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Worker’s Compensation: To Buy or Not To Buy?
avalon_agency wrote in insurance_chat

Or maybe the better question is “Are they employees, or aren’t they?”.


It’s an important distinction, because certain employees are required to be covered for Worker’s Compensation coverage, and others are not. And even though it may not be a requirement, it may be a good idea to cover them anyway.


Homeowner’s usually don’t consider themselves employers, but many would be surprised to find that they are, under certain circumstances. Let’s try this: which of the following types of “employees” do you think would need to be covered: the babysitter, the 15 year old neighbor who mows your lawn, your neighbor who helps you paint your house for free, your live-in nanny, your gardener, cook, companion, nurse, or the builder you hire to renovate your home.


The answers to this question will surprise you in some cases. First of all, an employer/employee relationship must exist, which would require the homeowner to pay compensation benefits should the worker become injured. If the worker is an independent contractor, no coverage by the homeowner would be required. Also, if there is no contract, meaning the work is being done without compensation, the comp law would also not be applicable. However, there are exceptions to even these rules.


One such exception is the domestic worker employed for less than 40 hours per week. What a domestic worker is is not explained in the New York State Workers’ Compensation Law, but Black’s Law Dictionary defines a “domestic servant” as the following: “a person hired or employed primarily for the performance of household duties and chores, the maintenance of the home, and the care, comfort and convenience of members of the household”. There are many examples in the rules, but in the end the Workers’ Compensation board decides on a case by case basis.


Another exception is Casual Employment, consisting of yard work, household chores, repairs, and painting in or about a one-family, owner occupied residence. It refers to basically a single job, with no ongoing work. Casual employment that takes 40 or more hours to complete in a week is not subject to the comp law, however an injured party is likely to try to argue that their work was not casual should they become injured and wish to receive compensation.


Casual Employment by Minors is another exception. A minor is anyone 14-17 years of age doing yard work or household chores in and about a one-family, owner occupied residence or the premises of a nonprofit, noncommercial organization, not involving power-driven machinery. It is surprising for most homeowners to find out that Federal Law prohibits minors under 16 from operating power-driven machinery, INCLUDING LAWN MOWERS. New York’s labor law allows 14 or 15 year olds to operate this machinery ONLY if an employment certificate (working papers) has been obtained.  AND if you hire a 16 or 17 year old to mow your lawn, you are required to purchase Workers’ Compensation coverage.


Something else to be aware of: if you hire a 14 or 15 year old to mow your lawn, and they do not have working papers, you can be liable for double the amount of any claim payable under the compensation coverage that you should have had. And this penalty is NOT insurable, so you would be paying this out of pocket, as well as any penalties from the state for not having the coverage, which can be very expensive. Your best bet is to not hire anyone under 16 to mow your lawn.


The last major exception is a minor, 14-17 years of age, engaged in baby-sitting. This class of employee, as well as any other you hire for less than 40 hours per week, would be covered under an endorsement on your Homeowner’s policy, HO 24 93, which was required on all policies that offer personal liability coverage on homes that have from 1 to 4 families, and are occupied by their owners, as of March 1, 1985.


There are two very important distinctions here to mind. One is that these exceptions only refer to Owner Occupied homes and the other is whether or not the employee is working more or less than 40 hours per week.


So obviously, a worker hired for more than 40 hours per week needs to be covered, such as the live in nanny. That classification is called “Inservant”, and the coverage usually runs about $350 per year. And unless the employee falls under one of the exceptions, even part time employees, hired for regular work that is less than 40 hours per week, need to be covered. Yes, domestic and casual workers are two of the exceptions, but just remember that the Workers’ Compensation board looks at each case and it is possible that your employee could convince the board that their work was neither domestic nor casual. No exceptions apply to rental dwellings that are not owner-occupied or any dwelling with more than 4 families.


In the end, the best advice we can give you is to purchase Workers’ Compensation coverage for any worker you hire to work on your home. Just because they are not required to have it, does not mean they will not sue you if they are injured. True, they would have to prove that you had breached some duty of care owed to them, and your liability coverage on your Homeowner’s insurance would pay for your defense, but the most prudent thing to do is to have the coverage to begin with.

You can visit our website or call us at 914-234-5678 for more helpful insurance information or for a free quote. Have a great day!

Avalon Agency


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