temporary employees

How Seasonal Workers Can Impact Your Business Insurance

Is this your busy time of the year? If so, hiring a few seasonal workers may be a great way to help you get through it, but here are a few things you need to know first.

Workers’ Compensation

Don’t assume a seasonal worker does not require workers’ compensation insurance in California. Many factors determine whether a person is an employee or not.

California law requires employers carry workers’ compensation insurance, even if they have only one employee. Independent contractors are generally not eligible for workers’ compensation coverage and state laws do not require it.

Nonetheless, you may need professional advice from a trained advisor to determine whether your worker is an employee or contractor as many rules apply. The Division of Labor Standards Enforcement (DLSE) presumes a person is an employee unless you can prove otherwise based on these rules.

Failing to carry compulsory workers’ compensation insurance can trigger hefty fines, a lawsuit, or even criminal charges.

Worker Misclassification

Intentional misclassification to avoid paying workers’ compensation premiums, taxes, and employee benefits can have serious ramifications.

Violation of California Labor Code Sections 226.8 and 2753 include fines between $5,000 and $15,000 for each violation, climbing to between $10,000 and $25,000 if the company’s found to have a “pattern of practice”.

Additionally, workers’ compensation insurance carriers can seek resolution through legal and/or civil means for fraudulent behavior.

Contractor Certificates of Insurance

California contractors with employees must carry workers’ compensation insurance and should be able to supply you with a copy of their current certificate of insurance. It’s important to obtain, otherwise you could be liable for injuries and rehabilitation if an accident occurs.

Sole proprietors are exempt from workers’ compensation, but companies may ask for proof of a policy anyway to protect themselves from the possibility of a claim. If an independent contractor has an accident, they could try to claim they’re an employee to receive workers’ compensation benefits.

Many companies also rely of temporary agencies to fill their seasonal worker void. It is important the agency you work with has coverage for workers’ compensation claims.

Also ask for General Liability Insurance from your contractors before you hire them if they’ll work on your business property. If someone’s injured there, they could sue you and your contractor. Once again, if the contractor doesn’t have their own policy, you may end up paying the damages.

Health Insurance

The Affordable Care Act’s Employer Shared Responsibility rules describe a “seasonal worker” as an employee that worked no more than 120 days or four months during the previous year.

The number of employees you hire, including seasonal workers determines whether you are an Applicable Large Employer, with an exception. If you have over 50 full-time employees, but those exceeding 50 were seasonal workers, the rule does not apply.

Seasonal worker hours cannot exceed 130 hours per month for four months or more during the calendar year, or they’re no longer seasonal workers. Then you’re required to provide the same benefits to them as your full-time employees. Companies wanting to minimize costs should limit hours to avoid healthcare expenses.

Don’t presume anything. Get professional advice and protect your business.

Your insurance agent can recommend solutions for compliance with local, state, and federal insurance requirements. They will also review your general liability coverage for optimal protection.