N.H. Fixes Workers’ Compensation Law for Contractors

As promised, New Hampshire lawmakers made changes to a controversial workers’ compensation measure affecting small contractors one of their first orders of business for 2008.

Meeting in Concord on Jan. 2, the House (329-6) and Senate (23-0) overwhelmingly agreed to amend last year’s House Bill 471, which was forcing some small contractors to pay more in workers’ compensation insurance premiums in some cases, according to agents, more than $10,000 a year for a single employee.

The lawmakers repealed the section that had eliminated the workers’ compensation exemption for officers and directors, a provision that also caught small firms in its net. They also passed a provision to require insurance companies to refund on a prorated basis any premiums paid to comply with the law.

In addition, they amended the section on public projects to exclude some seasonal contractors including snow plowers and landscapers from the workers’ compensation requirement.

Gov. John Lynch praised the legislative action and vowed to sign the bill.

“I will sign this law as soon as possible, and I applaud the bipartisan leadership of the House and Senate for listening to the concerns of small business and working together quickly to fix unintended problems with the bill. We must also continue to work together to address the very real concerns that led to the original bill, and act to make sure all workers are protected,” Lynch said.

The original version of House Bill 471 was the result of a bipartisan study committee of House and Senate members and was passed with bipartisan voice votes in both bodies.

The intent was to stop some firms bidding on state projects that were avoiding some workers’ compensation costs by claiming their work was done by “independent” contractors who were officers or directors of their own corporations. Unions had complained that this classification meant these employees could be denied benefits if injured on the job.

“The bill was intended to crack down on construction contractors who have been giving themselves an unfair competitive advantage over legitimate businesses by insisting that the workers they hire call themselves ‘independent contractors’ and by insisting that these workers claim themselves as officers of a corporation so they can be excluded from workers’ compensation,” said Senator Maggie Hassan (D-Exeter), chairwoman of the Public and Municipal Affairs Committee.

“We acknowledge an underlying problem with misclassifying workers that needed and still needs to be addressed. But in passing HB471, we inadvertently captured contractors who are not part of the problem,” House Speaker Terie Norelli said.

Lawmakers acknowledge that the language in the original bill went too far and forced any corporation or limited liability company with three or fewer officers or owners, even one-person businesses, who worked on a construction site, to be covered by worker compensation.

“I am glad that we are able to work together to repeal the unintended consequences and negative cost factors caused by HB 471. This is good news for the vitally important business sector of New Hampshire,” Senate Republican Leader Ted Gatsas said.

House Bill 471 went into effect starting Sept. 14 last year for renewals of compensation coverage. The legislation means firms that bought additional coverage because of HB471 are entitled to a refund prorated through Jan. 2.

The fix passed on Jan. 2 repeals Section 1 of HB471, clarifies the intent by adding language that excludes certain contract workers such as snow plowers and grass cutters, and allow businesses that paid for workers compensation policy under the new rules to collect refunds.

House and Senate leaders say they will continue efforts in 2008 to address the issue.

The Professional Insurance Agents of New Hampshire Inc. was among the groups urging lawmakers to fix the law.

“We applaud the state legislature for adopting this amendment,” said Judy George, CIC, president of PIANH. “The requirement for employers to provide coverage for all contractors, regardless of how much actual time they spent on-site, created an unnecessary and costly obligation that would have proved detrimental to the progress of small business in New Hampshire.”