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Farm Worker’s Compensation

In the state of Pennsylvania, Worker’s Compensation is a requirement. Any employers who do not stay in compliance face the possibility of significant fines and even jail time. Worker’s Compensation laws can seem overwhelming and reliable educational resources can be difficult to locate. Farm Worker’s Compensation provides an additional challenge because of the complexity of farm operations, and the regular use of independent contractors.

Common Challenges for Farm Worker’s Compensation

Some Carriers have Ineligible Classes

Although there are some benefits of a Monoline Worker’s Compensation insurance policy, very few companies will write Farm Worker’s Compensation on a Monoline basis. What this means is that most farm insurance companies will require Farm Worker’s Compensation to be written in conjunction with a property policy like a Farmowners Insurance product. Some carriers will have ineligible classes of business that they will not write Farm Worker’s Compensation for. High-risk classes, like an Orchard class, can be harder to place because of the higher potential for losses.

Some Carriers Have Minimum Policy Premiums

In addition to having specific eligible classes, some carriers will only write Worker’s Compensation policies of a certain premium size. Minimum policy premiums may be $2,500 or $5,000 or more. Farm employers with small payroll may still have dangerous loss exposures within their operations, which increases the possibility of large shock losses. Likewise, even small claims can soon make a small premium policy unprofitable to insure.

Some Carriers Don’t Offer Farm Worker’s Compensation at All

Smaller operations may have fewer loss controls in place or less risk management practices. For these reasons, some smaller Farm Worker’s Compensation accounts can become harder to place than larger accounts. Regardless of the policy size, farmers needing Worker’s Compensation insurance will reduce their carrier options by about half. Many farm insurance companies do not provide Worker’s Compensation insurance coverage at all, leaving agents with a scarce few options for monoline coverage.

Ruhl Insurance has multiple carrier options to help you realize the value of your Worker’s Compensation policy. Coupling the Farm Worker’s Compensation insurance with a property policy can lead to significant premium savings over Monoline carriers and having multiple options allows you to tailor your insurance package to meet all your needs for Property, Liability, Auto, and Worker’s Compensation.

Independent Contractors

As a farmer or agricultural employer, you may be in need of a Worker’s Compensation policy and not even know it. In some situations, farmers who employ independent contractors inadvertently create an employer/employee relationship by the way they compensate the IC or how the job they are hired for is contracted.

Independent Contractors Need to Have Coverage for Their Workers

In addition, farmers hiring independent contractors with employees can be held liable for work-related injuries to those employees if they fail to verify that the IC has coverage for their workers. Many farmers consider their workers as independent contractors because they pay them with a Form 1099.

The Employer/Employee Relationship Determines the Need for Worker’s Comp

Worker’s Compensation looks at the employer/employee relationship rather than the way your payroll is distributed. A true independent contractor sets their own hours, is paid by the contracted job, not by the hour, realizes financial gain OR loss as a result of the contract, and uses their own tools, among several other criteria.

Employee Relationship

If a farmer tells the independent contractor when to be at work, and the independent contractor makes $15/hour regardless of how long his job takes, the relationship indicates that of an employee rather than an independent contractor. If the independent contractor were to be injured within the course of employment, the farmer could be found liable to pay wage loss and medical bills.

Independent Contractor Relationship

If the farmer hires an independent contractor to paint the side of the barn for $1,500, and the contractor will use his own tools, come and go as he pleases, and receive $1,500 regardless of the time it takes to do the job, a bona fide independent contractor situation likely exists. The farmer will still need to verify that the independent contractor has Worker’s Compensation insurance if they have employees working for them.

Coverage Provided by Farm Worker’s Compensation

As with any Worker’s Compensation Policy, Farm Worker’s Compensation Insurance will pay medical bills and wage loss to an employee who sustains an injury within the scope of employment. Specific loss is also paid to employees suffering the loss of an extremity or a disfigurement.

Worker’s Comp Provides Common Law Defenses to Employers

Employers who comply with Worker’s Compensation mandates are afforded certain common law defenses. Employees working for employers with Worker’s Compensation insurance, simply by their employment, agree to Worker’s Compensation being the sole remedy they may seek for injuries. Even if the employer was in the wrong, and it led to a work-related injury, Worker’s Compensation insurance will only pay for the injured employee’s medical bills and wage loss.

Failure to Secure Worker’s Comp Also Fails to Secure Common Law Defenses

It is important to note that employers who fail to secure Worker’s Compensation insurance for their workers also give up the common law defenses and employees injured in the scope of employment may seek non-economic damages like pain and suffering claims. If the farmer or employer does not have Worker’s Compensation insurance, he will also have no insurer-provided legal defense and the cost of a defense attorney will lie solely on him.

