Month: September 2018

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Your Responsibility for Worker’s Compensation May Extend Further Than You Think

Workers’ compensation obligations may extend to cover individuals beyond those you consider to be your traditional employees. While this article considers such obligations under the Virginia Workers’ Compensation Act (VWCA), the consideration may be applicable in other states as well. Consult with an attorney licensed in your state to discuss the issue.

One of the aims of the VWCA is to prevent employers from avoiding responsibility for employee injuries by contracting work out to others. To accomplish this, the VWCA designates some employers as “statutory employers” in certain circumstances. Statutory employers are responsible for injuries under the VWCA just like traditional employers. The statutory employer doctrine is normally implicated where the injured worker is an employee of an uninsured subcontractor. Understanding whether you are considered a statutory employer on a particular project is an important part of ensuring you are prepared to accept that work. This is especially true in the construction context, where contracting and subcontracting is the norm.

Under the VWCA, a statutory employer is one who contracts for another party to do any work that is “part of his trade, business or occupation.” Va. Code § 65.2-302(A). Thus, the key is whether the injured worker was performing work that was part of the potential statutory employer’s “trade business or occupation.” Courts in Virginia often rely on three different inquiries to aid in answering this question.

The first is often called the “normal work test.” This test asks whether the activity in that industry is normally conducted by employees of the project owner, rather than independent contractors. If it is, then the activity is considered part of the employer’s trade, business or occupation. This makes the employer a statutory employer and liable to the injured worker under the VWCA.

The second inquiry is the “subcontracted fraction test.” This test considers whether the work engaging the injured worker was a subcontracted fraction of a main contract. In this case, a general contractor, for example, can be the statutory employer of an injured subcontractor—even if the activity was not part of the trade, business or occupation of the project owner—if the subcontractor was doing work that was clearly part of the main contract.

The third inquiry is the “stranger to the work test.” This test applies when the injured worker is an employee the project owner or general contractor, and a subcontractor was somehow responsible for the injury. The subcontractor is liable under the VWCA if it is not a “stranger” to the particular business of the owner. For example, the Virginia Supreme Court considered a subcontractor who installed an automatic door at an automobile manufacturing plant that injured an employee of the plant owner to be a stranger to the owner’s work of manufacturing and selling automobiles. In that case, the subcontractor was not covered under the VWCA.

Courts have noted that making these determinations is highly dependent on the facts and circumstances of each case. Accordingly, it is important to discuss the issue with an experienced attorney who is familiar with what sort of facts and circumstances should be considered, and who can help you determine what impact any statutory employer issues may have on your business or project.

General Contractors: Important Licensing Considerations

Businesses must become licensed before acting in a contractor’s capacity.  The ability to issue licenses serves an important function of protecting public safety by ensuring that contractors meet established minimum competency requirements.  When applying for licensure, important considerations include (a) where the work will be performed, (b) the type of work the contractor plans to do, (c) the size of its projects, and (d) the clients it plans to service.

Location.  Before acting as a contractor, a business must obtain a license in the location where the work is to be performed.  Each state has its own licensing requirements – most requiring state-wide licenses, some requiring municipality-specific licenses, and a few requiring both state and municipal licenses.

Type of Work.  A business desiring to become licensed must evaluate which trades it plans to perform or coordinate.   Nearly every state issues both expansive general contractor’s licenses, which encompass a variety of trade areas, and also specialized licenses.  Licenses limited to specialties are typically easier and less expensive to obtain, requiring less reference letters and more limited examinations.  The broader general contractor licenses allow room for growth and more flexibility as new job opportunities arise but are more difficult and usually more expensive to obtain with lengthy and comprehensive examinations and verifiable work experience requirements.

Size of Projects.  Most contractors’ licenses are divided into classes based on the contract price of the contractors’ projects.  The selection of a classification dictates many of the prerequisites for licensure.  For example, a state or locality typically requires information regarding the financial worth and working capital of a business before they will issue a license.  Lower classifications may simply require signed/notarized financial statements whereas upper classifications may require professionally prepared and audited financial statements.  Furthermore, upper classifications require a demonstration of higher working capital than lower classifications and may also require a contractor to maintain large (and expensive) bonds.

Clients.  The clients that a contractor expects to service can also dictate the license(s) needed.  For example, some (but not all) states require specific licenses when performing public works contracts.

A contractor must be careful to ensure that it obtains the appropriate license(s) that encompass the type and size of its anticipated work and also the clients it intends to service.  Exceeding the scope or classification of a license can be both dangerous and costly – leading to expensive penalties and possible suspensions or terminations of licenses, not to mention damage to the reputation of the business.  Planning ahead will save time, expense, and face later.

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Contractor Safety Continues to Improve, but Trends Continue

Various aspects of construction are inherently unsafe. The Federal Occupational Safety and Health Administration (OSHA) therefore continues to maintain focus on the construction industry in an ongoing effort to alleviate workplace incidents.

Part of that efforts includes inspection and citation for workplace safety violations. For fiscal year 2017 (October 1, 2016 through September 30, 2017), Federal OSHA’s “Top 10” most frequently cited OHSA standards were as follows (with included regulatory reference and link to further related information available from OSHA noted for each):

  1. Fall protection, construction (29 CFR 1926.501) [related OSHA Safety and Health Topics page]
  2. Hazard communication standard, general industry (29 CFR 1910.1200) [related OSHA Safety and Health Topics page]]
  3. Scaffolding, general requirements, construction (29 CFR 1926.451) [related OSHA Safety and Health Topics page]
  4. Respiratory protection, general industry (29 CFR 1910.134) [related OSHA Safety and Health Topics page]
  5. Control of hazardous energy (lockout/tagout), general industry (29 CFR 1910.147) [related OSHA Safety and Health Topics page]
  6. Ladders, construction (29 CFR 1926.1053) [related OSHA Safety and Health Topics page]
  7. Powered industrial trucks, general industry (29 CFR 1910.178) [related OSHA Safety and Health Topics page]
  8. Machinery and Machine Guarding, general requirements (29 CFR 1910.212) [related OSHA Safety and Health Topics page]
  9. Fall Protection–Training Requirements (29 CFR 1926.503) [related OSHA Safety and Health Topics page]
  10. Electrical, wiring methods, components and equipment, general industry (29 CFR 1910.305) [related OSHA Safety and Health Topics page]

The Top 10 are all things that should already be addressed in contractor and project safety plans and training; but their identification by Federal OSHA as the most commonly cited violations give further reason to emphasize these items in both plans and training.

Ideally, such violations eventually become eliminated in the industry, but realistically accidents will continue to happen. Given that, prior consideration of them and incorporation into plans and training can effectively reduce their incident and, when inspections occur, demonstrate company proactiveness to have avoided such incidents.

Vandeventer Black’s Construction and Labor Practice Group attorneys are available to assist with construction site incidents and other work safety guidance matters.

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