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When an injured employee works for a company that doesn’t have workers’ compensation insurance, some people don’t consider that there may be a whole host of employers – employers with an ‘s.’ Employees might not even know that there is a way to receive compensation for a workplace injury when their employer doesn’t have workers’ comp insurance. That’s because they weren’t aware that there are statutory employers who may have to cover them when their direct employer doesn’t bother to get insurance.
But what is a statutory employer? A statutory employer is a company or general contractor that is legally responsible for providing workers’ compensation benefits to a worker, even if that worker is directly employed by a subcontractor rather than the main company.
The state of North Carolina recognizes a chain of employers, and our legal system favors cases where employers have workers’ comp coverage. This is for public policy reasons: so that employees and taxpayers aren’t left holding the bag when employees are injured on the job. Consequently, when an employer doesn’t have coverage, it is essential to take the next step to identify other actors that can be held responsible for injuries sustained on the job.
The chain starts at the bottom with a link between the direct employer and the employee. Then, you work up the chain to see who gave that direct employer the job, to examine their subletting and safety obligations. Employers higher in the chain than the direct employer are usually considered “statutory employers.” And then you keep following up the chain until you either find coverage, or you don’t.
Example A – Case against statutory employer.
Let’s say you are a framer working for Framing Company A. Then you are injured after falling off the side of the house. Unfortunately, you find out that Framing Company A doesn’t have workers’ compensation insurance. Then you discover that they got the job from Framing Company B. You may have a workers’ compensation case against Framing Company B, who is a statutory employer.
Example B – Case against statutory employer.
Using Example A, but changing the facts a little, you learn that neither Framing Company A nor B has workers’ compensation. But you learn there is a General Contractor for the project. You may have a workers’ compensation case against the General Contractor, a statutory employer with coverage.
Example C – Civil case and workers’ compensation case.
Now, suppose that your employer, Framing Company A, did have workers’ compensation insurance, but the general contractor had a duty under OSHA to prevent falls by following certain safety protocols. Unfortunately, the general contractor doesn’t have a safety program and failed to provide any safety directives. You may have a civil lawsuit against the general contractor and a workers’ compensation claim against your employer.
Example D – Workers’ compensation and negligence case.
A crane is being operated by Crane Company X, striking you and knocking you off the house. Your employer, Framing Company A, has workers’ compensation insurance. In this case, you may have a workers’ compensation case against the employer and a negligence case against Crane Company X.
Following the chain of employers isn’t automatic or easy to trace. And a general contractor higher up in the chain may be able to shield themselves from statutory employer liability if they obtained a certificate showing that their subcontractor had workers’ comp coverage or was self-insured. Having that certificate on hand at the right time could protect both the general contractor up the chain and the injured worker, because the injured worker may be covered by the subcontractor’s insurance, assuming the subcontractor did not let the coverage lapse during the project.
If the general contractor gets the certificate before subletting the work, then the general contractor is usually protected from liability under the Workers’ Compensation Act, even in circumstances when the subcontractor’s coverage lapses or gets cancelled.
The bottom line is that nobody having workers’ compensation coverage spells trouble, but sometimes it opens up avenues for civil lawsuits. Under the North Carolina Workers’ Compensation Act, generally, employers are required to have coverage if they have 3 or more employees. Failure to provide coverage has real consequences for employers, including steep fines and criminal charges. Under N.C. Gen. Stat. § 97-19, a contractor up the chain can be held liable, even if the subcontractor below them had only one or two employees.
When there is an obligation under existing state and federal regulations, you can sometimes find legal remedies, like payment for pain and suffering, that you wouldn’t be able to achieve under the Workers’ Compensation Act. This often comes into play when nobody in the chain of statutory employers has coverage, or when a third party, like a property owner, equipment operator, another tradesman, or product manufacturer, is negligent on the jobsite. It also happens when a general contractor does not follow OSHA and other safety regulations, and the negligence results in the injury or death.
Navigating a workplace injury when the direct employer lacks coverage can seem like a dead end, but it rarely is. Injured workers might still have other options to obtain compensation by following the chain of employers under N.C. Gen. Stat. § 97-19 or by knowing about the civil remedies that exist.
