The Senate Finance Committee approved legislation that creates a procedure for sole proprietors, partners, officers of corporations, and members of limited liability companies engaged in the construction industry to file for an exemption from obtaining workers' compensation insurance on themselves. The legislation, Senate Bill 3591, comes after the General Assembly voted earlier this year to suspend a new law requiring sole proprietors and partners engaged in the construction industry to carry workers' compensation coverage on themselves. The new law was suspended due to unintended effects of the measure.
The legislation represents a consensus of all parties after several months of negotiations between those impacted by this matter. It is designed to address concerns over gaps in coverage and provides exemptions so that small businesses will not be harmed. It also addresses provability, verifiability and accountability in our state's worker's compensation law.
The proposal aims to address gaps in coverage for workers in the various construction fields without harming small business owners. The bill reinstates the requirement that sole proprietors and partners engaged in the construction industry carry workers' compensation insurance on themselves but provides a mechanism for exemption.
Those eligible for the exemption, include:
- Up to three officers of a corporation
- Certain members of a limited liability company, if they own at least 30 percent of the company
- Partners that own at least 30 percent of a limited partnership
- Sole proprietors
- Up to three members of a family-owned business
The bill requires any construction services provider requesting exemption, which has not been issued a valid license from the Board of Licensing Contractors, to obtain first a construction services provider registration from the Secretary of State. They may then apply to the Secretary of State's office either in person or online for an exemption. No more than three persons on any one commercial job are eligible for an exemption. The bill also requires the provider requesting an exemption be current in paying all taxes.
The cost, under the bill, would total $200 every two years for a construction service provider registration and exemption. A construction service provider that has been issued a license by the Board of Licensing Contractors would pay $100 every two years for an exemption. Costs incurred by a construction service provider will be significantly less than a worker's compensation insurance premium based on the construction service provider's payroll. The bill also increases the penalties against an employer engaged in the construction industry who fails to comply with the law.
Finally, the bill creates an offense for an employer knowingly to coerce a job applicant to obtain a worker's compensation exemption or to fire an employee due to failure to receive an exemption. The proposal establishes a task force that will study the effects of employee misclassification in the construction industry.
The bill is supported by the National Federal of Independent Businessmen and the Home Builders Association of Tennessee.