# Just found out sub has no workmans comp



## Warren (Feb 19, 2005)

I have heard of construction companies here doing something similar, but using it to skirt paying. They register the secretary, then they 1099 all other workers and give the GC the WC number. Apparently, all GC's want is the number, and they fail to check if any of the workers on site are actually covered.


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## dom-mas (Nov 26, 2011)

I see, not what i was implying. The independent operator form is 10 or so pages long and requires receipts, old invoices etc... It`s a huge pain, one I`m glad I`ll never have to do again


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## Astrix (Feb 23, 2009)

BamBamm5144 said:


> I think work comp is ridiculous. Well, the rates are. It's out of control. My rate just lowered to $26.71 per 100. Is it really necessary for me to pay $2,671 for every 10k in wages, especially considering I have yet to have any claims and have a documented safety plan in place?
> 
> That's the main problem.


You can't compare the $2,671 premium to the $10,000 in wages. What you need to compare is how much money was paid out to injured workers. Unfortunately, because you are in the roofing trade, your group has one of the highest claims pay-outs for injured workers, and this total pay-out is then portioned back out to the employers. So, even though your business has never had an W/C incident, you end up paying for all the other roofers doing business in Wisconsin, including those with less than stellar safety practices.

As an example, I checked the Wisconsin W/C site: http://dwd.wisconsin.gov/wc/research_statistics/default.htm

As 2011 and 2010 statistics are not fully reported and compiled yet, I respectfully suggest that a review of the 2009 year will give a good indication. In 2009, the Roofing industry was listed as having:

- 34,000 workers

*Non-Fatal Incidents*

- 9.2% incident rate for claims (which isn't the truly relevant number as it includes all reports, even a scratched finger that is fixed with a bandaid and then the worker goes back to work).

- 3.8% incident rate where there are days off work.

- 2.5% incident rate for those that don't return to the roofing trade; either on W/C for life or get re-trained into a different job.

The last two figures are what can cost big bucks. A total of 6.3 out of every 100 workers, in one year alone, is a huge risk. 

It would be easy to hit the $1,000,000 mark to pay for just one permanently injured worker: medical costs, monthly wage replacement till age 65, home modifications to accommodate wheelchair, full time nursing care, etc, etc. and all that indexed to inflation over the years.

*Fatal Incidents*

Construction industry as a whole. (stats on Roofing alone were not provided.)
- 13 fatal accidents.
- 5 of these were falls.

I'm not condoning the cost; and it is an almost crippling cost for many businesses. I'm just trying to explain why the W/C rates are so high.


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## BamBamm5144 (Jul 12, 2008)

Astrix. Thanks for that. I know why it is so high. Most guys don't carry it for roofing although they do mostly roofing.

I just got my estimated amount for this upcoming year (my policy runs september to September). It honestly has me evaluating my business and the direction I want to take it.


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## dom-mas (Nov 26, 2011)

it still makes no sense to me. Why are the rates 1/2 (or so) that in Ont? over 15% is nuts, I don't think any private diability ins would approach 10k a year or more (depending on wages).


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## Chris Johnson (Apr 19, 2007)

Ontario can have high rates, I'm at 8.8% for low rise construction, I have special rate for high rise of 17.6%, this requires very meticulous record keeping.

In Ontario we pay the same rate for everyone, no matter what job function, WSIB blankets the whole company with one rate. When I was in the US each job function could be rated different provided you kept accurate records, so your secretary was under 1% but onsite concrete finishers were 5.6%, we don't get that luxury here.

And Bam, experienced roofers in California were at 40%, a new company was at 60%!!!


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## Astrix (Feb 23, 2009)

dom-mas said:


> it still makes no sense to me. Why are the rates 1/2 (or so) that in Ont? over 15% is nuts, I don't think any private diability ins would approach 10k a year or more (depending on wages).


In addition to Chris Johnson's comments, there are three other reasons why Ontario Workers Comp is cheaper than in most USA states:

1. Ontario WSIB is a single-payer government-administered system, whereas workers comp in the USA is provided by a combination of private insurers and state funds (in some states only). If buying W/C from a private insurer, then the profit to the private insurer and the commission to the agent/broker intermediary increases the final cost to the employer.

2. Ontario's system is not fully funded. The Arthurs Funding Review Report which was has not been fully released yet, but some details were provided in April 2012, indicates that employers only pay 54% into the system. The remainder is subsidized by the Ontario provincial government and/or the WSIB is simply operating in a deficit position (which is why the rules are changing shortly).

