Does Worker’s Compensation Apply to Vessels? What Type of Crew Should I Hire For my Vessel? How Should I Pay my Crew?
Workman’s Comp is a state law concept and does not apply to yachts, which are governed by Admiralty Law. Admiralty Law actually affords greater rights to workers on boats ("seamen") who are considered "wards of admiralty.”
So, what about hiring U.S. citizens as crew on a foreign-flagged vessel? A foreign-flagged vessel can hire U.S. Citizens. The question really is whether you can hire non U.S. Citizens. There are a few things to consider. What if the yacht’s flag is "foreign" and you plan on visiting the U.S. under a Cruising Permit issued by U.S. Customs and Border Protection?
Our friends at U.S. Immigration take the following approach when looking at the status of your crew – the homeport. The HOMEPORT of the Vessel is the distinguishing factor that decides whether the Yacht can employ foreign (i.e. non U.S. nationals) crew.
U.S. Immigration uses a "totality of the circumstances" test to determine a yacht’s homeport. They look for tangible ties to a given port (slip fees, yacht club dues, registry, etc.) and these things are considered in the light of the transitory nature of yachting: i.e. yachts move around.
The bottom line is that even foreign-flagged yachts with a U.S. homeport CAN NOT employ crew with B1 visas. (B1 Visas are visas which are good for more than 30 days but less than 180 days issued for the purpose of work. U.S. entities cannot directly employ a crew member with a B1 Visa).
Conversely, if you can show that the foreign-flagged vessel has a foreign HOMEPORT, then the yacht can employ crew with B1 visas on long term visits to the U.S. B1 visas can be extended by filing for the extension (form 1-539) which permits the non-immigration worker to stay in the U.S.
When you travel on a foreign-flagged vessel outside of the U.S. for extended periods, you can hire anyone you want. If the Yacht will be sitting in the U.S. for extended periods of time under a cruising permit, you probably cannot hire foreign crew on a B1 Visa because the homeport would most likely be where the Yacht is berthed.
With respect to paying your crew, one should pay all crew to the account where they tell you to pay them. The issue that arises is whether you should withhold tax or not. On this point, there is no clear, precise answer but the conventional and widely-held view in the legal world is to withhold for U.S. crew but not for foreign crew. In other words, if you have foreign crew, pay them by sending their pay to an "offshore" account (we can assist you in setting up offshore accounts) and don’t withhold. Most industry professionals believe that if you withhold for the Americans you can get away with not withholding for the non-American workers. Unfortunately, there is no precise answer.
If a crew member works on the boat more than 1/3 (rule of thumb) of his time, the worker is a "seaman" almost irrespective of what they do onboard. The rights of a seaman are covered by Admiralty Law which is Federal law and not Workman’s Compensation law, which is state law.
The most important thing to have is to have good yacht insurance to cover any sickness, health or personal injury claims that come up. You should also always consult a competent maritime attorney to sort through the issues specific to your circumstances, yacht, crew, and flag state.
Gail Wasserman is Senior Director of Ashmead & White Consulting, Inc., a maritime and aviation solutions company based in the Virgin Islands. Previously, Gail was Director of Paralegal Services in a law firm based in South Florida which served these industries.