Experience with Contractors and Workers Comp.

mrwiseguy85February 26, 2014

I currently live in Southern California and am evaluating general contractors for a full bathroom remodel. I have found one general contractor who is licensed with the Contractor State Licensing Board (CSLB) and has very favorable reviews on Angie's List. I've met him in person and have a good impression, and believe he is offering a thorough and competitively priced bid.

I've hit a red flag that's kept me from hiring him. He does have an active CLSB license, general liability insurance ($1mil policy), and contractor's bond for $12,500. What caught my attention is on the CSLB, it shows he does not have a worker's compensation policy because he is labeled as 'exempt' (meaning he has no employees which would require a policy).

I asked the contractor about this and he said his 'workers' are covered with medical insurance. He used the term 'workers' but did not clarify if they were 'employees' or sub-contractors. I told him the workers compensation is a sticking point for me because I have family working in the field of civil law (court reporters) and they have seen many instances of workers comp. cases hitting the homeowner. He mentioned something along the lines of the contract that we'd sign would release me (the homeowner) of any liabilities.

I am really unfamiliar with workers compensation laws and more specifically the relationship between the homeowner, the general contractor, employees of the general contractor, or sub-contractors of the general contractor. Everything else looks to be in-line, I just don't know if I am paranoid about the matter, or if I am right in being worried about liability.

Does anyone have any experience with this topic or could provide some context for the matter?

Thanks.

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snoonyb

You need to understand the insurance requirements of the CSLB.
In Ca. the EDD administers workmen's comp.

As in any work environ, if you are injured, as a function of that employ, the negotiations are with the employer, not the customer.

    Bookmark   February 26, 2014 at 9:20PM
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snookums2

I too have read HO's need to be very careful they have the insurance or we can be liable.

    Bookmark   February 26, 2014 at 10:41PM
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southerncanuck

What you describe is standard here in Ontario. The customer has no liability for workers injuries under the employ of a certified and insured GC. That million dollar liability insurance is inadequate. It doesn't take much to exceed a million dollars. He burns your home down and results in damage outside of your property a million isn't going far. A child is injured walking by your home due to his negligence and needs care for another 70 years a million doesn't come close to covering the damages a court will reward. Who do you think they will come after next? You hired him. Contractors and customers have to come to grips with this. It was a million liability 30 years ago.

    Bookmark   February 27, 2014 at 1:44AM
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Trebruchet

" He mentioned something along the lines of the contract that we'd sign would release me (the homeowner) of any liabilities."

I sure hope this guy builds better than he lawyers. You cannot sign away liability. Why do you think you can't ride rental horses anywhere anymore?

Say Pedro cuts off his hand on your job. His lawyer starts looking for money. The lawyer sees your contractor has little but then spots your homeowner's policy. This is a no-brainer.

If you really want to hire this guy, put in writing that he has to hire all his help through a temp agency.

    Bookmark   February 27, 2014 at 7:24AM
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snookums2

So. Pedro cuts off his own hand. How is that the homeowner's fault?

    Bookmark   February 27, 2014 at 7:53AM
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lmccarly

HE may be exempt being a one man show. The issue is, as you suspect, is the "workers". If they are on his payroll, he is not eligible for the "one man show" exemption. If they are sub-contractors, they need to produce their own WC insurance.

Our state also offers the exempt status for single member companies.

    Bookmark   February 27, 2014 at 9:17AM
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snoonyb

"Trebruchet
" He mentioned something along the lines of the contract that we'd sign would release me (the homeowner) of any liabilities."
I sure hope this guy builds better than he lawyers. You cannot sign away liability. Why do you think you can't ride rental horses anywhere anymore?"

You also need to understand the insurance requirements of the CSLB.

You can and do. transfer the responsibility, for the actions of others, not in your employ, for liability, via a contract/

You cannot be required to sign your life away.

"Say Pedro cuts off his hand on your job. His lawyer starts looking for money. The lawyer sees your contractor has little but then spots your homeowner's policy.This is a no-brainer."

This is a no-brainer for sure. Put a stamp on the envelope and mail a copy of the contract.

"Why do you think you can't ride rental horses anywhere anymore?"

Can I give them your name as a legal reference, when I demand a refund for this past week-ends rental?

    Bookmark   February 27, 2014 at 10:43AM
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patriceny

I do workers' comp for a living.

Workers' comp laws are defined and legislated at the state level (at least as far as this example is concerned).

