Posts Tagged ‘Workers Compensation’

Louisiana Contractors – Workers Compensation Insurance

Back in 2009 this blog reported on the very topic of Workers Compensation insurance, stating that 1 and 5 businesses are breaking workers compensation laws. In my everyday practice, I feel like the trend is still prevalent in the construction industry. The main reason being is due to the exorbitant price of this insurance on contractors.

Workers Compensation is codified in Louisiana under Revised Statute 23:1021 et seq. There are a myriad of rules and definitions within this chapter of the code that would make any contractors head spin. There are a few key items to remember when classifying employees. First and foremost is that there is a presumption of employee status, as seen in La. R.S. 23:1044. This can be overcome by a number of factors which would make the worker, an independent contrator rather than a employee. La R.S. 23:1045 is where the law states that independent contractors and subcontractors are exempt from coverage. Although the price to insure all employees under workers comp insurance is high, the price that is paid if an accident happens to an uninsured worker is much higher. Furthermore, when the insuring companies do an audit at the end of the year of the status, there can be a hefty price tag for improper reporting.

I represent a number of clients who are learning the hard way that companies like LWCC and Louisiana Home Builders Association are not fun to litigate against for a contractor trying to make profits. These companies have either in-house attorneys or law firms who handle these cases day in and day out. There is almost no incentive for them to settle claims because there is no fear of pricey litigation. As for the contractor, attorney fee bills keep going higher and at the end of the day the contractor can pay double and triple of what they would have if they had properly reported or settled early.

So let this be a warning to all contractors who are trying to push the line when it comes to workers compensation insurance, its just not worth it. Just like fighting any insurance company, even if the insurer is wrong, they will fight to the bitter end to be proven so. Taking an early haircut, so that you can get back to making money in the industry, can be a win-win for your construction company.

Posted in:     Construction Contracts, Construction News, Disputes, Insurance, Labor Law, Litigation, Louisiana, Payment Requirements  /  Tags: , , , , , , ,   /   1 Comment

California Contractors Need Workers Compensation Insurance, or else…

One of my favorite places to find good content and expert opinion regarding construction and legal issues is JDSupra.com. This is a service whereby bloggers and others can post content and it is marketed by JDSupra. In one of JD’s tweets last week I discovered a very informative article by Matthew Hicks regarding Workers’ Compensation Insurance law and jurisprudence in California.

Hicks sites two landmark cases, Wright v. Isaak, 149 Cal.App.4th 1116 (2007) and Loranger v. Jones, 184 Cal.App.4th 847 (2010). See Hicks article for the in depth analysis of these cases. The bottom line here is that all California contractors need to be sure to maintain proper and adequate workers compensation insurance.

The main statutory component of Hicks article and the source of Workers Compensation law in California come from California Business and Professions Code §7125.2 which states in pertinent part:

“The failure of a licensee to obtain or maintain workers’ compensation insurance coverage, if required under this chapter, shall result in the automatic suspension of the license by operation of law in accordance with the provisions of this section…”

The key elements here are 1) obtain or maintain, basically saying that the contractor has a duty to get it and then a duty to keep up the correct amount of insurance. The other important element quoted above is 2) the fact that the suspension of the license occurs by “operation of law,” meaning that you do not have to be caught and if/when a contractor is caught without or under insured, the suspension of the license will have automatically happen retroactive to the date of insufficient coverage. Needless to say, this is pretty powerful language.

Just as Hicks points out in his well written-piece, contractors need to abide by and closely adhere to the requirements for Workers Compensation insurance. This can be complicated and contractors should get legal advise when making such decisions.

For further reading see Wesley E. Meyers article here.

Posted in:     California, Construction News, Insurance, Licensing  /  Tags: , ,   /   Leave a comment

Two New Washington Laws Contractors Must Know From the 2009 Legislature

As we enter it a new year, we thought it was prudent to review what the Washington legislature passed last year that is now law and affecting the construction industry.

Earlier this week, we wrote about the small amendments to the Contractor Registration Act.

More changes to Washington’s regulatory scheme passed into law in 2009 aside from these small amendments.   In this post, we’ll discuss SB 5613 which authorizes L&I to issue stop work orders on employers not in compliance with workers compensation requirements, and SB 5904 which defines an “independent contractor” on public works projects.

Stop Work Orders Allowed on Contractors Who Do Not Pay Workers Compensation

SB 5613 was passed by the Washington legislature, and became effective in July 2009.   This new law provides Labor & Industries with an additional mechanism to enforce the worker’s compensation requirements for contractors:  stopping work.

Previously, L&I could fine employers and contractors in violation of the workers compensation provisions, but couldn’t actually force the contractor to stop work.   Now, a new section has been added to RCW §51.48 giving L&I this stop work authority.

If an employer is in violation of the workers comp requirements, L&I can force the employer to stop work on that project (and other projects where there are violations) until the employer gains compliance.   Becoming compliant will require the payment of any assessed penalties and interest.

What happens if the employer doesn’t stop work after being so ordered?   Paragraph (4) of the new section subjects the employer to a $1000 per day penalty until the employer is in compliance.

