                            QBfficeof tjy !ZlttornepQ&nerd
                                          %tate of ID;exae
DAN MORALES
 ATTORNEY
       GENERAL                              August 11,1994


     Mr. Abed F. Hurley                        Opiion No. DM-300
     chancellor
     University of North Texas                 Re: Whether there is a de minimis exception to
     P.O. Box 13737                            the requirement that certain wmpsnies that enter
     Denton, Texas 76203-6737                  into a “building or wnstruction contract” under
                                               Labor Code section 406.096 with the state or a
                                               political subdivision of the state must provide
                                               workers’ wmpensation        insurance for their
                                               employees, and related questions (RQ-596)

     Dear Mr. Hurley:

             You ask us to determine what constitutes a “building or construction wntract”
     within section 406.096 of the Labor Code.1 Section 406.096 provides, in pertinent part,
     as follovvs:
                     (a) A governmental entity that enters into a building or
                wnstruction wntract shah require the contractor to certity in writing
                that the wntractor provides workers’ compensation insurance
                coverage for each employee of the contractor employed on the public
                project.

                     (b) Each subcontractor on the public project shall provide such
                a certhicate relating to wverage of the subwntractor’s employees to
                the genera) contractor, who shah provide the subcontractor’s certiti-
                cate to the govemmentsl entity.

                      .

                    (d) The employment of a maintenance employee by an employer
                who is not engaging in building or construction as the employer’s
                primary business does not wnstitute engaging in building or
                wnstruction.



              %cction 406.0% of the Labor Cede was fcmerly cxnlikd as V.T.C.S. article8308-3.23(c), (d)
     (1925). a provisionof the 1989 Workers’CompeoYltionAn (the “act”). The .Smnly-third Lc&latm
     lepealcdtheactsnd mnaacdifwithoutsubstantiverrvision,astiUe5oftbcLaborc4de.            Acts1993,
     73d Leg., ch. 269,s 1, at 1132.




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Mr. Al&i F. Hurley - Page 2                (DM-300)




               (e) In this section:

                    (1) “Building or construction” includes:

                         (A) erecting or preparing to erect a structure,
           including a buikliig, bridge, roadway, public utility facility, or related
           appurtenance;

                           (B) remodeling, extending, repairing, or demolishing a
           structure; or

                          (C) otherwise improving real property or an appurte-
           nance to real property through similar activities.

                     (2) “Ciovemmental entity” means this state or a political
           subdivision of this state. The term includes a municipality.


        In particular, you also ask whether section 406.0% applies to the following types
of jobs:

          (1) the fbmishing and installation of an item in a building (such as
          the instaMion of carpeting for a single office, or a wall system to
          divide a room in half etc.); (2) the service or repair of a certain item
          (such as the replacement of a glass window pane; the repair of a
          nndtImctioning electronic door; resealing seams and restretching a
          carpet, etc.); (3) small sheet metal projects; (4) specialized pipe
          fitting work; or (5) annual service contracts for services such as
          elevator maintenance and tire alarm maintenance.

We cannot answer this question because the determination in each case may depend on a
consideration of additional facts to determine whether the job wnstitutes “building or
wnstruction” as defined in section 406.096(e)(l). Resolution of questions of fact is not a
tbnction of the attorney general opinion process. For this reason, we cannot amplify the
statutory definition of “buildi or construction” to provide a formula for determining
whether or not these jobs are “building or construction contracts.”

         On the assumption that such jobs are “building or construction wntracts,” you ask
whether section 406.096 of the Labor Code applies to them, no matter how small the
subject matter of the contract may be. We see in the statutory language no indication of a
legislative intent to except small contracts from the coverage requirement of section
406.096. Furthermore, injuries at the work place may occur during the performsnce of
even minor tasks, so we can think of no reason to interpret this section as applying only to
large contracts.

       You contend that if this provision applies to small jobs such as a $50 carpet repair
or a $150 plate glass replacement, then the University of North Texas will not be able to




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Mr. Alfred F. Hurley - Page 3            (DM-300)




hire for minor jobs many of the smaller and less expensive independent wntractors that do
not provide workers’ compensation coverage to their employees. It is obvious that the
maintenance of workers’ compensation wverage will entail costs that may be factored into
the rates charged for services provided by the covered wntractor in a building or
construction contract. Ifthe etTect of section 406.096 is to place an added cost burden on
a governmental entity, we believe that the legislature anticipated this effect and determined
that the added cost was justitied by the be&its of requiring coverage. We therefore
conclude that section 406.096 applies to all contracts falling within its terms regardless of
the size of the subject matter.

        You next ask whether a “governmental entity” as detined in section 406.096(e)(2)
may he a “hiring wntractor” as defined in Labor Code section 406.141, which begins
subchapter G of chapter 406. Subchapter G establishes that in certain construction
wntracts, see Labor Code 5 406.142, an “independent contractor” as defined in section
406.141(2), and not the “hiring contractor” as defined in section 406.141(l), is responsible
for the provision of sny workers’ compensation to any of its employees, see id. 5 406.143,
unless the hiring contractor and the independent contractor enter into an agreement
making the hiring contractor the employer of the independent contractor and its employees
for the purpose of providing workers’ compensation coverage, see id. 5 406.144.

       To answer this question we will need to consider the meaning of the phrase hiring
contractor as used in subchapter G. Section 406.141 defines hiring conmcfor as follows:

           In this subchapter:

                (1) “Hiring contractor” means a general wntractor            or
           subcontractor who, in the wurse of regular business, subcontracts all
           or part of the work to be performed to other persons.
Section 406.121, in turn, defines general contractor and subcontmctor as follows:

           In this subchapter:

                (1) “General contractor” means a person who undertakes to
           procure the performance of work or a service, either separately or
           through the use of subcontractors. The term includes a “principal
           contractor,” “original contractor,” “prime contractor,” or other
           analogous term. The term does not include a motor carrier that
           provides a transportation service through the use of an owner
           operator.
               .
                (5) “Subcontractor” means a person who contracts with a
           general contractor to perform all or part of the work or services that
           the general contractor has undertaken to perform.




