Caught in the Middle with Workers Comp

      When a client doesn't pay on time, a business gets stuck in a workers-comp double bind. May 4, 2005

I am the owner of a Union Architectural Millwork Installation Company. We have been working on a project in Pebble Beach, CA for 2 years. We are 90% complete. My client has not been paid by the owner for 5 months, but they have been paying us. Until now. November 5th I was to receive a progress payment. Our workers comp insurance notified us we would be cancelled if they did not receive payment on Nov. 5th. I told the insurance company we would pay. I could not, because I did not get paid. Morning of Monday Nov. 7th, client tells me they will send a check on Tuesday, Nov. 9th. Afternoon on Tuesday, client tells me they received Notice of Cancellation from my workers comp carrier and now they cannot pay us until policy is reinstated. I do not have the money to pay without our payment from client. Is this fair? Legal? I had coverage when we did the work. Pay me.

Forum Responses
(Business Forum)
From contributor B:
Sometimes life sucks. Any chance you can get the workman's comp people to go ahead and do a certificate as soon as you give them a check and talk them into holding the check for 36 hours? As soon as they get a check, they can fax a binder, which should get your check released. Offer to pay a wire fee and have them wire the money directly into your bank account as soon as they receive notice that your insurance is in force. Just an idea that might work if you approach everybody really nice and try to explain the situation. In my mind, they should have to pay if you had insurance in force when the work was done, but I don't know how it works in your state.

From contributor J:
I realize it's late for you, but contact your local ASA (American Subcontractor Association). They are extremely good at helping subs like yourself. You may have to join, but the cost is real inexpensive. They have legal advisors you can speak with.

From contributor O:
Contributor B has the right idea. I would hold off getting the attorneys involved just yet. Call your agent and explain the situation to him. I've been in similar situations here and the bottom line is that everyone makes a buck, even the insurance carriers (grin). You must get a handle on the workers comp issue pretty quick whether or not your customer pays you. When you are cancelled for non-payment of premium, you won't be allowed to secure another policy with anyone else until after you clear the books with your old carrier. One option is employee leasing. Under that scenario, you are provided workers comp only when you need it, but the certificate stays in effect.

From contributor A:
The quickest solution would be to have your customer write two checks, one to you and one to you and the insurance company for the amount you owe, then you can pay the insurance company.

The most he should be able to withhold is the audit premium for the hours your guys worked on his project and you haven't paid (with you not paying, he is now responsible for your workers comp payment). Are you doing audited premiums and do you track your labor by job? If so, give a copy of the monthly audit you filed. It sounds like you don't have time for lawyers. See if you can work something out quickly. Did you file a preliminary notice and have you been updating or keeping the amount current?

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