                          The Attorney General of Texas
                                           November 12, 1980

MARKWHlfE
Atlomey aenenl
                       Honorable Jimmy blankim                  Opinion No. W-271
                       Chairman, House Employment
                         Practices Committee                    Rer Obligations of a general con-
                       House of Representatives                 tractor to a s&contractor    mder
                       Austin, Texas 787ll                      the workers’ compensation laws
Tel-.5uiam
Mm.       TX. 75505
                       Dear Mr. Xankim:
El4m34544
                             Ycu bve asked three questions concern*         a general  contractorb
                       obligations to a subcontractor m&r the workers’ compensation laws, article
                       6306, et set, V.T.C.8. We will assume for purpaes of this discussion that
                       the &contractor     you inquire abcut b a bana fide independent contractor,
                       who is not deemed an WemployeeDwithin section 1, article 6309, V.T.C.S.

                             Your first question is whsther, pursuant to article 8307, section 6,
                       V.T.C.S., a general contractor is responsible for obtainhg workers’ com-
                       pensation imurance fa a s&contractor who obtains oDverage for his
                       employees but not for himself. Article 8307, section 6 p~~idss in pertinent
                       part:
                                  lf my s\bscriba to this law with the cur-          md
                                  intention of avoidi~r my liability impmed by its
 miTmlh.Euims                     terms s&lets the whole cr any part of tha wak to. . .
 Usuk      TX    7-1              GjG&contractor,      then in the event my employd of
 515a55~7
                                  such s&-contractor sustains an injury in the course of
                                  his employmmt ha stmR be &emed to be md taka
                                  fa~purpasesofthblarr~DbeemplogCofthe
                                  srbscriba. . . . (Emphasis added)
                       Section 6 has not been amended since its enactment in 1917.
                             The mderllned language clearly indiclrtes that a &contractor%
                       employees are deemed to be employees of a general contractor cnly when
                       the contractor ulilizxe a s&uzontractor “with the purpcee ad Intentian of
                       avoid& any Rabilitf imposed by the workers’ compensation laws. Abosnt
                       proof that the contractor  tms s&let work with such purpose md intention,
                       the s&contractor% employees will not, in the event they sustain h&y ln
                       the course of
                       contractor. Un




                                                       p. 861
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Honcrablr Jimmy Mankln - P-r      Two     @W-271)                                  ’          .




Imurance Association v. Harper, 249 S.W. id 677 (Tax. Civ. App. - Dallas l952, writ
rePd nr.e.X II the Nwontractor’r employees are not considered to be employees of
the general contractor, then the iatter ha IID ob&ation to obmin workers’
compensation &trance fa them.

       Even if it is proven that a contractor utilized a s-tractor  la the purpose of
avoid@ liability, however, it dses not follow that the contractor has my obligation
with mspect to the s&contractor, as opposed to the s&contractor2 employees.
Article 8307, section 6 may, for purposes of the workers’compensation laws, transfam
a subcontractor% employees into employees of the general contractor, but it does not
perform the same frnction with respect to the &contractor himself. As the court
observed in Houston Fire & Casualty Company v. Farm Air Service, Inc., 325 8.W. 2d
860 (Tex. Civ. App. - Austin 1959, writ rePd n.r.e.h
            (Section 61 does not purport to mske the s&contractor such
            employee but anly makes an injured employee of the sticon-
            tractor sn employee of the s&scriber la all purposes of the
          . compensation law. Here appellant cndertakes to extend the
            provisions of the section 5) Bs to make the independent
            contractors (s&contractors) employees of the s&sa~ber. This
            would be writing a pmvision into the section that the
            Legislature did not see fit to include therein. . . .
325 S.W. 2d at 665. Accordi@y, because section 8 &es not make a s&contractor an
“employee” of the general contractor, we conclude that the latter would mt be
obligated to obtain workers’ compensation insurance Cw a s&contractor who chooses
not to obtain such coverage fa himself.

