# Workman Compensation Question



## CApainter

As I understand it, the following is a formula to predict a contractor's WC insurance premium.

WCIP=EMR x Labor rate x payroll units

Therefore, it seems in order to know what your WC premium will be, the insurer would need a record of payroll. Is this correct?


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## CliffK

Absolutely....In NY they require all payroll records,(including 941s and state filed payroll taxes) invoices, check stubs, and owners schedule C. As I've said before...it's a regular colonoscopy!


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## CApainter

So I can assume that any contractor paying their employees cash, most likely haven't submitted payroll records to WC insurance? And therefore, those workers are most likely uninsured, and are posing a risk to the owner of any project the contractor has placed them at?


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## Gough

CliffK said:


> Absolutely....In NY they require all payroll records,(including 941s and state filed payroll taxes) invoices, check stubs, and owners schedule C. As I've said before...it's a regular colonoscopy!


We've been with a private company, rather than the state fund, for ~35 years. They only wanted to see the books for the first few years...and they never needed the Schedule C. Now we just email them the numbers.

Fundamentally, CA is right on the formula.


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## Gough

CApainter said:


> So I can assume that any contractor paying their employees cash, most likely haven't submitted payroll records to WC insurance? And therefore, those workers are most likely uninsured, and are posing a risk to the owner of any project the contractor has placed them at?


That's a fair assumption, although it's not a sure thing. There is nothing illegal about paying employees in cash. It's the lack of a paper trail that raises red flags.


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## CApainter

Gough said:


> That's a fair assumption, although it's not a sure thing. There is nothing illegal about paying employees in cash. It's the lack of a paper trail that raises red flags.


As a licensed contractor, is it illegal to not have WC insurance to cover employees? I certainly need to look into this more.


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## Gough

CApainter said:


> As a licensed contractor, is it illegal to not have WC insurance to cover employees? I certainly need to look into this more.


That's my understanding...not just for contractors, but anyone with employees.
I have some vague recollection that there may be one state that doesn't folow that rule.

In the trades, someone NOT having WC is an indication that they're trying to skirt the rules. Most likely, by using the infamous Subcontractor Dodge.


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## LA Painter

In CA, to hold an active contractors license, you have two options.

1) Obtain Workman’s Comp Insurance. 
2) File “Exempt” ie: You claim you have no employees.

Without one or the other, the CSLB will suspend your license.


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## CliffK

CApainter said:


> So I can assume that any contractor paying their employees cash, most likely haven't submitted payroll records to WC insurance? And therefore, those workers are most likely uninsured, and are posing a risk to the owner of any project the contractor has placed them at?


 I think realistically they are posing more of risk to the contractor himself(and themselves of course if they should get hurt in the line of duty). If someone in your employ gets injured I think it is going to be more on "you" than the home or business owner where the injury happened. I'm not sure how this would play out legally, but my take.
I think most people's homeowners insurance would protect them.


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## CliffK

Gough said:


> We've been with a private company, rather than the state fund, for ~35 years. They only wanted to see the books for the first few years...and they never needed the Schedule C. Now we just email them the numbers.
> 
> Fundamentally, CA is right on the formula.



It is such a mess in NY that many years ago most private companies got out of the WC business. I am sure there are still some, but it became not cost effective. Most contractors in these parts go thru the State Fund.
We went through a private company for years and they just stopped writing the policies and sent us to the State Fund ... we've been there ever since.


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## Gough

Cliff,

Without WC, you're right that the employer is the first on the hook. If, like the average house painter, he doesn't have two dimes to rub together, the lawyers will look elsewhere.

The company that we're with no longer offers WC to new clients, but continues with existing ones.


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## DeanV

We are in a co-op program now for WC. So far so good.


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## CApainter

LA Painter said:


> In CA, to hold an active contractors license, you have two options.
> 
> 1) Obtain Workman’s Comp Insurance.
> 2) File “Exempt” ie: You claim you have no employees.
> 
> Without one or the other, the CSLB will suspend your license.


So as a solo worker, you just need WC insurance for yourself to maintain a contractors license?


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## CApainter

I suppose an unscrupulous contractor, who doesn't have WC insurance for their employees, can file a claim with their General Liability insurance if an employee is injured and wants to pursue compensation?

And, is it a requirement for contractors to have general liability insurance?


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## CApainter

Gough said:


> ...In the trades, someone NOT having WC is an indication that they're trying to skirt the rules. Most likely, by using the infamous Subcontractor Dodge.


But then the contractor would have to provide evidence that whom ever they have doing the work, is in fact a sub contractor. And of course, the sub would have to provide proof of WC insurance. Right?


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## CApainter

Thanks for the replies and information! 

As someone representing an owner, I'm concerned that the typical small general service contractor, hired these days, has a tendency to pay their employees cash without the required deductions. And given that its almost certain cash is intended to be untrackable by the recipient, that a payroll record of the employee is no where to be found. Thus rendering them uninsured. This places a lot of risk to an owner in terms of liability considering they generally will have deeper pockets then the contractor.

