Opinion No.

The Honorable Shane Broadway State Senator 201 Southeast Second Street Bryant, AR 72022

Dear Senator Broadway:

I am writing in response to your request for an opinion on the following questions:

1. Does the law in the State of Arkansas require a construction contractor to maintain Worker's Compensation Insurance to do business in the state?

2. If the answer to the above question is `yes,' when what are the penalties for not maintaining the insurance?

3. How is the requirement to maintain insurance enforced?

RESPONSE

Your first question cannot be answered with a simple "yes" or "no" because it will depend upon the particular surrounding facts, viewed in light of the requirements of the Arkansas Worker's Compensation Law (A.C.A. § 11-9-101 et seq.) relating to an employer's obligation to secure the payment of compensation to its employees for compensable injuries or death. See § 11-9-401 (Repl. 2002).

Arkansas Code Annotated § 11-9-404 (Supp. 2003) states in part as follows:

(a) Every employer shall secure the payment of compensation under this chapter:

(1) By insuring and keeping insured the payment of the compensation with any carrier authorized to write workers' compensation insurance;

(2) By furnishing satisfactory proof to the Workers' Compensation Commission of his financial ability to pay compensation and receiving an authorization from the commission to pay compensation directly.

The term "employer" is defined in A.C.A. § 11-9-402(10) (Supp. 2003). This definition, and the other definitional provisions in § 11-9-402, must be applied to the particular facts to determine whether the construction contractor in question must secure the payment of compensation under the Worker's Compensation Law. Compensation may be secured either through an insurance carrier or through self-insurance, as further set forth in § 11-9-402(a)(2)(A) through (C).

With regard to your second and third questions involving penalties and enforcement in the event an employer fails to secure compensation as required, reference must be made to A.C.A. § 11-9-406 (Repl. 2002). The penalties established by this Code section include a fine of up to $10,000 or a Class D felony. Id. at subsection (a)(1). The Workers' Compensation Commission may also assess a civil fine of up to $1,000 per day of violation. Id. at subsection (b)(1) and (5). If an employer fails to secure the payment of compensation or pay any civil fine assessed under a final Commission order, the Commission may obtain a circuit court order enjoining the employer from engaging in further employment until the employer secures the payment of compensation or pays all civil penalties. Id. at subsection (b)(6).

Assistant Attorney General Elisabeth A. Walker prepared the foregoing opinion, which I hereby approve.

Sincerely,

MIKE BEEBE Attorney General

MB:EAW/cyh