Subcontractor coverage

The purpose of this information is to explain the responsibility you, as a prime contractor, may have for providing workers' compensation coverage for your subcontractors and their employees.

Independent business or subject workers
Subcontractors may be considered your subject workers for premium and claim purposes, unless they are independently established in business AND meet at least one of the following conditions:

1. The work to be performed is subject to regulation by the Construction Contractors Board (CCB) or the Landscape Contractors Board (LCB), and the subcontractor is registered with the CCB or LCB. Such registration is a conclusive presumption of independent contractor status for contracts performed on or after September 9, 1995.
2. The contract work is not customarily associated with your business or trade, and the subcontractor does not meet the definition of "worker" in ORS 656.005(30). (See Direction and Control Section)
   EXAMPLE
   A retail store owner lets a bid to a subcontractor to design and write a computer software program for inventory control. The programming work is not considered part of the retail trade, and the subcontractor is not your "worker" since he/she meets the points addressed in the Direction and Control Section.
   EXAMPLE
   A retail store owner wants to expand sales by contracting with a traveling salesperson who would be paid only on commission. This employment, although a specialized type of retailing, is included within the store's retail trade. The salesperson would be considered to be a "worker" and not as a person with an independent business. Their work is customarily associated with your business or trade, but the subcontractor has his/her own workers' compensation policy in effect prior to the start of the work.
3. Their work is customarily associated with your business or trade, but the subcontractor has her own workers' compensation policy in effect prior to the start of the work.
   EXAMPLE
   Oregon law tries to establish responsibility before the job starts and allows no change in responsibility during the course of the job. If the subcontractor proves the existence of a policy before the job starts, the prime contractor will not be responsible for the subcontractor or the subcontractor's employees. This is true even if the subcontractor's policy expires before the job ends. Likewise, if a subcontractor obtains a policy after the job begins, this action does not relieve the prime contractor of responsibility under the law. 
4. Their work is customarily associated with your business or trade, but they do not meet the definition of "worker." (See Direction and Control Section).
5. Their work is customarily associated with your business or trade, they do meet the definition of "worker," and yet they are specifically exempted by workers' compensation law in ORS 656.027.
   Exempted occupations
   Some occupations which are within the definition of "worker" have been specially exempted from the workers' compensation law. These include certain owner/operators of trucks for hire, log trucks, and dump trucks; certain religious or charitable workers, certain news carriers, and certain taxicab and medical transportation drivers, among others.
   Federal coverage
   On jobs subject to the Federal Longshore and Harbor Workers' Act (LHW), the prime contractor is responsible for both the subcontractor and his or her employees, unless the subcontractor provides his/ her own policy with that type of coverage specifically endorsed.

 

Direction and control - A critical element
The degree to which the subcontractor is under the direction and control of the person "letting" the contract is the main test used to determine if the subcontractor is a worker. (Please note that if the subcontractor is registered with the Construction Contractors Board or the Landscape Contractors Board, the evaluation of direction and control is not necessary. It is a necessary element in evaluating other types of subcontractors.)

If you, as the prime contractor, can answer "yes" to all the following questions, the subcontractor is most likely an independent contractor for workers' compensation purposes and not your "worker."

1. Does the subcontractor perform the same services for others, and not primarily for you?
2. Does the subcontractor perform the job without you ever offering restrictions as to how to do the job?
3. Does the subcontractor furnish his/her own supplies used in the job?
4. Does the subcontractor determine his/her own work hours and schedule?
5. Does the subcontractor provide and maintain his/her own equipment and tools?
6. Does the subcontractor advertise?
7. Is the subcontractor to be paid a fixed "bid" or "contract" amount rather than being paid on an hourly, daily, or piecework basis?
8. Is the full bid or contract amount agreed to before work commences?
9. Is the nature of the work separate in location or duties from those operations and tasks done by you, your employees, or other subcontractors on the job?
10. Is the subcontractor registered as required by various regulatory or taxing authorities?
11. Does the subcontractor perform the job completely without assistance from you, your employees or other subcontractors?
12. Does the subcontractor have the right to employ assistants without your permission in order to complete the job?
13. Does the subcontractor have financial bonding or liability insurance for the work performed?
14. Does the subcontractor pay all state and federal withholding taxes, social security and other taxes?

Independent contractors with employees
If a subcontractor who is otherwise an independent contractor, has employees but no workers' compensation insurance policy, the prime contractor generally is responsible for those employees, and premiums will be charged for such workers. However, if the subcontractor is registered with the Construction Contractors Board or the Landscape Contractors Board, the prime contractor is not responsible for those uncovered workers.

It takes three
Three parties need to be involved when determining if a subcontractor qualifies as an independent contractor under the law:

1. You, the prime contractor
2. Your subcontractor
3. Your insurance carrier

As your insurer, SAIF Corporation is liable for all benefits payable under your policy. Even if you and your subcontractor have a written agreement stating that the subcontractor is independent, this is not binding on either the courts, or the insurer, if an injury occurs.

This is why we attempt to identify responsibility for subcontractors before work begins and injuries occur. This process reduces litigation and allows you to consider workers' compensation costs when negotiating contracts.

Protect yourself

1. Always obtain a current Certificate of Coverage from subcontractors who indicate they have a workers' compensation policy. Keep these certificates with your records. If SAIF insures your subcontractor, you can also verify coverage by telephoning one of our local offices. The dates of the policy should include the anticipated duration of the subcontracted job.
2. For construction work subject to the Construction Contractors Board (CCB) or Landscape Contractors Board (LCB) obtain the CCB or LCB registration number or photocopy of the subcontractor's card. You may wish to contact the CCB or LCB to verify that the registration is still current.
3. Make sure the work agreement with your subcontractor is in writing.
4. You must allow the subcontractor freedom to be an independent business person. Every restriction you impose brings the subcontractor one step closer to being your subject worker.
5. For subcontractors without a workers' compensation policy, apply the independent contractor questions and ensure they meet each item. (See Direction and Control Section)
6. For unusual subcontractor situations, contact us well in advance of beginning the job. Even if we determine that the subcontractor is your worker, this gives you the opportunity to either change the job specifications or solicit additional bids from subcontractors who might meet independent contractor exemptions.

When you need help
Contractor coverage can be a very complex subject. Never hesitate to contact your nearest SAIF office whenever you need assistance or have questions.

This material is designed to provide accurate and authoritative information regarding the subject matter covered. It is distributed with the understanding that SAIF is not engaged in rendering legal or accounting advice. If legal or accounting advice is required, the services of a competent professional person should be sought.