And I'm also concerned that the so called subcontractor, doesn't have any WC insurance either.

*Question:* Is it the responsibility of the contractor, or the sub hired by the contractor, to provide proof of WC insurance for the workers actually performing the work?

We typically go through the contractor for invoices. We have no idea how the sub is getting paid.


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## Oden

I often wonder this. What affect does a claim have on ur insurance? Premiums go up? What? Is a catostrophic injury just as bad as say six stitches?

Over the years I have noticed, employers go literally to war over claims. And people do get hurt. Some really badly. Quite a few by now. 20 years almost, they add up. Ironic on the PT the contractors seem to get a bug up their but if guys put in a unemployment claim on em. Not a problem here. A unemployment claim. A workman's comp claim? War! I think it is a big expense but never quite understood it.


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## Painter-Aaron

Here in bc Canada 
For our trade it's 3.62% of the payroll dollars that go towards wc. And it's mandatory for employees but not the business owner. But you can get it through wcb or privately for the owner . 

Any subs you use, if the company is a oms and doesn't have wcb or proof as in a clearance letter you have to pay that for them to. Unless they have it 

Every time a claim is made, the contractors rates go up and I think even a penalty in some cases but I'm not sure as i haven't had a claim against me yet


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## Epoxy Pro

CApainter said:


> I suppose an unscrupulous contractor, who doesn't have WC insurance for their employees, can file a claim with their General Liability insurance if an employee is injured and wants to pursue compensation?
> 
> And, is it a requirement for contractors to have general liability insurance?


Some states yes. Common sense yes. Comp if you have guys you pay cash to, sub, have on payroll either you need the comp to cover them all or they need to provide proof of ins and and or comp if some one stops by and asks you for proof. 

We only started carrying it because we got popped for not having comp. Fortunately it was at the end of the day, end of the job and cost us $100.00 plus a 24 hr shut down.

From that point on we have had it, both Carly and I are also covered. Yeah it really hurts the pocket but it also gives HO's kind of piece of mind knowing we have it.


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## Epoxy Pro

CApainter said:


> So as a solo worker, you just need WC insurance for yourself to maintain a contractors license?


Solo you claim Exempt and you have no employees.


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## Gough

In some states, you can go the exempt route.

CA, if the Gc has provided his certificate of insurance for WC, that should be sufficient. Normally, if he carries it, all his subs either carry their own or the GC pays for them on his policy. That's the sort of thing that comes up during WC audits.


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## Oden

The worst thing I figured out you can do, this is as a employee now. You get hurt. Whatever you fall down, you twist ur back, ur knee so on. Well ur a tough guy. You have been hurt before. Your gonna work through it not even mention it. Then a few days later whatever injury is nothing but worse, so bad u can't now work. Then you tell em........whoa the wagons get circled and ur are screwed. 

Really though. If you make a note of every time you get hurt a bit in this racket. It would be a daily report. Almost. lol..


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## SemiproJohn

CApainter,

I'm not sure how you are defining "contractor's license." A OMS here can paint with nothing more than an occupational license obtained from the county of residence, and possibly some city licensing depending upon the locale. I have these and, as an LLC, pay around $260 annually in such fees.

I can't believe there could be many, if any, OMS's actually studying and paying for a state GC license.

And it is not necessary to have WC insurance as a OMS. However, proof is needed that the OMS files and pays for an annual WC exemption, which costs around $50.

Of course, the risk of injury to the OMS is indeed a risk, and not all customers want to hire a painter who does not carry WC insurance.


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## CApainter

The fact is, I know of contractors who pay their employees in cash. But from my understanding of WC insurance, you can't have a premium established if you don't provide the insurer employee payroll records. So how are contractors getting away with paying cash?

I suppose a contractor that 1099's their employee could. Is 1099 only for subcontractors, or is it also an option for obligating the employee with paying taxes?


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## CApainter

I didn't read page two of this thread before my last post. Although, I think I'm becoming more confused.

I will certainly confirm, with the proper entities, what everyone here provided. Thanks again!


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## SemiproJohn

CApainter said:


> The fact is, I know of contractors who pay their employees in cash. But from my understanding of WC insurance, you can't have a premium established if you don't provide the insurer employee payroll records. So how are contractors getting away with paying cash?
> 
> I suppose a contractor that 1099's their employee could. Is 1099 only for subcontractors, or is it also an option for obligating the employee with paying taxes?


It sounds as though those contractors are not paying WC premiums ( or their share of withholding and social security) for their employees. I really doubt those employees who are being paid cash pay their own WC or any self-employment or social security taxes. This is a very common way to skirt the system. And because of the cheating, these guys can afford to bid jobs cheaper than the above-board guys/gals.


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## CApainter

SemiproJohn said:


> It sounds as though those contractors are not paying WC premiums ( or their share of withholding and social security) for their employees. I really doubt those employees who are being paid cash pay their own WC or any self-employment or social security taxes. This is a very common way to skirt the system. And because of the cheating, these guys can afford to bid jobs cheaper than the above-board guys/gals.


