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Workers Compensation for Home Based Businesses

Workers Compensation for Home Based Businesses

When you own a home-based business, it can be easy to overlook certain insurance coverage in favor of simply getting the work done. Business from home can seem a very different animal than businesses run in a more commercial setting. An oft-overlooked but important coverage is Workers Compensation Insurance. Your business and its employees are not provided any coverage under a homeowners insurance policy, and employees that are required to have work comp benefits under state law are specifically excluded. How do you know if you need to provide workers compensation? How do you get this coverage? Workers Compensation Law Laws pertaining to workers compensation vary by state and can be found on the state’s Workers Compensation department web page. A list of basics by state with links to their websites can be found here. In California, any business with one or more employees must provide workers compensation insurance coverage for those employees. The code does not qualify that by the financial size of the business or the location of that business. (Who is considered an employee? Read more about that here.) What happens if you don’t provide workers compensation insurance for your employees? Again, this varies by state and is outlined on the state website. The California website lists these penalties that far outweigh the cost of getting and keeping workers compensation insurance: “Section 3700.5 of the California Labor Code makes it a misdemeanor punishable by either a fine of not less than $10,000 or imprisonment in the county jail for up to one year, or both. Additionally, the state issues penalties of up to $100,000 against illegally...
Marijuana in the Workplace

Marijuana in the Workplace

As cannabis legalization sweeps across the country, those who use the substance are applauding. However, those who employ these users are now left wondering how to navigate the minefield of legal usage of a substance that was once illegal. Questions about employee rights, the legality of drug testing post-hire and other human resources issues should always be handled by an experienced HR professional or qualified labor attorney.  While Hayes Brokers are not legal professionals, we can advise on the insurance aspects of cannabis use in the workplace. Here is how marijuana usage on the job may affect your insurance policies and premiums: Can You Get Insured or Bonded? Liability insurers and bonding companies typically do not ask for evidence of drug-free employees before insuring a business for liability.  However, an employer’s main concern should be providing a safe work environment that also allows for the completion of projects in a timely manner pursuant to contract. Bonding companies may nonrenew bonds or decline to insure contractors who habitually fail to perform their contractual obligations.  Liability insurance companies may also nonrenew or decline to write policies for any business that has large or frequent claims.  Impaired employees can contribute to both of these, costing employers in increased insurance premiums for years to come. As the legalization of marijuana continues across the country, insurance companies may begin to include questions about drug free programs and marijuana usage on applications as part of the underwriting process. A strict company policy on these issues will make these questions easier to answer. How Will Your Workers Compensation Coverage Be Affected? Workers Compensations pays claims on...
Hash Oil Headaches

Hash Oil Headaches

As new industries arise, old problems can resurface and cause a lot of headaches for employers. The most common one for employers right now is employee status. Who is considered an employee? How can you provide work for someone without being responsible for workers compensation premiums for them, especially if the work is high risk? Uber has been grappling with the independent contractor vs. employee issue for a few years now. The cannabis industry is just beginning to have the same problems and it all boils down to hash oil. What’s the Problem? When produced commercially, hash oil can be expensive. Cannabis operations may find it cheaper to hire someone to make the hash oil for them using the butane extraction process, or purchase it from a local “manufacturer”. This independent contractor may be working out of his or her own home, or in a makeshift facility, such as a shed, near the cannabis dispensary. The butane process is dangerous, and without proper venting and proper equipment, explosions can happen. These explosions cause property damage as well as injury to the independent contractor. How Is This Your Problem? It may seem like a cut-and-dried issue: you hired an independent contractor, so his injuries are his problem, not yours. Unfortunately, it isn’t that simple. Like in the case of California Uber drivers suing for employee status to cover on-the-job injuries, independent hash oil contractors are contacting law firms looking for someone to pay their medical bills. That someone will most likely end up being you. You may have an employment contract with someone signifying he is an independent contractor, but...
WCIRB and You

WCIRB and You

It is an entity that is part of the insurance portfolio of every employer in California: the Workers Compensation Insurance Rating Bureau (WCIRB).  You may have heard about WCIRB from your broker, or the WCIRB may have been in contact with your business. How much do you really know about this agency? What They Are Every state has a way of assigning payroll classes, etc., much like the WCIRB. For the purposes of this article we are going to discuss the California WCIRB. The WCIRB is a nonprofit association comprised of all companies licensed for workers compensation transactions in the State of California.  The WCIRB works with the California Department of Insurance to perform many Workers Compensation Insurance related functions including: Using statistical and actuarial data to determine pure premium rates. Administering Workers Compensation regulations. Assist policyholders with employee classification. Produce and distribute experience modification factor worksheets. Reviews policy forms and endorsements. Advises the Cal-OSHA Targeted Inspection Program. WCIRB serves workers compensation policyholders in many different ways, but the two most important ones for business owners are experience modification factors and employee classification codes.  Here is how those work: The Mod Factor One way to modify pure premium on a work comp policy is through an experience modification factor. This factor is determined through a complicated mathematical process involving 5 years of claim data for a particular employer, including both frequency and severity of claims. Depending on frequency (number of claims) and severity (claims amount paid out) a modification factor of anywhere from 60% to 300% may be applied to the pure premium to determine the total cost of...
Why You Should Care About Your Mod Factor

Why You Should Care About Your Mod Factor

Workers Compensation Insurance is a necessary evil.  The state of California requires that businesses have Workers Compensation Insurance even if they only have one employee, so everyone should have it.  Federal law and other states laws may vary slightly, so check with your state or the Department of Labor for specific requirements. Workers Compensation Insurance rates are set by the state and based on the classification of your workers.  That means that all roofers pay the same rate per employee, all banks pay the same rate per employee, all sales offices pay the same rate per employee.  It might seem like there is no wiggle room for rates. There are a couple of factors that can affect your Workers Compensation Insurance rates, and the most important one is the Experience Modification Factor.  So what is this Experience Modification Factor (Mod), and why should you care about it? What the Mod Is The Experience Modification Factor is a complicated calculation that is based on the last three (3) years minus the current year of your workers compensation claims payouts to policy premium.  The factor is affected not only by the dollar amount of claims you have (severity) but also the number of claims you have in a given policy period (frequency). Your Mod Can Cost You Money The standard Mod is 1.0.  This means that when your policy premium is calculated, the premium is not affected by any modification factor. However, a high ratio of claims to premium can result in a higher Mod factor, above 1.0.  If there are very large claim payouts or a high number of small...