Fiscal Summary

NOT SIGNIFICANT

Bill Summary

ACCIDENT REPORTS

Under the Occupational Safety and Health Act of 1972, present law requires each employer to, in addition to making available to the commissioner of labor and workforce development ("commissioner") the records and reports required by existing law, report each and every accident resulting in a work-related death or personal injury.

This bill changes the existing law by requiring each employer to, in addition to making available to the commissioner the records and reports required by existing law and the rules of the department of labor and workforce development's division of occupational safety and health, report each accident resulting in a work-related death or personal injury to the bureau of workers' compensation ("bureau") no later than 14 calendar days after the earlier of the date the employer is notified of the accident or the date the employer has knowledge of the accident.

Present law also requires that reports of accidents that result in death or personal injury of a nature that the injured person does not return to the person's employment within seven days after the occurrence of the accident must be submitted to the bureau of workers' compensation as soon as possible, but not later than 14 days after the accident. Reports of all accidents causing seven days of disability or fewer must be submitted to the bureau on or before the fifteenth day of the month following the month covered by the report. This bill deletes this provision entirely.

NOTICE OF CONTROVERSY

Present law provides that if payments have been made without an award, and the employer subsequently elects to controvert the employer's liability, then notice of controversy must be filed with the administrator within 15 days of the due date of the first omitted payment. This bill changes the present law by requiring the employer to electronically file the notice of controversy.

ASSESSMENT OF PENALTIES

Present law requires the bureau to assess against an employer who has failed to secure workers' compensation or who misclassifies employees to avoid proper classification for premium calculations a penalty equal to 1.5 times the accurate average yearly workers' compensation premium, or, if the employer is engaged in the construction industry, then the greater of $1,000 or 1.5 times the accurate average yearly workers' compensation premium when applying appropriate assigned risk rates to the employer's payroll, minus the premium dollars paid, if any, during a period of violation.

This bill replaces the above provisions and provides, instead, that the bureau must assess against an employer who has failed to secure workers' compensation or who misclassifies employees to avoid proper classification for premium calculations a penalty equal to 1.5 times the average yearly workers' compensation premium determined based upon applying applicable assigned risk rates to the employer's average yearly wages or payroll for the period of non-compliance, minus the premium dollars paid, if any, during the non-compliance. If the employer is engaged in the construction industry, then the penalty assessment must not be less than $1,000.

WORKERS' COMPENSATION

Present law provides that the provisions below regarding workers' compensation insurance compliance investigations, subpoenas, failure to secure workers' compensation, distress warrants, fraudulent exemption, revoked exemption, and liability to injured employee cease to exist on July 1, 2024. However, this bill extends those provisions to July 1, 2029.

WORKERS' COMPENSATION INSURANCE COMPLIANCE INVESTIGATIONS

Present law provides that the chief administrative officer of the bureau of workers' compensation of the department of labor and workforce development ("administrator") or the administrator's designee, upon receipt of sufficient information to give reasonable cause that an employer may be in violation of the insurance laws of this state and upon the compliance specialist presenting appropriate credentials to the owner, operator, or agent in charge, is authorized to (i) inspect and investigate the places of employment and pertinent conditions; business records, including complete payroll and tax information; certificates of insurance; sign in and sign out sheets for jobsites; and vendor lists; and (ii) question privately an employer, owner, operator, agent, worker, or employee.

Present law authorizes the administrator or the administrator's designee to request, and the general contractor to provide, a list of amounts paid by the general contractor to subcontractors on the jobsite.

SUBPOENAS

Present law requires the administrator or the administrator's designee to designate representatives who may serve subpoenas and other process of the bureau. For the purposes of workers' compensation insurance compliance investigations, the administrator or administrator's designee may issue and serve subpoenas for (i) the attendance of witnesses at administrative hearings; and (ii) the production of books, documents, or other tangible things that may be relevant, or reasonably calculated, to lead to the discovery of relevant information necessary to determine whether the employer is subject to this chapter held by the employer or third parties, including, but not limited to, general contractors, subcontractors, intermediate contractors, accountants and tax preparers, insurance agents and carriers, and banking institutions.

Present law requires information requested in a subpoena under (ii) above must be submitted to the bureau within 21 calendar days of service of the subpoena. If an employer or entity wishes to dispute the subpoena, then the employer or entity must submit that dispute with particularity, in writing, to the administrator or the administrator's designee within 10 calendar days of service of the subpoena. Failure to timely comply with the subpoena issued and served under (ii) above may result in an assessment by the bureau of civil penalties against the employer and third-party holder of information relevant to the bureau's investigation. The penalties, if assessed by the bureau, may be in an amount not less than $50 per day per subpoena until the requested information is provided, or $5,000 per subpoena, whichever is less.