Besides how much it must stick in the contractor's craw who has to compete with these unscrupulous circumventors, a lot of owners are putting themselves at risk too. 

It's like, OK, we'll give amnesty to all the undocumented workers. Fine. But for crying out loud, require these contractors to pay above board so we don't have a labor assault with concealed risks and liability!

Note: I'm referring to owner as, building, residential, plant, etc., owner.


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## Gough

SemiproJohn said:


> CApainter,
> 
> I'm not sure how you are defining "contractor's license." A OMS here can paint with nothing more than an occupational license obtained from the county of residence, and possibly some city licensing depending upon the locale. I have these and, as an LLC, pay around $260 annually in such fees.
> 
> I can't believe there could be many, if any, OMS's actually studying and paying for a state GC license.
> 
> And it is not necessary to have WC insurance as a OMS. However, proof is needed that the OMS files and pays for an annual WC exemption, which costs around $50.
> 
> Of course, the risk of injury to the OMS is indeed a risk, and not all customers want to hire a painter who does not carry WC insurance.


To say that things are different in California would be an understatement.

Lots of OMSs around here with the state ticket.


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## Gough

CApainter said:


> The fact is, I know of contractors who pay their employees in cash. But from my understanding of WC insurance, you can't have a premium established if you don't provide the insurer employee payroll records. So how are contractors getting away with paying cash?
> 
> I suppose a contractor that 1099's their employee could. Is 1099 only for subcontractors, or is it also an option for obligating the employee with paying taxes?


Again, it's an unusual scenario, but it CAN all be done legally in cash. You can maintain the records, do the deductions, etc. and run a cash payroll. The biggest problem is that there is no direct paper trail. Should the IRS come calling, you may have a tough time making a case.

That being said, you'd be a fool to do it that way, and I've never heard of anyone who's done it.

If someone is paying his employees in cash, I'd say you could be 99.9% sure that he's not running a legal operation.


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## LA Painter

CApainter said:


> The fact is, I know of contractors who pay their employees in cash. But from my understanding of WC insurance, you can't have a premium established if you don't provide the insurer employee payroll records. So how are contractors getting away with paying cash?


They are likely paying a small amount by check - for reporting purposes, and the rest in cash.


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## Gough

LA Painter said:


> They are likely paying a small amount by check - for reporting purposes, and the rest in cash.


Does that mean the contractor takes the hit at tax time? Doesn't seem like the best approach. Or is the contractor himself doing work for cash?


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## LA Painter

Gough said:


> Does that mean the contractor takes the hit at tax time? Doesn't seem like the best approach. Or is the contractor himself doing work for cash?


A little of each. There is also a lot of undocumented labor in CA. - which only adds to the puzzle. Between the CSLB, IRS, INS & WC... let’s just say it’s a complicated relationship. :whistling2:


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## riskend

This is some maverick stuff, brethren.
Accident insurance is mandatory. we need it, subordinate personnel need it.
Along with rudimentary tickets in site safety.
If we hire cannon fodder, we ultimately stare down the barrel of the Feds come looking.
If we can't cover anything else, at least cover that.
My wife & daughter combined forces to attack me because the truck was not insured.
Grumbling mightily in private I paid up, but only because they threw in $20m public liability cover.
Excellent.
I can say...."The Think Tank did it."


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## Gough

riskend said:


> This is some maverick stuff, brethren.
> Accident insurance is mandatory. we need it, subordinate personnel need it.
> Along with rudimentary tickets in site safety.
> If we hire cannon fodder, we ultimately stare down the barrel of the Feds come looking.
> If we can't cover anything else, at least cover that.
> My wife & daughter combined forces to attack me because the truck was not insured.
> Grumbling mightily in private I paid up, but only because they threw in $20m public liability cover.
> Excellent.
> I can say...."The Think Tank did it."


If you're going without WC for people that are really employees, lawyers are a far bigger threat that the Feds, or the state, who are the ones who deal with WC. Lots of attorneys making a comfortable living dealing with employers who tried to use the Subcontractor Dodge.


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## CApainter

As an owner representative, I really hate to pry into a contractor or subcontractor's business practices. But frankly, too many are operating dishonestly, which forces me to be the a-hole. All I get is moans and groans. Granted, I'm not managing large projects, but all it takes is one minor accident of an un insured worker, and all hell can break loose.

But like homeowners, I too have to deal with management trying to keep costs down and within an operating budget. Which ultimately means dealing with low bidders who present the problems we're discussing. 

You really do get what you pay for, and honesty and trust have tremendous value.


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## DunriteNJ

Workmans comp is the biggest scam out there-very unfair to contractors

However- it does seperate the "real" contractor from a scab

Go figure


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## Gough

DunriteNJ said:


> Workmans comp is the biggest scam out there-very unfair to contractors
> 
> However- it does seperate the "real" contractor from a scab
> 
> Go figure


I'm curious in what way you feel it is "unfair" to employers? They get a pretty good deal in the "compensation bargain".


