Request By:
J. W. Hatfield, President
Associated Insurance Service, Inc.
Suite 228 Professional Towers
6010 Dupont Circle
Louisville, Kentucky 40207
Opinion
Opinion By: Robert F. Stephens, Attorney General; Martin Glazer, Assistant Attorney General
You state that you have several construction or similar firms that have their subcontractors voluntarily sign Workmen's Compensation form 4's, but do not have the employees of the subcontractors sign the form. You have been told that there is a question as to the legality of these form 4's being signed by the subcontractors. And, you state that the Department of Labor will not give you a direct answer as to the validity of this practice.
Ordinarily, we do not render official opinions to correspondents who are not public officials, unless the subject matter is of such general interest that an official opinion is warranted. The question raised by your letter appears to warrant the issuing of a formal opinion.
The form 4's that you speak of are forms for employees (not employers) to sign indicating that they (the employees) are electing not to be covered under the Workmen's Compensation Act.
We need to explain the background and history of this practice in order to understand why it is required.
When the Workmen's Compensation Law was drastically amended in the 1972 Session of the Kentucky General Assembly, the law was made compulsory for all employers, with certain exceptions, whether they had one or 100 employees. Excepted from the employer coverage were employers who had one (1) domestic servant in a private home. If there were two or more domestic servants employed for 40 hours or more a week, they would be covered; (2) any person employed not exceeding 20 consecutive work days to do repair work on a private home; (3) any person performing services in return for sustenance only received from a religious or charitable organization; (4) any person who is covered by liability under federal law -- except black lung; (5) any person employed in agriculture; (6) any person who elects not to be covered as an employee; and (7) any person in a car pool going and coming from work (KRS 342.650).
The reason the employee was permitted to opt out of the Act was to comply with Kentucky Constitution Section 54, which provides:
"The General Assembly shall have no power to limit the amount to be recovered for injuries resulting in death or for injuries to persons or property."
Since the Workmen's Compensation Act limits the right to recover to certain sums and in a certain manner, any law which did not give the employee the right to choose to accept the Act might be in violation of Section 54 of the Kentucky Constitution. Therefore, the employee was permitted to choose. The employer was not given that option because his compulsory participation in Workmen's Compensation did not violate Section 54.
However, where an employer has all of his employees sign the waiver, there is a question whether such wholesale waiver is voluntarily made by the employees, or rather is required by the employer.
After all, why would most of the employees intelligently waive Workmen's Compensation? Without such coverage, an employee who is injured must prove the employer was negligent and he, the employee, was not negligent in order to collect damages in a civil suit. And, he would probably receive a much smaller judgment than he would get from benefits under Workmen's Compensation. Under Workmen's Compensation Law, an employee does not have to prove negligence or his lack of it. He only needs to prove the extent of a compensable, work-related injury or disease.
KRS 342.395 provides, in part:
". . . The workmen's compensation board shall not give effect to any rejection of this chapter not voluntarily made by the employe. . . ."
KRS 342.610(2) provides, in part:
"A contractor who subcontracts all or any part of a contract and his carrier shall be liable for the payment of compensation to the employes of a subcontractor unless the subcontractor primarily liable for the payment of such compensation has secured the payment of compensation as provided for in this chapter. . . ."
If a prime contractor hires a subcontractor who has a one or two man operation and the subcontractor has properly filed a rejection notice for each of his employees, the prime contractor is still exposed to liability under the Act. The subcontractor may hire someone who did not voluntarily reject the Act. Those people who had rejected could rescind their rejections and withdraw them, or the sub may have a relationship with another sub who the first one thinks is an independent contractor, but who, in reality, is an employee of the first sub.
In all those cases, the prime contractor is exposed to liability under his insurance contract (or even without such contract) if he does not protect himself by requiring each sub to become insured before he will do business with his.
In short, a prime contractor who contracts with a subcontractor without requiring Workmen's Compensation insurance coverage of the subcontractor is taking a risk of the prime contractor's liability. Even where the subcontractor has all his employees reject the Workmen's Compensation Act or has no employees, the prime contractor is still exposed to future contingencies in relation to that subcontractor.
We enclose a prior opinion, OAG 77-527, which deals with this subject as it related to coal mines and their employees. I trust this has clarified the matter for you.