TN Attorney General OpinionOver the past two months, I have received a few inquiries from small business owners about an amendment to Tennessee’s workers’ compensation laws.  The primary question is whether the new law, which takes effect on December 31, 2009, will require a sole proprietor to carry workers’ comp insurance on himself?  (Traditionally, there was an exclusion for sole proprietorship under Tennessee law.)

According to the recent Tennessee Attorney General Opinion No. 09-173, the answer to the above question is a resounding, "YES."  Based upon the AG’s opinion, here is how the law now stands:

  1. If you are a general contractor or subcontractor, you must provide workers’ compensation insurance coverage for your employees. ("Any person engaged in the construction industry, including principal contractors, intermediate contractors and subcontractors, shall be required to carry workers’ compensation insurance.")
  2. If you are a sole proprietorship … and you have no employees and you are performing the work yourself … you are required to carry workers’ compensation insurance on yourself, unless: (a) you contract directly with the homeowner; or (b) you are working on your own residence.

It will be interesting to watch how the construction industry responds to this issue.  The legislative history of the amendment reveals that the change in the law was prompted by a need to ensure that all subcontractors and employees working on a construction site were properly covered by workers’ compensation insurance.  According to the legislative discussion, some employers were purportedly avoiding paying for coverage by claiming that their employees or subcontractors were actually sole proprietorships.

Question: What’s happening in your state on this issue?