# Workers Compensation Scammers



## rdr8887 (Jan 28, 2012)

I probably could have gotten a better title here, but I figure this would get your attention. Now, I know that no one here is party to the following problem.....:whistling

*The following is how to do this the "right" way:*

Ok. So, if I choose to use an unlicensed subcontractor to perform my work, I have to pay out the nose for my WC policy to cover them. For example, if I am hiring an unlicensed roofer, WC will charge me 75% of the labor price to cover these men. That is if there is clear definition of what is labor and what is materials. If you don't have that, you will be charged 75% of the total contract value. Ouch. If it's a carpenter, we would be close to 30%. 

So, my rates go up significantly to the point where it is no longer cost effective to use the unlicensed subcontractor. 

*The following is how this done regularly:*

I hire the guy as a subcontractor and don't do anything with my WC. Now I'm cheaper so I'll get the job. I do the job and it goes great. I've made a profit and I'm happy. Now, what happens when they audit me at the end of the year? I'm sure some trickery with paperwork gets most of this overlooked. 

This also applies to your employees. I know companies that have 10-99'd their employees. I say employees because in all other aspects they are such. These 10-99 guys are not covered on the company's WC policy and they don't have their own WC. So technically, they are uninsured subcontractors. They are not paying additionally on their premiums so they are getting away with a scam in my opinion.
*
I digress....*

So. Let's here it. What do you guys think of this practice. Are you morally okay with this? I know Georgia is trying to crack down on this type of behavior. However, in looking at the fines associated with this, working without a license, etc, the fines aren't that bad. So I guess no one cares if they get caught. They've already made back well over what they would pay in a fine. 

So tell me what you know. I'd like to get as much knowledge here so I don't get myself into trouble and do something wrong. I would also like to educate my clients about this practice. 

Bottom line, if that uninsured guy falls off the roof or removes a finger on accident, the client is the one stuck holding the back. I imagine this situation opens the client up to lawsuits against their Home Owner's Insurance policy. Am I wrong here?

I think side conversations are made with these 10-99 employees saying if you hurt yourself, it's on you. Most of the time, these guys don't know that this is wrong and they don't say anything.


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## summithomeinc (Jan 3, 2011)

rdr8887 said:


> I think side conversations are made with these 10-99 employees saying if you hurt yourself, it's on you. Most of the time, these guys don't know that this is wrong and they don't say anything.


Ever hear "you're fired before you hit the ground"? All you can do is make sure you are doing it the right way. It'll ptotect you, your employees, and your customers.


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## d-rock (Oct 17, 2009)

educate yourself. All legitimate subs should have WC and GL. If not, you must pay it for them. Employees should never be paid with 1099, it's illegal and exposes you and your client to high risk. If a guy sprains an ankle on the job, you and the homeowner will pay through the nose, even if the guy is an illegal. In addition, if you're paying guys cash or 1099, and he gets hurt your WC must cover him by law, even if he is an illegal. If you own a home, a vehicle etc, if you've worked hard on building your business why would you take these risks? All it takes is one disgruntled employee to make a call..
Believe me, it's tempting to break the rules when so many others are, and I wish the penalties were stiffer for them when caught, but always take the high road and sleep easy knowing what you've earned was earned honestly and justly.


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## rdr8887 (Jan 28, 2012)

So do you think these guys are just hoping nothing happens? Or are they really doing this legally? How are they getting past the WC audit at the end of year?


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## summithomeinc (Jan 3, 2011)

I would think that most contractors who pay for comp are doing things legally. I know that if I was going to do things illegally I wouldn't pay for a policy that I couldn't use. As far as contractors getting around an audit. I don't know how you would. I use a payroll co. Comp wants an audit I send the my quarterly and yearly payroll reports from the payroll co.


