Accidents Do Happen - Workers Comp Has Got You Covered

By Darin Burt
Written for Professional Program Insurance Brokerage
As seen in PAIN Magazine April 2016


Though you want the best for your employees, unfortunately, accidents do happen. That's where Workers Comp comes into play.

Every state (except for Texas) requires that employers carry workers' compensation insurance for their employees. Workers' compensation laws cover only work-related injury or illness. But, the injury or illness does not necessarily have to occur in the workplace. As long as it's job-related, it's covered. For example, your employees are covered if they are injured while traveling on business – such as tattooing at a convention.

Tattoo and piercing studios, like any other licensed business, need workers' compensation insurance coverage for their full and part-time employees. But here's the issue – according to Susan Preston, president of Professional Program Insurance Brokerage (PPIB), a common notion among tattoo business owners is that they don't need to worry about workers' comp coverage because their staff is made up of independent contractors.

But are they really independent? Do require your artists to work set hours? Do they have regular duties around the shop aside from their main job? Do you use the same credit card processing service for payments?

According to the Internal Revenue Service, the facts that provide evidence of the degree of control and independence fall into three categories:

Behavioral: Does the company control or have the right to control the worker as well as how the worker does his or her job? For example, if a company provides training for the worker, this signals an expectation to follow company guidelines and therefore indicates that the worker is likely an employee.

Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how a worker is paid, whether expenses are reimbursed, who provides tools, supplies, etc.).

Type of Relationship: Are there written contracts or employee-type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue, and is the work a key aspect of the business?

“Virtually, if you have any control over an employee, then you are likely to need workers comp for them,” Preston says. “It's very hard to uphold the independent contractor status if the shop owner is setting any of the rules.”

Most states have classification guides online and will help you verify a worker's classification. Failure to carry workers' compensation insurance, or otherwise meet a state's regulations in this regard, can result in fines and penalties should there be a claim.

Susan Etter, underwriting manager with PPIB, recalls one shop in New York, where not carrying coverage is considered a criminal offense, that was slapped with a $10,000 fine right off the bat simply because they had let their coverage lapse. Some states will also hold the uninsured employer responsible for paying all medical and wage benefits that are awarded to injured employees.

“More states are working on legislation that requires tattoo artists and piercers to have liability and professional insurance coverage,” Etter says. “Looking into my crystal ball, as tattoo and piercing businesses become more mainstream, the states are going to start analyzing them more stringently, and not only requiring liability coverage, but looking into the rest of their operation as well.”

Some states do allow businesses to forego workers comp coverage if they have fewer than a designated number of classified employees. Even if you're flying under the radar, and have confirmed that your staff are indeed independent contractors, you can still have a safety net in place by extending workers’ compensation coverage to exempt staff members by attaching a voluntary compensation endorsement to your workers compensation insurance policy.

The standard workers' compensation insurance policy is a unique insurance contract in many respects. Unlike other liability insurance policies, it doesn't have a maximum dollar amount limit to its primary coverage. And that's the biggest benefit - once the policy is in force, the insurance company is responsible for all that employer's claims that arise for workers' compensation benefits in the states covered by the policy.

Preston suggests that providing workers compensation coverage for ALL of your staff members is really a smart way to take care of your work family.

“Twenty years ago, most tattoo shops didn't even bother with basic liability insurance. Nowadays, these are professional businesses, and having proper and adequate insurance coverage, is part of being professional.”