This bill authorizes, in addition to civil penalties, if a person refuses to obey a subpoena to appear for an administrative hearing or to produce evidence requested by the administrator or the administrator's designee, then the administrator or the administrator's designee may seek an order requiring compliance with the subpoena in the chancery court where the person named in the subpoena resides. The chancery court may find a person who refuses to obey an order requiring compliance with a subpoena in contempt. In addition to civil penalties, the person who refuses to comply with a subpoena must pay costs, including reasonable attorneys' fees, court costs, and court reporter attendance and transcription costs, incurred by the administrator or the administrator's designee in obtaining an order to enforce the subpoena.

Present law authorizes an employer or entity who is aggrieved pursuant to the above provisions to appeal under the Uniform Administrative Procedures Act.

Finally, present law requires penalties assessed pursuant to the above provisions must be deposited in the employee misclassification education and enforcement fund to be administered by the administrator.

FAILURE TO SECURE WORKERS' COMPENSATION

Present law provides that an employer fails to secure workers' compensation if, at any time, an employer:

(1) Who is required by workers' compensation law to secure or maintain insurance, fails to secure or maintain the payment of workers' compensation insurance coverage; or

(2) Misclassifies employees to avoid proper classification for premium calculations by concealing information pertinent to the computation and application of an experience rating modification factor or materially understating or concealing the amount of payroll, the number of employees, or the employees' duties.

Present law requires the bureau to assess against an employer who has failed to comply with (1) and (2) above a penalty equal to 1.5 times the accurate average yearly workers' compensation premium, or, if the employer is engaged in the construction industry, the greater of $1,000 or 1.5 times the accurate average yearly workers' compensation premium when applying appropriate assigned risk rates to the employer's payroll, minus the premium dollars paid, if any, during a period of violation. If the employer fails to secure the payment of workers' compensation insurance coverage as ordered by the administrator or the administrator's designee within the required time as set forth by the decision, then the bureau must assess a second penalty, immediately due and payable, equal to the greater of $1,000 or an amount equal to the accurate average yearly workers' compensation premium. The bureau must hold the second penalty in abeyance if coverage is timely obtained. If the administrator or the administrator's designee determines the period of noncompliance is less than 12 consecutive months, then the administrator or the administrator's designee must prorate any assessed monetary penalty; however, the monetary penalty must not be less than an amount equal to one month's premium or, in the case of construction services providers, not less than $1,000.

Present law requires the bureau to notify the employer by certified letter advising the employer of monetary penalties that may be assessed if the bureau's investigation of an employer reasonably indicates that the employer is subject to workers' compensation law and has failed to comply with the insurance requirements of the above provisions. The employer must provide to the bureau, within 10 calendar days of the receipt of the certified letter proof that the employer (i) had secured the payment of workers' compensation insurance at all required times; or (ii) has not engaged in misclassification of its employees. If the bureau determines that sufficient proof is not provided, then the administrator or the administrator's designee must issue a decision ordering the employer to secure payment of workers' compensation insurance coverage and assessing the penalties as described in existing law by certified mail to the employer's last known address.

Present law authorizes the employer to request a contested case hearing, in writing, within 15 calendar days of receipt of the decision assessing monetary penalties. If the request is not made within the 15-day period, then the decision becomes final. The employer has the burden of proof at the contested case hearing and must produce documentary evidence that the penalties should be reduced. The contested case hearing must be scheduled to be heard within 60 calendar days from the date of receipt by the bureau of the employer's written request for a contested case hearing.

Present law provides that if an employer, or successor in interest, fails to comply with the above provisions two or more times within a five-year period, then the monetary penalty is the greater of $3,000 or three times the average unpaid yearly workers' compensation premium for each second or subsequent violation. The second violation is presumed to be a willful violation subject to rebuttal by the employer, or successor in interest, with clear and convincing evidence to the contrary. Additionally, if an employer engaged in the construction industry fails to comply with the existing law two or more times within a five-year period, in addition to other penalties pursuant to existing law, then such employer is permanently prohibited from obtaining an exemption.

