There is still some confusion about the subject of Workers Comp insurance. In this article you will find out why it's a NECESSITY – not an option and how you can meet the obligation with safety and security.
The (BRIEF) history: Workers Comp developed in the USA largely as the result of the influence of German immigrants who brought the concept with them. Prior to the acceptance of the Workers Comp scenario, if a worker was hurt on the job the only remedy was the courts. If a worker was injured the employer would use "Common Law" defenses available, like Contributory Negligence. The system was weighed in favor of the employer since the employer had the resources to mount a defense and the worker was hurt and out of work.
The result was often a family that was in dire straits because the "bread winner" was not only stopped from producing income, but now became a burden to the family due to injury.
Eventually (not overnight!) the workers Comp system we see today evolved. The idea is this- If a worker is hurt on the job – they get paid. End of story. In return, Comp is supposed to be an "exclusive remedy" for on the job injury, paying medical bills AND lost wages.
How does the system work?
There is a schedule in place that lists the amount of "Compensatory Damages" to be paid, the term of lost wage payment and even a dispute resolution mechanism through special "Compensation Courts".
That's the ideal. Practically, some employees try to go outside the system and SUE the employer by alleging things like " Unsafe Workplace Conditions". The incidence of suits outside the Comp System is becoming more and more common.
The Independent Contractor Trap:
It's sad, but some Pizzeria Owners still think they don't have to buy workers Comp insurance. They mistakenly latch on to a "catchphrase" like "Independent Contractor" and think that by mouthing that magic word that the problem goes away. IT DOES NOT.
Look – "independent contractor" can mean almost anything. To the IRS it's one thing. To a labor attorney it's another. To your worker it means nothing. If the someone gets hurt on the job they just don't care – they want benefits.
Listen – independent contractors seem to "magically transform" into employees on the way from the emergency room to the lawyer's office. If you are counting on some "accounting contrivance" to protect you, you just may be "counted out"!
FLASH: Just because you don't buy the insurance doesn't mean that your workers don't have access to benefits.
Here are the Facts
In most states, if your worker gets hurt they have access to benefits under the Workers Comp law. It's just a matter of who pays the bill – YOU or an insurance company. It's true… your hurt worker can and will go into Workers Comp court and get a judgement for benefits.
Now, the benefits to the worker will be paid no matter what, either by the insurance company that provides your Compensation Policy or by YOU.
IF YOU DID NOT BUY THE INSURANCE…
You will meet many new and interesting people, like the attorney your employee hires to sue you, the attorney you hire, the compensation court judge and the labor department examiner that investigates your business. And they will all have one thing in common. They will all cost you money and lots of precious time. You are compelled to deal with these people. You can't tell them you will deal with them when you get around to it. You will have to put your pizzeria on hold while you do this. In the end you will pay!
If you bought the insurance – it's pretty much out of your hands …..
The compensation insurance machinery is well oiled and efficient. You report the injury in a timely matter and in about 98 percent of the cases I've seen that's the last YOU see of it. The employee deals with a claims specialist, the bills get paid and you run your Pizzeria and make money.
The Short Answer
Workers Comp is one of the "basic building blocks" of your Pizzeria Insurance program. I just don't know of any way you can SAFELY ignore this issue. If you have employees, you have the obligation to provide this insurance*.
*(Check your state for individual regulations – a very few allow some opt out mechanism from the insurance- not the law!)
There are ways, and there are ways…..
Now, as a prudent businessman, make sure you take advantage of everything available to you. Look into things like:
DIVIDEND PROGRAMS: If you qualify, you can participate in a type of 'profit sharing' with the insurance company and get a portion of your premium returned at year end for better than average performance.
PROPER CLASSIFICATION: Workers Comp policies assign employees to "classifications" that each take different rates. Take the time to look this over – be sure that your bookkeeper is not being rated as a delivery driver!
SAFETY MONITORING: Having a worker get hurt is bad. Forget about the cost – what about the horrible "pit of the stomach" feeling when you see someone really hurt! Do all you can to provide a safe workplace with good equipment and proper training. This is another place you can "do well by doing good". The system rewards safe workplaces!
COMMUNICATION: Believe it or not! This is the lowest cost highest return thing you can do – Make it clear – in writing – with constant reinforcement – that you DEMAND a safe workplace. That you will NOT tolerate risky behavior on the job. That you place a real priority on the safety of the people who work for you.
Workers Comp is one of the "basic building blocks" of your Pizzeria Insurance program. I just don't know of any way you can SAFELY ignore this issue. If you do this right, Workers Comp should not be a terrible burden. It should be part of your business's basic protection plan. You can take care of your obligation and not "burst the budget".*
PS:*In my experience, if you think that for some reason YOU are not subject to the same rules as other businesses, you are usually wrong…. ( Get an outside opinion – your CPA or lawyer for example).
PPS: Visit my website – WWW.PIZZASURE.COM for more information and a copy of my SPECIAL REPORT: "How to end a Comp Audit in 10 Minutes flat and have the auditor talking to himself on the way out."