UNLICENSED VENDORS

Associations should should still carry workers' compensation insurance even if they do not have employees. If the board hires a painter, landscaper, roofer, plumber, part-time handyman, etc., the association could be liable for employment-related injuries even though the vendors are independent contractors.

Unlicensed & Uninsured Vendors. By law, if a board hires an unlicensed contractor, the association automatically becomes the employer of the injured worker. State Compensation Ins. Fund v. Workers' Comp. Appeals Board (1985) 40 Cal.3d 5. This is true even if the contractor misrepresented the fact that he was licensed and insured. Without workers' compensation insurance, there are no limits on the damages that may be claimed by an injured employee, including claims for pain and suffering. The association could be liable and the membership could face large special assessments to pay the damages. With insurance, the employee's claims are limited and the loss is paid by insurance.

Licensed but Uninsured Vendors. Typically, so long as the vendor is licensed, the injured worker will remain the employee of the vendor, and not the association. Accordingly, the injured worker would have the option of proceeding against the vendor either civilly or for workers' compensation. In the event that there was a finding of dual employment, then the association becomes liable. So long as the association is insured for workers' compensation, the injured worker's remedy would be limited to workers' compensation. If the association is NOT insured, then the injured worker can pursue the association both civilly and under workers' compensation.

However, if the association is NOT the employer, and there is negligence on the association's part, then it can be civilly liable to the injured worker for the damages caused by its negligence, regardless of any workers' comp insurance protecting the vendor/employer.

Heiman v. Workers' Compensation Appeals Board (2007). Background: Property manager filed petition for writ review to challenge ruling by Workers Compensation Appeals Board (WCAB) that property manager was the employer of worker who was injured while working for unlicensed and uninsured contractor who was chosen by property manager to install rain gutters on condominium building.

Decision: Associations and property managers may be found liable for workers' compensation if they hire unlicensed and uninsured contractors to do work for them. By definition, an independent contractor must be licensed; if he is not, then he may be deemed an employee (and, in turn, his hires are also employees) of the property manager. The Association is liable under agency law, in which its agent (property manager) is working on its behalf.

Protection Against Loss. To avoid unexpected special assessments, boards should (i) purchase workers' compensation insurance, even if the association does not have employees and (ii) make sure their vendors are licensed and insured (always require a certificate of insurance prior to the vendor coming onto the premises).

Updated by ADAMS KESSLER 5/7/2008