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## eews

the thing that bugs me, here in NY, is that workers comp premiums are based on employee payroll, which includes vacation time, holidays, and personal/sick days. Since WC is supposed to insure workers who injure themselves while working, why are monies paid for NOT working included?


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## CApainter

eews said:


> the thing that bugs me, here in NY, is that workers comp premiums are based on employee payroll, which includes vacation time, holidays, and personal/sick days. Since WC is supposed to insure workers who injure themselves while working, why are monies paid for NOT working included?


I suppose it wouldn't be fair to the employee to lose credit for benefits they earned through their service. The theory may be that they can't reap the reward of vacation, holidays, or sick leave if they were injured and have to recuperate. So, the premiums include those fringe benefits along with their wage.


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## MKap

CApainter said:


> I suppose it wouldn't be fair to the employee to lose credit for benefits they earned through their service. The theory may be that they can't reap the reward of vacation, holidays, or sick leave if they were injured and have to recuperate. So, the premiums include those fringe benefits along with their wage.


You don't have to pay for a lot of the post you make.


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## CApainter

MKap said:


> You don't have to pay for a lot of the post you make.


Thank goodness! But being a contractor is a choice, and hiring people to work for you is a responsibility.


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## Oden

It's called a 'package'
Vacation, holidays whatever. That plays into why the employee took the job, holds down the job, it's a package.
Hey. Too good too be true. Put in a application..,,,,


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## Gough

Just saw this in JLC, somebody apparently thought they had another workaround:

http://m.ehstoday.com/construction/...pay-1-million-workers-comp-premiums-penalties


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## CApainter

^Good for the union watch dogging. I'm sure they could tell the workers hanging the drywall weren't partners with the owner.


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## Oden

CApainter said:


> ^Good for the union watch dogging. I'm sure they could tell the workers hanging the drywall weren't partners with the owner.


I am most certainly not political with and have my own criticisms. Unionwize. I'm a company guy. That said. Union worker or non union worker ur better off with a strong presence in the area you work. If u are in the trades. Case in point right there. If a outfit gets big enuff. And wants to stay non Union. They need their ducks in a row. Cause they are gonna get looked at, and pointed out what ducks aren't lined up.


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## CApainter

Oden said:


> I am most certainly not political with and have my own criticisms. Unionwize. I'm a company guy. That said. Union worker or non union worker ur better off with a strong presence in the area you work. If u are in the trades. Case in point right there. If a outfit gets big enuff. And wants to stay non Union. They need their ducks in a row. Cause they are gonna get looked at, and pointed out what ducks aren't lined up.


I can only imagine the blow hard owner and his blow hard wife running around in their fat Cadillac Escalade getting over on the system. Maybe if they kept their fat egos in check, they'd still be running a business.


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## daArch

CApainter said:


> I can only imagine the blow hard owner and his blow hard wife running around in their fat Cadillac Escalade getting over on the system. Maybe if they kept their fat egos in check, they'd still be running a business.


C'mon man, they're just trying to reelise the *I*merican Dream w/o none of that Big Brother Govmunt inyourfacense . "My profits don't git made with none of this socialized intravensions" 

:whistling2:  :blink:


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## CApainter

I was talking with a sub contractor employee yesterday. Yes, I worked a ten hour Saturday making certain that at least a third of my income goes towards government social programs, and towards food, shelter, clothing, education, and federally funded body building programs for our imprisoned terrorists. But I digress.

This worker spoke very good English as a second language, and informed me of the potential out there to start your own business in construction, landscaping, and handyman work. He described several people he knew making over $150K and more a year, without going through the hassles of WC insurance. He could have been pulling my leg for all I know. But it really made me think about competing as a contractor. I am really considering starting a business in retirement, but the playing field seems to be getting more and more un-level as the population of undocumented workers increases, and the ability to work below board becomes the norm.

And with the economy improving, contracting seems to be the place to be.


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## straight_lines

CApainter said:


> I can only imagine the blow hard owner and his blow hard wife running around in their fat Cadillac Escalade getting over on the system. Maybe if they kept their fat egos in check, they'd still be running a business.


Look at the dates, its the height of the housing collapse. Poor soul just couldn't walk away from his business when it was time and got creative to stay afloat. 

This fine is ridiculous, its more than a certain CIA director got for giving away classified documents. Which is about half of what he would get for giving a speech.


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## Gough

straight_lines said:


> Look at the dates, its the height of the housing collapse. Poor soul just couldn't walk away from his business when it was time and got creative to stay afloat.
> 
> This fine is ridiculous, its more than a certain CIA director got for giving away classified documents. Which is about half of what he would get for giving a speech.


I would think there might be some"creative" alternatives that aren't also illegal.

Strictly speaking, only $102 K was penalties, the rest was for back premiums and interest.


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## Oden

straight_lines said:


> Look at the dates, its the height of the housing collapse. Poor soul just couldn't walk away from his business when it was time and got creative to stay afloat. This fine is ridiculous, its more than a certain CIA director got for giving away classified documents. Which is about half of what he would get for giving a speech.