Present law authorizes the administrator or the administrator's designee to seek an injunction in the chancery court of Davidson County to prohibit an employer from operating its business until the employer has complied with an order by the administrator or the administrator's designee to comply with the insurance requirements. The employer may appeal a decision made, or order issued, by the administrator or the administrator's designee,

Present law requires a penalty issued under the above provision to follow an owner of a business, or member of an LLC, that is closed, liquidated, or dissolved, when that owner or member owns or operates any part of a subsequent business that is carried on and controlled in substantially the same manner as the penalized employer. A successor in interest is liable for a penalty assessed against that employer. A penalized owner, general contractor, company, corporation, or member of an LLC, or a successor in interest, may appeal a penalty assessment by requesting a contested case hearing. The administrator or the administrator's designee may waive a penalty against a penalized owner, general contractor, company, corporation, or member of an LLC, or successor in interest, for good cause.

The funds collected by the administrator or the administrator's designee for penalties assessed for violations of the present law must be deposited in the employee misclassification education and enforcement fund.

In addition to the penalties provided for in this chapter, the bureau must refer cases involving business operations that are in violation of the present law to the Tennessee bureau of investigation or the appropriate district or state attorney general for any action deemed necessary under applicable criminal law.

Additionally, present law provides that a person that submits an initial exemption registry application, renewal exemption registry application, or insurance application that contains false, forged, misleading, or incomplete information to avoid proper classification for premium calculations by concealing information or materially understating or concealing the amount of payroll, the number of employees, or the employees' duties is subject to a civil penalty. The penalty, per violation, is in an amount of up to the greater of $1,000 or the unpaid premium, which is calculated as 1.5 times the accurate average yearly workers' compensation premium for the employer based on the appropriate assigned risk rate minus the premium dollars actually paid by the employer on the policy that was the object of the understatement or concealment.

DISTRESS WARRANTS

Present law provides that if after due notice, an employer defaults in payment of penalties, then the amount due may be collected by civil action in the name of the administrator, and the employer adjudged in default must pay the costs of the action and the administrator or the administrator's designee is authorized to issue a distress warrant against the delinquent employer for the amount of the penalties that may be due and unpaid as of the date of the issuance.

Present law also provides that the distress warrant is returnable within 30 days from its date and has the same effect as other distress warrants authorized by law for the collection of delinquent taxes or revenue owed to the state or an agency of the state. Distress warrants issued under the authority of existing law for the collection of penalties, arising out of the above provisions may, in the discretion of the administrator, be addressed to and delivered to an employee or representative of the bureau for the purpose of execution, and the employee or representative has the same power and authority as a sheriff for the purpose of levying and executing the distress warrant. All costs must be included in the total amount to be collected from the penalized party.

FRAUDULENT EXEMPTION

Present law provides that an exemption from the requirement that construction services providers carry workers' compensation insurance that is fraudulent, or where the exemption holder is determined to be an employee is void.

REVOKED EXEMPTION

Present law requires, if a provider's exemption is revoked, the bureau of workers' compensation must notify the construction services provider that such provider is required to notify, within 24 hours of such revocation, any person or entity for whom the provider is currently providing services that the provider's workers' compensation exemption has been revoked. If a construction services provider fails to perform the notification required , then the person or entity for whom the provider provided services is not liable for workers' compensation insurance for the construction services provider.

LIABILITY TO INJURED EMPLOYEE

Present law provides a general contractor, intermediate contractor, or subcontractor is liable for compensation to an employee injured while in the employ of a subcontractor of the general contractor, intermediate contractor, or subcontractor and engaged upon the subject matter of the contract to the same extent as the immediate employer.

Present law also provides that a construction services provider is not liable for workers' compensation premiums prior to January 1, 2021, for a commercial construction project, as long as the provider held a valid exemption. A general contractor, intermediate contractor, or subcontractor is not liable for workers' compensation premiums prior to January 1, 2021, for a construction services provider on a commercial construction project that held a valid exemption. The assessment of retroactive fees or premiums are prohibited pursuant to time periods exempted by existing law.

Present law provides that, except for funds collected by the administrator or the administrator's designee for penalties assessed for violations of when an employer misclassifies employees to avoid proper classification for premium classifications and a person that submits an initial exemption registry application, renewal exemption registry application, or insurance application that contains false, forged, misleading, or incomplete information to avoid proper classification for premium calculations by concealing information or materially understating or concealing the amount of payroll, the number of employees, or the employees' duties, which must be deposited in the employee misclassification education and enforcement fund, to be administered by the administrator, the remainder of the funds collected must be deposited in the uninsured employers fund and must be used for payment of the costs incurred by the bureau of workers' compensation to administer the assessment of and collection of the other penalties and the costs of administering these provisions, including, but not limited to, lien fees or fees of third-party administrators.