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## The_Game (Jun 8, 2008)

I don't think you need to be incorporated to qualify for an wmc exemption, but if you WANT to exercise an wmc exemption on your sub. You will remain liable for all work-related injury claims even if you exercise an exemption. Saves you big $$


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## summithomeinc (Jan 3, 2011)

I don't think we can do a WC exemption in Ga. However if you are really worried about subs having comp or not just figure what your Ins. Co. will charge you and charge the sub a 5% higher rate then have them on your comp.


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## rdr8887 (Jan 28, 2012)

summithomeinc said:


> I don't think we can do a WC exemption in Ga. However if you are really worried about subs having comp or not just figure what your Ins. Co. will charge you and charge the sub a 5% higher rate then have them on your comp.


Wouldn't that make the uninsured guy's price higher than the insured guy? I guess it might just depend on the trade.


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## summithomeinc (Jan 3, 2011)

rdr8887 said:


> Wouldn't that make the uninsured guy's price higher than the insured guy? I guess it might just depend on the trade.


Possibly. But you do get what you pay for. All the GC's I've worked for just ask for a certificate from my ins. co. and thats that. I don't think they would have any liability as long as I have a policy. I think the liability for comp would fall on my company if I was to pay employees as subs. I had a conversation with one GC about their subs being illegal. "They said they have comp and liability and I write the check out to a company so I'm covered." Same GC wanted me to pay their laborer for some work that was in my scope. I couldn't get there until the next day. So I said fine I need a ss# and adress etc. for my taxes. Never heard anything else about paying for that.


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## The_Game (Jun 8, 2008)

summithomeinc said:


> I don't think we can do a WC exemption in Ga. However if you are really worried about subs having comp or not just figure what your Ins. Co. will charge you and charge the sub a 5% higher rate then have them on your comp.


All states have wc exampt, i work all over us, we do federal contracts with usace, fema and ins. comp.

You don't need workers comp, if its just your self, but you do need to have contractors liability insurance, they have to have liability insurance. if they don'y they are working illegally.

Hope this help.


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## summithomeinc (Jan 3, 2011)

The_Game said:


> All states have wc exampt, i work all over us, we do federal contracts with usace, fema and ins. comp.
> 
> You don't need workers comp, if its just your self, but you do need to have contractors liability insurance, they have to have liability insurance. if they don'y they are working illegally.
> 
> Hope this help.


Ok I looked it up. I can waive comp on myself as an officer of the corporation. However if I have 3 or more emplyees I still have to cover them with comp.


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## The_Game (Jun 8, 2008)

summithomeinc said:


> Ok I looked it up. I can waive comp on myself as an officer of the corporation. However if I have 3 or more employees I still have to cover them with comp.


all my subs carries liability ins. they work for us all year long, they are sub 1099 with no employees under them, the advantage on this are , as fallow: 

wage they get paid the same amount per hours event after 45 hrs over time is gone.

taxes we are not responsible to held income tax anymore less paper work.

all theire expenses are deductible for them at the end fuel clothing, boot repairs on theire vehicules etch etch and much more.


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## summithomeinc (Jan 3, 2011)

The_Game said:


> all my subs carries liability ins. they work for us all year long, they are sub 1099 with no employees under them, the advantage on this are , as fallow:
> 
> wage they get paid the same amount per hours event after 45 hrs over time is gone.
> 
> ...


Sounds like your subs are really employees that you are 1099ing


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## Sir Mixalot (Jan 6, 2008)

The_Game said:


> All states have wc exampt, i work all over us, we do federal contracts with usace, fema and ins. comp.
> 
> *You don't need workers comp, if its just your self*, but you do need to have contractors liability insurance, they have to have liability insurance. if they don'y they are working illegally.
> 
> Hope this help.


You must not have worked in Florida.:no:


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## Warren (Feb 19, 2005)

The_Game said:


> all my subs carries liability ins. they work for us all year long, they are sub 1099 with no employees under them, the advantage on this are , as fallow:
> 
> wage they get paid the same amount per hours event after 45 hrs over time is gone.
> 
> ...


