Every state in America has a worker's compensation law. Although these laws are, in fact, state laws and as such, will vary from state to state, their purpose, intent and content are all very similar.

The purpose of worker's compensation laws are, as stated by one court, "to make reasonable compensation for injuries sustained or death incurred by reason of such employment a part of the expense of the lines of business included within the definition of hazardous employments and ultimately to require such compensation to be paid by the consumer."

These laws provide an employee is entitled to compensation if the employee's injury or death arises, "out of, and in the course of the employment." Worker's compensation benefits have been referred to as no-fault benefits. This is because an injured or disabled employee is entitled to receive such benefits regardless of whether he or the employer was negligent in causing the injury. The main exception would be if the injury was caused by the employee's willful intent to self inflict injury or to injure another. Generally speaking, an accident which occurs during the course of employment is presumed to arise out of employment and so would be covered under these laws. To avoid questions in this area, many state laws provide that certain presumptions shall be made to benefit the injured employee.

For example, New York law states, "it shall be presumed, in the absence of substantial evidence to the contrary: the claim comes within the provision of this chapter; sufficient notice thereof was given; the injury was not occasioned by the willful intention of the injured employee to bring about the injury or death of himself or of another; the injury did not result solely from the intoxication of the injured employee while on duty, and the contents of medical and surgical reports introduced in evidence by claimants for compensation shall constitute prima facie evidence of fact as to the matter contained therein."

These presumptions are intended to aid the employee in obtaining benefits and the employer or the insurance carrier would be required to produce substantial proof to rebut these presumptions.

In the worker's compensation laws, employers are, for the most part, required to carry worker's compensation insurance to provide for the benefits to the injured employee.

One question which often arises in this context within the floor covering industry is the definition of employee as opposed to the definition of subcontractor, and whether or not coverage must be provided to individuals defined as such. This is important because insurance companies will attempt to collect premiums for all whom they consider to be employees. On the other hand, the employer will attempt to avoid paying premiums for certain individuals because they are subcontractors.

The issue of whether a particular installer is an employee or a subcontractor is a factual one to be determined under the facts and circumstances of the relationship between the parties. The main issue is one of control and a judge will look at more or less the same factors that the International Revenue Service (IRS) uses in its determinations.

Most of these disputes arise after the insurance company does an audit of the payroll records of the flooring contractor and assesses him premium charges for all installers listed on those records who did not have their own worker's compensation certificates. It does not usually consider whether or not the employer claims they are independent contractors.

Under their policy agreement with the employer, they are required to provide benefits to all those to whom the employer is responsible. The insurance company takes this to mean everyone on the payroll who does not otherwise have insurance, and leaves it to the employer to rebut its presumption.

As we noted above, these laws provide that compensation must be provided for all employees. Thus, it would appear no coverage would be required for an independent subcontractor. The New York law with regard to subcontractors does, in fact, make the employer liable for benefits to subcontractors who do not have their own insurance, with certain very important exceptions.

These exceptions provide that the employer/contractor is not responsible for benefits to an injured subcontractor if he is self-employed, a partner of a partnership or if he is one of no more that two executive officers of a corporation who, between them, own all the shares of stock of the subcontracting corporation and hold all of the offices.

It is important to note here that injuries to the employees of the subcontracting self-employed person, the partnership or the two-principal corporation are, in fact, the responsibility of the contractor/employer if the subcontractor himself does not have worker's compensation insurance.