Gough said:


> I would think there might be some"creative" alternatives that aren't also illegal. Strictly speaking, only $102 K was penalties, the rest was for back premiums and interest.


Sorry. But IMHO straight lines is missing the point, all the projects cited, we're going to be done. With or without this d bag.
He in essence stole the money, and he stole it from legitimate businessmen. Them legitimate businessmen need protection.
He's a shim a ham, a con. A thief is what he is. The shortcoming on his penalties is it doesn't involve jail time, he'll reincarnate.
Them swindlers, both big and small, fines are just a calculated risk of doing business.


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## daArch

I'm wondering, was he simply forced to find a creative way of keeping his family clothed and fed (barely), or was he profiteering at the expense of those who were trying to make an honest living ????

I guess that perception all depends on one's business model.


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## straight_lines

Oden said:


> Sorry. But IMHO straight lines is missing the point, all the projects cited, we're going to be done. With or without this d bag.
> He in essence stole the money, and he stole it from legitimate businessmen. Them legitimate businessmen need protection.
> He's a shim a ham, a con. A thief is what he is. The shortcoming on his penalties is it doesn't involve jail time, he'll reincarnate.
> Them swindlers, both big and small, fines are just a calculated risk of doing business.


I have heard you post many times about getting away with one coat where two were spec'ed and your boss was under contract to do two coats. That is technically defrauding a client. Its really easy to point the finger so be careful with the condemnation. There are legitimate outfits that won't cut every corner possible to make more money like only doing one coat. I suspect your eagerness to jump on him has something to do with the union being the ones who got him caught. 

This was also seven years ago, no one is getting these lost jobs back. 



daArch said:


> I'm wondering, was he simply forced to find a creative way of keeping his family clothed and fed (barely), or was he profiteering at the expense of those who were trying to make an honest living ????
> 
> I guess that perception all depends on one's business model.


I don't know what it was like in Washington state during those years but here in NC there was very little money to be made in any construction trade. Profits were very slim if there at all, many that stayed in business did so just barely breaking even. 

I am not condoning what they did, just putting it in perspective. They cheated on their insurance reports that's it. I think employee misclassification is a much bigger and more harmful practice that should be getting more attention.​


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## daArch

straight_lines said:


> I have heard you post many times about getting away with one coat where two were spec'ed and your boss was under contract to do two coats. That is technically defrauding a client. Its really easy to point the finger so be careful with the condemnation. There are legitimate outfits that won't cut every corner possible to make more money like only doing one coat. I suspect your eagerness to jump on him has something to do with the union being the ones who got him caught.
> 
> This was also seven years ago, no one is getting these lost jobs back.
> 
> 
> 
> I don't know what it was like in Washington state during those years but here in NC there was very little money to be made in any construction trade. Profits were very slim if there at all, many that stayed in business did so just barely breaking even.
> 
> I am not condoning what they did, just putting it in perspective. They cheated on their insurance reports that's it. I think employee misclassification is a much bigger and more harmful practice that should be getting more attention.


I don't know about Washington either, that's a continent away. 

But please do not be so cavalier as to dismiss it as jiust "cheating on their insurance reports". They essentially stole from the insurance pool, cheated their workers out of protection, gave themselves an unfair bidding advantage and denied their brethern the chance to compete honorably. 

And I agree, employee misclassification is a large and harmful practice, which exactly this was. 

As we run our professional businesses we should keep in perspective what it means to be truly professional. Part of that is not dismissing, excusing, nor defending those that run theirs dishonestly least it gives the appearance that's how we do it.


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## Oden

Since when is tough times a excuse to steal? Lol
WTF lol


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## daArch

Oden said:


> Since when is tough times a excuse to steal? Lol
> WTF lol


I think since the beginning of time that rationale has been too pervasive amongst self proclaimed victims of society.


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## CApainter

Everyone has the opportunity to circumvent laws and standards. Big Deal. But when did it become vogue to embrace those who get caught and convicted for their deception? 


In my opinion, when a God fearing society removes the stigma for doing wrong things, it loses sight of its conscientousness, along with its integrity.

I would expect ridicule and judgement if I did something I knew was wrong. These people knew what they were doing. Unfortunately, like so many in this consumer age of gluttony, their greed and appetite gave them a false sense of immunity. Period.


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## straight_lines

My initial response was to you and taken completely out of context. You and Oden seemed to imply this guy was a big shot who cheated to live a lavish lifestyle.

This didn't seem the case to me and I imagined a desperate contractor clinging to his business when the smart thing to do would have been to close shop and let all his employees go on UE. 

I had to do just that around the time I joined paint talk, and for several years lived not knowing if I would have work week to week. Never able to put together a consistent full time job for myself.

It was cheating on insurance reporting. You guys can make it out to be something more but the reality is that is *all *it was. Like I said the 1099 dodge hurts contractors more than any other practice and nothing is being done about it.