      Your second question is whether a general contractor must obtain wrxke&
compensation irwurance la a Meontractor which b a partnership consisting of three
persons snd no employees. As we stated above, article 8307, secticn 6 applies cnly to
a s*contractor% employees. Since your question assume3 that the partnership turn no
employees, the partnership could be deemed en “employee” of the general contractor
c&y if the partners themselves are employees. However, as the court stated in Powell
v. Vigilant lrwurence Company, 577 S.W. td 364 tTex. Civ. App. -Tyler 1879, no mr
            A partner is usually held to be w employer and therefore he
            cannot be slid to be m employee es contemplated by the
            Wakers’ Compensation Act. . . unless the iruursnce contract
            shall specifically include the partner by endorsement thereon.
            Art. 8309, sec. 1~
 577 S.W. 2d at 366 (citations omitted). Since the ticontractor is a partnership with
 no employees and the psrtners themselves are rot ‘employeesa within ths workers’
 compensation laws, we conclude that a general contractor )as no obliption to obtain
 workers’ compensation coverage for the partnership.




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                Honombie Jimmy Hankins - Page Tlwe        (HJ-271)




                      Your last qusstion b whether, if a Fneral contractor &es obtafn worka&
                compensation lrawsnce for a s&contractor ad his employees, an insurance company
                may base its premium ~1 the gross payment to the sticcntractor.   Since dcontrac~
                usually state a firm oontract price la the completed wcrk, the gross payment to the
                s&contractor will likely include items such m overhead, equipment, material and
                other such eqwnses in addition to dada.

                      The statutes provide little @dance in this inquiry. Article 5.55, et se& of the
                Insurance Code, which vests control over premiums la workers’ compensation
                irwurance in the State Board of bwurance, merely requires that mtes be just and
                reasonable    Article 5.80 pmvicks that the barrd “shall determine tmzards tg classes
                and fix suoh rates of premium spplicable to the payroll in each of such classe~.~
                (Emphasis addedL
                      The Texss Workmen’s Compensation and Employers’ Liability Insumnce Manual,
                which is published by the National Council cn Compensatmn, recognizes that premiums
                based upon factors other than payroll would nscessarily be inflated. It requires that
                premiums QI workers’ compensation policies be calculated ~1 the basis of services
                rendered by employees. We are informed that the Manual is consistently relied rpcn
                by the State Rcard of lrwurance and that it accurately mflects the board’s
                understandirg of the legal requirements in this area. Courts will generally @old
                interpretations placed upon laws by an agency charged with the enforcement of those
                laws. Tarry Moving & Storage Co. v. Railroad Commission, 359 S.W. 2d 62 (Tex. Civ.
                4~. - Austin l962), e,     367 S.W. 2d 322 (Tex. 1963). We therefore conclude that an
                insurance asrrier may mt base its premiums a~ the gross payment to the
                s&contractor.
                                                   SUMMARY

                               A general contractor is not obligated tmder article 8307,
                           section 6, V.T.C.S., to pu&ase         workers’ compensation
                           hwmance for a &contractor        who chooses mt to obtain
                           coverage for himself, nor is a general contractor required to
                           obtain workers’ compensation average for a subcontractor
                           which b a partnership consisting of three persons ad rp
                           employees.    lf a general contractor &es obtain workers’
                           compensation insurance for a s&contractor ad the s&con-
                           tractor’s employees, an ~insmce company may mt base its
                           premiums on the gross payment to the s&contractor.

                                                          verYmverYtP&

                                                            MARK      WHlTE
                                                            Attorney General of Texas
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             Honomblo Jimmy Yankim - Page lour         (M-271)



             JOHN W. FAINTRR, JR.
             wst Assistant Attomey Qeneral

             RICHARD IL GRAY Ip
             Executive Assistant Attorney General

             Prepared by Jan Bible
             Assistant Attorney General

             APPROVRlh
             OPlNlON COMMKTRR
             Susan L. Garrison, Acting Chairman
             Jon Bible
             Rick Gilpin
             Charles J. Maddox, Jr.




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