If you hire a subcontractor that lacks the proper workers’ compensation coverage — or doesn’t qualify as an independent contractor — it could put you at risk for liability if a work injury occurs, depending on which state the work is being performed in.

Here are some tips to avoid this situation, where applicable:

• Confirm that the subcontractor is an independent contractor as defined by your state’s laws
• If the subcontractor uses employees, ask for a certificate of insurance as proof of workers’ compensation coverage

Subcontractors with no employees can choose whether to purchase workers’ compensation insurance for themselves in most states. If they do have coverage, ask for a certificate of insurance for verification. Note that certificate of insurance verification alone does not qualify a subcontractor as an independent contractor. They still must meet all of the state’s criteria.

If they don’t have coverage: Request a copy of the subcontractor’s independent contractor registration form if applicable in your state. Some states have a registration process for independent contractors, and some don’t. Otherwise, ask for a copy of the subcontractor’s current license.

Note that a contractor registration form alone does not qualify a subcontractor as an independent contractor. You should also:

• Check to see that the subcontractor is registered with the state as a business entity
• Request a Certificate of Insurance for General Liability covering the dates the work was performed with limits of at least $300,000

Other considerations

Employers must also be aware of their respective state requirements. Every state is different, but in most cases, for a worker to be considered an independent contractor for workers’ compensation purposes, the worker must have:

• Control over how the work is performed
• Ability to realize financial loss or gain based on how a project goes
• Ownership of equipment to complete the job
• Compensation on a per-job basis

These are just some basic criteria, and most states have additional requirements beyond these. Get details through your state’s department of labor. For example, the labor departments in Minnesota , Wisconsin and Iowa  provide additional information online.

There are also industry-specific considerations. In Minnesota, for example, many job sites require drivers in varying capaci­ties. There is a statute that defines independent contractors in the “trucking and messenger/courier industries,” but those industries are undefined. An operator of a car, truck or van is deemed an employee unless all criteria are present. These include:

• Owning or leasing the vehicle
• Being responsible for the maintenance and all related operating costs
• Being compensated based on the work performed, and not an hourly basis
• Being substantially responsible for the means and manner of performance
• Having a written contract specifying the relationship of independent contractor

A general contractor should assume any driver will be deemed an employee unless all of the statutory criteria are met.

Your agent can help

Lastly, if you need help determining whether a subcontractor is an independent contractor or employee, ask your agent for guidance.

They can help you understand the implications to your workers’ compensation coverage.