Contractors vs. Employees: Where Does Homeowner Liability Lie?

by CherrellT on June 7, 2012

Hiring people to do work around the house is a smart move. You can choose experienced people to ensure that the completed job is of the highest quality, and you won’t have to work up a sweat doing the heavy labor yourself. However, you must be careful about the legal relationship between you and the workers. One injury could leave you facing serious legal problems, and your homeowner’s insurance may not have you covered.

The Difference Between Employees and Contractors

According to common law, an independent contractor supplies all tools, purchases necessary materials determines how the work will be done and has personal control over working hours. A contractor can be discharged at any time, and they have the freedom to choose whether or not they will accept a job. Responsible for their own taxes, they typically charge a flat fee to cover the desired service. They are also generally responsible for their own insurance to cover injuries on the job.

Employees have taxes withheld from their checks, and they work at the direction of their employer. Most supplies are provided by the employer, as well as insurance protection in case of an injury. They are paid a wage or hourly fee set by the employer, and employers may be responsible for damages caused by an employee.

The Impact on Homeowners

As a homeowner, this difference is vital to you should the worker sustain an injury while on your property or working for you. If an independent contractor breaks his arm while painting the house, then he will have to cover his own injuries. If an employee has the same injury, then you will have to cover those injuries. While your homeowner’s insurance will cover accidents on your property involving friends and family, they will usually only cover an employee if you have insurance for operating a business.

How to Protect Yourself

The best way to protect yourself is to hire independent contractors who are fully insured. Most contractors are proud of their status as licensed, bonded and insured, and they are happy to share that information with you. If the contractor is not insured, or is not willing to provide you with proof of insurance, then you should seek out another contractor.

Avoiding Inadvertent Liability

Hiring an independent contractor is simple, but situations can arise that might cause problems. Loan a roofer your ladder and you could be accepting liability for an employee. Hammer in a few nails to be helpful and they can argue that you were showing them how to do a job and acting as an employer. Help out your housekeeper by paying part of her self-employment taxes and you are creating an employer-employee relationship.

Proper Coverage

Remember that your insurance company will not cover employees without special coverage. If you do decide to hire gardeners, housekeepers or nannies, you should make sure your company knows about the situation. Your rates may go up slightly to have the coverage, but it is necessary to protect your assets in the long run.

Independent contractors offer many valuable services, but you should make sure that you are protected by looking for certain qualities. In addition to experience, choose one that is fully licensed and willing to provide you with policy information. They should have all of their own equipment, and they should not request assistance from you with any part of the job. Avoid gray areas and potential liability by maintaining a clear contractor-client relationship.

Jerry Edgars is a financial consultant and often recommends getting a cheap car insurance premium by using online insurance quotes. He also suggests their home and travel products when you are in need of a policy.

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