General contractors may have to pay subcontractor workers’ comp.

On Behalf of | Aug 30, 2021 | Workers' Compensation

General contractors hiring out subcontractors may not realize they may be liable to cover additional workers’ compensation insurance for the employees of another company. Under Minnesota law, uninsured contractors may receive workers’ compensation benefits from general contractors.

Having to cover the workers’ compensation benefits of contracted individuals is not a common thing. This requirement only applies in certain situations depending on the contractor’s insurance status.

Uninsured contractors

Companies may try to avoid having to pay their employees benefits by hiring individuals as contractors. This type of classification allows a contractor to avoid the trouble of having to deduct taxes from paychecks, to avoid having to offer retirement or health care benefits when they cannot be easily afforded, or to save from having to pay for paid time off.

A contractor who, through various reasons, may be in the practice of hiring out employees as contractors may not realize they may still be required to pay for workers’ compensation in the event one of their contractors are injured. For a contractor injured on the job, Minnesota may require a general contractor to cover workers’ compensation benefits by classifying independent contractors as company employees.

Minnesota considers contractors to be misclassified for Workers Compensation purposes. Even though an employee may receive a 1099 tax form instead of a W2, uninsured individuals may be covered for workplace injuries by their general contractor.

Circumstances apply strictly to injures obtained on the job. But in these conditions, a general contractor may be required to cover medical costs from injuries, rehabilitation or long-term disability care. General contractors may wish to consider purchasing workers’ compensation insurance for the individuals they hire as contract workers to avoid any potential financial pitfalls resulting from workplace injury.