Tennessee Workers’ Compensation Coverage: Liability for Principal Contractors and Employers Engaged in the Construction Industry

A unique issue that can arise in Tennessee workers’ compensation law is when employees are hired by contractors to perform work and get injured on the job. Many people in Tennessee work for temporary agencies or staffing companies, and they are then hired by a contractor for a limited duration to assist with a particular job or project. After sustaining an on the job injury, the employee will want to know which workers’ compensation insurance carrier will be required to provide benefits under Tennessee law.

Pursuant to Tenn. Code Ann. § 50-6-106(5), an employer that regularly employs more than five (5) individuals must carry workers’ compensation insurance coverage. As a general rule, however, pursuant to Tenn. Code Ann. § 50-6-113, a principal contractor or sub-contractor can be held equally liable to an injured employee as long as the employee was engaged in the subject matter of the contract to the same extent as the immediate employer. The purpose of this statute is to ensure employees are eligible to receive medical care and temporary and/or permanent disability benefits when injured within the course and scope of their employment, even if the employee’s immediate employer did not carry workers’ compensation insurance coverage. Benefits under this statute often are received through a principal contractor when an employee is hired through a temporary service and assigned to perform work with a specific employer or when an employee is employed through an employer with no workers’ compensation insurance coverage and the employee is assigned, directed, or contracted to perform work for a separate business/company.

Tenn. Code Ann. § 50-6-113 does not apply to the construction industry. Instead, we look to Tenn. Code Ann. § 50-6-901.  All individuals or entities in the construction industry are required to carry workers’ compensation insurance coverage, regardless of whether they employ more than five (5) individuals. However, specifically in the construction industry, an individual or entity may qualify to apply for exemption under Tenn. Code Ann. § 50-6-903. All applications for exemption must be reviewed and approved by the Tennessee Secretary of State. If approved, the individual or entity is then added to the Workers’ Compensation Exemption Registry.

If approved for exemption and added to the Registry, pursuant to Tenn. Code Ann. § 50-6-902, there are six scenarios where an individual or entity in the construction industry shall be exempt from the coverage requirement under Tennessee workers’ compensation law:

1. The construction project is not commercial.
2. The individual or entity is rendering services on a project with no more than three (3) exempt construction service providers on the same construction project.
3. The construction service provider is already covered under a workers’ compensation insurance policy maintained by the individual or entity for whom the provider is providing services.
4. The construction service provider is performing work directly for the owner of the property, provided that said provider is not subsequently contracting any of the work it has been contracted to perform.
5. The construction service provider is performing work on the provider’s own property.
6. The construction service provider is engaged in “casual” employment, defined under Tenn. Code Ann. § 50-6-106(2) as not in the usual course of trade, business, profession, or occupation of the employer.

In Tennessee, it is important to note that pursuant to Tenn. Code Ann. § 50-6-910, any action to recover damages from an injury sustained while within the course and scope of employment with an exempt construction service provider shall proceed as at common law rather than in accordance with the Workers’ Compensation Act.