What that means is that unless anyone knows California workers' compensation laws specifically, how it is handled in New York, or Ontario, or Timbuktu is interesting - but not at all relevant. :)

I can tell you exactly how this would be handled in NY...but in light of what I just wrote, I'll spare you. ;)

The best advice I can give you is to call whoever handles your home owners' insurance policy. They should know this plays out in your state, and then you can make an informed decision.

Good luck. I do not think you are being overly cautious - but I suppose that is because I spent way too many hours every day dealing with stuff that no one ever thought would happen.

    Bookmark   February 27, 2014 at 11:27AM
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Trebruchet

"So. Pedro cuts off his own hand. How is that the homeowner's fault?"

snookums2:

Thanks for making my point. It's not. Fault is not relevant. Who has the money is.

    Bookmark   February 27, 2014 at 6:07PM
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snookums2

Who loses is where the so called fault, responsibility, liability falls. The judge is not going to award based on who has money to pay the guy.

    Bookmark   February 27, 2014 at 9:28PM
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Trebruchet

snookums2:

Thanks again. You're right, a judge won't, but no lawyer in his right mind is going to trial without a jury. When Pedro shows his 5 kids and stump to them, they're gonna award him homeowner insurance money.

I take that back. When Pedro shows his 5 kids and stump to the jury, the homeowner's insurance company is gonna call a recess and they'll settle in the hallway.

    Bookmark   February 27, 2014 at 10:56PM
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kirkhall

When you call your insurance agent, you might also find they offer a liability rider (I think they are called) you can purchase to cover such issues and any injury (work related or not) that occurs on your property of any of the contractors/workers. Mine did.

So, although the GC had his insurance, and bond, and... I chose to pay a little extra for the time of my remodel. It was a small amount for a million or 2 of extra coverage.

I'm not in CA, and so can't advise on CA WC.

    Bookmark   February 28, 2014 at 1:53AM
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snookums2

Judge, jury, whoever. Liability/responsibility is not determined by who can pay. It is wherever the responsibility lies - and sometimes the winner never sees the award because the person who was determined to be responsible doesn't have that much money.

Sure people can sue anyone, go after sources of money, but that doesn't mean the court system blames whoever simply because they have money. Some of those cases are thrown out as frivilous lawsuits. And today they are even charging back legal costs to plaintiffs who lose for wasting everyone's time and money and clogging up the court systems with their greedy attempts to make money.

My question was - John cut off his own hand. How is that the HO's fault. He sells his services, all the HO did was offer him employment. Presumably no negligence on HO's part. Why would the HO be liable for John screwing up or not knowing how to operate his equipment properly. I think he'd have a lot of nerve even thinking about suing someone. He needs his own insurance and to accept the dangers of the job he's chosen.

    Bookmark   February 28, 2014 at 2:54PM
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snoonyb

"My question was - John cut off his own hand. How is that the HO's fault."

In the case of the HO, contracting with a legitimate contractor, the contractors liability policy governs. As it is in the OP's inquiry.

"He sells his services, all the HO did was offer him employment."

Which them places the liability with the HO's insurance.

Two different scenarios.

    Bookmark   February 28, 2014 at 3:26PM
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snookums2

Since when aren't we talking about legitimate contractors?

Even so, the WHY of the legitimacy of John's claim against a HO when he cuts his own hand off still isn't answered. Why is it anyone's responsibility but his own?

    Bookmark   February 28, 2014 at 5:12PM
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sjhockeyfan325

A better example would be what happens if John falls through the ceiling that has become unstable due to dry rot (owner's negligence). Then the question is whether workers comp is his only recourse, or he has a claim against the homeowner.

    Bookmark   February 28, 2014 at 8:59PM
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snoonyb

"Since when aren't we talking about legitimate contractors?"

You did;"My question was - John cut off his own hand. How is that the HO's fault. He sells his services, all the HO did was offer him employment."

Please show me where contractor is mentioned in that direct quote.

All I did was clarify under which scenario, where the liability lies and how it's determined.

"Why is it anyone's responsibility but his own?"

Accidents happen and the degree of talent is not equal nor absolute.

    Bookmark   February 28, 2014 at 9:05PM
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snoonyb

"A better example would be what happens if John falls through the ceiling that has become unstable due to dry rot (owner's negligence). Then the question is whether workers comp is his only recourse, or he has a claim against the homeowner."

The liabilirt is the same.

Employed by the HO, HO's insurance.

Empliyed by a contractor, contracrors insurance.

