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Joint and several liability: How to avoid paying someone else’s workers’ comp premiums

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  • Joint and several liability: How to avoid paying someone else’s workers’ comp premiums

If your business uses a subcontractor to carry out a contract, or if you hire a contractor to perform work at your company, here’s what you need to know!

What is joint and several liability?
Joint and several liability is the principle under which a workers’ compensation board holds a business liable for payment of a premium that should have been made to the WCB by a business whose services the company has used. The board may hold a business liable for hiring a subcontractor to carry out part of a contract, or a contractor to effect repairs at the company.

Here is an example:
Company ABC Inc. has decided to engage a building contractor to expand its commercial premises. The work was completed within a few weeks; ABC Inc. paid the contractor and was satisfied with the results. Then, a few weeks later, ABC Inc. receives a letter demanding payment of an amount equivalent to the building contractor’s unpaid premiums.

Does this strike you as unfair? We totally agree! The good news is that there’s a way to protect yourself from this type of situation.

Certificate of Compliance
To avoid being held liable for the unpaid premiums of another company, you can ask the company to provide you with a Certificate of Compliance. This certificate will confirm that the company has paid all its premiums and is in good standing. Your provincial workers’ compensation board can also supply you a copy of this certificate. 

Withholding a part of the contract’s value
While waiting to receive the certificate, you can withhold payment of an amount that would cover the premiums for which you might be held liable. It is good practice to include a clause to this effect in your contract with the supplier. Then, if you never receive the Certificate of Compliance and have to pay that company’s premiums, the money will not come out of your own pocket.

If you’re not sure how to go about obtaining a Certificate of Compliance, call your CFIB Business Counsellor!