Tennessee: New law clarifies opt-out process for construction owners

Subcontractors in the construction industry can still opt to go without workers' comp coverage, but they must register with the state. That's part of a new law that took effect this year.

The previous law allowed subcontractors to opt out of coverage for themselves. However, general contractors often ended up having to pay benefits, according to a spokeswoman for the Home Builders Association of Tennessee. She said injured subcontractors would file claims and argue they did not know they could be covered.

A law that was scheduled to take effect in 2010 required all subcontractors to obtain workers' comp coverage. Following criticism that such legislation would put many sole proprietors out of business, legislators changed the law.

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S. 3591 allows business owners in the construction services industry to apply for exemptions from the requirement to cover themselves with workers' comp insurance. The law says applicants may qualify for an exemption if they are a sole proprietor, officer of a corporation, member of a limited liability company with at least a 30 percent ownership interest, or a partner with at least a 30 percent ownership. Also, applicants can qualify if they are owners in a family-owned business.

The law further stipulates:

A maximum of three individuals associated with each business may qualify for the exemption.
Sole proprietors can have only one qualifying applicant and he must own 100 percent of the business.
Applicants without an active contractor's license issued by the Board for Licensing Contractors must additionally apply for a construction services provider registration.

Read more at the WorkersComp Forum homepage.

February 7, 2011

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