In general, issues relating to employment law occur in all industries. However, some issues are more likely to be raised in certain employment contexts. For example, office work environments tend to give rise to harassment and discrimination claims while wage and hour disputes and workplace safety claims are common in the oil and gas industry. In the construction industry, employers must be especially cognizant of discrimination and harassment claims, employee misclassification claims, workplace safety issues, and wage and hour claims. In the context of workers’ compensation claims, construction projects often create unusual situations due to the contractual relationships between the parties.
Even relatively simple construction of a single-family residence involves several levels of contracting, including between the owner and general contractor, between the owner or general contractor and design team, between the general contractor and subcontractors, and between the prime subcontractors and lower tiered sub-subcontractors. In most circumstances, this would not be an issue. However, when an injured worker makes a workers’ compensation claim, the contractual relationships among the various entities involved in a project can have a significant impact on which party or parties could be liable for the injury.
Under Colorado’s workers’ compensation scheme, an employee injured while performing services within the purpose and scope of his or her employment is entitled to receive compensation for any medical expenses and lost wages. See C.R.S. § 8-40-101, et seq. The purpose of this law is to ensure that the employee receives timely compensation without having to invest time and money into filing a lawsuit. To protect the employer, workers’ compensation is the exclusive remedy for the employee, provided the employer has workers’ compensation insurance and the injury is not intentionally self-inflicted. To further ensure the employee is compensated for an injury, Colorado provides any person or entity conducting business by contracting out work is considered a statutory employer and is liable for workers’ compensation. If the statutory requirements are met, workers’ compensation is the exclusive remedy for each statutory employer.
In a construction context, this workers’ compensation scheme can create issues for the various parties involved. If, for example, an employee of a plumbing subcontractor is injured by falling debris from the roof, the plumbing subcontractor, the general contractor, and the property owner would be statutory employers for the purposes of a workers’ compensation claim. Further, once the compensation claim is paid, the plumbing subcontractor, general contractor, and property owner would be protected from claims resulting from the injury, regardless of which entity paid the claim. This includes subrogation claims brought by a workers’ compensation carrier. However, subcontractors who are not in the same chain of contracting as the plumbing subcontractor could be sued for negligence and/or premises liability. In the example above, both the workers’ compensation carrier and the injured employee could sue the roofing subcontractor and any other subcontractor who may have been involved. The responsible subcontractors would not be able to seek contribution or indemnity from the plumbing subcontractor, general contractor, or property owner because of the protections afforded by Colorado’s Workers’ Compensation Act.
To protect themselves against workers’ compensation related claims, subcontractors must ensure that they have adequate insurance coverage for personal injury matters. If a subcontractor subcontracts out a portion of its scope of work, it must ensure that every entity in the chain of contracting has adequate insurance coverage. This requires more than simply requesting a certificate of insurance. The subcontractor may want to consider having an attorney or its insurance broker review the policy to ensure coverage is adequate or get an affirmative acknowledgement from the carrier that coverage exists. Otherwise, a subcontractor could discover that the entity which caused the injury does not have adequate coverage only after an incident occurs, thereby exposing the subcontractor to a potential claim.
For additional information regarding the effect of Colorado’s Workers’ Compensation Act on the construction industry, feel free to reach out to Jordan Kaplan by e-mail at email@example.com or by telephone at (303) 987-9811.