In general, any Michigan firm that employs at least one full-time person (35 hours or more per week) or employs more than two people at one time (including part time) is required to carry Michigan Workers Compensation insurance.
But my workers are all subcontractors!
We often hear - “I don’t need workers compensation insurance. My workers are all subcontractors because I don’t withhold taxes and I send them a 1099.” Michigan’s Workers Compensation law (MCL -418.161(1)(n)) defines an employee as, “Every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, if the person in relation to this service does not maintain a separate business, does not hold himself or herself out to and render service to the public, and is not an employer subject to this act…” . In other words, while there are some limited exceptions, anyone working for you that is not a separate business and subject to the workers compensation law is considered an employee!
What does Workers Compensation insurance do?
A Workers Compensation insurance policy does 2 primary things:
- It provides valuable coverage for the medical, rehabilitation and work loss expenses that result from an employee’s on-the-job injury or illness, and
- It provides a wall of protection for the employer. Workers compensation is an injured employee’s sole or exclusive remedy. This means that, unless the employee’s injury was caused by extreme negligence of the employer, the employee is not able to recover damages from the employer except as prescribed by the law.
What happens if I don’t have Workers Compensation insurance?
In the absence of workers compensation insurance an injured employee may be able to seek recovery directly from the employer. This can be very costly for the employer because the workers compensation law does not establish any dollar limits and other forms of insurance exclude coverage for injury to employees. In the case of an employee working for a contractor, the injured employee may even have recourse directly against a general contractor, if applicable, or the owner of the premises where work is being done. If this isn’t enough, an employer that fails to carry workers compensation insurance may be subject to fines of up to $1,000 per day and 6-months in prison.
What does workers compensation insurance cost?
Premiums for workers compensation insurance are based on the type of work being done by employees and annual payroll. A provisional premium is charged at the beginning of a policy year based on payroll estimates provided by the employer. After the policy expires, the insurance company will audit the firm’s payroll and the premium will be adjusted up or down depending on how the estimated payroll compares with the actual audited payroll. The premium can also be discounted or surcharged by a Merit Modifier or Experience Modifier.
The professionals at Insurance Planning Service are able to answer questions and help to secure a Michigan Workers Compensation insurance policy tailored to the needs of your business. Call us at 800-220-5582 or contact us for a free quote today!