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Ask the Experts: Independent Contractors

If we hire independent contractors, are they covered under our Workers’ Compensation coverage?

No. To be perfectly clear, independent contractors should carry their own workers’ compensation insurance, and your district should not be extending workers’ compensation coverage to them.

The contractor relationship is not new, but too few districts know how to proactively shield themselves from potential liabilities arising from independent contractor injuries.

A best practice when working with independent contractors is to secure a certificate of insurance from them prior to awarding any project. The certificate should demonstrate that the contractor’s workers’ compensation coverage is current. If the coverage expires prior to the completion of work, the district should require a renewal certificate before the expiration date.

In cases where workers’ compensation is not available to the contractor, it is critical to establish a true independent contractor relationship to protect your district. The contract should address and pass all of the nine statutory factors of independent contractor status as outlined below:

  1. Ensure that the district does not require the individual to work exclusively for the district except that the individual may choose to work exclusively for the district for a finite period;
  2. Ensure that the district does not establish a quality standard for the individual, except that the district may provide plans and specifications regarding the work but cannot oversee the actual work or instruct the individual as to how the work will be performed;
  3. Ensure that the district pays a fixed or contract rate and issues a 1099 tax form;
  4. Ensure that the district may only terminate the work of the service provider during the contract period if such service provider violates the terms of the contract or fails to produce a result that meets the specifications of the contract;
  5. Ensure that the district provides minimal to no training for the individual;
  6. Ensure that the district requires that the individual uses their own tools; however, the district may choose to supply materials and equipment;
  7. Ensure that the district only provides a completion schedule and a range of negotiated and mutually agreeable work hours and not dictate the time of performance;
  8. Ensure that the service provider has a trade name or business name and that the district pays the service provider’s trade or business name and not the individual personally; and
  9. Ensure that the district does not combine the business operations with the business operations of the service provider.

As a courtesy, we offer an Independent Contractor Status Form upon request. It should be reviewed and discussed with the contractor, and the signed copy should be made part of the written contract.

In some cases when a contractor fails to pass any of the nine statutory factors, they could likely be considered an employee regardless of having a contract with your district.

If this is the case, you must report the contract price, job scope, and a copy of the contract to us immediately. We will then assess and pass on a corresponding invoice to the district based on the work being performed to cover the exposure.

To minimize the district’s expenses, the additional cost for the independent contractor coverage can be transferred to the contractor as a withholding from their fees. If you need more information about independent contractors, feel free to contact us.

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