I realize workers comp and liability are entirely different.
In order for the new instructors to be independent contractors, where I am not required to have workers comp, the instructors would need to purchase their own liability policy, which is about $750.
I do not own the facility, just the academy.
My current policy, yes, covers employees. However, I need a worker comp plan in order to have employees, and I am having trouble finding a company that does that in Ca.
I misunderstood. The way it was written, it appeared to me you were looking at workers comp and liability as the same thing.
Around here, trainers can be added on to a school's liability policy without hiring them as formal employees and all the other problems it entails (such as worker comp and benefit packages).
Also, while many programs operating out of a barn have their own liability insurance, they also usually get added onto the property owners insurance. In some cases this can end up covering the program's instructors without the program or instructors needing to buy the insurance. Maybe you can't do that in CA either - and I always though NY was the worst for petty rules.
You say you are an equine teacher, are hiring more teachers and are a sole proprietor? I'm not a lawyer, but let me highly suggest you look at incorporating or going LLP. You are currently subject to more personal liability that you need to be. A Corp or LLP setup is much less expensive than you may think it is.
As to what Stevenson mentioned about "above board" it is what people also call "on the books." That means when you pay them you are deducting Social Security, Medicare, Federal Withholding, State, Local and any other applicable tax. You are also filing out the forms, filing them and paying those taxes to the appropriate agencies. Then you are providing W-2 and/or 1099s to the employees at the end of the year. Not all these taxes are only deductions from employee pay - some, like SS also require the employer to pay a portion.
Payroll is a real PITA. Lot's of paperwork to do it right. Most companies contract it out and/or let an accountant handle it. Check out a service like ADP or ask the person who does your taxes. This is why I suggested looking at the "contractor" route, which is how most places around here handle it. Unfortunately, that doesn't seem to be a viable option in your area.