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## CApainter

straight_lines said:


> My initial response was to you and taken completely out of context. You and Oden seemed to imply this guy was a big shot who cheated to live a lavish lifestyle.
> 
> This didn't seem the case to me and I imagined a desperate contractor clinging to his business when the smart thing to do would have been to close shop and let all his employees go on UE.
> 
> I had to do just that around the time I joined paint talk, and for several years lived not knowing if I would have work week to week. Never able to put together a consistent full time job for myself.
> 
> It was cheating on insurance reporting. You guys can make it out to be something more but the reality is that is *all *it was. Like I said the 1099 dodge hurts contractors more than any other practice and nothing is being done about it.


I guess it comes down to choices and risks. And that's probably why I didn't choose to be a contractor when i could have easily dove in with everyone else.


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## Gough

straight_lines said:


> My initial response was to you and taken completely out of context. You and Oden seemed to imply this guy was a big shot who cheated to live a lavish lifestyle.
> 
> This didn't seem the case to me and I imagined a desperate contractor clinging to his business when the smart thing to do would have been to close shop and let all his employees go on UE.
> 
> I had to do just that around the time I joined paint talk, and for several years lived not knowing if I would have work week to week. Never able to put together a consistent full time job for myself.
> 
> It was cheating on insurance reporting. You guys can make it out to be something more but the reality is that is *all *it was. Like I said the 1099 dodge hurts contractors more than any other practice and nothing is being done about it.


It really is just another twist on misclassifying employees. Where the Subcontractor Dodge calls them "subs", this version calls them "owners". 

Something not mentioned: many of the projects done during the period would have been Little Davis-Bacon jobs. We worked on those with small firms where the 2-3 guys were actually legitimate owners, which frees them from the prevailing-wage issue. This guy thought he was being clever, but the Industrial Commission thought otherwise.


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## Oden

straight_lines said:


> My initial response was to you and taken completely out of context. You and Oden seemed to imply this guy was a big shot who cheated to live a lavish lifestyle. This didn't seem the case to me and I imagined a desperate contractor clinging to his business when the smart thing to do would have been to close shop and let all his employees go on UE. I had to do just that around the time I joined paint talk, and for several years lived not knowing if I would have work week to week. Never able to put together a consistent full time job for myself. It was cheating on insurance reporting. You guys can make it out to be something more but the reality is that is all it was. Like I said the 1099 dodge hurts contractors more than any other practice and nothing is being done about it.


Different life experiences dictate our view of a guy. Who may as well be a fictional charaxhter. We read the story and he is somebody we know. His face, mannerisms and everything. We know that guy! Lol

Eeeh whoever or whatever he is, he got caught with his hand in the cookie jar. Or his pants down. Whichever way you see him.
And he'll appeal and his jeopardy will get reduced, probably greatly. And he will likely not pay pennies on the dollar of what is left. Either xharaxhter we see. He'll be fine. Right where he started. Grinding away trying to get out from under. Or shim shamming his way along. Best wishes to him whatever he is.


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## daArch

Oden said:


> Different life experiences dictate our view of a guy. Who may as well be a fictional charaxhter. We read the story and he is somebody we know. His face, mannerisms and everything. We know that guy! Lol
> 
> Eeeh whoever or whatever he is, he got caught with his hand in the cookie jar. Or his pants down. Whichever way you see him.
> And he'll appeal and his jeopardy will get reduced, probably greatly. And he will likely not pay pennies on the dollar of what is left. Either xharaxhter we see. He'll be fine. Right where he started. Grinding away trying to get out from under. Or shim shamming his way along. Best wishes to him whatever he is.


Ironic fact being that legal fees will more than exceed whatever fines he MIGHT get reduced.

And WHY do many get the feeling this guy and his wife weren't scraping the barrel to eek out a living being "forced" do to this to keep the candles lit in their double wide?


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## Gough

CApainter said:


> I can only imagine the blow hard owner and his blow hard wife running around in their fat Cadillac Escalade getting over on the system. Maybe if they kept their fat egos in check, they'd still be running a business.


From the looks of his house and "grounds", this looks closer to the truth.


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## DunriteNJ

Workmans comp IMO is the biggest scam out there

In NJ my rate is $13 and change per Hundred for painting/drywall

Im exempt as the owner

I have a large restoration company who subs me lots of work for interior rebuilds-drywall,flooring,paint, etc

Some of these jobs, depending how busy i am, i sub out to another contractor

So on any one of these jobs there are 3 contractors involved all required to carry WC for the same 1 job!

Ridiculous!

I could go on and on


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## Wildbill7145

DunriteNJ said:


> Workmans comp IMO is the biggest scam out there
> 
> In NJ my rate is $13 and change per Hundred for painting/drywall
> 
> Im exempt as the owner
> 
> I have a large restoration company who subs me lots of work for interior rebuilds-drywall,flooring,paint, etc
> 
> Some of these jobs, depending how busy i am, i sub out to another contractor
> 
> So on any one of these jobs there are 3 contractors involved all required to carry WC for the same 1 job!
> 
> Ridiculous!
> 
> I could go on and on


Wow, you're paying almost double what we pay here in Ontario, Canada. WSIB says that if you're working for contractors/businesses you're required to have coverage, but if you're working for home owners you're not. This supposedly is intended to get rid of the underground cash economy. I have never worked for a business/contractor who didn't want an invoice or ever paid me in cash. Homeowners.... Not so much.


