The important question you need to ask and we help answer
Are sports organizations required to carry Workers’ Compensation insurance when workers are paid? This is a complex issue with some gray areas. Making matters worse for administrators is the fact that consequences can be severe for organizations that don’t have coverage if an injured worker can successfully argue that they are entitled to Workers’ Compensation benefits.
Most sports organizations such as teams and leagues are run by volunteers, but pay individual workers or businesses for services such as umpiring, janitorial, concessions, field maintenance, etc. And if these sports organizations win a bid to host a large tournament, the number of workers increases. These hired workers are, of course, considered independent contractors, not employees, for tax purposes.
Sports organizations typically purchase Accident and General Liability insurance but not Workers’ Compensation. The Accident policy usually covers all players, coaches, umpires, scorekeepers, and other staff, paying for medical expenses (ranging from $25,000 to $250,000 depending on the limits selected) not covered by family health insurance. The Accident policy is meant to cover volunteers and other paid workers who don’t come under the Workers’ Compensation Act.
I am basing the information below on South Carolina law and my understanding of the South Carolina Worker’s Compensation Act as it pertains to sports leagues. Other states have similar laws, but slight variations that occur from state to state can make a difference, and several states have enacted laws that exempt sports leagues from carrying Workers’ Compensation.
Liability for injuries to unpaid workers
- Workers who are not paid are considered to be gratuitous workers. Their injuries are not compensable under the Workers’ Compensation Act.
- Workers whose compensation is considered to be expense reimbursement (ex: some umpires) are likely considered to be gratuitous workers.
- Injured gratuitous workers can file for Accident insurance benefits if such a policy exists. They can also file a lawsuit against the sports organization based on negligence. Such lawsuits may be covered by a General Liability policy unless a specific exclusion applies to deny coverage.
Liability or injuries to paid employees
- Just because a sports organization classifies a paid worker as an independent contractor does not mean that the Workers’ Compensation commissioner will agree with such classification. This is true even if there is a contract in place that states the worker is an independent contractor. In these cases, the injured worker almost always claims to be an employee instead of an independent contractor. The commissioner will apply a test based on case law and will look at about 20 different factors. Commissioners are typically sympathetic to injured workers and will go to great lengths to find that they are employees and their injuries compensable under the Workers’ Compensation Act as a result.
- Sports organizations are exempt from carrying Workers’ Compensation if they regularly employ less than four employees within the state or had a total annual payroll of less than $3000 during the previous year, regardless of the numbers of people employed during that period.
Liability for injuries to subcontractor workers
- The terms independent contractor and subcontractor are interchangeable for Workers’ Compensation purposes.
- Sports organizations hiring subcontractors to perform or execute work that is part of the “trade, business, or occupation” of the sports organization are liable for injuries to the workers of such subcontractors, just as if they were employees of the sports organization.
- Injures to a subcontractor worker who is a sole proprietor, partner, or LLC owner of the subcontractor business are not compensable under the Work Comp Act. However, these workers will usually claim that they are employees instead of subcontractors.
- If the subcontractor carries its own Workers’ Compensation policy, such policy will pay benefits to the injured workers. That being said, it’s imperative to require the subcontractor to provide a certificate of insurance as evidence of Workers’ Compensation before they are hired.
Liability and penalties for failure to carry required Workers’ Compensation
If an employee or worker of a subcontractor suffers an injury that is covered under the Act and they seek Workers’ Compensation benefits from a sports organization that was required to carry Workers’ Compensation but failed to do so, the consequences can be severe.
- Penalties can be assessed against the sports organization to make up for past Workers’ Compensation premiums that should have been paid.
- The injured worker can file for Workers’ Compensation benefits against the state Uninsured Employers Fund, which results in a lien being placed against the sports organization in an amount that is equal to the benefits paid. This can result in insolvency for the sports organization since the total benefits can be extremely large depending on the seriousness of the injury. Workers’ Compensation may include past and future medical bills, lost wages based on 66.66% of the worker’s average weekly wage for up to 500 weeks paid in a lump sum for a disability, disfigurement, or death benefit.
If you have questions or want to inquire about receiving a Workers’ Compensation proposal, please call Sadler Sports & Recreation Insurance at 800-622-7370. You’ll be asked to provide information about the types of work and annual projected payroll of your workers.
DISCLAIMER: THIS ANALYSIS IS NOT MEANT TO PROVIDE SPECIFIC INSURANCE OR LEGAL ADVICE TO ANY SPORTS ORGANIZATION IN SOUTH CAROLINA OR ANY OTHER STATE. SPORTS ORGANIZATIONS MUST SEEK ADVICE FROM THEIR INSURANCE AGENT AND LEGAL COUNSEL BASED ON THEIR OWN UNIQUE FACTS AND CIRCUMSTANCES.