This article was republished with permission from Insurance Journal.
September 21, 2020
By Mike Freeman
When the construction labor market tightens, employers fill the gap with independent contractors. While hiring 1099 contract workers helps keep projects on track, it can potentially create an entirely separate problem if their employment classification isn’t made clear for insurance purposes.
If an insurer doesn’t know about 1099 workers from the onset, they are unable to fully account for what they are underwriting. This can cause issues down the road, whether related to coverage when claims arise or when it’s time for policy renewal. Brokers can do several things to help mitigate these issues.
Identify worker status
Using a 1099 form is not enough to settle the status of a worker. The two questions at issue: Does the individual essentially perform as an employee? And does the company manage and otherwise treat that person in the same way it would an employee? If yes, the 1099 worker may fall under the employee classification of the hiring company’s insurance policy – in which case, the best strategy for the company could be to hire that individual as a W-2 employee instead.