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S.B. 37

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AMENDMENTS TO WORKERS' COMPENSATION

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1997 GENERAL SESSION

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STATE OF UTAH

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Sponsor: David H. Steele

5    AN ACT RELATING TO LABOR AND WORKFORCE SERVICES; PERMITTING A
6    PROPERTY OWNER AND CONTRACTORS, CONSULTANTS AND
7    SUBCONTRACTORS, AND SUBCONTRACTORS IN CERTAIN CONSTRUCTION
8    CONTRACTS TO TREAT WORKERS AS STATUTORY EMPLOYEES; PROVIDING FOR
9    SCOPE OF EXCLUSIVE REMEDY; AND PROVIDING AN EFFECTIVE DATE.
10    This act affects sections of Utah Code Annotated 1953 as follows:
11    ENACTS:
12         35-1-110, Utah Code Annotated 1953
13         35A-2-212, Utah Code Annotated 1953
14    Be it enacted by the Legislature of the state of Utah:
15        Section 1. Section 35-1-110 is enacted to read:
16         35-1-110. Providing workers' compensation as part of wrap-up -- Statutory
17     employees -- Exclusive remedy.
18        (1) For purposes of this section:
19        (a) "construction contract" means a contract or agreement:
20        (i) relative to the design, construction, alternation, repair, or maintenance of a building,
21    structure, highway, appurtenance, appliance, or other improvement to real property, including
22    moving, demolition, or excavating connected to the construction contract; and
23        (ii) under which there will be an aggregate estimated annual payroll for all employers of
24    $1,000,000 or more;
25        (b) "construction project site" means that area described in the workers' compensation
26    policy that is included in the wrap-up insurance program;
27        (c) "employer" means a contractor, subcontractor, consultant, or subconsultant of any tier


1    working under a written construction contract;
2        (d) "property owner" includes a governmental entity such as a department, commission,
3    board, or other agency of the state;
4        (e) "under a written construction contract" means work performed under:
5        (i) a written construction contract between a property owner and a contractor or consultant;
6    or
7        (ii) a construction contract between a contractor, consultant, or a subcontractor or
8    subconsultant of any tier if:
9        (A) the construction contract with the subcontractor or subconsultant was contemplated
10    by the written construction contract between the original contractor and the property owner; and
11        (B) the property owner or its agent has notice of the construction contract with the
12    subcontractor or subconsultant; and
13        (f) "wrap-up insurance program" means those insurance policies purchased by the property
14    owner that:
15        (i) may consist of property and casualty insurance lines as provided in Title 31A, Insurance
16    Code;
17        (ii) shall include workers compensation insurance; and
18        (iii) is purchased to coordinate indemnification and control risk of loss due to specified
19    contingencies or perils at a construction project site named in the policies.
20        (2) (a) If the property owner complies with Subsection (2)(b):
21        (i) for purposes of Subsection 35-1-42(6), all employees working for the property owner
22    or any employer under a written construction contract shall be considered to be the employee of
23    the property owner and all employers working under the written construction contract; and
24        (ii) the exclusive remedy under Section 35-1-60 for an industrial accident or occupational
25    disease arising out of and in the course and scope of an employee's employment at the construction
26    project site shall apply jointly and severally to the property owner and all employers working
27    under the construction contract.
28        (b) For the purposes of Subsection (2)(a), a property owner shall:
29        (i) be solely responsible for the payment of premium to provide workers' compensation
30    insurance coverage under Subsection 35-1-46(1)(a) or (b) as part of a wrap-up insurance program
31    that:

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1        (A) includes the property owner and all employers working under the written contract at
2    the construction project site as named insureds;
3        (B) provides all employees of the named insureds working at the construction project site
4    with workers' compensation insurance coverage under Subsection 35-1-46(1)(a) or (b); and
5        (C) does not exclude any sole proprietor, partner, or corporate officer from coverage under
6    workers' compensation;
7        (ii) implement a workplace safety program that may incorporate claims administration,
8    loss control specifications, risk management information systems, and safety programs; and
9        (iii) provide the Industrial Commission:
10        (A) that portion of the construction contract that describes the project site covered by the
11    wrap-up insurance program;
12        (B) a valid certification of compliance with Subsection 35A-1-46(1)(a) or (b) from its
13    insurer during the course of construction showing named insureds; and
14        (C) a copy of the workplace safety program required under Subsection (2)(a)(ii).
15        Section 2. Section 35A-2-212 is enacted to read:
16         35A-2-212. Providing workers' compensation as part of wrap-up -- Statutory
17     employees -- Exclusive remedy.
18        (1) For purposes of this section:
19        (a) "construction contract" means a contract or agreement:
20        (i) relative to the design, construction, alternation, repair, or maintenance of a building,
21    structure, highway, appurtenance, appliance, or other improvement to real property, including
22    moving, demolition, or excavating connected to the construction contract; and
23        (ii) under which there will be an aggregate estimated annual payroll for all employers of
24    $1,000,000 or more;
25        (b) "construction project site" means that area described in the construction contract
26    including the area available for construction operations, access routes, right-of-ways, and approved
27    additional sites necessary or incidental to the construction project;
28        (c) "employer" means a contractor, subcontractor, consultant, or subconsultant of any tier
29    working under a written construction contract with a property owner;
30        (d) "property owner" includes a governmental entity such as a department, commission,
31    board, or other agency of the state;

