(Written by Jack Milarch – NMHBA EVP/CEO – Originally published in the April 2008 Housing Journal)

Contractor Successfully Challenges Workers’ Compensation Rule

Do Sole-Proprietor Contractors Who Have No Employees Need A Policy?

As many readers of the Housing Journal know, one of the more controversial and contentious rules of the Workers’ Compensation Administration (WCA) is their requirement that all contractors, regardless of whether or not a particular contractor actually has any employees, must buy a workers’ compensation policy. That may be changing due to a very recent decision by Court of Appeals Judge Geraldine Rivera.

According to the case filing, in June of 2007 Albuquerque contractor Bjorn Jorgi of Bjorn Construction was ordered by WCA to get a workers’ compensation policy and was fined $250 for violation of the law. Jorgi obtained coverage as ordered, but appealed the decision of the WCA Director to the District Court seeking to overturn the ruling.

Interestingly, Judge Rivera notes in the ruling that “before addressing the merits of this issue, however, this Court notes that this appeal is not properly submitted for review” and additionally “there is no statutory right of appeal to the district court from a decision of the Director of WCA.” The judge then goes on to write that, all that notwithstanding, she believes the NM Constitution allows her to rule on matters brought to her by aggrieved parties, at her discretion, and “in the interest of fairness to Mr. Jorgi” she will issue a ruling on this one.   (I add this detail to give some courage to those of us who tend to feel our courts are ivory tower institutions that only respond to big name attorneys who can speak to them in Greek. Judge Rivera’s decision to look at this case and her statements alone are probably worth a Housing Journal column, but wait, there’s more!)

Judge Rivera writes that Section 52-1-6(A) requires “all employers engaged in activities required to be licensed under the provisions of the Construction Industries Licensing Act…regardless of the number of employees ‘to maintain workers compensation insurance’” and further writes, “By plain language (this section) applies only to employers engaged in construction activities.”

Judge Rivera notes that nobody has presented any evidence that Mr. Jorgi employs anyone. She goes on to write, “This Court recognizes that there may well be unscrupulous business owners in the construction industry who hold themselves out to be sole proprietors but who surreptitiously employ one or more workers. However, the solution to this problem is not to require all sole proprietors in the construction trade to supply proof of workers’ compensation insurance, particularly when that insurance is not required to cover the sole proprietor himself.”

Judge Rivera’s final words in the case are “The decision of the Director of WCA is Reversed.”

Now what? For all you sole proprietor contractors out there, don’t cancel your policy just yet. Many workers’ compensation carriers, including our affiliate Builders Trust, insist that any worker on the general contractor’s job site will cause somebody to pay premium. Therefore, if you are a sub, your general contractor may still insist that you have your own policy, never mind how this case eventually plays out. And if you EVER have even a part time temporary helper it makes little sense to go without coverage. WCA Director Glenn Smith, who brought this case to the attention of a gathering of construction association executives and lobbyists recently, said he is debating whether to appeal this decision or just go ahead and change his rules.

I know many of my general contractor sole proprietor friends would urge Director Smith to follow Judge Rivera’s ruling.

We will keep you updated with further news on this development in the next Housing Journal.