By: Emily Anderson, Esq.
Any contractor who hires subcontractors wants to know whether the subcontractors have workers’ compensation insurance. We have recently seen issues arise where a subcontractor signs a contract stating they will obtain insurance, and may even provide a certificate of insurance, but it does not fully protect the contractor. If this occurs, then the contractor may be found to be a statutory employer pursuant to O.C.G.A. § 34-9-8(a), and will then be responsible for an injured worker’s comp benefits. The statutory employer can go after the contractor for breach of contract, but they are still responsible for upfront payment of benefits, and it takes additional legal fees to go after the contractor in civil court. Therefore, here are some steps we recommend all contractors take before hiring a subcontractor:
1. Never hire a subcontractor without first obtaining a valid certificate of insurance
While it is important to get the certificate of insurance, the contractor should look at the certificate, and not just take it at face value. The contractor should first make sure the certificate covers workers’ compensation insurance. This is to avoid a situation where a subcontractor only purchases liability insurance and does not secure workers’ compensation insurance. Next, a contractor should review the states covered by the certificate of insurance. It may seem clear that the insurance should cover any state in which the subcontractor does work. However, there are circumstances where the insurance only covers one particular state, and then the contractor is on the hook if a subcontractor’s employee gets hurt in a different state. Finally, the contractor should check what dates the insurance covers, and be diligent about following up to ensure that coverage does not lapse.
2. Use the Board’s Coverage Verification Tool
As an extra layer of protection, before starting any new project with a subcontractor, a contractor should always check the coverage verification tool on the State Board of Workers’ Compensation website located here. Checking this verification tool is another method to confirm that a subcontractor has workers’ compensation insurance in Georgia. However, we still recommend reviewing the certificate of insurance because changes are not immediately reflected on the Board’s website.
3. A contractor should be diligent about having a fully executed contract with any subcontractor
The contract should outline the relationship between the contractor and subcontractor. Namely, that no employment relationship is created, so the subcontractor cannot go back and claim to be an employee. Next, the contract should outline the workers’ compensation insurance requirement, and have an indemnity provision. While these contractual provisions may not help when determining compensability in a workers’ compensation case, they do give the opportunity for the contractor to recover against the subcontractor in court. The potential for civil penalties also gives an extra inducement for the subcontractor to be diligent in making sure their insurance is up to the contractor’s specifications.