If you are in the construction trades, you cannot be held liable for a subcontractor’s premiums if you can show that all six of the following statements are true:
1. Both you and your subcontractor are either: Registered contractors under RCW 18.27
2. The work you have subcontracted is the work of a contractor as described in RCW 18.27.010 (work that involves construction, repair, addition or removal, improvement, movement, wrecking or demolition of another’s real property)
3. Your subcontractor maintains a set of books and records that reflects all of the business’s income and expenses.
4. Your subcontractor works out of either a storefront location or home office that is used regularly and exclusively for the business, including paperwork, and is eligible for an IRS business deduction.
5. You are not supervising your subcontractor or his/her employees. This means you are hiring a truly independent contractor, which means you are not: Telling them how to do the job; Assigning tasks; Training; Keeping time sheets; Paying a wage; Setting regular hours.
6. Your subcontractor has an industrial insurance (workers’ compensation) account in good standing with L&I or is a self-insured employer certified by L&I. To help protect yourself from liability, check your subcontractor’s liability certificate (Certificate of Coverage) each year at this site, print a copy of it and keep it on file. It appears that you may have some exposure here if this was not done.
I apologize for my earlier comment; I was thinking that you had just hired a janitor to clean your facility and that he should be exempt under RCW 51.08.180; but it appears that you still have a duty to verify the insurance under Publication F262-262-000.
My thought is that it would be best to be honest about what has transpired during the audit.