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1        (e) "under a written construction contract" means work performed under:
2        (i) a written construction contract between a property owner and a contractor or consultant;
3    or
4        (ii) a construction contract between a contractor, consultant, or a subcontractor or
5    subconsultant of any tier if:
6        (A) the construction contract with the subcontractor or subconsultant was contemplated
7    by the written construction contract between the original contractor and the property owner; and
8        (C) the property owner has notice of the construction contract with the subcontractor or
9    subconsultant; and
10        (f) "wrap-up insurance program" means those insurance policies consisting of property and
11    casualty insurance lines, including workers' compensation, as provided in Title 31A, Insurance
12    Code, that are purchased by the property owner to coordinate indemnification and control risk of
13    loss due to specified contingencies or perils at a construction project site named in the policies.
14        (2) (a) If the property owner complies with Subsection (2)(b):
15        (i) for purposes of Subsection 35A-3-103(6), all employees working for the property
16    owner or any employer under a written construction contract shall be considered to be the
17    employee of the property owner and all employers working under the written construction
18    contract; and
19        (ii) the exclusive remedy under Section 35A-3-105 for an industrial accident or
20    occupational disease arising out of and in the course and scope of an employee's employment at
21    the construction project site shall apply jointly and severally to the property owner and all
22    employers working under the construction contract.
23        (b) For the purposes of Subsection (2)(a), a property owner shall:
24        (i) be solely responsible for the payment of premium to provide workers' compensation
25    insurance coverage under Subsection 35A-3-201(1)(a) or (b) as part of a wrap-up insurance
26    program that:
27        (A) includes the property owner and all employers working under the written contract at
28    the construction project site as named insureds;
29        (B) provides all employees of the named insureds working at the construction project site
30    with workers' compensation insurance coverage under Subsection 35A-3-201(1)(a) or (b); and
31        (C) does not exclude any sole proprietor, partner, or corporate officer from coverage under

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1    workers' compensation;
2        (ii) implement a workplace safety program that may incorporate claims administration,
3    loss control specifications, risk management information systems and safety programs; and
4        (iii) provide the Division of Labor, Safety, and Program Regulation:
5        (A) that portion of the construction contract that describes the project site covered by the
6    wrap-up insurance program;
7        (B) a valid certification of compliance with Subsection 35A-3-201(1)(a) or (b) from its
8    insurer during the course of construction showing named insureds; and
9        (C) a copy of the workplace safety program required under Subsection (2)(a)(ii).
10        Section 3. Effective date.
11        (1) If approved by two-thirds of all the members elected to each house, this Section
12    35-1-110 in this act takes effect upon approval by the governor, or the day following the
13    constitutional time limit of Utah Constitution Article VII, Section 8, without the governor's
14    signature, or in the case of a veto, the date of the veto override.
15        (2) Section 35A-2-212 takes effect on July 1, 1997.


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Legislative Review Note
    as of 1-17-97 12:56 PM


This bill raises the following constitutional or statutory concerns:

Article I, Section 11, of the Utah Constitution protects a person's right to seek a judicial remedy
for certain injuries. In general, this right may not be eliminated unless an adequate alternative
remedy is provided. Although in most circumstances under workers' compensation an employee
may not sue the employee's employer for an injury suffered at work, the workers' compensation
system is constitutional because it provides the alternative remedy of statutorily guaranteed
benefits. Under general workers' compensation law, an employee generally may sue third-parties,
including property owners, whose actions may have contributed to the injury.

This bill defines the statutory employer-employee relationship to include a property owner and
others working on the property owner's construction site and expressly prohibits an employee from
suing these statutory employers. The extension of the exclusive remedy protection to the newly
described statutory employers may be challenged as violating Article I, Section 11 because it
arguably deprives an employee of a judicial remedy without providing an alternative remedy.
However, the application of this bill is limited to only those large property owners who can
exercise significant control over the employees' working conditions. For example, the bill requires
that the property owner be responsible for payment of workers' compensation fee and that it
exercise control the safety of the employees. This control is analogous to the control exercised by
traditional statutory employers who arguably now enjoy the exclusive remedy protections of the
current workers' compensation system.

Office of Legislative Research and General Counsel


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