A new Tennessee law is requiring all construction firm owners to register with the state if they choose to opt out of the state’s workers’ compensation system.
The law is designed to protect general contractors from having to pay benefits for uninsured subcontractors.
Under the old law, subcontractors could choose not to purchase workers’ compensation coverage for themselves, although they were mandated to provide it for their employees. However, when a subcontractor was injured, they would file a claim arguing they did not know they could not be covered. Judges then awarded benefits, often at the expense of the general contractor.
“The judges would go up the ladder until they found someone with insurance,” said Susan Ritter, executive vice president of the Home Builders Association of Tennessee.
Lawmakers changed the law in 2008 calling for all subcontractors to obtain workers’ compensation for themselves. However, the building industry, and trade groups argued the law would hurt subcontractors.
“The law would have put many sole proprieties out of work,” said Ritter. “They were looking at having to pay $10,000 or $12,000 for a policy when they only make $25,000 a year.”
So, the Legislature changed the law so that: Unlicensed contractors were able to apply for the exemption beginning Jan. 4 and licensed contractors could begin applying Feb. 1, 2011. ÊRegardless of when they submit an application, their exemption does not take effect until March 1, 2011.
The Secretary of State has a website for construction owners to register and for homeowners to verify a subcontractor’s insurance status.
Topics Workers' Compensation Contractors Construction Tennessee
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