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Resist the Temptation to Operate Without WC Insurance!

April 17th, 2013

Be wary of the advice you take, dear readers.  Free advice, especially, tends to prove the most expensive.  Recently, your humble blogger read of a certain private security company getting into hot water for failing to insure for workers’ compensation.

The owner was allegedly advised by his accountant that he wouldn’t have to provide workers’ compensation insurance for his employees, if they were independent contractors (instead of employees).  Unfortunately, the company owner took this advice without consulting an attorney, or even wondering why anyone would ever hire an employee instead of an independent contractor.

Hired to patrol a portion of Salinas, the employer was fined and is in a bit of trouble now, although there is no available information as to whether someone actually filed a workers’ compensation claim.  The silver lining, as far as your humble blogger can tell, is that no one got hurt, and no injured worker will be left in the cold.  Being an illegally uninsured employer is not a pretty picture by any means.

In the recent case of Oscar Ornella Castaneda v. Happy’s Mobile Car Wash, a worker actually did get hurt and the employer didn’t have insurance.  Mr. Castaneda was involved in a car accident while riding in the employer’s truck on the way to a job site.  Happy’s Mobile Car Wash tried to argue that Mr. Castaneda was an independent contractor and that the injury was sustained while in transit to work, and so was not compensable under the going and coming rule.

Well, Happy’s wasn’t very happy after the trial, and the workers’ compensation Judge didn’t have many happy things to say about it either when Happy’s petitioned the Workers’ Compensation Appeals Board for reconsideration.

The arguments were quickly dispatched – there was no basis to conclude that applicant was an independent contractor when he was paid a set salary every week and he performed his job duties under near total control of the employer.  The going and coming rule did not apply because applicant reported to Happy’s place of business and then rode in the company truck to the specific job site.  The fact that he rode in the company truck at all would have negated the going and coming rule, even if coming from home.

Neither the WCAB nor the Court of Appeal bothered to write an opinion on this case, and Happy’s saw its defenses wash down the drain (like at a car wash? Get it?)

California comp rates are expensive, and it’s constantly becoming harder and harder for businesses and employers.  When you’re trying to make ends meet and keep the lights on in your business, it can be very tempting to save the money on a comp policy and apply it to things like inventory and wages and maybe bringing home some profits once in a while.  After all, your employee agreed to be an independent contractor, and what could possibly happen on such a safe job, right?

Don’t do it.  Even if you get lucky for years upon years, sooner or later someone will get hurt or a disgruntled employee will lie and say he did.  If you’re a small business, the Board can be a cold and unforgiving place without the protection of an insurer, with its sharp adjusters and crack team of attorneys (such as your humble blogger).

Trust me – you can’t afford to take the free advice.

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