Why You Need Workers’ Comp
Everyone you know has a great injury story. Something that happened to them or someone they know while on set. Something as simple as a slip and fall, or as complicated and unlikely as a faulty set piece going astray.
You can’t plan when accidents will happen, especially in the creative and chaotic environment of a photoshoot. So we in the industry need to be prepared at all times for injuries and illnesses to occur on set. One of the best ways to be prepared is by having proper workers’ compensation coverage. However, workers’ comp is often misunderstood. There’s a lot of legalese to get through, but that’s what we’re here for. In this installment of Ask OOTB, we’ll answer some of your most common questions about workers’ compensation policies.
We’ll answer the following questions:
What is workers’ compensation?
Are independent contractors covered under workers’ comp?
Do I need to maintain my own workers’ compensation policy as a hiring entity?
Is COVID covered under workers’ comp?
What happens if I don’t have workers’ compensation insurance, and someone gets injured on set?
But first, some quick housekeeping:
Ask OOTB is an ongoing series in which we share some of the most commonly asked questions that we receive, along with relevant information that can help you better understand all things payroll. If you have a question that you would like us to tackle, please submit it to us via our Ask OOTB online form.
And an important note: The information provided in this article does not, and is not intended to, constitute legal, tax, or financial advice. All information, content, and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information. We highly recommend that you seek the advice of an attorney or tax professional rather than relying solely on the information provided herein.
Different States have different laws regarding workers’ compensation. In this article, we’ll focus on California, since that’s where OOTB is based. If you are in a different state and want to learn about your state laws on workers’ compensation, we found a great page on the U.S. Department of Labor website with links to different state’s official websites with workers’ comp guidelines.
What is workers' compensation?
Workers’ compensation is medical care and benefits for an employee that are paid for by their employer if that employee gets injured or sick while on the job. It covers both single exposure injuries or illnesses (like a sprained ankle), and repeated exposure injuries or illnesses (like a back injury from lifting heavy set items).
According to the California Department of Industrial Relations resource page, Answers to Frequently Asked Questions About Workers' Compensation for Employees, workers' compensation insurance provides the following five basic benefits:
Medical care: Paid for by the employer to help an employee recover from an injury or illness caused by work.
Temporary disability benefits: Payments to an employee if they lose wages because their injury prevents them from doing their usual job while recovering.
Permanent disability benefits: Payments if the employee doesn't completely recover.
Supplemental job displacement benefits (if the date of injury is 2004 or later): Vouchers to help pay for retraining or skill enhancement if the employee doesn't recover completely and doesn't return to work for their original employer.
Death benefits: Payments to the employee’s spouse, children, or other dependents if the employee dies from a job injury or illness.
(All of the above links will take you to articles on the Department of Industrial Relations website detailing these benefits.)
Are independent contractors covered under workers’ comp?
Generally not. Independent contractors are not required to maintain a workers’ comp policy. In order to ensure workers on set are covered, they should be paid as W-2 employees. This is one of the reasons why worker classification is so important. According to an article titled, Do I Have to Have Workers’ Compensation Insurance on the DIR website, many employers misclassify their employees as independent contractors. However, the penalties for neglecting to have a workers’ compensation policy for your misclassified workers are extremely steep. It is therefore very important to classify your workers correctly. We’ve written a number of articles about worker classification based on great source material, and we encourage you to learn as much as you can! To learn more about correctly classifying your workers as employees or independent contractors, check out the articles we wrote on the Borello test, the ABC test, and Misclassification.
Do I need to maintain my own workers’ compensation policy as a hiring entity?
As a hiring entity, whether you’re the producer or the client, you need to make sure that the Employer of Record has a valid workers’ compensation policy. The employer of record could be you, or it could be a different company that pays your employees with W-2 wages for tax purposes.
