California Workers Compensation Audit – Using Subcontractors in California

While there’s many pitfalls that both small and large contractors can trip over when it comes to a workers compensation audit,  the identification, knowledge and application of some basic preventive steps can help avoid costly audit problems after the fact. In this post we’ve put together a few helpful hints for California contractors who use subcontractors.

  1. Only work with insured subcontractors; Avoid all workers comp audit issues by working only with insured subs. Be sure to verify the subcontractor you’re using has a valid, current workers compensation policy and keep that information in their file.
  2. Be sure to verify with your workers compensation company that uninsured subcontractors will be picked up and included in your payroll at audit; It can be a costly mistake assuming that uninsured subs will not be charged against your workers comp policy!
  3. Require a Certificate of Insurance; The certificate of insurance is the acceptable proof of coverage. Certificates should be updated on a regular basis.
  4. Make sure you document the type and scope of work performed by the subcontractor; Keep a file on the subs you use. Have your attorney draw up a subcontractor agreement in which you spell out the scope and work the subcontractor is to perform for you.
  5. If your subcontractor provides materials for the job be sure to have them separate the cost of materials and labor; Separate material and labor costs need to be shown on each subcontractors invoice, for each job. This is especially important if you happen to use an uninsured subcontractor.

This has been a year for workers compensation consulting for California contractors! Seems like we’ve had more contractors from California experiencing a greater variety of workers compensation related problems this year than hardly any before. If you’re a contractor take a few minutes to learn about how your workers compensation policy will respond to insured and uninsured subcontractor issues. Learn about the rules that will be applied to your policy at audit time and don’t be surprised after the fact!

Remember, if you’re experiencing a workers compensation premium related problem, had your classification codes changed or received a large workers comp audit bill, contact a workers compensation premium consultant for help!

Hope this helps you out!