3. The legal culture in the USA results in more people retaining lawyers and suing for increased benefits as opposed to Canada where a greater percentage of workers will simply accept whatever is offered by the provincial W/C board. I don't have specific statistics handy, but the general consensus is that a greater percentage of injured workers are awarded full disability status in the USA than in Canada.


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## FramingPro (Jan 31, 2010)

Chris Johnson said:


> Ontario can have high rates, I'm at 8.8% for low rise construction, I have special rate for high rise of 17.6%, this requires very meticulous record keeping.
> 
> In Ontario we pay the same rate for everyone, no matter what job function, WSIB blankets the whole company with one rate. When I was in the US each job function could be rated different provided you kept accurate records, so your secretary was under 1% but onsite concrete finishers were 5.6%, we don't get that luxury here.
> 
> And Bam, experienced roofers in California were at 40%, a new company was at 60%!!!


if it was anything like insurance
youd be paying 10000% on me :laughing:


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## dom-mas (Nov 26, 2011)

Astrix said:


> In addition to Chris Johnson's comments, there are three other reasons why Ontario Workers Comp is cheaper than in most USA states:
> 
> 3. The legal culture in the USA results in more people retaining lawyers and suing for increased benefits as opposed to Canada where a greater percentage of workers will simply accept whatever is offered by the provincial W/C board. I don't have specific statistics handy, but the general consensus is that a greater percentage of injured workers are awarded full disability status in the USA than in Canada.


I'd bet this is the major reason why.

From my understanding, WSIB is a private company but it is provincially/federally mandated that we buy into it. There is NO private ins company that I know of that would allow their rates to make them operate in the negative. I have never heard of an ins company making a negative except for LLoyds of London immediately after 9/11.


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## hdrider_chgo (Feb 23, 2009)

Warren said:


> I have heard of construction companies here doing something similar, but using it to skirt paying. They register the secretary, then they 1099 all other workers and give the GC the WC number. Apparently, all GC's want is the number, and they fail to check if any of the workers on site are actually covered.


That scheme probably won't work unless someone is cooking the books. The WC auditor should pick up on the 1099 workers and ask to see WC certificates for each. If they can't be produced, then the WC insurance company would charge for providing WC coverage for the subcontractors.

The GC should be protected by obtaining a WC certificate from the sub, and possibly a hold harmless agreement in addition to that.


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## Stephen H (Feb 18, 2011)

hdrider_chgo said:


> That scheme probably won't work unless someone is cooking the books. The WC auditor should pick up on the 1099 workers and ask to see WC certificates for each. If they can't be produced, then the WC insurance company would charge for providing WC coverage for the subcontractors.
> 
> The GC should be protected by obtaining a WC certificate from the sub, and possibly a hold harmless agreement in addition to that.


 Keep in mind warren is in Ohio.
Our WC is run by the state- it's unlikely an auditor will ever be involved- unless someone files a claim.
don't know how it works where BamBam is, BTW- but here in ohio BamBam could be saving some money by differentiating hours spent roofing from hours spent on carpentry( siding,window and door replacement etc.)
stephen


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## Al Taper (Jul 10, 2007)

Well I spoke to my sub about him not having WC. And he was like Iam a sole proprietorship and I have no employee. So my account said" I dont need it" 


I have spoke to my two insurace agents about this. And they both said he has too have it. Then I told him we will call my WC agent and talk with them about this. 

Hopefully on monday get this over with.:whistling

Any one who works for me as 1099 sub has to have there own WC. Even when I didn't have it, I would get docked the money, Or I would have to wait to get paid till i had WC. Whats fair is fair..


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## ranteso (Nov 11, 2010)

Bottom line folks, the GC of the project can be sued for workers comp benefits by ANYBODY working on his project, including the owner of a Sub Company who has workers comp for his employees but not for himself.

AND don't for a second think the sole proprietor "one hat sub" you hire who tells you he doesn't need WC. He's right, that is until he gets hurt. 

All of the above has been through the courts in NYS. 

You have to look at WC as insurance to not getting sued, it protects your family more than your dinky Liability policy that covers nothing but your false sense of security.


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## Astrix (Feb 23, 2009)

ranteso said:


> You have to look at WC as insurance to not getting sued, it protects your family more than your dinky Liability policy that covers nothing but your false sense of security.


To be clear, both Workers Compensation and General Liability are similar in many ways.

WC pays the bodily injury claims of your employees. GL pays the bodily injury claims of third parties other than employees (plus property damage claims of third parties).

Both offer a method of defending yourself when a claim is filed against you. WC law prohibits a worker from suing their employer if they accept the WC payments. GL insurers provide you with legal counsel when you are served with a lawsuit and these lawyers help negotiate a settlement and/or prepare your defence argument for court. So even though it is relatively accurate to say "WC is insurance to not get sued", Liability insurance provides way more than "a false sense of security".

