Can a business operate under the laws of its headquarters in another state with regards to the contractors that it hires?

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Can a business operate under the laws of its headquarters in another state with regards to the contractors that it hires?

A particular business requires contractors to carry a workman’s comp policy in order to work for them. State law says that companies with less than 3 employees (independent contractors) are exempt from the workman’s comp requirement. The company in question claims to operate under out of state law (where its company headquarters are located) which requires contractors to carry comp. By the same token, full-time employees pay state taxes, and not out of state taxes. So why are contractors treated differently?

Asked on June 13, 2012 under Employment Labor Law, Virginia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Contractors are treated differently than employees because they are not employees; as such, labor laws do not apply to them. The relationship between contractor and client/customer is, as the term "contractor" implies, governed by contract, or the agreement between them. That contract could require contractors to provide insurance which they not otherwise be legally required to have; contractors who do not wish to comply with such contractual obligations have the options of either 1) trying to renogotiate the contract, or 2) not working with/for that client.


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