board refuses to hire gardeners with w/c ins

Started by ShirleyC • 11 replies • 2851 views

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ShirleyC (California)
Posts: 117

Posted:

We live in Calif. Our board has fired a landscaping company that had workers comp insurance and gen liab insurance.

They are now using a gardener who uses his whole family to work and he has no workers compensation insurance. We also pay them $1200 per month and do not report this on a 1099. Obviously the gardener isn't reporting it as income either.

I brought this up at the meeting last night and was told the gardener is going to sign a document accepting liability for any injuries.

In the state of Calif personal injury law suits have no limits. I am sure we(the owners) could still be sued personally even with the proposed letter.

Is there any way to stop the board from doing this. We have six of fourteen owners who will vote against them, the others don't want to get involved.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Your HOA should have liability insurance to protect against being sued personally. It mostly reqards Board member but the board members are the ones doing the hiring and not the general membership. So as along as the HOA has liability insurance the membership should be protected from PERSONAL lawsuits but not as a "group".

Is this a migrant worker? I think there are some rules regarding use of migrant workers and their insurance coverages. What they are, I don't know. California is pretty strict on that. You may want to check into that area of employment laws.

I would suggest the HOA NEVER hire a contractor that isn't licensed and insured. Our documents even state that our lawncare must care atleast a $1M liability insurance policy for damages if we are to hire them. You may want to review to see if this is also a requirement with your HOA.

Your right in being perceptive about this situation. It is a litigious world out there. Better protect what you can!

Former HOA President

MikeS1
Posts: 668

Posted:

Shirley - I think that your HOA insurance agent can easily resolve this for you. Call whomever his handling the HOA's insurance (liability, property, Officer's Diretor's E&O, etc) and explain the situation. Usually, what happens is that this insurance account is audited on an annual basis by the insurance company and if you did not get COI's (Certificates of Insurance) from contractors (like gardener is in fact a contractor), then not only is the HOA at risk in terms of liability exposure, but also, the insurance company will send you an audit bill based on the additional risk or exposure. Gen Liability and worker's compensation premiums are ususually based on receipts wages. Once the agent or auditor sees the additional $14,400, then the HOA will probably receive an audit billing. Also ask your attorney about the gardener signing a waiver. Usually waivers aren't worth the paper that they are printed on. Get some good advice from professionals here. I think that if you do, then the rest of the board will wake up and smell the coffee. What they are doing is absolutely nuts!

Of course, they could make them employees, but then they might have to ask for I9's and the gardener would have to pay taxes. Good luck.

MicheleD (Kentucky)
Posts: 4,491

Posted:

The board doesn't have the ability to "opt out" of the 1099s.

If the person is being paid over $600 from you during the year YOU have to report it to the IRS. You don't have to withhold taxes, but it MUST be reported, or the board itself will have the IRS to deal with.

Not a pretty picture.

We used to have a landscaper who charged $1,200 per month and did not provide us his SSN so that we could file the proper forms.

This went on for several years. The majority of the board was unaware, but once we got a new treasurer, she organized the financials and the files and set about collecting SSNs and tax ID numbers from our vendors to make sure we had them on file.

When she got to the landscaper he threw a fit. Said the board had agreed under the original contract that he wouldn't have to report his earnings from us and that we wouldn't report them from our end. That, of course, was ludicrous. The contract said nothing of the sort. On the other hand, the head of our Architectural Committee, who was a board member, DID tell him that "behind closed doors" -- they are next-door neighbors. This same board member was also very close friends with the previous treasurer, so the two of the pretty much colluded to keep the $1,200 monthly payment as much "under the table" from our end as possible.

Then the landscaper tried to get us to provide him extra money on his contract AND give him the difference of what he is going to have to pay on his taxes to cover the past 3 years.

Uh, yeah. Right. We'll get right on that. Needless to say, he quit and we hired a vendor who is bonded, insured AND carries W/C on his employees.

DaneC (California)
Posts: 210

Posted:

This is what the State has to say - If your gardener prunes trees over 15 feet in height, then he is considered a contractor, and is required to be licensed.

Business & Professions Code §7026.1.
(d) Any person not otherwise exempt by this chapter, who performs tree removal, tree pruning, stump removal, or engages in tree or limb cabling or guying. The term contractor does not include a person performing the activities of a nurseryperson who in the normal course of routine work performs incidental pruning of trees, or guying of planted trees and their limbs. The term contractor does not include a gardener who in the normal course of routine work performs incidental pruning of trees measuring less than 15 feet in height after planting.

The following excerpts are from the California Contractors State License Board phamphlet, "What you should know before you hire a contractor."
http://www.cslb.ca.gov/forms/wysk.pdf

In California, anyone who contracts to perform work that is valued at $500 or more for materials and labor must hold a current, valid license from the
Contractors State License Board in the specialty for which he or she is contracting.

Make sure the contractor has Workers’ Compensation and Liability Insurance coverage - see page 10.

NancyD1 (Florida)
Posts: 447

Posted:

A BOD should never hire unlicensed and uninsured contractor. They have to report the wages on a 1099 or hire the individuals as employees. Again you have to pay taxes. If you are a "not for profit" you can lose your status as one for this indiscretion.

You are correct that the HOA can be sued. A waiver provides no protection. If you have to go to court, it does not negate the fact that the person was hurt on the HOA property. When D&O insurance looks a a case like this they would have to settle up front. They have hired unlicensed, uninsured, and are not paying taxes on this person. The HOA has no defense.

ShirleyC (California)
Posts: 117

Posted:

Thanks, lots of good infor, keep it coming....but, how do we convince or force the board to right this??

NancyD1 (Florida)
Posts: 447

Posted:

Shirley, don't your doc's state the way contracts are to be awarded and the requirements of the vendors? If the BOD will not "do the right thing", get rid of them. They will put your community in a very precarious position. You will have IRS, State, Immigration, County and every other authority on the HOA. If fines are imposed, who do you think is going to pay for them? D&O insurance does not cover stupidity.

DaneC (California)
Posts: 210

Posted:

Quote:

Posted By MikeS1 on 09/12/2007 7:05 AM
Shirley - I think that your HOA insurance agent can easily resolve this for you. Call whomever his handling the HOA's insurance (liability, property, Officer's Diretor's E&O, etc) and explain the situation.

You've tried the Board, now step it up a notch. Just get the agent and ask him if he is prepared to deal with the IRS.

NancyD1 (Florida)
Posts: 447

Posted:

Quote:

Posted By DaneC on 09/13/2007 12:11 PM

You've tried the Board, now step it up a notch. Just get the agent and ask him if he is prepared to deal with the IRS.

Dane always on the ball!!

GloriaM (North Carolina)
Posts: 829

Posted:

Not only do they have to report it either by a 1099, the HOA would be liable if they did hurt themselves while on the job without their own insurance. Do your Documents read that all contractors used by the HOA must be insured?

This board is opening the HOA up to tremdous legal actions, the IRS, medical bills, workers comp and state taxes as well. I would think just those alone would open the board's eyes to hired a licensed and insured landscaper.

RonaldW (South Carolina)
Posts: 901

Posted:

The board probably figures they are saving the association money, but as others have said, they are putting everyone at a big risk. As a board and as a board member one has to act responsibly because irresponsible actions can bring a risk to others.

They must hire licensed, insured contractors or hire these people as employees and assume the responsibilities of "employer". For many reasons, they are better off hiring a contractor in this case.

Ron
SC

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