The reason GCs can still be held liable for the injuries of a Sub's employees is that the WC prohibition re suing only applies to the direct employer (the business that provided the injured employee's WC cover). So a Sub's worker can collect WC from his employer's WC policy, and he can also sue the GC (or even homeowner in some cases) claiming negligence due to the GC's primary control over the entire project site.

That is why it is very important to have an indemnity agreement in the contract to transfer the GC's risk of being sued for an employee's injuries back to the Sub. So, when an injured employee tries to double-dip, the lawsuit against the GC gets handed over to the Sub-contractor for him to deal with it. This, in turn, is easily dismissed because the Sub simply invokes the WC prohibition to sue the employer who paid for the WC. If the GC-Sub contract didn't have an indemnity agreement, there is still a possibility that the GC's GL policy will respond to the Sub worker's bodily injury lawsuit depending on the policy wording. (I'll save that explanation for another time).

On big commercial projects, there is a growing trend whereby you will see the GC providing the insurance for everyone on the jobsite (GL, WC, Builders Risk) under a Wrap-Up or CCIP (Contractor Controlled Insurance Program). The Subs then adjust their prices because they are not providing any insurance on the job. With a CCIP, the GC doesn't have the hassle of chasing after dozens of individual Sub-contractors for proof of their GL and WC policies; nor do they have the worries of being stuck with a claim because there were gaps between the GC's and Subs' policies, or the Subs' policies were inadequate.


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## Astrix (Feb 23, 2009)

Al Taper said:


> Then I told him we will call my WC agent and talk with them about this.


This is no slight to your WC agent, but I wouldn't just take their answer as gospel. Depending on their expertise level with construction insurance and Workers Compensation regulations, they may just be parroting a response of "you have to buy the coverage" because they were told this by their supervisor and they don't actually have a full and detailed knowledge of the subject at hand.

I have been in the insurance business for over 25 years and I still learn new things every day. Just recently, a whole debate was opened up with the Procurement Office of my City Hall with respect to their Builders Risk insurance requirements. The wording had been in their standard contract for approx. 10 years and no one ever questioned that it was, in essence, incorrect. When you talk with most people, they just tend to say "it's always been done this way" without actually thinking about it or questioning it. 

So unless you can be given an explanation that makes sense to you, I wouldn't just accept that the insurance agent knows what they are talking about. At a minimum, press them to investigate further and provide you with the applicable wording in the insurance policy or the application regulation in the state's Workers Comp legislation. Just because an insurance company has been auditing and charging the wrong way for all these years, doesn't mean that they can continue doing it the wrong way. Perhaps it will come to light that their accepted method needs to be changed and then the practice of a GC paying for an exempted Sub-owner will be corrected.

Good luck at your meeting.


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## Al Taper (Jul 10, 2007)

Spoke to a WC agent here in NJ this morning. As a Sole Proprietorship or any type of contractor, Thats a one man show doesn't need to have WC. But if he gets workers or works for other contractors he needs to have it to protect his company. If he works for you, you work it out some how. They don't care what you do, just as long as they get their money for coverage. 
So, I think if he not planning on getting it. I would think the best way of working it out is to just dock him for what he makes. 
I assume.


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## oldfrt (Oct 10, 2007)

Al Taper said:


> Spoke to a WC agent here in NJ this morning. As a Sole Proprietorship or any type of contractor, Thats a one man show doesn't need to have WC. But if he gets workers or works for other contractors he needs to have it to protect his company. If he works for you, you work it out some how. They don't care what you do, just as long as they get their money for coverage.
> So, I think if he not planning on getting it. I would think the best way of working it out is to just dock him for what he makes.
> I assume.


 Why would you dock him,if by your own investigation,you found out he doesn't need it?
When I had subs,(electrical,plumbing,etc) done by sole proprietors all the auditor
wanted was their liability cert.
Have past audits cost you for subs without WC?If so,at what rate?


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## dom-mas (Nov 26, 2011)

oldfrt said:


> Why would you dock him,if by your own investigation,you found out he doesn't need it?
> When I had subs,(electrical,plumbing,etc) done by sole proprietors all the auditor
> wanted was their liability cert.
> Have past audits cost you for subs without WC?If so,at what rate?


read his post again, he needs WC if he works for other contractors. Personally I would split it with him. You were both ignorant of the regulations, and he's your friend. I would certainly get him to change the invoice to not include materials if you can.


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## Al Taper (Jul 10, 2007)

dom-mas said:


> read his post again, he needs WC if he works for other contractors. Personally I would split it with him. You were both ignorant of the regulations, and he's your friend. I would certainly get him to change the invoice to not include materials if you can.


