lwd.dol.state.nj.us/labor/wc 609-292-2515
New Mexico www.workerscomp.state.nm.us/employers.php 505-841-6200
New York www.wcb.ny.gov/content/main/onthejob/WCLawIntro.jsp 518-462-8880
North Carolina www.ic.nc.gov/employers.html 919-807-2501
North Dakota www.nd.gov/risk/workers-compensation 701-328-7584
Ohio www.bwc.ohio.gov/employer/default.asp 800-644-6292
Oklahoma www.ok.gov/oid/Consumers/Workers’_Compensation/ 405-521-2828
Oregon www.cbs.state.or.us/wcd/communications/emp_info.html 503-947-7585
Pennsylvania www.portal.state.pa.us/portal/server.pt/community 717-772-4447
Rhode Island www.dlt.ri.gov/wc/ 401-462-8100
South Carolina www.wcc.sc.gov/welcomeandoverview/lawsregulations 803-737-5700
South Dakota www.dlr.sd.gov/workerscomp/ 605-773-3681
Tennessee www.tn.gov/workforce/section/injuries-at-work 844-224-5818
Texas www.tdi.state.tx.us/wc/employer/index.html 512-676-6000
Utah http://www.laborcommission.utah.gov/ 801-530-6800
Vermont http://labor.vermont.gov/ 802-828-4301
Virginia http://vwc.state.va.us/ 877-664-2566
Washington www.lni.wa.gov/ClaimsIns/Insurance/Learn/ 360-902-5226
West Virginia http://www.wvlabor.com 304-558-7890
Wisconsin https://dwd.wisconsin.gov/wc/ 608-266-1340
Wyoming www.wyomingworkforce.org/businesses/workerscomp 307-777-6763

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