Aloha Pools & Spas, Inc. v. Employer's Insurance

Tom Glaze, Justice,

dissenting. I dissent because I believe the majority has added an unnecessary step to the determination of an injured worker’s status. The issue presented in this case is whether subcontractors who are sole proprietors or partnerships who fail to provide their prime contractors with a certificate of noncoverage are deemed employees of the prime contractor. Given that the intent of the workers’ compensation statutes is to provide coverage to all legitimately injured workers, I would interpret Ark. Code Ann. § ll-9-402(c) (Supp. 1999) to mean that these sole proprietor subcontractors should be deemed employees for the purposes of workers’ compensation insurance coverage.

The purpose and intent of the workers’ compensation laws is “to pay timely temporary and permanent disability benefits to all legitimately injured workers who suffer an injury or disease arising out of and in the course of their employment, to pay reasonable and necessary medical expenses resulting therefrom, and then to return the worker to the work force.” Ark. Code Ann. § 11-9-101 (b) (Kepi. 1996). Our courts have interpreted Ark. Stat. Ann. § 81-1306 (Repl. 1976), the predecessor to the statute currently in issue, as having as its primary purpose to “protect the employees of subcontractors who are not financially responsible, and to prevent employers from relieving themselves from liability by doing through independent contractors what they would otherwise do through direct employees.” Liggett Constr. Co. v. Griffin, 4 Ark. App. 247, 629 S.W.2d 316 (1982).

Aloha stipulated that it had a number of sole proprietor subcontractors who neither secured .workers’ compensation coverage for themselves nor provided Aloha, their prime contractor, with certificates of noncoverage. Aloha also stipulated that those subcontractors did not employ workers, but rather did the work themselves. If the majority opinion is correct, then if one of these sole proprietor subcontractors who has not secured coverage for himself is injured on the job, then there is a chance that he will not be covered by anyone’s workers’ compensation coverage, and the primary purpose of the workers’ compensation statutes will be defeated. The majority’s declaration that a trial court must apply the traditional “right of control” factors will mean that a sole proprietor subcontractor who, for example, brings his own tools to the job site and gets paid by the job, but is injured while performing some task given him by Aloha, will likely not be able to receive workers’ compensation benefits because he cannot satisfy the test imposed by the majority’s decision.

Ark. Code Ann. § ll-9-402(a) (Supp. 1999) states that “[wjhere a subcontractor fails to secure compensation by this sub-chapter, the prime contractor shall be liable for compensation to the employees of the subcontractor.” However, when the subcontractor is a sole proprietor and is thus the only person performing the work for the prime contractor, the distinction between the “subcontractor” and the “employees of the subcontractor” vanishes. For this reason, the majority’s rebanee on Arkansas Transit Homes, Inc. v. Aetna Life & Casualty, 341 Ark. 317, 16 S.W.3d 545 (2000), which dealt with a subcontractor with multiple employees, is misplaced.

Section ll-9-402(c)(l)(B)(i) (Supp. 1999) provides that a sole proprietor who does not elect to be covered under this statute and be deemed an employee and who delivers to the prime contractor a certificate of noncoverage will be conclusively presumed not to be an employee of the prime. In addition, § 11-9-102 (9) (B) (Repl. 1999), which defines an “employee” for purposes of the workers’ compensation statutes, states that “any sole proprietor or partner of a partnership who desires not to be included in the definition of ‘employee’ may file for and receive a certification of noncoverage under this chapter from the [workers’ compensation] commission.” Thus, to avoid being deemed an employee, a sole proprietor is statutorily directed to take the affirmative steps of obtaining a certificate of noncoverage and delivering that certificate to the prime contractor. In the event that a sole proprietor does not deliver that certificate, he is deemed an employee. The intent of our workers’ compensation laws is to provide coverage for injured workers, and the specific purpose of the statute in question is to prevent prime contractors from avoiding workers’ compensation liability by farming out work to workers who are not direct employees. Why, then, should we make it easier for prime contractors to avoid liability by making it harder for sole proprietor subcontractors to be considered employees?

Because I believe that sole proprietor subcontractors, who do not present the statutorily required certificate of noncoverage to their prime contractors, should be deemed employees of the prime for purposes of workers’ compensation coverage, I dissent.