Workers' comp isn't working

Sacramento Bee ^ | December 7, 2003 | Julie Meier Wright

[MARTIAL MONK]

If you are incorporated and actively involved in the business you are forced to carry WC for yourself. I have had businesses in four states and was forced to pay for myself even in situations where I was rarely there.

I had one long time employee who was involved in a serious automobile accident (non-work related). She was out for over a year but I kept her on the payroll. I didn't mind paying the salary but it really grated that I had to pay the WC premiums, too.

I can understand the county requireing WC. If you didn't have it they would be next in line for a suit.

[farmfriend]

Sole proprietor not incorporated.

[jocwhales]

"It looks to me like it is time to bail out of Kalifornia, when the state mandates that you buy something you can't use, I would call that stealing."

You hit the nail on the head. I am a finish carpenter here in NC. I work alone, w/ no employees. The contractors I work for occasionally, (I have a mix of individual clients and general contractors.) require me to have coverage, in order to satisfy their insurance carriers. As a sole proprietor, w/ 2 or less employees, I should not have to carry it according to the statutes. However, if I don't carry it, the gc wants to hit me up for 20% of my bill to pay the premium. Tacking that fee on to my bill won't fly in my neck of the woods. So, I bite the bullet and get my own policy.

Whether the gc actually pays the premium is never really known by me. I know some I have worked for pocketed that money, based on my check stubs. That is bad enough. What is worse, is that the policy I have doesn't actually cover me, personally. It only applies to any employees I may have (temporary subs). It is known in the insurance industry here as a "ghost" policy. Its only purpose is to provide the gc's wc carrier with a certificate of insurance. God only knows if I was ever hurt on a gc's, job. I've been told by the NC Industrial Commission that the contractor would have to ante up, but who knows?

The bottom line is that I see that coverage as extortion money. It is a fee that I have to pay to an insurance carrier, to satisfy another insurance carrier, and does not even cover me for what it was intended.

[E.G.C.]

BTT!!!!!

[Mr Ducklips]

We can spend a lot of time trying to place blame for today's problems, but doing so is unproductive.

Au contraire. Placing blame requires identification of the problems to begin with - rather critical to preventing them in the future.

[NormsRevenge]

BUMP

[P-Marlowe]

You are technically correct that Workers comp pays for employees only, but General Contractors require that all subcontractors carry workers' compensation insurance even if they have no employees. farmfriend is correct. There is a minimum rate that must be paid even if you have no employees. The coverage is there if there is an interim point at which you hire an employee (or in the not too uncommon situation where someone else's employee is legally determined to be your employee). Regardless, farmfriend's situation is not an exception, it is the norm.

[scripter]

We're incorporated in California and do not carry WC. We've been told that if we don't have any employees (other than the corporate officers), WC is not required. The state of California tried really hard to convince our last contract that we had to have it, but they lost.

We refused the contract if we had to carry WC so the company who wanted to hire us contacted the state and specifically asked: "Is it a requirement if they don't have any employees" and the state representative apparently got really annoyed and answered "no." Then went into some tirade about how we're not taking care of our families.

I had to laugh at that, as if WC is the only solution.

I don't know the WC differences between corporations and sole proprietorships. If that's what makes the difference, and I have no idea why it would, but making the change to a corporation would be worth the savings.

[Conservative4Ever]

I have friends who pay over 60% worker's comp rates.

After our pitiful interim rate our modification rate is 86%. We haven't had a claim in decades. Your friends are getting off pretty good.

Red

[aShepard]

Worker's Comp claims tend to go up as unemployment rates go up. If facing unemployment, workers will do some crazy things to keep a paycheck coming, so that may account for some of the premium runup.

In a foundry that I worked at some guy facing a potential layoff, poured molten iron on his foot so he could collect disability for the rest of his life.

His scheme worked!

[farmfriend]

I think there is some misconception here. It is not that our type of business is required to carry it. We are not required to carry it if we have no employees. The rub is that we get some of our contracts, husband is general contractor, through Sacrament Housing and Redevelopement. They require us to carry it in order to get contracts. If we stop getting contracts through them, we could drop insurance.

[scripter]

They require us to carry it in order to get contracts. If we stop getting contracts through them, we could drop insurance.