Like that Idea..I want to be fair. And think thats very fair..


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## Al Taper (Jul 10, 2007)

Thanks for all the replys. They are very help full. 
The Sub and I sat down and worked it out. We spoke to my WC underwriter and she answered his questions. And we just split what he cost was. And talk about how we will handle it next time..

Thanks Guys

Al


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## fjn (Aug 17, 2011)

*w/c*



pinwheel said:


> As a sole proprietor in MO, I'm not required to carry WC & it's actually not financially feesable to carry it on myself. As a sub, the GC's I work for, know this when they hire me & we both agree up front that they deduct their WC costs from my final draw.




If I'm not mistaking,if as a sole proprietor you opted out of the work comp situation and have forms to prove it the GC's should not deduct any thing from your draws. The reason being,they are not forced to balance anything with their own insurance provider. I could be wrong,they may just be pocketing your money!


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## Tom Struble (Mar 2, 2007)

you can tell that kind of stuff to your auditor,but he is going to want a check right then but not to worry..they will refund it back to you in 6-8 months


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## Paulie (Feb 11, 2009)

fjn said:


> If I'm not mistaking,if as a sole proprietor you opted out of the work comp situation and have forms to prove it the GC's should not deduct any thing from your draws. The reason being,they are not forced to balance anything with their own insurance provider. I could be wrong,they may just be pocketing your money!


Pinwheel ought to sit down with his insurance guy/gal and get the low down on the statues in his state.


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## katoman (Apr 26, 2009)

So self employed one man show guy has no comp on your job. He falls off a ladder or scaffold and ends up a quadraplegic.

Trust me, he's going to sue everyone. 

I cover them under my policy and deduct it from their invoice. This of course is arranged before they quote the job. Fair is fair.


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## TIGHTER MITER (Jul 9, 2011)

I am in NJ where a sole proprieter is allowed to opt out of insuring himself. However if you use a sub that does not have WC you are responsible for covering the cost of the WC on what you paid that sub. For me it is about 11 percent.
A few years ago I had been using a sub ti install kitchens. I noticed that his WC had expired and that I did not have a current certificate. I told him that I needed it before I could give him his next check and later that week he gave me an envelope with a current certificate in it and I filed it away.
So now cut to 5 months later when I am about to be audited and am putting together the certificates from my subs- I look at the one that the sub in question gave me and realize it is a little hinky- strange. I call the agent listed on the top and find out that the certificate is a fake and that he never renewed for the year- So I confront him and finally after trying to wiggle out of it he fesses up and says he just didnt have the $ at the time to renew. I had paid him $45,000 up to then since the policy expired, which ment that I was on the hook for almost $5000. Lucky I owed him about that much at that time , but he cried so much that he wouldn't be able to make his mortgage payment etc, I held $2500 and had him work of the rest over the next month or so. (I also held 11% form those payments for current WC. He turned out to be a stand up guy and paid it all off, but after that I stopped using him.


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## pinwheel (Dec 7, 2009)

TIGHTER MITER said:


> I am in NJ where a sole proprieter is allowed to opt out of insuring himself. However if you use a sub that does not have WC you are responsible for covering the cost of the WC on what you paid that sub. For me it is about 11 percent.


The GC that backcharged me, charged 10%. On the next job I done for him, my labor rate went up 10%. He seen my wife in the store the other day & told her he's got another project coming up in the near future, I'll also mark that job up 10% & let him deduct it for WC & pass it along to his client. 

I've only got 2 GC's that I work for that pay me directly, as a rule, I sub directly to the homeowner & collect payment directly from them.


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## Astrix (Feb 23, 2009)

TIGHTER MITER said:


> ..... So now cut to 5 months later when I am about to be audited and am putting together the certificates from my subs- I look at the one that the sub in question gave me and realize it is a little hinky- strange. I call the agent listed on the top and find out that the certificate is a fake and that he never renewed for the year- .


Unfortunately, this is happening more often in recent years as more people are getting good at word-editing and photo-shopping. Even when tamper-proof methods are used on electronic attachments, it isn't that hard to scan a cert and then edit some of the printed info using a computer; or to re-create an entire document using Word, figuring out the right fonts and table box sizes, and then copying an insurer logo from the internet to insert at the top of your fake letterhead. 

The common practice was that the client would ask us (the insurance broker) to issue a cert and they would give us the name and address of the cert holder. We would give the cert to our client, who would then pass it on to the cert holder (their client). Over the past couple of years, I have noticed a growing trend where we are asked to send the cert direct to the cert holder so that they can confirm an untampered version left our office and went direct to theirs. They want it to be emailed from our company email address, faxed from our business fax number or courier delivered from our office address. We can cc to our client, but they want their own version that they know hasn't passed through our client's hands.

