As you can imagine, I am frequently asked by owners of non-emergency transportation companiesif it would be better for them, from a workers compensation standpoint, to 1099 all their employees, since they would then not have to cover them under a workers compensation policy. The answer, unfortunately, is that this is only partially true as follows:
Pay To Play
If you hire a subcontractor, they must have their own workers compensationpolicies. In Georgia, as of September, 2011, the minimum premium for such a policy is $1,100 per subcontractor. This would be their annual premium if they listed zero payroll and excluded themselves from coverage on the policy. This means that, if these drivers got into an accident they would have no coverage for their injuries.
Real Life Example
Imagine, if you will, a situation where one of these subcontractors gets into an accident and suffers severe injuries resulting in medical bills of over $100,000 only to discover that he has no coverage for himself under his workers compensation policy. Since he was a subcontractor and not an employee, he would also have no coverage from the NET company for which he was operating. He is now looking at paying medical and rehab bills of over $100,000 and the prospect of never being able to work again.
20 Questions That Make ALL The Difference
This subcontractor will, naturally, hire an attorney who will inform the subcontractor that he may have, in fact, been an employee of the NET company based on a series of questions posed by the Georgia Department of Labor. If the subcontractor can answer ‘yes’ to ANY of these statements about his role with the NET company then he is considered an employee of the NET company. These are the statements:
- The person is required to comply with the employer’s instructions about the work.
- The person is provided training from or at the direction of the employer.
- The person’s services are integrated into the employer’s business.
- The person’s services are rendered on a personal basis.
- The employer hires, supervises and pays assistants who help the person.
- The person has a ‘continuing’ relationship with the employer.
- The employer set the hours of work.
- The person devotes full time to the single employer.
- The person performs services at the employer’s location.
- The sequence of the person’s work is directed by the employer.
- The person is required to give oral or written reports on a regular basis.
- The person is paid by the hour, week or month, not by the job.
- The person’s business and/or traveling expense is paid by the employer.
- The person is provided ‘tools’ and ‘materials’, for work by the employer.
- The person does not have ‘significant investment’ in equipment or facilities.
- The person has a ‘Profit or Loss’ potential.
- The person works for only one entity or employer.
- The person does not make his/her services available to the general public.
- The person can be dismissed for reasons other than non-performance.
- The person can ‘quit’ work at any time, without liability, for completing the job.
Since the subcontractor can easily answer ‘yes’ to many of these statements, precedence has shown that the employer would then become legally liable for the subcontractor’s injuries, expenses, and loss of work. Further, since workers compensation is the ‘sole remedy’ for injured employees, and it was not made available, the subcontractor can now also sue the employer for punitive damages.
So, this is a very long winded way of saying that you should only 1099 your drivers if you do it in such a way that they could not answer ‘yes’ to ANY of the above statements.