That's too bad. It seems to me Sacrament Housing and Redevelopement is unnecessarily raising labor costs, but I'm no expert in this regard. I'm out of work now and keep trying to get contracts to realize that hiring me through our corporation (without WC) is a huge cost savings.

[ridesthemiles]

Unless you have a business, you have no clue how expensive workman's comp insurance is.

I am a self-employed bookkeeper for several businesses.

I have seen this kind of activity happening for the last 3 years, as the article states. Here's a sample:
Prior workmen's comp ins premium: $2000
Current annual premium $4000.
State big-wigs-John burton, etc, say they are working hard on the problem and they will backup the premiums a whopping 3.6 % So do the math:
Prior Premium $2000 Current: $4000, an increase of $2000.
3.6% decrease of $4000 = $144.00. So WHERE IS THE $1856.00 ADDITIONAL PREMIUM that has been stolem from my client? Pulled from W/Comp into General Fund?
These clients have NEVER had a claim. Office workers, etc.
This whole system is obscene, and Armold knows it. I only hope he can take these examples to the people and make them see the light of day.
In the meantime, Joe LIeberman wants employers to pay now when employees decide to take Family Leave.
Look around the stores you do business with. Can they afford to pay employees to take off 6 or more weeks at a time and pay them full pay? Rush was right. Socialism.

[ridesthemiles]

Farmfriend- You really have me confused. I do books for clients with and WITHOUT employees. ONLY the clients with EMPLOYEES even have a payroll to report w/Comp data on. The clients which have no employees don't have W/Comp ins, as they have no "workmen" who can get injured ON THE JOB.

I sincerely advise you to check with your lawyer or your CPA as to the legality of any rules that tell you to carry insurance for something you don't have. I am very confused over your data here. Please keep us informed as to the information you get.
Is there any possobility some bureaucrat at the state has told you that you must have a policy that you really don't need? Wouldn't surprise me at all.

[hosepipe]

[ Workers' comp isn't working ]

It is for the abusers....

[ridesthemiles]

I don't know the WC differences between corporations and sole proprietorships. If that's what makes the difference, and I have no idea why it would, but making the change to a corporation would be worth the savings.

In Calif, you must pay a MINIMUM state corp income tax of $800, whether you made ANY money in the fiscal year or not.Right off the top for incorporating.

If sole proprietorship, you can take your "income" out of the business with "DRAWS", and no matching soc sec/medicare taxes, nor fed and state unemployment ins taxes. The owner then pays ALL of the soc sec/med, but never pays fed of state unemployment taxes on his draws. You can be a sole prop and have employees on the payroll, which would have the usual tax deductions applied, along with the unemployment taxes on the employees only, not on the draws.
If incopr, the corp become the new "ENTITY". The owner(s) must then go on payroll and have the usual deductions and also the unemployment taxes.
In both cases, workmen's comp ins applies to the GROSS PAYROLL. This includes all sick time, vacation, holiday, etc. If a sole prop taking a draw, their draw IS NOT included in the "gross payroll" for the w.Comp ins premium calculations. So if owner is taking a gross salary of $60,000, which is far from alot for a small business, you have just added $80,000 X the rate for your category of job. If rate is $4.00 per $100 of gross payroll, you just added $3200 to a lower bottom line.
Most policies in Calif exempt the officers of the company from w/Comp because then you have a conflict of interest: The employee (owner) gets injured, and the paperwork on the claim goes to the owner (officer) to validate the claim. Leaves a person testifying for or against himself all at the same time, and I don't know how the 5th amendment would apply ....

[BurbankKarl]

we just received a letter saying the rates were going up at least 25% again....what a crock of sh*t. we havent had an accident in years....

[TenthAmendmentChampion]

What happened to the plan to adopt an Arizona-style plan for WC? Didn't Arnold talk about it in his campaign? Of course, if the current system is benefitting unions and trail lawyers, the chances of reforming it are 0% with a majority of Dems in the legislature.

[farmfriend]

I think you answered your own question.

[scripter]

we just received a letter saying the rates were going up at least 25% again...

I thought that needed to be repeated with again in bold. That's precisely why we will not hire employees in California. In fact, we just incorporated in Nevada and may drop our California presence...