Kansas - Affidavit of Exempt Status - HB 2134

Effective 05-15-2011, Kansas passed a workers compensation bill that allows individuals who may be expemt from the workers compensation act to provide others they may work for with an Affidavit of Exempt Status. This affidavit, when properly executed and in the posession of the receiving party, relieves the receiving party from any workers compensation claims made by the individual providing the affidavit. It's a great step forward in clearifying some muddy water when it comes to hiring independent contractors. You can read more about this topic on our website on the Kansas State Rules pages. Hope this helps you out!

How Far Will They Go To Avoid Paying Workers Comp?

What a question! There seems no end to how far some people will go to avoid paying their fair share of workers compensation premiums. Don't get me wrong, workers comp premiums can be very expensive for a business owner to cough up and during tough economic times some folks turn to fraud as a way to bilk the workers compensation insurance company out of premium dollars they owe!

In the news you'll find a Kentucky coal mine operator recently charged with fraud. They allegedly set up a shell trucking company and showed payroll for some of their underground miners in the trucking company to avoid paying the higher underground mining rates.

You'll find others are not as creative and resort to things like shifting payroll from higher rate workers comp code classes to lower rate classes, this is called misclassification of employees; or not reporting workers as employees but considering them as subcontractors or independent contractors, there are many rules that apply when determining employee status; And on and on...

So, yes workers comp can be expensive and any business who has a workers compensation policy should have that policy reviewed for accuracy by an independent work comp consultant. Honest mistakes are made by insurance companies every day, mistakes that can be found and corrected with the proper help!

Workers Compensation Telephone Audit

There are several methods that an insurance company may use in completing the workers comp audit process. They are:

1. The mail or self audit
2. The physical audit
3. The telephone audit

Remember, the audit process is a policy condition, a requirement found within the work comp policy contract. Yes...I said contract!

The typical telephone audit goes something like this...

1. Shortly after the workers comp policy expires, the business owner will receive a letter and some forms in the mail from his insurance company;
2. The forms are included to make every ones job go easier, for the business owner it makes the gathering of the information easier, for the auditor it makes a crib sheet to follow and makes sure they gather all the info they need to complete the audit.
3. The auditor then talks with the business owner by phone and secures the needed information.
4. The auditor completes his worksheets and then sends them into the insurance company's audit department.

Sounds great right? Well maybe it's easy for everyone involved but we find telephone audits are ripe with errors, many times costing the business owner in additional cost for his workers compensation insurance. Why does this happen? A lot of important details are overlooked, changes in the business operation, reclassification of employees, misused and uncorrected class codes, misclassification of owners and uncorrected changes of ownership or entity. All of these can make significant differences in the workers comp premiums a business owner has to pay.

So, when presented with a telephone audit to complete...just be aware! Oh yea...not all telephone audits have errors. Many are found to be right on. But because of the method of gathering and verifying information many are also wrong!

Hope this helps you out! Thanks!

The Ghost Policy - A Workers Compensation Sham!

What is a workers compensation ghost policy? Is it something you can see on the next episode of the "Ghost Whisperer?" Not really, read on!

A ghost policy is typically a workers compensation insurance policy sold by an insurance agent to a business owner, usually a contractor, who has no employees and has elected, if allowed to do so in his state, to not include himself within the policy coverage. Most times these policies are issued with one thing in mind:

• so the business owner can secure a certificate of insurance.

Let me recap, a business owner buys a workers comp policy, has no employees and excludes himself from coverage....hummm, sooo....if no one is covered by the policy...why buy it? Usually so the business owner can give that certificate of insurance to someone he's working for. But wait a minute...there's no one covered by that insurance policy right? Right! So...the certificate of insurance is worthless, right? Right! Why do it? It's usually about the money.

Workers compensation insurance is expensive and the purchase of a "ghost policy" usually falls below the minimum premium charged by the insurance company or allowed by the state. Let's say the minimum premium is $900 and for the business owner to include himself within the coverage his premium would be $2,200....are you starting to get the picture?

