Workers’ Compensation Coverage for Canadian Inbound Workers

Article written by John C. Newman, Esq.
Posted on Jul 31, 2012

Reading a state’s statutes to try to figure out how they might apply to an international transaction can be difficult. US state legislatures do not often consider international commerce, even though US trade and worker immigration flows with a contiguous country, like Canada can be substantial. One of the issues that has just arisen in our immigration practice is whether workers’ compensation coverage needs to be secured here in Vermont when an individual employed by a Canadian employer enters Vermont to perform services here.

Under the Vermont statutes, as in other states, what is termed a “traveler” does not need workers compensation insurance coverage under a Vermont insurance policy. A traveler is a worker covered by another US state’s workers’ compensation insurance program who is working in Vermont. The typically case is a truck driver or construction contractor. Provided that the employee is covered by another state’s insurance program, he or she does not have to be covered in Vermont under its program. If the worker is injured in Vermont, the traveler may elect to seek coverage under Vermont’s program or under the worker’s home state program. The question we recently confronted for a client was whether an individual covered by the program of a Canadian employer would be a traveler whose employer did not need to be covered by a Vermont policy if sent to worker in Vermont.

Having contacted the Vermont Department of Labor, it cited 21 V.S.A. § 687 as requiring a Canadian insurer of employees working in Vermont to seek permission to cover risk in Vermont. Essentially, an application with the Vermont Department of Labor is made, with a local bonding requirement. In particular, the Vermont Department of Labor indicated that the exclusion for interstate travelers applies only to travelers within the US (i.e., from one US state to another). The exclusion for interstate travelers does not apply to Canadian workers entering the US from Canada who have coverage under the Canadian system.

We recommend that a Canadian employer sending an employee to work in Vermont secure a Vermont workers compensation policy that will cover the worker for the duration of the employee’s work in Vermont.

The cost for a policy from a Vermont workers’ compensation insurance company likely will be rather nominal when compared to the potential cost of an injury in Vermont. If Vermont coverage is not secured, then an injured worker will be able to suit in Vermont courts in tort. In such a case, the normal monetary limitations on workers’ compensation will not apply. The injured worker’s Vermont attorney will be able to sue for compensatory damages without monetary limits, usually taking the case on a contingency. In addition, once notified of a workplace injury, the Department of Labor could fine the Canadian employer for failing to secure coverage for Vermont-sited workers. To give an order of magnitude, if a worker breaks his or her back and is paralyzed for life, a Vermont jury could award such individual an amount well in excess of $1 million in compensatory damages.

The alternative to seeking local coverage would be to have the Canadian insurance company insuring the Canadian employer seek to have that insurer secure reinsurance in the United States, which could be rather straightforward if the Canadian insurer already owned an affiliate that could write the coverage in the state of Vermont.

As an additional issue, Canadian employers sending workers into the United States should bear in mind that the employee vs. independent contractor distinction as made under Canadian law will not be binding on Vermont’s Department of Labor or on Vermont courts. The US courts and the Vermont Department of Labor may apply their own criteria in deciding whether a worker is an employee (for whom workers’ compensation coverage will be required) or an independent contractor (who will be self-insured).

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