Contractors Slam New Workers' Comp Law

The new law eliminates workers' compensation insurance payment exemptions for corporate officers, partners, sole proprietors and independent contractors but doesn't affect residential homebuilders. Monthly premiums per worker are an estimated $150.

"The only exemptions removed were in commercial (non-residential) construction over $250,000," Wylie says. "This segment of the business is not experiencing the abuse mentioned, as it is more highly regulated and has a higher demand for skills and manpower."

Wylie says insurance regulators told the Legislature the change would have no impact on compensation insurance rates. "Complete elimination (of exemptions), including residential construction, would reduce overall rates between 10% and 15%," Wylie says.

Exemptions "don't remove a work-injured person from comp protection," the ABC executive says. "It just shifts the costs from an employer to the next highest contractor (prime or general) in the system." Wylie says "that makes their comp insurance cost more, as their carrier has to insure against the risks of an uninsured person filing a claim."

He says the 2002 reform law "also hit contractors in the middle of projects, so the cost of comp on July 1 had to be absorbed by the contractor."

Small company owners with comp on their workforce and owners exempt, "were particularly hit hard," Wylie says. "It should have started Jan. 1, as larger contracts have a longer duration."

ABC opposed the bill in its final form. "Associated Builders and Contractors has historically supported removing all exemptions from workers compensation insurance," Wylie tells GlobeSt.com. "We feel that exemptions create a climate that is ripe for abuse."

He says the incentive to cut labor costs through exemptions "also encourages unlicensed activity, as well as an opportunity to not pay unemployment insurance and FICA."