So why is this such a bad thing? To start with, in my opinion, it's a sham! Employers who hire subcontractors to perform work for them will require the subcontractor to provide them with a certificate of insurance, proof that workers compensation coverage is in place. This is done to protect the general contractor or employer from work related exposures associated with injuries sustained by the subcontractor or his workers. In other words, if the subcontractors workers are injured on the general contractors job then the subcontractor's workers comp policy would take care of his workers. In absence of a valid workers comp policy, the general contractor may be responsible for the subcontractor's workers. Oh yea...the general contractors insurance company would also be happy to charge him for those workers comp exposures generated by the sub, whether a claim occurred or not!

So could that business owner who bought a workers compensation ghost policy but did not include himself in the coverage make a claim against the general contractors policy, yep.

There's plenty more on this topic...but for now lets just say a workers comp ghost policy is in no one's best interest!

Hope this helps you out!

Employee or Independent Contractor - A Workers Compensation Issue

"I thought he was an independent contractor!" ...No, son, that's what they call an employee!

If you've been around the workers compensation business for a while employee or independent contractor is something you'll hear quite a bit. Whether it's done on purpose or an honest mistake the line between a legitimate independent contractor and employee may be blurred at best. Over the years I've worked with many clients who were caught in this workers comp trap. ....It could happen to you!

An example...Lets say you have an office based business, maybe you own an accounting firm, and have an individual come into your office several times a week after hours to clean, you know, empty trash, vacuum, dust, etc. You hired this person because they also clean you home and you like them cause they are trust worthy and do a good job. So, for workers compensation purposes are they an employee or independent contractor?

Another example...You own a successful floor covering store. Your employees conduct sales both on and off your premises and you have a office staff. You hire a handy man to do some repair work on the gutters on your building and he falls off his ladder breaking his arm. Employee or independent contractor?

You might be surprised at the answers and just how the answer might effect your workers compensation premium!

We'll continue with this topic a little later.

Misclassifying Workers - A Nebraska Workers Comp Problem

Things are still tough out there! With the economic down turn we are seeing more and more employers incorrectly classifying their employees as independent contractors or subcontractors instead of employees all in the hopes of reducing the cost of workers compensation, employee benefits, payroll taxes and unemployment insurance. This scary trend is rampant in the construction industry.


For workers compensation purposes, when an employer purposefully misclassifies an employee as an independent contractor they are trying to avoid paying workers compensation premium on that employee. By doing so, the employer would potentially save many thousands of dollars in workers comp premium. Unfortunately employers who practice this activity leave their workers exposed to uncovered on the job injuries. Leaving the employee's only recourse for compensation that of pursuing a legal outcome against the employer either through the state authority. through the courts or both. All flying against the basic reasoning for workers compensation protection, that of protecting the employee.

So here's the scoop...look for more individual state legislatures and the IRS to crack down hard on those employers who abuse the independent contractor/employee status. As a matter of fact, Nebraska has a current workers comp bill pending that, if passed, will impose heavy fines on employers who treat workers as independent contractors in violation of their states definition of an employee.

Yes it's tough out there, but congratulations to the State of Nebraska for their efforts in correcting this big workers compensation problem found in the construction industry!

Check out this link for more information on Nebraska Workers Compensation.

Georgia Workers Comp Carrier Declared Insolvent

Georgia Workers Compensation insurance carrier, Southeastern US Insurance Company, has been declared insolvent. According to recent news out of Georgia, John Oxendine, the Georgia Insurance Commissioner, will act as the liquidator. This action has been approved by Fulton County Superior Court Judge Thomas Campbell.

It's estimated approximately 3,000 Georgia employers will be impacted by this action. Southeastern US Insurance Company specialized in providing workers compensation coverage to organizations like hospitals, associations, public entities and private companies alike and it was reported they were the eighth largest workers comp provider in the state of Georgia.

So as of October 27, 2009, the date Judge Campbell approved the liquidation, all business with Southeastern US Insurance Company was required to cease. For further information about this liquidation contact the Georgia Insurance Commissioners office. Also here is a link with information about this liquidation.