Do I Need a Workman’s Comp as a Sole Proprietor?
Any business employing more than one person in Ohio must get workers' compensation insurance. This insurance isn't necessary for sole proprietorships because they don't have employees.
However, the workers' compensation policy can help a sole proprietor pay for medical bills and replace wages during recovery. This insurance is essential since the health insurance provider may deny a claim for a work-related injury. Workers comp claims usually require an IME, but you may be able to refuse an IME.
Field service business owners may also need workers' compensation insurance in fields where work-related injuries are common such as construction and roofing.
Why May a Sole Proprietor Need a Worker’s Comp Cover?
Despite not having employees, there are other reasons to invest in workers' comp.
Clients May Request It
Businesses without employees are legally exempt from workers' compensation insurance. However, clients may request it for independent contract businesses even without staff. Clients may demand that the contractor has insurance to protect themselves from liability.
The clients usually demand that the contractor has a Certificate of Insurance (COI). It may be necessary for the business owner to carry insurance just in case they get an injury on the job. Alternatively, the proprietor may invest in a workers' ghost comp policy. It helps self-employed individuals get a COI without paying the full cost of workers' comp.
Each state determines contractors and subcontractors differently. Whether a sole proprietor or general contractor, the state may consider subcontractors as employees that need workers' comp insurance. If any subcontractors get injured while working with the contractor, and the state determines that he is an employee, the proprietor may be liable to fines and liability.
The penalties may require reimbursing the state workers' uninsured employer's fund and the final penalty, including a percentage paid out of the fund to the subcontractor. A state may consider a subcontractor an employee even when they have their cover. The business owner is responsible for providing workers' comp for the said employee.
Non-W-2 Workers May Be Considered Employees
Sole proprietors may not have full-time W-2 staff. However, there's no guarantee that the state won't see part-time staff as employees. Even when the sole proprietorship is a Limited Liability Company, it may be in financial jeopardy if the department of labor in the state recommends that the business must have workers' comp insurance.
If the said non-W-2 contractor doesn't offer services to the general public, they could legally be considered an employee of the business. Classifying non-W-2 staff as business employees may make the business owner liable to various fines for worker misclassification.
How Business Owners Can Mitigate Risk
Hire a workers' compensation attorney to determine whether the subcontractors qualify to be called employees. The workmans compensation attorneys in Columbus will have the knowledge and experience to determine the workers' comp requirements for someone to be an employee.
General Contractors Working for Another Company
Ohio workers' comp coverage doesn't extend to independent contractors even when injured while working for a client. Recourse is possible if the contractor was misclassified or if the injury resulted from negligence.
Under Ohio law, a client designating a contractor as independent doesn't necessarily mean it's true. Be mindful that 1099 workers who get injured are eligible to receive workers' comp. The law in the state relies on various factors to determine an employee and an independent contractor.
When it comes to determining eligibility to claim workers' compensation, the factors to consider include:
Whether the contractor offers services to other business owners
Degree of control over their schedule
How the contractor is paid
Being self-employed and getting injured while serving a customer makes someone not qualified to get workers' comp. However, the contractor can file a personal injury lawsuit against the client if the injury results from negligence. The contractor may pursue damages such as pain and suffering that aren't available in a workers' comp case.
Participating in the state works' compensation program is the best way to get cover as a proprietor. When injured while working for a customer, there's a need to determine whether it resulted from the client's negligence. This is a lengthy process which may be challenging to prove. It is also necessary for a lost time adjuster to look into all of the details for the claim. Find out more about what a lost time adjuster is.
Get Professional Assistance
The best way to have peace of mind is to seek legal assistance from Larrimer & Larrimer, one of the best law firms in Columbus, Ohio. Professional assistance will ensure access to any valuable compensation and claims.