Workers Compensation

What is Workers Compensation and Do I need it?

A special report by Limoinsurers.com

Workers compensation insurance has long been a source of confusion among many public transportation companies. Why? Because most limousine or bus operators utilize a combination of different types of individuals to run their operation, these include:

• W-2 Employees
• 1099 Drivers: drivers who are paid wages and are given a 1099 tax form at year end, with no “employer” payroll taxes withheld
• Independent Contractors: some independent contractors who may use company owned vehicles, or independent contractors who own their own cars, but work at your direction. This variety of types of drivers, salespeople, and independent operators has presented a challenge to employers. In this report we will help you to answer the following questions:

1. What is covered?
2. What is NOT covered?
3. When can employers be sued?
4. What benefits are covered?
5. Who is covered?
6. Do I have to provide workers compensation for all drivers?
7. How are premiums for workers compensation insurance charged?
8. How much does it cost?
9. What is included in wages?
   Under the workers’ compensation system, employers are required to purchase insurance that provides benefits to employees who suffer work-related injuries and illnesses. Historically the workers compensation insurance system evolved to provide a compromise between employees and their employers.
   The employees are paid benefits for an on the job injury or illness, regardless of who is at fualt, and in return for providing this benefit, employers are protected from lawsuits from injured employees. Employees receive “compensation for the injuries, and can not sue their employers for pain, suffering and mental anguish.
   Like all insurance products, Workers’ compensation is governed by each individual state, not federal, law, and each state’s system differs slightly in the details. However, the structure and operation of the overall workers’ compensation system is very similar from state to state. Each states’ rates and benefits vary according to the laws and filed rates in each state. Employees, Employers and insurance companies must abide by the rules and regulations set by the state.The main differences are the rates paid to injured employees and the procedural rules employers, employees, and insurance companies must abide by.

Each State has specific laws regarding workers compensation insurance laws. Check with your state department of workers compensation for specific information, or Call Mike at1-800-222-2425 X458, for more information.

1. What Does Workers’ Compensation Cover?
   Workers’ compensation laws cover only work-related injury or illness. But, the injury or illness does not necessarily have to occur in the workplace. As long as it’s job-related, it’s covered. For example, employees are covered if they are injured while traveling on business, doing a work-related errand, or attending a business-related social function.
   Covered injuries and illnesses can range from sudden accidents — such as falling in an employer’s parking lot, or a motor vehicle accident — to injuries that happen over time, such as carpel tunnel syndrome, or back pain due to herniated discs), or illnesses that result from exposure to workplace chemicals, air pollution, or radiation.. Workers also receive compensation for illnesses and diseases that are the gradual result of working conditions — for example, heart conditions, lung disease, and stress-related digestive problems. Each state’s Workers Compensation Board sets the actual monetary minimums and maximums the employee will receive.



2. What Doesn’t Workers’ Compensation Cover?
   Not all problems that occur in the workplace are covered. Coverage may be denied in situations involving:
   • injuries caused by intoxication or drugs
   • self-inflicted injuries
   • injuries from a fight started by the employee
   • injuries resulting from horseplay or violation of company policy
   • felony-related injuries
   • injuries an employee suffers off the job
   • injuries claimed after an employee is terminated or laid off, or
   • injuries to an independent contractor ( this is a very tricky area for transportation companies as Independent contractors are strictly defined by the IRS, and depending on the definition, and degree of control exercised over the Independent contractor, they may be deemed an employee.)
3. When Can an Employee Sue an Employer in Court?
   Employers aren’t protected from allemployee lawsuits related to injuries. If the employee is injured because of the employer’s intentional or reckless actions or the employer did not have workers’ compensation insurance, the employee can bypass the workers’ compensation system to sue the employer in court for a full range of money damages, including punitive damages, pain and suffering, and mental anguish. Employees may also be able to sue outside third parties, such as when the employee is involved in a car accident that is someone else’s fault or the employee was injured by a defective piece of equipment.


