Legislature(2009 - 2010)
02/16/2009 03:17 PM L&C
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* first hearing in first committee of referral
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HB 22-WORKERS' COMPENSATION: SUBCONTRACTORS 4:49:15 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 22, "An Act relating to requiring subcontractors who do not have employees and who are acting as independent contractors to secure payment for workers' compensation, and to requiring subcontractors who fail to secure payment of workers' compensation to pay additional premiums incurred by contractors because of that failure." 4:49:20 PM PAUL GROSSI, Staff, Representative Harry Crawford, Alaska State Legislature, speaking on behalf of a joint prime sponsor of HB 22, Representative Harry Crawford, stated that the bill would require sole proprietors that are subcontractors to carry workers' compensation on themselves. He offered that this bill would address a long-standing issue that identifies whether a subcontractor is actually a subcontractor or an employee. He stated that in the worst case, a worker is injured, does not have workers' compensation insurance, and files a claim against the contractor. He explained those claims would go to the Workers' Compensation Board to determine whether the injured worker is an employee or a subcontractor. He indicated that if the injured worker is found to be an employee that the employer must cover the Workers' Compensation claim. However, if the Workers' Compensation board finds that the injured person is determined to be a subcontractor, he/she is personally liable or their insurance company must pay the claim. 4:51:34 PM MR. GROSSI related that the more common instance arises when a contractor wins a bid, begins the job, and during an insurance audit, the insurance company requires the contractor to pay additional premiums, which reduces the contractor's profit. The most common complaint is that some contractors cover their employees, but other contractors call their workers subcontractors when in reality they are employees to avoid paying Workers' Compensation premiums and to obtain a bidding advantage. Additionally, the employee affected work in the construction industry, which poses higher risks for injury. In the event the worker is injured and not covered by workers' compensation, the potential exists to shift the cost to a hospital. He opined that in many instances the workers are truly subcontractors. He stressed that this bill removes the uncertainty and removes the doubt of liability and coverage. 4:54:06 PM REPRESENTATIVE HARRY CRAWFORD, Alaska State Legislature, speaking as joint prime sponsor of HB 22, stated that he has worked on this issue since he has served in the legislature. He explained that this issue relates to liability. He stated that many general contractors hire subcontractors with the expectation that the subcontractors hold workers' compensation insurance, and often the subcontractors provide proof of coverage. He pointed out when a subcontractor drops his/her insurance and someone is subsequently injured, that the liability falls on the general contractor. However, he opined, the liability should rest with the subcontractor. This bill requires that the right person has the liability. He offered that it is not imposing a requirement that a sole proprietor acquire insurance for himself/herself. He described a scenario in which a person is building a home and hires a sole proprietor to build a deck. He indicated that the person building the deck is not required to hold workers' compensation insurance. However, if a general contractor builds the home and hires a subcontractor to build a deck that under this bill the subcontractor must hold workers' compensation insurance, he stated. He emphasized that HB 22 erases all doubt as to who is liable. Representative Crawford opined that this bill helps ensure a fair and level playing field for general contractors and subcontractors. 4:56:49 PM CHAIR OLSON announced that HB 22 would be held over for further consideration.