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Mr. Alfkd F. Hurl9    - Page 4            (DM-300)




The statutory definition of general coniractor is consistent, for the most part, with that
found in Black’s Law Dictionary:

               One who wntracts for the construction of an entire building or
          project, rather than for a portion of the work.        The general
          wntractor hires subcontractors (e.g. plumbii      electrical, etc.),
          wordiites     all work, and is responsible for payment to
          subwntractors. Also called “prime” contractor.
BLACK’SLAW DICTIONARY683 (6th ed. 1990).

        Although the foregoing Labor Code provisions do not define hiring wntructor or
general contractor in teams expressly limiting the phrases to include a person who is a
“contractor,” it is helpibl to consider the meaning of the word contractor in order better to
understand the these phrases. Bkxk’s defines coniracior, in part, as:

                One who wntracts to do workfor another. This term is strictly
           applicable to any person who enters into a contract, but is wmmonly
           resetved to designate one who, for a t&d price, undertakes to
           procure the performance of works or services on a large scale, or the
           tiunishing of goods in large quantities, wheiher for the public or a
           compary or ina?viaM.

               A wntractor is a person who, in the pursuii of any idpendeni
           business, undertakes to do a specific piece of work for another or
           other persons.

Id. at 326 (emphasis added). We believe that a “hiring contractor” under section 45141
and a “genersl contractor” under section 496.121 do not include the entity that grurrrs a
prime contract-such entity not being a “contractor” in wmmon usage-but may include
the entity that is gronfed the contract. See Gov’t Code 5 312.002(b) (“If a word is
wnnected with and used with reference to a particular trade or subject matter or is used as
a word of art, the word shag have the meaning given by experts in the particular trade,
subject matter, or art”).

        The University of North Texas, in hiring a company to extend a campus building,
for example, does not act as a “hiring contractor” as that phrase is defined in section
466.141 because it does not act even as a “contractor” as that term is wnnnonly
understood. In regard to such a project, the university does not undertake to provide
goods or services for another. The company would be the “contractor” because it
undertakes to do the project for the university, and not vice versa Nor does the
university, we assume, make a “business”-that is, a “wmmercial activity engaged in for
gain,” BLACK’SLAW DICTIONARY198-out of entering into wntracts with companies to
have its buildings extended (such contracts being, rather, merely necessary to the pursuit
of the university’s purposes as an educational and research institution); but the company




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Mr. A&d F. Hurley - Page 5               (DM-300)




that it hires probably does pursue a “busiiess” of entering into contracts to extend
buildmgs. Because your concern appears to be limited to contracts to perform “building
or construction” on buildings on the university’s campus, we do not need to engage here in
speculation to determine whether any “govemmentsl entity” as detined in section
406.096(e)(Z) may in some situations be a “hiring contractor” as defined in Labor Code
section 406.14 1. It s&ices to conclude that the University of North Texas is not a “hiring
contractor” as detined in Labor Code section 406.141(l) when it hires an individuai or a
wmpany to petform on campus buildings any activity that constitutes “building or
wnstruction” for purposes of section 406.096.

         You finally ask whether an agreement under Labor Code section 406.145 satisSes
the requirements of a certiticate of wverage under section 406.096, subsections (a) and
(b). Section 406.145, which is part of subchapter G, provides that a joint agreement
between the hiring contractor and an independent contractor aSInning that the
independent contractor is not an employee of the hiring contractor will establish as a
matter of law that the subcontractor “is an independent contractor and not an employee,
and is not entitled to workers’ compensation insurance coverage through the hiring
contractor unless an agreement is entered into under Section 406.144 to provide workers’
wmpensation insursnw coverage.” Section 406.096 requires that the contractor, see id.
5 406.096(a), and any subcontractors, see $406.096(b), in a building or construction
wntract with a governmental entity certify in writing that each employee of the contractor
or subcontractor that is working on the project is being provided workers’ compensation
insurance wverage. Because an agreement under section 406.145 does not certify that
the contractor and any subcontractor are in fact providing workers’ compensation
coverage to its employees, we conclude that such an agreement would not satisfy the
certitIcate requirements of section 406.096.




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Mr. Alfred F. Hurley - Page 6            (DM-300)




                                  SUMMARY

                Labor Code section 406.096 applies to every “building or
          construction w&-act” entered into by the State or a political
          subdivision of the State, no matter how small the subject matter of
          the contract may be. The University of North Texas is not a “hiring
          contractor” as de&d in Labor Code section 406.141(l) when it
          hires an individual or a company to perfortn on campus buildings any
          activity that constitutes “building or wnstruction” for purposes of
          section 406.096. An agreement under Labor Code section 406.145
          between a hhing contractor and an independent wntractor a&ming
          that the independent contractor is not an employee of the hiring
          wntractor does not certify that the contractor and any subcontractor
          is in fact providing workers’ compensation coverage to its employees
          and therefore would not satisfy the certiticate requirements of section
          406.096.




                                                     DAN MORALES
                                                     Attorney General of Texas

JORGE VEGA
Fii Assistant Attorney Genera)

DREW DURHAM
Deputy Attorney General for Criminal Justice

JAVJER AGUILAR
Special Assistant Attorney General

RENEA HICKS
State Solicitor

SARAH.J. SHIRLEY
Chair, Opinion Committee

Prepsred by James B. Pinson
Assistant Attorney General




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