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How Do Construction Companies Avoid Paying Workers’ Comp?

Construction workers have some of the hardest, riskiest jobs in the United States. This is why there are rules concerning safe construction sites and safe equipment to be used there. However, this does not prevent construction workers from sustaining injuries on some projects. In 2019, about 20 percent of worker fatalities in the private industry happened in construction.

Unfortunately, many employers, including construction companies, avoid paying workers’ compensation when their workers sustain injuries on site. They find several ways to skirt this responsibility. Below, we explore which companies must have workers’ compensation insurance. We also explain how construction companies avoid taking out workers’ compensation for their employees. To find out how to address these issues, contact a Nashville workers’ compensation lawyer today.

Who Must Have Workers’ Compensation Insurance?

According to the Tennessee Workers’ Compensation Law, certain employers must provide workers’ compensation insurance benefits.  This includes:

  • All employers in the construction business or trades that have one or more employees unless they are specifically exempted.
  • Every other employer in the state of Tennessee that has five or more employees.
  • Employers in the coal mining industry must secure coverage if they have one employee.
  • Family members, part-time employees, and corporate officers are included when determining the number of employees if they meet the definition of employee.

Five Ways Construction Companies Avoid Workers’ Comp Insurance

Unfortunately, while construction companies should have workers’ compensation, they often find ways to skirt this. Below, we explore ways they do this:

Misclassification of Employees

A compliance report from the Tennessee Bureau of Workers’ Compensation Compliance Program revealed that construction companies intentionally misclassify workers to avoid paying workers’ compensation. For example, many of them list employees as independent contractors rather than employees and will likely avoid paying compensation when they sustain injuries. 

No Coverage for Out-of-State Workers

Another way construction companies avoid paying workers’ comp is by failing to provide coverage for out-of-state workers. For example, an out-of-state employer could send teams of different employees to work in Tennessee for short periods that do not exceed the current statutory limit. They would, however, remain at the construction site for the period of time needed to complete the project. 

Unfortunately, there are no laws against this practice. As such, employers can get away with this. To mitigate against this, lawmakers recently introduced a bill that requires all construction companies performing work in Tennessee to maintain workers’ compensation insurance coverage throughout that work. 

Misusing the Exemption Registry

The Secretary of State’s office manages an Exemption Registry for construction service providers. The registry helps one-person construction workers sign an exemption from workers’ compensation insurance. This is supposed to help small companies not bleed out unnecessary money. 

However, some employers and insurance agents have taken advantage of this to sign up their employees for the Exemption Registry without their knowledge. Hence, a system that should help individual business owners is now negatively affecting employees. When employers sign their employees for the Exemption Registry, they automatically deny them access to compensation in the case of workplace injuries.

Disregarding Notices of Assessment From the Compliance Program

To mitigate against many of these, the Compliance Program conducts periodic assessments of construction companies. This investigation asks the employers to disclose payroll information, tax documentation, and other financial information. This information helps determine whether or not employers should be penalized. Unfortunately, there are no clear rules about the punishment for not complying with this assessment. Therefore, many employers disregard this notice and simply do not provide the necessary information. 

Utilizing Labor Brokers

Some construction service providers use labor brokers to meet their needs. This broker provides a certain amount of laborers to a general contractor for work on construction projects. The contractor would then pay the broker directly instead of the construction workers. The broker, in turn, takes their share and pays the workers from the remnant. 

Most times, the broker conveniently leaves out insurance over these workers. These brokers allow employers to avoid paying insurance premiums on their workers. It is estimated that insurance carriers lost as much as $296.1 million in 2016 due to uncollected workers’ compensation premiums.

Speak With a Workers’ Compensation Attorney

Workplace injuries can be quite unfortunate as many of them can be prevented. If you are working in a high-risk environment or are involved in a workplace accident, you should immediately contact a Nashville workers’ compensation lawyer. Our experienced workers’ compensation attorneys at Nashville Injury Lawyers will ensure that you get adequate compensation for your injuries. Schedule a consultation with us today to get started.

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