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Workers' Compensation Insurance and Independent Contractors

Is your company aware of Texas Workers' Comp requirements?

From a Workers' Compensation insurance perspective, there are four categories of independent contractors:

• owner operators in the transportation industry,
• residential and small commercial construction independent subcontractors,
• construction and non-construction industry independent subcontractors, and
• all other independent contractors.

The Texas Workers' Compensation Commission developed forms to be used by Workers' Compensation subscribers to clearly define the relationship between an employer and their independent contractor. These forms, unique to each of the categories listed above, must be filed by the employer with the Division of Workers' Compensation and the insurance company providing the Workers' Comp insurance. The filing must be done within a LIMITED period of time from execution, which can be as little as 10 days.

It is critical that employers define their relationship with independent contractors from the start. This will avoid any misunderstanding in regards to the legal obligations of an employer toward insuring their independent contractors. If the relationship is not clearly defined, and the appropriate documentation is not filed, employers may find themselves in court either because an injured independent contractor demands compensation under the Workers' Comp policy or because an insurance company is claiming an attempt by the employer to avoid paying higher premiums by intentionally misrepresenting an employee's status as an independent contractor.

It is also important for employers to consult with a qualified attorney to ensure that close relationships with independent contractors do not jeopardize the legality of these agreements. In the past, legal issues were brought up in Texas courts regarding the theory of "Single Business Enterprise," which was rejected in 2008 by the Texas Supreme Court.

The above mentioned forms have no bearing if the employer or general contractor does not carry Workers' Comp insurance. Keep in mind, while Workers' Compensation insurance is not mandatory in the great state of Texas, obtaining this insurance significantly limits the employer's liability for work-related injuries. Also, employers who choose not to obtain Workers' Compensation insurance, or who cancel their insurance, are required to file form DWC-005, with the Division of Workers' Comp in a timely fashion. Either way, there are additional notices which must be provided to employees and displayed in the work place. Otherwise, employers may be liable for administrative violations.