    Bookmark   February 28, 2014 at 9:12PM
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sjhockeyfan325

The liability is not necessarily the same. If you're "employed by" the HO and workers comp kicks in, yes. But if you're employed by the contractor, there are situations where you can still sue the homeowner under their general liability policy for negligence, and you'll also get medical, pain and suffering, lost wages, and more.

    Bookmark   February 28, 2014 at 9:51PM
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snookums2

You did;"My question was - John cut off his own hand. How is that the HO's fault. He sells his services, all the HO did was offer him employment."
Please show me where contractor is mentioned in that direct quote.>>

"He sells his services"

This refers to a businessman selling his services, not HO staff.

This all sounds like more reason to just DIY! What a sense of entitlement.

    Bookmark   February 28, 2014 at 10:17PM
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snoonyb

"But if you're employed by the contractor, there are situations where you can still sue the homeowner under their general liability policy for negligence, and you'll also get medical, pain and suffering, lost wages, and more.

However, to establish a "standing" for "negligence", you must prove intent and knowledge.

And, since the "contractor" has been hired, his professional expertise, and contract, transfer the responsibility from the HO, too the "resident" professional.

"This refers to a businessman selling his services, not HO staff."

"businessman", Is not mentioned anywhere in the "referred too" quote.

Or by the OP.

    Bookmark   March 1, 2014 at 12:00PM
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snookums2

Snooby you are not making sense. We are talking about contractors here.

    Bookmark   March 1, 2014 at 12:15PM
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jackfre

I think you are correct in being concerned about WC coverage for everyone on the job. If the contractor is giving these "workers" a pay check and withholding taxes then he is in fact the employer and they are his employees. People try to dodge this but unless the workers are getting 1099's at year end then they are employees. If the IRS gets involved they have turned many 1099 people back to employees.

I would suggest a sit down with your insurance company and put whatever riders are recommended on the policy to protect yourself. I'd ask the contractor for something in writing. He could also just get WC for your job. If you like this contractor try to work it out with him. We are just finishing a remodel and one of the best parts of the job was that we generally had nice people in the house. The sheet rockers were a bit crusty, but then again they are sheet rockers, so how can you blame them.

The fact is that anyone can be sued for anything. I was named in and just had to defend a Mesothelioma case where a 92 yr old ship fitter died of white lung. Completely frivolous case, but I had to defend it and it took over two years to be dropped from the suit.

    Bookmark   March 1, 2014 at 2:55PM
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snoonyb

"Snooby you are not making sense. We are talking about contractors here."

And It would require two submissions, because of maximum allowed verbiage, to back-quote where you have used the term"HO", in reference and associated with employees.

So, should I assume that "HO" means contractor, instead of contractor, meaning contractor?

    Bookmark   March 1, 2014 at 3:43PM
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snookums2

HO means homeowner and I really don't see where there should be such a communication gap around what is being said.

    Bookmark   March 1, 2014 at 3:54PM
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snookums2

Supreme Court rules Ho's are not responsible for contractors who don't have WC insurance. Around 2007.

I think it is a good idea to have your own policy cover workers of any type in the home. Leave nothing to chance in this crazy world.

Here is a link that might be useful: Supreme Court ruling

    Bookmark   March 1, 2014 at 5:12PM
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snoonyb

"HO means homeowner and I really don't see where there should be such a communication gap around what is being said."

Then, why are you insisting that you didn't say, what you said?

    Bookmark   March 1, 2014 at 6:53PM
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snookums2

Snooby, I know what I said. I know what I meant. You are reading something differently for some reason. Playing games perhaps. We are talking about homeowner liabilities with contractors. I don't know what you are talking about anymore.

    Bookmark   March 1, 2014 at 8:57PM
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sjhockeyfan325

Presumably the New Hamshire Supreme Court, not the US Supreme Court.

    Bookmark   March 1, 2014 at 9:00PM
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snoonyb

" I know what I said. I know what I meant. You are reading something differently for some reason."

They were direct quotes, so perhaps you'd be kind enough to coordinate the two, you know, "said" and "meant".

    Bookmark   March 1, 2014 at 11:15PM
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snookums2

I have no idea what you are talking about. But I think I've seen you pull this stuff before .

    Bookmark   March 2, 2014 at 12:18AM
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snoonyb

"I have no idea what you are talking about. But I think I've seen you pull this stuff before ."

Well, that's a start.

    Bookmark   March 2, 2014 at 10:23AM
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Trebruchet

"Presumably the New Hamshire Supreme Court, not the US Supreme Court."

Gotta be. You don't get the the SCOTUS from the appeals board, you've got to go through the districts first.

    Bookmark   March 2, 2014 at 11:21AM
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