Some won't accept a mailed version because they are even suspicious that the forger somehow got hold of some of our business envelopes and used those to mail his forged document. Not that hard because it is common practice to hand documents to visiting clients by putting them into an unaddressed envelope. They then could save the unsealed envelope to reuse at a later date. It's amazing what measures some people go to.

With Workers Comp, in Canada, many of the provincial boards now have a portal on their websites where GCs can order their own clearance certificates on their subs. I believe many of the state funds and major W/C insurers in the states have automated direct ordering as well. It is difficult to automate issuance of General Liability certs because often the policy file first needs to be amended to add the cert holder as an Additional Insured.

This is a good issue to bring up. Maybe some of the GCs reading this will want to re-consider their office practices with respect to getting insurance documentation from subs they don't know and trust well. 

(I remember reading a comment in another thread that business can no longer be done with simple trust and a hand-shake. It's too bad that it has come to this.)


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## Al Taper (Jul 10, 2007)

A GC I work for told me the other day the he was told not to take any WC or Liab page work from a sub. It has to be fax or emailed from the company.


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## DavidC (Feb 16, 2008)

An aside;

Our agent will not give us a generic certificate to use for sales, citing some of what Astrix has said. So I routinely will take a recent copy and edit out the name and address, substituting our business info, to use as a sales aide. We do make sure to let every prospect know that it has been altered and why.

I can make a pretty decent copy so it's a good tool to illustrate why they should call our agent to verify, and of course they should do the same for every contractor they are considering. A couple of prospects have reported that our agent tells them that we are their most likely contractor to ask for certificates and are very diligent to keep it in force. At least one said that is why they hired us. More than one has reported that this advise has alerted them to another contractor's insurance being cancelled or not renewed, which knocks them out of the running.

Whenever a prospect or client request a certificate (many don't even after our spiel) I call the agent with the info and they mail, fax or email according to the clients wishes. If I need an updated copy for my use I just ask to be cc'd.

They also maintain a list of automatic renewals for the code enforcement offices and repeat clients.

Good Luck
Dave


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## Astrix (Feb 23, 2009)

DavidC said:


> They also maintain a list of automatic renewals for the code enforcement offices and repeat clients.


That is a good added point. An insurance broker who knows the construction industry will have this as part of their SOP at renewal time. In our office, we keep a list of all certs issued throughout the past term and we send that list to the client a few weeks before renewal time and ask them to let us know which cert holders will need ongoing proof of insurance past the renewal date. Then, as soon as the renewal is finalized, but before the renewal date actually arrives, we will issue renewal certs and get them sent out to those cert holders ASAP. The last thing we want to happen is for our client to get locked out of a jobsite one day after their previous term expired because the owner didn't have the updated paperwork in their office.

As part of the renewal package to the client, we also provide them with a set of paper printouts and/or a pdf attachment (so they can print off as many fresh copies as they need) of a document called "Confirmation of Insurance". It is similar to a Certificate but is made out to "Whom It May Concern". It can't give a 15/30 day Notice of Cancellation and can't add an Additional Insured as there are no specific cert holder names listed. However, this is useful to hand out to prospective clients. 

If any contractors here are not already getting this service from their insurance broker, then you should be having a chat with them. Also, this should be free as you have already paid for this service via the commission percentage that is included in your policy premium.


P.S. To clarify what DavidC's broker told him re not giving a general confirmation, I don't agree with this. They can still issue the To Whom It May Concern Confirmation for your use with potential clients. Then, when you get the actual job, the owner can then request a Certificate made out specifically to them (and sent direct from the insurer) which is how they will get their guarantee that there was no counterfeiting of false documents going on. At the quoting stage, it really doesn't matter if the Confirmation is guaranteed authentic or not, and it is a more professional looking document, plus a bit more ethical than having to doctor up on old one on your own.


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## thom (Nov 3, 2006)

When the Ins. company audits and charges for an uninsured sub, they charge on the full bill, labor, material, profit, and overhead. It is far cheaper for the sub to buy insurance on himself because he is only paying on his own labor. 

If you hire an uninsured sub, at the very least, pay for the material yourself, out of your own company checking account.


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## Tom Struble (Mar 2, 2007)

Al Taper said:


> A GC I work for told me the other day the he was told not to take any WC or Liab page work from a sub. It has to be fax or emailed from the company.


exactly Al or mailed


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## CITY DECKS INC (Sep 4, 2012)

deduct it and have him chaulk it up....


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