• Tennessee Construction Service Providers Must Carry Workers' Comp Insurance
  • May 17, 2011 | Authors: C. Christopher Brown; Adam F. Rust
  • Law Firm: Leitner, Williams, Dooley & Napolitan, PLLC - Knoxville Office
  • On June 4, 2010, the Tennessee legislature passed Senate Bill Number 3591 of Public Chapter Number 1149.  Former Governor Phil Bredesen approved the enactment on June 30, 2010, and a number of provisions contained in the bill officially took effect on March 1, 2011.  A large portion of this bill created a new subsection of Chapter 6 of Title 50 of the Tennessee Code Annotated and this new portion is codified at Tennessee Code Annotated § 50-6-901, et. seq.  Of note, this new section now requires all construction services providers to carry workers’ compensation insurance on themselves.  See T.C.A. § 50-6-902(a)(emphasis added).  “Construction services provider” means “any person or entity engaged in the construction industry.”  See T.C.A. § 50-6-901(5).  This requirement set out in subsection (a) applies regardless of whether the provider employs fewer than five employees.  See T.C.A. § 50-6-902(a).

    Construction services providers may apply for an exemption from section 50-6-902(a) if they meet one of the following criteria: [1] if the individual is an officer of a corporation who is engaged in the construction industry, but no more than three officers of one corporation are eligible for an exemption; [2] if the individual is a member of a limited liability company who is engaged in the construction industry if such member owns at least thirty percent of such company; [3] if the individual is a partner in a limited partnership, limited liability partnership or a general partnership who is engaged in the construction industry if such partner owns at least thirty percent of such partnership; [4] if the individual is a sole proprietor engaged in the construction industry; or [5] the individual is an owner of any business entity listed in the first three examples in this paragraph, but no more than three owners of one family-owned business may be exempt.  See T.C.A. § 50-6-903(a).  It is important to note that, if a construction services provider is exempt from Section 50-6-902 based upon one the criteria above, then no construction services provider of an affiliate of such an exempted provider is eligible to apply for or receive the same exemption.  See T.C.A. § 50-6-903(b)(1).  Section 50-6-904 of this new Code section provides the method of applying for an exemption with the state and describes the exact information needed to make such application.  See T.C.A. § 50-6-904. 

    To the extent there is no restriction on applying for an exemption pursuant to Section 50-6-903, a construction services provider is exempt from Section 50-6-902(a) if the provider: [1] is a construction services provider rendering services on a project that is not a commercial construction project and is listed on the registry; [2] is a construction services provider rendering services on a commercial construction project, is listed on the registry and is performing a project where no more than three construction services providers are performing direct labor on a commercial construction project; [3] is covered under a policy of workers’ compensation insurance maintained by the person or entity for whom the provider is providing the services; [4] is a sole proprietor or partner engaged in the construction industry doing work directly for the owner of the property; [5] is a sole proprietor or partner building a dwelling or other structure, or performing maintenance, on the sole proprietor or partner’s own property for the sole proprietor or partner’s use and for which the sole proprietor or partner receives no compensation; or [6] is a provider whose employment at the time of injury is “casual” within the meaning of T.C.A. § 50-6-106.  See T.C.A. § 50-6-902(b). 

    A subcontractor working in the construction industry under contract to a general contractor engaged in the construction industry may elect to be covered under any policy of workers’ compensation insurance that insures the general contractor upon written agreement of the general contractor, regardless of whether such subcontractor is on the registry established under this new section of the Code, by filing written notice of the election, on a form prescribed by the Commissioner of Labor and Workforce Development, with the department.  See T.C.A. § 50-6-902(c).  It is the responsibility of the general contractor to file the written notice with the department.  It is also important to note that the failure of the general contractor to file the written notice does not operate to relieve or alter the obligation of an insurance company to provide coverage to a subcontractor when the subcontractor can produce evidence of payment of premiums to the insurance company for the coverage.  See T.C.A. § 50-6-902(c).  Under this new section of the statute, this election does not terminate or affect the independent contractor status of the subcontractor in any way for any other purpose than to permit workers’ compensation insurance coverage.  The election of coverage may be terminated by the subcontractor or general contractor by providing written notice of the termination to the department and to all other parties consenting to the prior election.  The termination is effective thirty days from the date of the notice to all other parties consenting to the prior election and to the department. 

    Any action to recover damages for an injury, as defined by Section 50-6-102 of the Tennessee Workers’ Compensation Law, by a construction services provider who was on the registry at the time of such injury, who was not covered under a policy of workers’ compensation insurance maintained by the person or entity for whom the provider was providing services at the time of the injury, is to proceed as at common law, and the defendant in the suit may make use of all common law defenses.  The construction services provider must forego the right to sue or reestablish workers’ compensation coverage for any injuries that occurred while the construction services provider was listed on the registry. 

    Under this new Code section, a general contractor, intermediate contractor or subcontractor is liable for compensation to any employee injured while in the employ of any of the subcontractors of the general contractor, intermediate contractor or subcontractor and engaged in the subject matter of the contract to the same extent as the immediate employer.  T.C.A. § 50-6-914(a).  It is important to also note that Section 50-6-914(b) provides that a general contractor, intermediate contractor or subcontractor is not liable for workers’ compensation to a construction services provider listed on the registry established by this new Code Section.  It is the responsibility of the general contractor to provide notice to any construction services provider who provides services to the general contractor and who is listed on the registry that such provider is not eligible for an exemption pursuant to this new section.  See T.C.A. § 50-6-914(b)(2)(C).  Any contractor who pays compensation under T.C.A. § 50-6-914(a) may recover the amount paid from any person or entity who, independently of this new Code section, would have liable to pay compensation to the injured employee, or from any subcontractor.  T.C.A. § 50-6-914(c). 

    Every claim for compensation under this section shall be presented first to and instituted against the immediate employer, but the proceedings do not constitute a waiver of the employee’s rights to recover compensation under this chapter from the general contractor, immediate contractor or subcontractor; provided, that the collection of full compensation from one employer bars recovery by the employee against any others, and the employee shall not collect from all employers a total compensation in excess of the amount for which any of the contractors is liable.  T.C.A. § 50-6-914(d).  It is lastly important to note that this new section applies only in cases where the injury occurred on, in, or about the premises on which the general contractor has undertaken to execute work or that are otherwise under the general contractor’s control or management.  T.C.A. § 50-6-914(e).