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## Gough

DunriteNJ said:


> Workmans comp IMO is the biggest scam out there
> 
> In NJ my rate is $13 and change per Hundred for painting/drywall
> 
> Im exempt as the owner
> 
> I have a large restoration company who subs me lots of work for interior rebuilds-drywall,flooring,paint, etc
> 
> Some of these jobs, depending how busy i am, i sub out to another contractor
> 
> So on any one of these jobs there are 3 contractors involved all required to carry WC for the same 1 job!
> 
> Ridiculous!
> 
> I could go on and on


The WC is for the employees, not the job and it's based on payroll. The GC's who hire us don't have to pay WC on us. If we hire another legitimate outfit (one with WC), we don't have to pay GC for them.

With the prevalence of the Subcontractor Dodge, insurance auditors are taking a hard look at companies that hire a passel of OMSs, knowing full well that a lot of them won't pass the ABC test.


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## DunriteNJ

Gough said:


> *The WC is for the employees, not the job and it's based on payroll.* The GC's who hire us don't have to pay WC on us. If we hire another legitimate outfit (one with WC), we don't have to pay GC for them.
> 
> With the prevalence of the Subcontractor Dodge, insurance auditors are taking a hard look at companies that hire a passel of OMSs, knowing full well that a lot of them won't pass the ABC test.


I understand that

However, if you look at the way i explained it its ridiculous

Too many layers


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## Gough

DunriteNJ said:


> I understand that
> 
> However, if you look at the way i explained it its ridiculous
> 
> Too many layers


??? Each outfit pays for its own employees. You're responsible for your crew. That's part of the whole "independent contractor" thing.

How else would you have it?


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## DunriteNJ

In that scenario im not working the job im subbing it

Im still required to having WC exposure for that job


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## slinger58

DunriteNJ said:


> In that scenario im not working the job im subbing it
> 
> Im still required to having WC exposure for that job


Does your sub carry WC?


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## Gough

DunriteNJ said:


> In that scenario im not working the job im subbing it
> 
> Im still required to having WC exposure for that job


That's because the "subs" that you've hired are probably considered employees by NJ employment law.


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## rebaccaliare

Employees get benefits based on the type and severity of their injuries. Workers can get compensation on Burial, Death, Medical, and income benefits.


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## straight_lines

Gough said:


> That's because the "subs" that you've hired are probably considered employees by NJ employment law.


It doesn't matter who it is if they don't have their own comp insurance you will be paying for it. 

Say I am painting a house that needs new gutters, I call my buddy who has a gutter machine and does a few jobs a month. If he doesn't have comp I have to pay it for him. I always wondered what it would pay I am not covered for gutter installation.


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## Gough

straight_lines said:


> It doesn't matter who it is if they don't have their own comp insurance you will be paying for it.
> 
> Say I am painting a house that needs new gutters, I call my buddy who has a gutter machine and does a few jobs a month. If he doesn't have comp I have to pay it for him. I always wondered what it would pay I am not covered for gutter installation.


Yeah, the problem arises when guys hire OMSs as "subs". Especially if the "subs" are engaged in the same trade. That runs afoul of the ABC rule.

We deal with that second problem by carrying WC for two classifications: painting and carpentry/general labor. We'd put the gutter man in the second.


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## straight_lines

Gough said:


> Yeah, the problem arises when guys hire OMSs as "subs". Especially if the "subs" are engaged in the same trade. That runs afoul of the ABC rule.
> 
> We deal with that second problem by carrying WC for two classifications: painting and carpentry/general labor. We'd put the gutter man in the second.


I understand that and they should have to pay comp, they are already cheating on taxes in that case. The part I don't like is if my painters are what I am insured for then that's all I should have to pay for. 

Not the plumber, HVAC, electrician or anybody else I may hire to do a job. Its a shakedown that says if we are insuring your painters everyone you write a check to is considered a liability. I have two separate companies for this reason. I learned that the hard way the first year when I did 150k in remodeling under my paint company.


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## Gough

straight_lines said:


> I understand that and they should have to pay comp, they are already cheating on taxes in that case. The part I don't like is if my painters are what I am insured for then that's all I should have to pay for.
> 
> Not the plumber, HVAC, electrician or anybody else I may hire to do a job. Its a shakedown that says if we are insuring your painters everyone you write a check to is considered a liability. I have two separate companies for this reason. I learned that the hard way the first year when I did 150k in remodeling under my paint company.


Don't those other trades past the ABC test? Or does NC take a different approach? During our WC audits, they request the Certificates of Insurance for any and all subs...no CI is what gets us dinged.


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## straight_lines

Gough said:


> Don't those other trades past the ABC test? Or does NC take a different approach? During our WC audits, they request the Certificates of Insurance for any and all subs...no CI is what gets us dinged.


 There is no law requiring WC here in NC. Not much at all in the way of business regulation. Plumbers and electricians are licensed and the HVAC test is about six questions. 

