Brett Stiegel, Administrator, FRSA Self Insurers Fund, Inc.
You don’t have enough trained labor or time to complete all the jobs you have booked to complete. You may not have the expertise in a particular type of job and need help. The construction demands after events such as Hurricane Irma put a huge demand on your business and time to satisfy your customers. These are just a few of the reasons that you may look for help in the form of hiring subcontractors. If you do, you should know the potential perils involved. Is the subcontractor properly licensed for the type of work to be performed for you in Florida? If not, you may be violating Florida law, and your license may be the one exposed for penalties. Is the subcontractor properly insured in the State of Florida? From a workers’ compensation perspective, they must have a Florida policy issued by an authorized carrier in the State of Florida.
Are they from out of state? If they are, they must have Florida listed on the policy as a covered state and if they don’t, they are considered uninsured and are your responsibility. Do they obtain their employees from an Employee
Leasing Company, also known as a PEO? If they do, understand that it is the PEO that is actually “insured” and not
the subcontractor for workers’ compensation. If they have any employees that they do not report to the PEO, they are unfortunately not covered by the PEO’s policy, and can be your exposure. This is terrible, but it is an unfortunate
reality under the PEO’s contracts. Until PEO’s and their carriers are held to the same coverage standards per Florida law as other workers’ compensation carriers, you should avoid using subcontractors who obtain their workers from PEO’s. Remember, it is the PEO who is insured, and not the client of the PEO! If they do present you with a certificate of insurance from a PEO, you should verify EVERY DAY that the only workers on your subcontracted jobsite(s) are specifically listed as covered by the PEO, and you must demand a list of covered PEO employees EVERY DAY. Otherwise, you should not let the subcontractor on your jobsite – period! Yes, this sounds ridiculous, but that is the extreme peril of subcontractors using PEO’s for labor.
Does the subcontractor supposedly only get their employees from a temporary day labor company, and the subcontractor does not have their own workers’ compensation coverage? DO NOT USE THEM! They are an uninsured subcontractor.
Does the subcontractor have a workers’ compensation officer exemption, but does not have workers’ compensation
coverage? Any other individual or crew that they may bring onto your jobsite is not covered and will be your
responsibility! You will also have to pay workers’ compensation premium on the amounts paid to the “exempt” subcontractor if it is determined that they did have employment exposures.
Does your subcontractor use other uninsured subcontractors? Yep, likely your responsibility and liability.
What is the ultimate price to you? When your carrier determines the existence of these under/uninsured subcontractors, they will charge you premium for the full value of all payments you made to these subcontractors,
basing an assumption it was all for labor. You will have to prove otherwise. If the under/uninsured subcontractor(s)
has an employee who is injured, your carrier may have to defend and pay the claim. What cost is that to you? It will
be your experience modification that goes up for three years into the future due to the cost of this claim. This can be a substantial expense to you!
Subcontractors may be a necessary exposure to your business and, managed effectively, may be a viable temporary
solution. You need to know that they do present many potential perils however, as we have outlined above from a
workers’ compensation perspective. Subcontractors may also expose you to other potential areas of litigation and
general liability insurance exposures much the same as they do for workers’ compensation, but that is an article for a different day. Know your subcontracted exposures thoroughly, and properly manage them effectively.
Brett Stiegel is the Administrator of FRSA’s Self Insurers Fund, covering Florida roofing, sheet metal and air conditioning contractors through workers’ compensation and safety programs.
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