In 2009, HBA Government Affairs Chair Matt Bailey and the committee members have been researching and meeting with various elected officials and government agencies (including the state Attorney General’s office) in regard to the issue of non-compliance with the workers’ comp coverage requirement for companies in construction. The ultimate goal is to improve compliance with state law and prevent unfair competition from those businesses that either (1) knowingly opt not to carry required work comp coverage or (2) genuinely but mistakenly believe they are exempt because they do not understand state law’s requirements.
Thanks to the efforts of Rep. Jay Wasson, your HBA had one of its most productive meetings to date on this issue with the Deputy Director of the Missouri Dept. of Labor and Industrial Relations and the Chief of Operations for the Division of Workers’ Compensation. Rep. Shane Schoeller also attended the meeting and was very helpful in communicating about this issue, thanks to his past experience as Government Affairs Director for the HBA of Greater Springfield. In addition to HBA staff, HBA President Rusty MacLachlan and President-Elect Matt Bailey also were in attendance.
The HBA focused its comments on administratively changing the Affidavit of Exemption for Workers’ Compensation Insurance Pursuant to 287.061 (download form by clicking here.) In any jurisdiction that issues business licenses, if a construction-related company/contractor does not provide proof of insurance, the licensing entity is required to provide the business with this affidavit form, which the business may sign to confirm it is exempt from the state requirement to carry workers compensation insurance. In its current format, this affidavit leads many in the construction industry to falsely and/or mistakenly declare they are exempt from Missouri’s requirement to carry workers’ compensation insurance. Affiants check the first box (“sole proprietor with no employees”), believing that they qualify because they are a sole proprietor and they have no direct W-2 employees. What is not clear on the form is that Missouri workers compensation law holds a broader definition of “employee” than is most commonly assumed. Nearly all of these affiants utilize subcontractors, family members, or volunteers – any one of which would, in most cases, meet the definition of “employee” for the purposes of work comp coverage.
Within the scope of Workers’ Compensation law, Missouri recognizes the doctrine of “statutory employment”, i.e., recognizing that the employees of the second company are deemed to be employees of the first company in a subcontracting arrangement. This means that even when a general contractor does not have a traditional W-2 employee, the business may meet the definition of having an “employee,” and therefore is required to maintain workers’ compensation insurance coverage, as long as all of these requirements are met:
- work is done under contract (either express or implied, oral or written);
- work is done by the second company’s employees that the first business has a right to control; and
- the work is in the operation of the usual business of the first business.
Making these changes to the form would educate those who unknowingly believe they are exempt and ultimately improve overall compliance and consumer protection. Making the signed forms available electronically would allow contractors and homeowners to check on claims of exemption. The officials the HBA met with also suggested calling this toll free number to verify proof of workers’ compensation insurance, and to report non-compliance with the state requirement for construction related companies: 1-800-775-2667. The Division is also working on a web-based search mechanism to verify work comp coverage. This would be helpful in those jurisdictions with permitting, but without a licensing process, to check proof of compliance with the work comp law prior to issuing a permit.
If you have questions or comments about this issue, you can email Government Affairs Chairman Matt Bailey by clicking here.