 So much is wrong with this post. Worked only for you all year? Paid by the hour? Required to work specific amount of hours? Doing all this to avoid paperwork and create tax benefits?


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## PoolRepairsOnly (Jan 18, 2012)

The_Game said:


> All states have wc exampt, i work all over us, we do federal contracts with usace, fema and ins. comp.
> 
> *You* don't need workers comp, if its just your self, but you do need to have contractors liability insurance, *they* have to have liability insurance. if they don'y they are working illegally.
> 
> Hope this help.


Just for my clarification, the *"You"* is the primary contractor, that is to say, the contractor hiring the subs. The *"they"* refers to the subs. Is that correct?
And is the *"they"* referring to individuals working for themselves as subs under 1099's for the primary contractor, or companies working as subcontractors for the primary contractor?
Interestingly, in California you are not required to have liability insurance, but every commercial job, even cleaning a swimming pool has required a general liability insurance policy in my experience. The HOA or property management company has asked me for a copy of my policy. Savvy residential homeowners will also ask for one.
Also, in California all contractors with no employees can be exempt from workers comp with the exception of roofers.


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## go dart (Dec 6, 2005)

This is a valuable thread. I suspect theres several " one man shows " who post on here frequently and talk about their guys but couldn't prove WC coverage, and would say they arn't required to. They're only kidding themselves and exposing the homeowner to a lawsuit in the event someone gets hurt. True story-My brother left the company and did pretty well on his own but jobs got larger, he needed help but wanted to continue on the cheap. Hired a friend with a flatbed to haul his trash and he in turn hired a buddy to help. Well the truckowners buddy cut his finger on some 6x6 mesh. Not bad but he did cut his finger. The atty sued my brother as he had some cash and assets. It would of been the homeowner is he didn't have a pot. Had to sell his backhoe and empty his bank acct to settle it. Point is everyone cheating is one cut finger away from the same thing. Better to have the coverage.


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## rdr8887 (Jan 28, 2012)

Now what do you do when your subcontractor isn't paying for his 10-99'd guys workers comp. Or it's the basic policy but he has 10 guys that don't carry. Who gets sued now when there is an injury? I'd bet I'd get stuck holding the bag. 

So, how do you cover yourself from this?


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## RandyB1986 (Jan 2, 2009)

Fact is whether you have WC or a Waiver, are a builder or a sub or an employee.....someone gets killed on a site, everyone will get sued and the attorneys will sort it out. That is why you carry GL at the very least. E&O is a good insurance as well. And we all should have disability policies for ourselves.

I seen a plumber get seriously hurt on a new home site once...everyone got sued, the plumbing company, the builder, the HOA, the HVAC company, the lumber company, the owner of the subdivision.....they cover everyone and the lawyers decide who is what.


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## BamBamm5144 (Jul 12, 2008)

Problem is that guys like "the game" aren't doing things properly and they think they are. Add to that problem of all the guys who don't care and the problem is even bigger.

Why do I even write my thousands of dollars worth of checks to comp? Really.


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## summithomeinc (Jan 3, 2011)

rdr8887 said:


> Now what do you do when your subcontractor isn't paying for his 10-99'd guys workers comp. Or it's the basic policy but he has 10 guys that don't carry. Who gets sued now when there is an injury? I'd bet I'd get stuck holding the bag.
> 
> So, how do you cover yourself from this?


I would guess that if you paid the insurance to cover the subs you would be covered as far as insurance. I only saw it once on a commercial job I did in TN. Before I had a company. The GC withheld 30% for comp. If I showed him a certificate I got the money If not He covered me on his comp. I don't know anyone who does that now and I would think it would be cost prohibitive to cover the subs. Just my guess.


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## country_huck (Dec 2, 2009)

In mississippi you don't have to have WC if you have less than 5 employees however if you read the fine print a few paragraphs down it states that you must provide another way of taking care of medical and other such expenses 

So even if you can file for exemptions you may still be on the hook legally


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