4. What Benefits Are Available Under Workers’ Compensation? The workers’ compensation system provides:
   • replacement income when employees are unable to work due to a covered injury
   • payments for medical expenses, including doctors’ visits, surgeries, and prescription drugs, and
   • Vocational rehabilitation benefits — including on-the-job training, education, or job placement assistance (depending on the state where the employee is injured).
     An employee who is temporarily unable to work will usually receive temporary disability payments of two-thirds of the employee’s average wage, up to a fixed ceiling. An employee who becomes permanently unable to do the work he or she was doing prior to the injury, or unable to work at all, may be eligible for long-term or lump-sum benefits for permanent disability. The workers’ compensation system also pays death benefits to surviving dependents of workers who are fatally injured in a work-related incident.
     What Are an Employer’s Responsibilities for Workers’ Compensation?
     Employers have a number of obligations under the workers’ compensation system. If these requirements are not met, employers can be fined and injured employees may be able to sue an employer in court for punitive money damages.
     Post Notices and Advise Employees of Their Legal Rights Employers must post required notices in a convenient location frequented by employees during working hours. The notices or posters contain important information about employees’ rights and:
   • provide the name of the company’s workers’ compensation carrier, or the fact that the employer is self-insured, as well as who is responsible for claims adjustment
   • state that injured workers have the right to receive medical treatment and to select or change treating doctors, and
   • give details about available workers’ compensation benefits. Employers must also notify new hires of the above information.
   
   Provide Claim Forms to Injured Employers
   Employers must provide injured employees with a workers’ compensation claim form within 24 hours of receiving notice of the injury. Employers must also supply the employee with written information (usually a pamphlet) about the employee’s rights under the workers’ compensation system. The written material should provide details about available benefits and how to file a claim.
5. Who is covered?
   Each state’s specific Workers’ Compensation laws provide a definition of what an employee is. Generally, in order to qualify for coverage under Workers’ Compensation laws a person must have been an employee acting within the scope of his or her employment when the accident, injury or work-related illness occurred. Typically, an employee is defined as someone who is not an independent contractor and has been hired by the employer to perform specified duties or tasks. Employees generally receive a salary or hourly wages and are issued a paycheck from which state, federal and Social Security taxes are withheld. Both part-time and full-time employees are covered by workers compensation.


6. Do I have to provide workers compensation for all drivers?
   Yes, Unless a driver is an independent contractor with his own insurance, he must be covered under your company’s policy.


7. How are premiums for workers compensation insurance calculated?
   Premiums for workers compensation is based on renumeration paid during the policy year. The premiums are calculated based upon the type of business. Each employee’s duties are classified according to the workers compensation board, and rates are set by the state. For example, a limousine company would generally have a premium classification for the following employees: Drivers
   Clerical (including in-side sales)
   Executive Officers
   And possibly garage employees(If you service your own vehicles).


8. How much does it cost?
   Workers compensation policy premiums are calculated based on the class of business, annual payrolls and loss history Each class is charged at rate per $100 of compensation. For example, driver code in New Jersey will be approximately $12. Per $100 of compensation. Clerical employees will be charged at a rate of .29 per $100 of compensation.
   After all wages are included and each class code rate calculated, a premium is calculated. Once this premium is calculated, it is modified, by either a credit or debit, based on claim experience. (This is called a premium modification factor, and it is re-calculated every year based on certain minimums)


9. What is included in wages?
   Salary, overtime, Commissions, and hourly wages are all included in wages. However, in most states, GRATUITY IS EXCLUDED, from wages when calculating workers compensation insurance premiums. Note: it is very important to keep good records for all employee compensation, and gratuities must be broken out and listed separately on payroll records in order to make it easy to calculate driver payroll at audit time.
   Should I Carry Workers’ Compensation Insurance?
   If your business does not carry the workers’ compensation coverage required by law, employees may file a lawsuit against the business in civil court or, in some states, file a workers’ compensation claim against a special uninsured employers fund (for instance, California has the Uninsured Employers Benefits trust fund). You may also be subjected to Fines and penalties by your state if you do not carry workers compensation.


10. ***IMPORTANT WORKERS COMPENSATION INSURANCE TIPS:
    If you are farming out work to affiliate limousine or bus companies, ALWAYS get copies of certificates of insurance and ask to be listed as a certificate holder on the other company’s workers compensation policy. This will provide protection for you that you will not have to pick up the money paid to your affiliate on your workers compensation policy. If you fail to require a certificate of insurance, you may be charged workers compensation premiums for the work that that you farmed out to an affiliate. This rule should also be followed when working with any independent contractors also.

Note: it is very important to keep good records for all employee compensation, and gratuities must be broken out and listed separately on payroll records in order to make it easy to calculate driver payroll at audit time.