The Attorney General of Texas
November 12, 1980
MARKWHlfE
Atlomey aenenl
Honorable Jimmy blankim Opinion No. W-271
Chairman, House Employment
Practices Committee Rer Obligations of a general con-
House of Representatives tractor to a s&contractor mder
Austin, Texas 787ll the workers’ compensation laws
Tel-.5uiam
Mm. TX. 75505
Dear Mr. Xankim:
El4m34544
Ycu bve asked three questions concern* a general contractorb
obligations to a subcontractor m&r the workers’ compensation laws, article
6306, et set, V.T.C.8. We will assume for purpaes of this discussion that
the &contractor you inquire abcut b a bana fide independent contractor,
who is not deemed an WemployeeDwithin section 1, article 6309, V.T.C.S.
Your first question is whsther, pursuant to article 8307, section 6,
V.T.C.S., a general contractor is responsible for obtainhg workers’ com-
pensation imurance fa a s&contractor who obtains oDverage for his
employees but not for himself. Article 8307, section 6 p~~idss in pertinent
part:
lf my s\bscriba to this law with the cur- md
intention of avoidi~r my liability impmed by its
miTmlh.Euims terms s&lets the whole cr any part of tha wak to. . .
Usuk TX 7-1 GjG&contractor, then in the event my employd of
515a55~7
such s&-contractor sustains an injury in the course of
his employmmt ha stmR be &emed to be md taka
fa~purpasesofthblarr~DbeemplogCofthe
srbscriba. . . . (Emphasis added)
Section 6 has not been amended since its enactment in 1917.
The mderllned language clearly indiclrtes that a &contractor%
employees are deemed to be employees of a general contractor cnly when
the contractor ulilizxe a s&uzontractor “with the purpcee ad Intentian of
avoid& any Rabilitf imposed by the workers’ compensation laws. Abosnt
proof that the contractor tms s&let work with such purpose md intention,
the s&contractor% employees will not, in the event they sustain h&y ln
the course of
contractor. Un
p. 861
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Honcrablr Jimmy Mankln - P-r Two @W-271) ’ .
Imurance Association v. Harper, 249 S.W. id 677 (Tax. Civ. App. - Dallas l952, writ
rePd nr.e.X II the Nwontractor’r employees are not considered to be employees of
the general contractor, then the iatter ha IID ob&ation to obmin workers’
compensation &trance fa them.
Even if it is proven that a contractor utilized a s-tractor la the purpose of
avoid@ liability, however, it dses not follow that the contractor has my obligation
with mspect to the s&contractor, as opposed to the s&contractor2 employees.
Article 8307, section 6 may, for purposes of the workers’compensation laws, transfam
a subcontractor% employees into employees of the general contractor, but it does not
perform the same frnction with respect to the &contractor himself. As the court
observed in Houston Fire & Casualty Company v. Farm Air Service, Inc., 325 8.W. 2d
860 (Tex. Civ. App. - Austin 1959, writ rePd n.r.e.h
(Section 61 does not purport to mske the s&contractor such
employee but anly makes an injured employee of the sticon-
tractor sn employee of the s&scriber la all purposes of the
. compensation law. Here appellant cndertakes to extend the
provisions of the section 5) Bs to make the independent
contractors (s&contractors) employees of the s&sa~ber. This
would be writing a pmvision into the section that the
Legislature did not see fit to include therein. . . .
325 S.W. 2d at 665. Accordi@y, because section 8 &es not make a s&contractor an
“employee” of the general contractor, we conclude that the latter would mt be
obligated to obtain workers’ compensation insurance Cw a s&contractor who chooses
not to obtain such coverage fa himself.
Your second question is whether a general contractor must obtain wrxke&
compensation irwurance la a Meontractor which b a partnership consisting of three
persons snd no employees. As we stated above, article 8307, secticn 6 applies cnly to
a s*contractor% employees. Since your question assume3 that the partnership turn no
employees, the partnership could be deemed en “employee” of the general contractor
c&y if the partners themselves are employees. However, as the court stated in Powell
v. Vigilant lrwurence Company, 577 S.W. td 364 tTex. Civ. App. -Tyler 1879, no mr
A partner is usually held to be w employer and therefore he
cannot be slid to be m employee es contemplated by the
Wakers’ Compensation Act. . . unless the iruursnce contract
shall specifically include the partner by endorsement thereon.
Art. 8309, sec. 1~
577 S.W. 2d at 366 (citations omitted). Since the ticontractor is a partnership with
no employees and the psrtners themselves are rot ‘employeesa within ths workers’
compensation laws, we conclude that a general contractor )as no obliption to obtain
workers’ compensation coverage for the partnership.
p. 862
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Honombie Jimmy Hankins - Page Tlwe (HJ-271)
Your last qusstion b whether, if a Fneral contractor &es obtafn worka&
compensation lrawsnce for a s&contractor ad his employees, an insurance company
may base its premium ~1 the gross payment to the sticcntractor. Since dcontrac~
usually state a firm oontract price la the completed wcrk, the gross payment to the
s&contractor will likely include items such m overhead, equipment, material and
other such eqwnses in addition to dada.
The statutes provide little @dance in this inquiry. Article 5.55, et se& of the
Insurance Code, which vests control over premiums la workers’ compensation
irwurance in the State Board of bwurance, merely requires that mtes be just and
reasonable Article 5.80 pmvicks that the barrd “shall determine tmzards tg classes
and fix suoh rates of premium spplicable to the payroll in each of such classe~.~
(Emphasis addedL
The Texss Workmen’s Compensation and Employers’ Liability Insumnce Manual,
which is published by the National Council cn Compensatmn, recognizes that premiums
based upon factors other than payroll would nscessarily be inflated. It requires that
premiums QI workers’ compensation policies be calculated ~1 the basis of services
rendered by employees. We are informed that the Manual is consistently relied rpcn
by the State Rcard of lrwurance and that it accurately mflects the board’s
understandirg of the legal requirements in this area. Courts will generally @old
interpretations placed upon laws by an agency charged with the enforcement of those
laws. Tarry Moving & Storage Co. v. Railroad Commission, 359 S.W. 2d 62 (Tex. Civ.
4~. - Austin l962), e, 367 S.W. 2d 322 (Tex. 1963). We therefore conclude that an
insurance asrrier may mt base its premiums a~ the gross payment to the
s&contractor.
SUMMARY
A general contractor is not obligated tmder article 8307,
section 6, V.T.C.S., to pu&ase workers’ compensation
hwmance for a &contractor who chooses mt to obtain
coverage for himself, nor is a general contractor required to
obtain workers’ compensation average for a subcontractor
which b a partnership consisting of three persons ad rp
employees. lf a general contractor &es obtain workers’
compensation insurance for a s&contractor ad the s&con-
tractor’s employees, an ~insmce company may mt base its
premiums on the gross payment to the s&contractor.
verYmverYtP&
MARK WHlTE
Attorney General of Texas
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Honomblo Jimmy Yankim - Page lour (M-271)
JOHN W. FAINTRR, JR.
wst Assistant Attomey Qeneral
RICHARD IL GRAY Ip
Executive Assistant Attorney General
Prepared by Jan Bible
Assistant Attorney General
APPROVRlh
OPlNlON COMMKTRR
Susan L. Garrison, Acting Chairman
Jon Bible
Rick Gilpin
Charles J. Maddox, Jr.
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P. 864