We can do any project under 30k without a contractors license. Many including me work on lots of projects over that amount, there is no regulatory body that enforces that. It basically means if there were a contract dispute I wouldn't have any legal recourse for getting paid.


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## Hines Painting

straight_lines said:


> There is no law requiring WC here in NC. Not much at all in the way of business regulation. Plumbers and electricians are licensed and the HVAC test is about six questions.
> 
> We can do any project under 30k without a contractors license. Many including me work on lots of projects over that amount, there is no regulatory body that enforces that. It basically means if there were a contract dispute I wouldn't have any legal recourse for getting paid.


Ya, California is pretty lax like that as well. Any project that is less than $500 is fair game :yes:

I'm not sure what actually happens if you get caught though.


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## Gough

straight_lines said:


> There is no law requiring WC here in NC. Not much at all in the way of business regulation. Plumbers and electricians are licensed and the HVAC test is about six questions.
> 
> We can do any project under 30k without a contractors license. Many including me work on lots of projects over that amount, there is no regulatory body that enforces that. It basically means if there were a contract dispute I wouldn't have any legal recourse for getting paid.


The interesting twist to the WC law in North Carolina is that you're only required to have it if you have three or more employees. That seems like an open invitation to use the Subcontractor Dodge. There are certain exceptions to the 3-person rule, and one of them is in construction. Here's a screenshot of the NC Industrial Commission PP on the topic.










That indicates that having CIs from your subs frees you of WC liability.


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## Picky_Painter

In NYS its $6500 per employee up to employee 5.

Doesnt matter if he works 40 hours or 2,000 hours, its over $6,000.

If Paychex or ADP tell you different either they are lying, or more likely, ignorant.


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## Wildbill7145

So, here in Ontario we have WSIB. Every quarter you have to report your earnings to the government, then pay your percentage. It's mandatory, regardless of whether you have private insurance. Mandatory if you want to work for businesses or contractors.

Every now and again, contractors check online to see if you are 'eligible for clearance' which means you're up to date with WSIB.

They push you pretty hard to do all this stuff online. Understandable.

Last month I did the reporting online, paid my % a week early. Yesterday I get a call from a contractor saying he checked and I'm not eligible and I have to get this sorted out before I come back to his job.

I call WSIB. Explain that I reported and paid. They say they got the money, but not the report. They say they didn't know what the money I paid them was for. I ask if they thought I was sending them money for their staff party? I give them the exact date and time of when I reported online. They say 'must have been a glitch in the system' and will fix the situation.

I ask them why they couldn't just call me, send an email, letter, etc. asking me to file my report (which I already had) rather than just make me ineligible, which could result in losing work or an entire job for that matter.

"Your glitch could have cost me hundreds, if not thousands of dollars." Her response, "Sorry for the inconvenience."

I love dealing with the government.


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## jason123

I usually get an email when I become ineligible, that part I find very useful.

I have never reported on line I always report over the phone, mainly because I don't want to mess up the reporting.

I then pay online through the wsib site that way it goes through automatically. I also get my clearance certificate online it's instant.


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## Wildbill7145

jason123 said:


> I usually get an email when I become ineligible, that part I find very useful.
> 
> I have never reported on line I always report over the phone, mainly because I don't want to mess up the reporting.
> 
> I then pay online through the wsib site that way it goes through automatically. I also get my clearance certificate online it's instant.


I should start doing things exactly the same way you are just to make sure things are happening when they should be.

A plumber and I were talking about wsib the other day. He was saying he was thinking of cancelling the coverage when he knows he's going to be doing long periods of time just working for homeowners, then reactivating when he's doing jobs for GCs. I suggested he'd save some money, but would have no coverage when working for the homeowners.

He wasn't exactly worried about it, and further more suggested that he didn't think we were covered working for homeowners unless we got each and every one to pull certificates for us the way GCs do. I've never heard such a thing and I can't see every homeowner contacting WSIB when they want me to paint their living room or a door.


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## Picky_Painter

I didnt read all this.

in NYS its a base rate payroll of $25,000 a year. thats the base payroll your WC is based on.

Construction maintenance, landscaping, ect... if Paychex or ADP tell you different they are either ignorant or are lying to you.

after $25,000 a year base payroll, its based on $15 per $100 in payroll.

Base premium for 1 guy is $6,000 a year for WC ONLY

Now ask your self why no company under $1,000,000 in sales has NO ONE on the books.


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## SunHouseProperties

Im working from Vancouver BC Canada and I only carry Liability if the customer requests it or If I feel the risk of smashing something over a certain amount is high. For instance Strata or Manager Caretakers always want me to have liability. High end homes with cars around and expensive art or such YEAH I may get Liability. Inquire the cost of 2 million dollars liability then ask the agent the steps of cancelling it AND the time and cost to reinstate the liability. IF your lucky then YOU can carry it when its needed and cancel it when its not needed THEN reinstate when its needed again SO as to not pay unnecessary monthly premiums (200$/mth for 2 million liability here) HOPE that helps!!


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