Freight brokers, like any other employer, are generally only liable for their own employees for workers’ compensation purposes. However, what if a freight broker contracts with a motor carrier to transport goods, the motor carrier does not carry workers’ compensation insurance, and the motor carrier’s driver is injured on the job? Can the freight broker be liable? The answer is, yes.
For example: Say ABC Brokers contracts with Carriers, Inc. to transport freight. In transit, John Doe (a driver for Carriers, Inc.) is involved in an accident. Mr. Doe sustains serious injuries and files for workers’ compensation benefits. Carriers, Inc., however, does not have a valid workers’ compensation policy. Thus, the state’s uninsured employers’ fund pays Mr. Doe’s workers’ compensation benefits in the amount of $200,000. The state’s uninsured employers’ fund can now start looking up the employer ladder (e.g., to brokers, shippers, and others up the chain) to try and find someone with a valid workers’ compensation policy to recover the $200,000 it paid to Mr. Doe.
The freight brokers’ liability in this example boils down to the state’s specific definition of a statutory employer. Some states require a contractor/subcontractor relationship. Others require some degree of control over the carrier’s work. A carrier might be able to successfully argue it does not meet the statutory employer definition and is therefore not liable. The results in these cases are mixed.
Avoid uncertainty; be proactive. Make sure your broker/carrier agreement expressly requires the carrier to have workers’ compensation coverage (or require them to provide a valid waiver of coverage) and to provide you with a copy of the certificate of insurance before starting work. You can then call the state workers compensation fund or the insurer to verify the amounts and that the policy is valid. Second, require the carrier to notify you of any changes to its policy and periodically call and check on the policy to make sure it is active. Have a system in place to notify you when the policy lapses so you can follow up and make sure it is renewed. Finally, make sure your broker/carrier agreement states the carrier is an independent contractor and not an employee.
At Skoubye Nielson & Johansen, we have years of experience helping freight brokers protect their business. We can review your agreements and processes to limit your exposure to workers’ compensation liability and other risks inherent to freight brokers. Give us a call, and let us put our experience to work for you.