Additional Penalties Can be Levied for Failure to Provide Worker’s Comp

Because worker’s compensation is designed, by law, to be compensatory in nature, courts will typically side with the injured worker (unless fraud can be proven), leaving a hefty bill at the feet of an uninsured employer. Penalties of $2,500 and up to 1 year in prison can be assessed for each occurrence, on top of any employee claims the employer is ordered to pay. In some cases, each day an employer does not carry Worker’s Compensation could be assessed as a separate occurrence.

Comprehensive Worker’s Comp Provides More Resources to Reduce Claims

Other benefits a comprehensive Worker’s Compensation insurance program can provide to farm employers is that insurers can help employers institute back-to-work programs which keep claim volume lower and allow the employee to return to their position in either a lesser capacity or return to a different job which they are cleared to perform. In addition to this benefit, some insurers will provide doctor panels to their insureds.

Ask your agent about the extra programs your insurer may have in place for Worker’s Compensation. Loss control and safety seminars may also be provided by the insurance company as a way to keep claims costs lower. Employers implementing regular safety meetings may see premium reductions, and avoiding losses will positively affect modification factors and provide additional credit to the policy.

Agricultural Employee Exemption

Many farmers incorrectly assume that agricultural employers are exempt from Worker’s Compensation laws.

Agricultural Exemption is Not Expansive

Although an agricultural exemption does apply in the state of Pennsylvania, it is not expansive. A farmer employing a worker for more than 30 days in a calendar year is required to carry a Worker’s Compensation policy for all workers. Likewise, a farmer paying a worker more than $1,200 in wages in any one calendar year is also required to carry Worker’s Compensation.

Most Farm Operations Do Not Fit the Exemption

The worker’s compensation manual for the State of Pennsylvania states this exclusion applies to farmers with one worker falling within the maximum work day and compensation thresholds.  For this reason, typically the only farmers fitting the exemption are smaller farms who employ seasonal labor around harvest time, or an occasional laborer like a relief milker.

For these farmers, coverage in the form of Farm Employer’s Liability is available. Farm Employer’s Liability is not a substitute for Worker’s Compensation, and an injured employee must prove that it was the farmer’s negligence that caused their injury in order to collect a payment under this coverage.

Because of the complexity of Worker’s Compensation and the laws surrounding it, it is important to discuss your options with a Ruhl Insurance agent.

Frequently Asked Questions

  • I pay my employees with a 1099, why do I need Worker’s Compensation?

    The key word here is employees; the fact that you pay workers on a 1099 doesn’t automatically exclude you from Worker’s Compensation mandates. Whether or not you are required to carry Worker’s Compensation depends on if you have established an employer/employee relationship.

    Paying workers by the hour instead of by the job, workers having no risk of financial loss within the performance of a job, dictating a worker’s hours or their coming and going, or a worker using your equipment to perform the work all are situations that define an employee, not an independent contractor.

  • How long will my injured employee receive benefits?

    In certain situations, wage loss benefits are payable for over 9 years, and medical bills are potentially payable for life. In some scenarios, workers may be able to return to work in a limited capacity which can help reduce claims.

  • I believe my employee got hurt over the weekend, but is saying it happened at work to receive compensation, what can I do?

    All insurance companies have numbers to report fraud. Your insurance company may, or may not, choose to investigate the claim. It is believed that as more people are required to get health insurance through the Affordable Care Act, less Worker’s Compensation fraud will occur.

  • How is my Worker’s Compensation premium calculated?

    Your Worker’s Compensation premium is calculated based on your annual payroll. You will pay a certain dollar amount per $100 of remuneration. Each compensation class will have its own rate that is adjusted off the state’s base rate considering insurer loss experience for that particular classification. So, an employer with a class rate of $5.00 and a payroll of $100,000 would pay $5,000 in premium (before modification factors, employer assessment, and other fees are added) ($5.00 X 1,000 hundreds=$5,000).

  • My mod factor is 1.0, is that good?

    If your mod is 1.0, you aren’t paying a surcharge but you aren’t receiving any credits either. If the lowest mod you may realize for your classification is .75, you are potentially leaving a 25% credit on the board. Working with your agent and/or your insurance provider and implementing safety committees and best practices can hopefully decrease your claim volume and help you realize the maximum credits available to your class of business.

  • I just started my business and I need Worker’s Compensation, what are my options?

    Unfortunately, many insurers are reluctant to write Worker’s Compensation for new startups because there is no prior history to base claims potential on. Usually, but not always, the options for new employers are limited to the State Worker’s Insurance Fund.

    SWIF rates are typically higher than many private insurers, however, it may be the only option in order to stay in compliance. Once the employer has a year of experience, private insurer options usually open up and their Worker’s Compensation coverage can be placed elsewhere.