(Written by Jack Milarch – NMHBA EVP/CEO – Originally published in the October 2011 Housing Journal)

Workers’ Compensation Administration Reverses Stand On No-Employee Contractor Coverage Requirements

Newly-appointed Workers’ Compensation Administration (WCA) Director Ned Fuller has reversed a longstanding WCA position requiring ALL licensed contractors, even those who have no employees, to carry a workers’ compensation policy.   At a recent “brown bag lunch” meeting Fuller explained that he is starting over on this and other issues which had been dictated by accumulated memos and positions of prior directors. In regard to this particular issue Fuller explained that his attorneys have read the statute and believe that the former requirement is not supported by law. A recent court case also rendered a similar opinion. (That decision is being appealed, but the appeal has not yet been taken up by the Court of Appeals.)

The portion of our workers’ compensation act which addresses contractor coverage requirements uses “employees” as the trigger for coverage requirements, as can be read in the following (abbreviated by me) excerpt from our state law:

52-1-6 A. The provisions of the Workers’ Compensation Act…shall apply to employers of three or more workers; provided that act shall apply to all employers engaged in activities required to be licensed under the provisions of the Construction Industries Licensing Act…regardless of the number of employees…

WCA has posted a new form on their web site at http://www.workerscomp.state.nm.us/pdf/cid_sole.pdf and this form is required to be filed with WCA in order to take advantage of the exemption for sole-proprietor, no-employee contractors. The form includes the following statements to be affirmed by the contractor electing this exemption:

– I own all the assets of my business and am solely liable for the debts of my business.

– No one works for me in my business.

– I have a license from the Construction Industries Division and I am engaged in business activities that fall under the Construction Industries Licensing Act.

– I understand that if I decide to hire any employee, even if on a temporary basis, I am required to buy workers’ compensation insurance immediately and to notify the Workers’ Compensation Administration.

– I understand that I may face significant monetary penalties, up to $1,000 for each occurrence, and that my business may be shut down if I fail to secure workers’ compensation insurance upon hiring an employee, even temporarily.

– I also understand that if I do hire an employee and fail to obtain workers’ compensation insurance, I may be responsible for the costs associated with any claim for workers’ compensation benefits by such employee, including the costs of medical and disability payments.

– I further understand that by making this election not to accept the provisions of the Workers’ Compensation Act and Occupational Disease Disablement Law, I will not be entitled to workers’ compensation benefits from the Uninsured Employers’ Fund.

 While coverage is no longer required by the state for some contractors, many banks and the G.C.’s insurance carriers may still require coverage, including coverage for every subcontractor on their job site regardless of whether the sub has employees or not. How this will be handled between the various general contractors and their subs is for them to decide. I highly recommend you check with your bank and your carrier/agent to see what their policy regarding this will be in light of the change. For subcontractors I highly recommend you check with your G.C.s to see what their requirements will be.

For anyone attempting to ascertain whether or not a business has workers’ compensation coverage I recommend getting the documents directly from the carrier/agent of the business in question rather than from the business itself because, unfortunately, forged documents are popping up occasionally.