If you hire an independent contractor to perform work and they are properly classified as an independent contractor, but their own workers’ compensation coverage lapses, you could be held liable as a “special employer” if they are injured while performing work for you. It is prudent to request confirmation of a valid workers’ compensation policy for any independent contractors hired to perform services on one’s behalf as you could be liable if a workers’ compensation policy does not exist or has lapsed.
Is COVID covered under workers’ comp?
The answer to this question is complicated, but according to the California Department of Industrial Relations resource page, Workers’ Compensation Presumption (SB 1159) Frequently Asked Questions, right now, if specific qualifications are met, it can be.
On September 17th, 2020, the California Senate passed Senate Bill 1159. It affects employees who got infected with COVID-19 on or after July 6, 2020 and remains in effect until January 1, 2023. SB 1159 creates a “rebuttable presumption of eligibility” for workers’ compensation benefits for “first responders and healthcare workers” and “employees whose employers have five or more employees, and who test positive for COVID-19 during an outbreak at their specific workplace.”
An “outbreak” is considered to have happened if any of the following 3 situations occurred:
4 or more employees tested positive for COVID if the employer has 100 employees or less.
4% of employees tested positive for COVID if the employer has more than 100 employees.
The workplace is ordered to close by a local public health department, the State Department of Public Health, the Division of Occupational Safety and Health, or a school superintendent because of a risk of infection of COVID-19.
What happens if I don’t have workers’ compensation insurance and someone gets injured on set?
The workers’ compensation system in California is a “no fault system.” This means that if you are uninsured, and an employee is injured in the course and scope of employment, you, the employer, are 100% liable for their injuries. It is irrelevant whether you were taking precautions or if the employee could be at fault. Intentional failure to maintain proper workers’ compensation coverage is a criminal offense and can have serious consequences.
The following is a list of potential penalties that you might incur if you fail to maintain workers’ compensation insurance:
A fine of up to $10,000
Imprisonment in your county jail for up to one year
Up to $100,000 in penalties from the state
The full cost of medical care for your injured employee
Legal fees if your employee decides to sue you for being illegally uninsured
A lien filed against your property from the Uninsured Employers’ Benefit Trust Fund (a state fund that is used to pay the premiums of workers whose employers are illegally uninsured)
The information for the above list was taken from the California Department of Industrial Relations resource page, Answers to Frequently Asked Questions About Workers' Compensation for Employees.
Clearly, the safest action is to maintain adequate workers’ compensation insurance for your employees. However, even if you are accidentally misclassifying your workers as independent contractors, you will still be penalized as an uninsured employer. This is why, again, it is vital that you classify the people on your set appropriately, so you know what kind of workers’ compensation policy you need to have.
We hope we’ve clarified some things regarding workers’ compensation policies. Let’s do a quick recap:
The laws are different in different states, but generally, workers’ compensation is an insurance policy that pays for medical treatment and other benefits for employees injured on the job. In California, it covers employees, but may not cover independent contractors. You can get into serious trouble for not having it. Penalties for neglecting to obtain workers’ compensation insurance include hefty fines and the possibility of imprisonment. If you have any more questions, please ask us via our Ask OOTB online form.
Sources:
Different State’s Workers’ Compensation Laws.
U.S. Department of Labor. Office of Workers Compensation Programs. State Workers’ Compensation Officials. https://www.dol.gov/agencies/owcp/wc
What is Workers’ Compensation?
California Department of Industrial Relations. Division of Workers’ Compensation. (May, 2016) Answers to frequently asked questions about workers' compensation for employees. https://www.dir.ca.gov/dwc/wcfaqiw.html
California Department of Industrial Relations. FAQ-Workers’ Compensation. (Jan 1, 2011) Do I Have to Have Workers’ Compensation Insurance. https://www.dir.ca.gov/dlse/FAQ-Workers%20Compensation.pdf
Senate Bill 1159
California Department of Industrial Relations. Division of Workers’ Compensation. Workers’ Compensation Presumption (SB 1159) Frequently Asked Questions. https://www.dir.ca.gov/dwc/Covid-19/FAQ-SB-1159.html)