 Written by: Jimmy Norton, CPCU
The Independent Contractor vs Employee discussion never ends! In a prior post, I wrote about State and Federal efforts to crack down on Employee misclassification. As of July 1, 2020, a new Virginia law declared that all workers are considered Employees and employers must prove their workers are Independent Contractors. If they cannot offer such proof, then employers must pay for prior wages, benefits and payroll taxes. If that wasn’t scary enough, changes in the Contractor vs Employee question can also dramatically increase your company’s liability risk and insurance premiums. Here’s a look at a few biggies: Workers’ Compensation Insurance Work Comp laws state that employers must pay medical bills and lost time arising from a work-related injury. Employees are automatically covered under Work Comp laws, but Independent Contractors are not (some state laws may vary). If an Independent Contractor is injured while working for your company, he or she could still try to file for benefits under your company’s Work Comp policy. Insurance Adjusters and State Work Comp Commissions often scrutinize the nature of the employer-worker relationship – similar to the IRS and DOL. If the Independent Contractor relationship more like an Employee, then that individual’s claim is often covered. If the Contractor is truly independent, then their claim is usually denied. In light of the tightening restrictions, what could happen if an Independent Contractor wins their misclassification suit, and they are retroactively classified as an Employee? It is possible that they would be entitled to Work Comp benefits that had been denied previously. Claim amounts can increase, causing insurance rates to increase in future years. Work Comp premiums are based on gross annual payroll for company Employees. Independent Contractor compensation is not included in this basis if that Contractor carries his/her own Workers’ Compensation insurance. If that Contractor is reclassified as an Employee, then he/she can drop his/her policy and rely on the employer’s coverage. His/her annual compensation is added to the premium basis, thereby increasing the employer’s insurance bill. General and Professional Liability If an Independent Contractor causes property damage or bodily injury while working for you, most Liability policies will cover YOU for work they perform on your behalf. Subcontracted costs are usually included in your Liability premium basis but at a reduced rate. If those Contractors are now Employees, then their cost becomes payroll and is charged at higher rates depending on the work they perform. Employment Practices Liability Employment Practices Liability (EPL) insurance covers companies against discrimination, harassment, wrongful termination and retaliation claims brought by Employees or third parties. A common Employee action is a “wage and hour” claim, where the Employee alleges that he/she is entitled to overtime or additional compensation due to employer misclassification. EPL policies typically exclude coverage for wage and hour claims, but many provide a sublimit ($100,000 or $250,000) for defense. The new DOL rule and state laws may spur a wave of new Employee misclassification claims. Check your coverage to see if it includes Wage & Hour protection. What Does This Mean For My Business? Now is a good time to take a look at the relationship between your company and any Independent Contractors whom you use. Read up on the topic and apply the IRS test (mentioned in my previous post) to see if your Independent Contractor will stand up to scrutiny. Remember, Virginia and several other states will operate on the assumption that your Contractor is an Employee. You must prove them wrong. Do you have enough evidence to support your assertion that they are Contractors? Read your insurance policies and educate yourself on how they will or will not respond to claims arising from your use of subcontractors. Give us a call if you have any questions on this topic. Be prepared!
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 The cyber liability market has changed drastically over the last decade and so has our dependence on technology. As the world progresses to be even more digital, protecting the privacy of individuals and corporations alike, will likely be a continuously daunting task. Although the average premium for a small business cyber policy is $2,000/year, the average cost of a cyber claim could be 20 times that cost. This discrepancy is causing carriers to recoil or exit the market entirely. So where does that leave insureds who are required to carry the coverage, sometimes in towers of $5m or more? Check out this great article from Big I that delves into some of the most recent attacks and their impact on the market as a whole, as well as how unpredictable these claims may be in the future.
https://www.iamagazine.com/markets/will-cyber-liability-be-an-insurable-risk-in-10-years  Restaurants are more than just a place to grab a bite to eat or have a drink after a long day. Many serve as the backdrop for celebrating our biggest milestones and connecting with friends and family. Restaurants are embedded into American culture and allow us to experience the culinary traditions of the immigrant communities that are now woven into the fabric of this country. Although we lost many to the pandemic, communities across the country doordashed, grubhubbed and uber ate as much as possible to help keep these cherished establishments afloat.
Now, the government is stepping in to do more. Through the lobbying efforts of the National Restaurant Association, the Small Business Administration has released its first $2 billion in Restaurant Revitalization Funds as part of the American Rescue Plan Act of 2021. If you are a restaurant owner and were not eligible for PPP funds, you may be eligible for RRF proceeds. To find out more, please follow the link for additional program details, applications and answers to frequently asked questions. https://www.sba.gov/funding-programs/loans/covid-19-relief-options/restaurant-revitalization-fund#section-header-2 Quick Fact Sheet - https://restaurant.org/downloads/pdfs/business/faq_revitalization_grants |
About UsBrock-Norton Insurance Agency was born in 1992 when Jim Norton, Sr. and Everett Brock combined their agencies and talents. We have steadily grown to become one of the premier Property & Casualty agencies in the Washington DC area with clients in almost every state. As an independent insurance agency, our goal is to assist you in all your insurance needs. Categories
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