Workers Compensation Coverage: Contractors, Subcontractors, and Employees – Oh My
When a person is injured at work and the injury was sustained in the course of employment, the injured worker has a legal right to seek compensation for his injuries, treatment, and lost wages. More often than not and barring unusual circumstances, the worker’s compensation rights are governed by workers compensation law. Miller, Butler, Schneider, Pawlik, & Rozzell, PLLC, has attorneys that can assist you if you have been injured on the job or if a claim has been filed against your company. Because of the large amount of housing being built in Benton County and Northwest Arkansas, Miller, Butler, Schneider, Pawlik, & Rozzell, PLLC, has taken several clients that have either been injured on the job or company that may be responsible for those injuries.
Workers compensation law protects injured employees by providing a framework for compensating injured workers for their injuries, reasonably necessary medical care and lost wages. Although recovery is limited in some respects, workers comp laws are also designed to provide a “speedy” resolution by imposing rules and regulations governing the time an employer has to respond to an injured worker’s request for compensation.
Workers compensation law also protects the public by taking steps to prevent injured workers from becoming wards of the state. This protection is based on the idea that when an injured employee can not work, the public should be protected to some degree from bearing the cost of maintaining that employee and his or her family through public assistance programs. Taking care of workers who were injured in the course of their employment helps everyone.
But what if the injured worker is a “subcontractor” or an “independent contractor”? What if the injured person was hired by the job and no one considers him or her to be their employee?
These types of questions frequently come up in relation to workplace injuries in construction, remodeling, and service-related industries. Here’s a common example:
A home owner hires a prime contractor to oversee the remodeling of his home. The prime contractor hires a subcontractor to remodel the cabinets. The cabinet maker has a crew of workers, which he has classified as “independent contractors” instead of employees. The cabinet maker pays these workers a set rate by the day, week or job and does not withhold taxes from their paychecks.
One day, two of these cabinet maker workers are working in the home when one worker slips and is injured. The injured worker needs a surgery that costs $15,000.00 and can not return to work for six months. The cabinet maker does not have workers compensation insurance and does not have the money for the surgery.
Who is financially responsible for compensating the injured worker?
Under Arkansas workers compensation law, the injured worker in this example sustained a work-related injury because he was injured while doing work in the scope of his employment. Since the worker’s employer (the cabinet maker / subcontractor) does not have workers compensation insurance and can not pay the bill, the worker must look to the general contractor for payment of compensation for his work-related injury.
This is because under Arkansas workers compensation law, prime or general contractors are liable for compensating the injured employees of their subcontractors. While a true sole proprietor can forgo workers compensation insurance on him or herself, that same sole proprietor can not forgo coverage for his or her employees. Additionally, Arkansas law creates the employer-employee relationship when a prime contractor hires a subcontractor who doesn’t carry workers comp insurance and one of the subcontractor’s workers gets hurt. Therefore, the prime contractor becomes the “employer” of the subcontractor’s worker who is the “employee” for workers comp purposes.
But is the injured worker really an “employee” or an “independent contractor” who is responsible for his own injuries?
Questions frequently arise as to whether a subcontractor’s workers can decline or waive their right to workers compensation coverage by calling themselves “independent contractors” and presenting the prime contractor with “Certificates of Non-Coverage”.
The answer is generally answered no. This is because Arkansas workers comp law seeks to prevent prime contractors or subcontractors from avoiding workers comp liability by using “independent contractors” when they would normally use direct employees to do the job. There are some situations in which the answer may be answered in the affirmative depending upon the specific set of circumstances.
The question of whether an injured worker is an “employee” is one that turns on the facts of each case; however, contractors and subcontractors in Arkansas should strongly consider obtaining workers compensation insurance coverage in almost any situation.
You should certainly contact an attorney if you receive notice that a claim has been filed. The key factor in determining if a company is responsible for a workers comp claim is determining whether the business utilizes other people’s work to satisfy their obligations to a third party (in the example above, the third party would be the home owner). If you have been injured or have had a claim filed against you, contact the attorneys at our firm to determine what legal steps need to be taken to protect you.