The new section is clearly aimed at punishing employers dearly if they are not compliant with the workers compensation statutes.   Where penalties alone didn’t always work in the past, now L&I can hurt contractors on jobs.  If an employer must stop work, obvious problems arise:  will they get paid for work done?  will they be responsible for delay damages on the project?   will the job be given to another contractor?

Getting clever and opening a new entity with less baggage will be of little use under the new section.  Paragraph (7) contemplates this circumstance, and provides that stop work orders are effective against “any successor…business entity that has one or more of the same principals or officers…”

Read the passed SB 5613 here.

Independent Contractor Defined for the Purposes of Prevailing Wages

In the past, much argument has ensued on public works between Washington’s Department of Labor & Industries and contractors over whether a party or entity is an employee or an independent contractor.

The consequence to the distinction is clear.   If an employee, prevailing wage rates must be paid.  If an independent contractor, the prevailing wage rate may not be required.

Well, SB 5904 adds a section to RCW 39.12 to clear up the ambiguity.

Regardless of how an employer attempts to label a party/entity, they will be considered a laborer, worker or mechanic unless all of these factors are met:

  1. They have been and is free from control or direction over the performance of the service, but unde under the contract and in fact;
  2. The service provided is either outside the usual course of business for the hiring contractor or the service is performed outside the places of business for the hiring contractor;
  3. The party/entity is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the instant contract;
  4. The party/entity is responsible for filing at the next applicable filing period a schedule of expenses with the IRS;
  5. The party/entity has an active and valid certificate of registration with the department of revenue, and all other required registrations;
  6. The party/entity maintains a separate set of books or records reflecting all items of income or expense of the business; and
  7. The party/entity is a registered contractor, if required.

Read the passed bill’s full text here.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Construction Law Blog.

Posted in:     Labor Law, Prevailing Wages, Washington  /  Tags: , , , ,   /   Leave a comment

1 in 5 Louisiana Businesses Breaking Workers Compensation Laws?

A recent survey by the Louisiana Workforce Commission found that 1 in 5 Louisiana companies may be violating the state’s workers compensation laws.

The unsettling survey is part to blame for the state’s new fraud program, which is aimed at identifying and bringing into compliance businesses not providing workers’ compensation coverage.

As reported by nola.com, violators will face penalties of $250 per employee, per incident. Repeat offenders could face criminal penalties and have the businesses shut down

The fraud program should be a warning call to non-complying contractors in Louisiana.

While the commissions hasn’t singled out the industry, it’s safe to assume that contractors will be the target of the commissions new fraud program.   The construction industry faces some of the highest workers comp rates, and most frequently encounter the fine line between an “employee” and an “independant contractor.”

When describing fraud problems, Chris Broadwater, director of the LA Workforce Commission, told nola.com that many business list “workers’ jobs as less hazardous than they are, or by claiming that their employees are independent contractors.”

The Rates
Provided examples of high and low workers comp rates were, not surprisingly, between construction workers (up to $13 per $100 paid) and clerical workers (60 cents per $100 paid).

The difference is clearly huge, and perhaps it’s why the first comment to nola.com’s story on the fraud program complained about the cost of compliance:

Well, bring the rates down and maybe businesses here in Louisiana could afford to stay in business with less exorbitant rates from a monopoly insurer for all new businesses (LWCC). Small businesses are often forced into questionable cutbacks to feed the “gimmie” attitude of our state!

The comment likely resonates with contractors in Louisiana, who are competing in a down construction market with other contractors who aren’t providing workers compensation (remember, only 20% of businesses in Louisiana do).   It’s seems nearly impossible to compete with other businesses who – from the start – can discount their bids by 13-15%!

Not surprisingly, construction companies have substantial motivation to classify workers as independent contractors rather than employees.

Employee v. Independent Contractor
The Louisiana Workforce Commission has written an online article about this very problem, reminding contractors that the difference between employees and independent contractors is not a subjective determination – but something subject to specific statutory criteria.

With regard to the applicable statute, the Louisiana Workforce Commission states:

La. R.S. 23:1021 defines an independent contractor as any person who renders a service, other than manual labor, for a specified recompense for a specified result either as a unit or as a whole, under the control of his principal as to the result of his work only, and not as to the means by which such result is accomplished. Independent contractors who meet this definition are not covered by the Workers’ Compensation Act.

Interestingly in Louisiana, a key factor in determining whether someone is an employee or independent contractor turns on whether they are required to perform “manual labor.”

According to the article, Louisiana courts “have defined ‘manual labor’ liberally, looking at the hands-on feature of labor combined with the strenuous quality of the work to determine whether a task is manual or not.”

If a substantial part of an independent contractor’s work time is spent in manual labor, your inquiry is over, and the worker will be covered by the provisions of the Workers’ Compensation Act.

Confused?
The workers compensation laws in Louisiana are confusing, and your business may be avoiding the law simply because it’s so difficult to understand.   However, the cost of non-compliance is great.  Not only will your business be penalized by the commission, but you’ll also find yourself liable if someone gets injured on the job.

The Office of Workers’ Compensation Compliance Division has set up a number for businesses with questions about the requirements at 225-342-5658.  Fraud can be reported to the Fraud Division at 225-342-2226.

Posted in:     Around The Web, Louisiana  /  Tags: , ,   /   1 Comment