Insurance Insights ~ July 1997

Subcontractors vs. Employees

We welcome summer with this edition of our monthly electronic newsletter. Many of us take advantage of this time of year to kick back and enjoy some well deserved time off. Unfortunately, there are others who don't have that luxury. We're referring to the contractors. This is the time of year when they are shifting into high gear, working from sun up to sun down. With the increase in hours and their overwhelming workload, all too often contractors are looking for hired help. Therefore, we thought it would be an appropriate time to address the issue of subcontractor vs. employee.

An independent contractor (often referred to as a "sub" or "subcontractor") is not an employee. He or she represents the principal only as to the results to be accomplished and is not subject to the control of the principal as to the method and means of doing the work. The independent contractor determines the hours of work, directs and controls the work, and may employ assistants when necessary. The principal only sets the specifications for the work to be done, and may require a completion date. Therefore, the right of control is the principal consideration in determining whether the contractor is an independent contractor or an employee.

The increase in the use of independent contractors over the last 10 years is due in large part to the costs related to employees. Health benefits and worker's compensation are at the top of that list. The use of independent contractors may seem like a rather clever way to "work the system," but the reality is that the practice can create a variety of very substantial risks for the business owners. Consider these issues:

1. Courts look beyond the language of independent contractor agreements. The test is applied to whether the individual is truly "independent" and if the relationship identified, matches the form.
2. If an investigation by federal or state enforcement agencies find that "independent contractors" are actually employees, not only the corporation, but also top management and key employees may all be liable for back wages, payroll taxes and/or penalties.
3. Independent contractors are typically less loyal than employees, since they have less at stake in the success of the business. Employee benefits are costly but also provide an incentive for people to remain with the company.
4. Savings in worker's compensation premiums achieved by using "independent contractors" may well be offset by increased liability exposures created when statutory limits under worker's compensation are lost when an individual is no longer an employee. An independent contractor can sue the company on the same basis as any other member of the public with an actionable claim. In addition, there is an increase in the exposure of additional audited premium being imposed if the "independent contractor" proves to actually be an employee.

Obviously, taking these issues into consideration, the use of independent contractors has to be carefully approached and if you choose to enter into such an agreement, the relationship must be administered with caution.

What may at first glance appear to be a useful, effective, cost control mechanism, may turn out to be a high risk employment practice with potentially stiff penalites. We encourage you to contact one of our professional staff to discuss your options and offer further information on this subject. You may contact us via e-mail at info@gcwinsure.com or by phoning (215) 257-9171.

Summer Car Care

With snow and rain taking its toll, summer is the best time to spruce up your vehicle inside and out. Here are some tips to get your car in tip-top shape:

• Clean floor mats improve the image of a car's interior. This area is likely to have alot of mud and salt build-up. Use a vacuum to remove as much dirt as possible. Use cleaners available in the automotive section of retail shops designed for cleaning this area.
• Check your carpets for colorfastness before applying a cleaner. Don't saturate your carpet as it may mildew.
• Household glass cleaners are great for your car's windows. Be careful not to use one containing ammonia. This can cloud and distort some glass installed with an after-factory tint.
• Eliminate tar and bug residue with tar remover.
• Spray tire cleaner in the wheel wells, and then hose down thoroughly.
• Oxidation is the hazy white tinge that results from the sun's damaging rays. A good polish will help remove the oxidation and prepares the car's surface for waxing and sealing.
• Waxing your car protects it from the fading effects of ultraviolet rays, and also prevents airborne contaminants and acid rain from imbedding in the finish and permanently etching it. Make sure the temperature is above 50 degrees fahrenheit, and wax your car in the shade.

What a wonderful way to spend a sunny summer afternoon. Now's the time to take a few minutes to kick back with a refreshing beverage and admire all your hard work!

Anti-lock Brakes

Anti-lock brakes (ABS) are designed to automatically detect wheel slippage when braking occurs in slick conditions. When the tires begin to slide, sensors alert the ABS microprocessor, which applies the brakes with a series of pulsations, yet allowing the wheels to turn. You do not need to, nor should you, pump the brakes.

How do you properly use ABS?

• Step on it. Always apply anti-lock brakes consistently and firmly. Never pump ABS brakes.
• Don't let up when you feel the pulsating effect. The brakes are working properly.
• Steer clear of trouble.
• Read before you slam. Look to your vehicle's owner's manual for guidelines pertaining to your vehicle.
• Practice, practice, practice. Take the time to learn how your vehicle's brakes react in slick conditions. A good way to do this is in a large, empty parking lot on a rainy day.

Many insurance companies are dropping the anti-lock brake discount because some studies have found that there is no substantial difference in the number of accident claims between vehicles with and without ABS. Erie Insurance refuses to follow fellow insurers down that beaten path. Instead of taking the easy road and doing away with the discount, we have elected to educate our policyholders on the correct usage of ABS.

Erie Insurance continues to offer a 10 percent premium discount on the bodily injury and property damage liability coverages for vehicles equipped with factory-installed four-wheel anti-lock braking systems. Government and industry experts call ABS one of the most significant safety advances in modern automobile engineering.

INSURANCE INSIGHTS is an electronic newsletter published monthly by G. C. Weimer Associates, Inc. Information contained herein is accurate to the best of our knowledge and belief as of 7/1/97. If you have a topic of interest for a future issue, e-mail us at info@gcwinsure.com.

|| Home || About GCW || Why GCW || Our Services || Performance Standards || People ||

To contact G.C. Weimer Insurance Agencies, e-mail info@gcwinsure.com (please read this first).