My understanding is that Worker's Compensation policies do not cover illegal employees or contract (1099) labor. Is this correct? What happens if one of these guys gets hurt? Am I on the hook or is there some other kind of insurance policy out there OR could I have them sign some kind of release that would hold up if something were to happen?
Thank you for posting your question to JA/Pearl. Legal questions often take time for research or I may be offline so please be patient, I will reply.First of all you should not have "illegal" employees. If you mean illegal in the sense that they are not legally in the US, they would still be covered by worker's compensation if you are paying them on your payroll and paying the workers compensation insurance premium on their wages. You do not have to provide worker's compensation for independent contractors (1099). However, the rules for an independent contractor are very strict and a court or the IRS may find that they are actually employees rather than independent contractors. If they are found to be an employee and they get hurt on the job, then you can be held liable. If there is no WC coverage, then they can successfully sue your company for their damages. You run that risk by not having them on your payroll and paying for the WC insurance. Insurance does not cover what you do not pay premiums on. You can have them sign a release but such a release is not enforceable. It may keep them from suing you to start with but such a release is against public policy and illegal if they are an employee.
OK, my company is a Sub chapter S. Can they come after me personally?
If the activity is illegal, it is possible that they could come after you personally. The legal term is "piercing the corporate veil". The IRS can also come after you personally if they determine that the 1099 workers are actually employees. A positive rating for my time is always appreciated
Practicing attorney with expertise in trucking accidents
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