What is the Effect of Corporate Officer Exemptions on Worker’s Compensation Coverage for Downstream Contractors?

By Nicholas Elder August 18, 2020 Posted in Construction Law Share

Florida statutory and administrative guidelines task contractors with a great deal of responsibility for the privilege of conducting business in the State.  One of those responsibilities is ensuring that employees and laborers on a project site are properly protected and insured.

Every contractor and subcontractor who engages in construction activities in Florida is required to secure workers’ compensation insurance for its employees.  Importantly, a general contractor is also responsible for obtaining compensation insurance that includes coverage for its subcontractors. 

A contractor can satisfy these insurance obligations by requiring the subcontractors themselves maintain compensation coverage for their employees.  As such, if the contractor maintains compensation coverage for the subcontractor employees, or ensures that the subcontractor maintains coverage, the contractor is immune from any lawsuit brought by a subcontractor’s employees for a workplace injury.  See VMS, Inc. v. Alfonso, 147 So. 3d 1071 (Fla. 3d DCA 2014); see also Rule 69L-6.032, F.A.C. (detailing contractor requirements for obtaining evidence that subcontractors possess worker’s compensation insurance).

The above requirements become slightly more complex when the subcontractor has elected to be exempt from the workers’ compensation laws via a corporate exemption. See §440.075, Fla. Stat.  Officers of subcontractor companies who have elected to be exempt are not considered employees under the law and are not entitled to recover worker’s compensation benefits from either the subcontractor or the general contractor in the event they suffer a workplace injury.  Vallina v. Victor Fuego Const. Co., 443 So. 2d 320 (Fla. 1st DCA 1983).  

The issue then becomes whether, and to what extent, these subcontractor employees are covered under the remaining worker’s compensation statutory guidelines, and the effect this has on the rights and liabilities of the general contractor.  This includes whether or not the general contractor is entitled to the worker’s compensation immunity from civil actions brought by an injured employee.  The recent case Gladden v. Fisher Thomas, Inc., 232 So. 2d 1146 (Fla. 1st DCA 2017) addresses this subject. 

Gladden analyzed whether an exempt corporate officer of a sub-subcontractor could maintain an action against the general contractor and subcontractor for injuries he sustained at the construction project.  Gladden contended that by electing the corporate officer exemption, he was in effect removing himself from the entire worker’s compensation scheme and thus opening the door to his personal injury lawsuits against those who employed him.  The court held that the statute at issue only allows the exempt employee to proceed with a lawsuit against his own “corporate employer” and not the contractor or subcontractor who retained him. §440.075, Fla. Stat.  As such, both the general contractor and upstream subcontractor were immune from suit and the case was dismissed. 

The Gladden case and its progeny make clear that exempted corporate officers of the subcontractor are barred from bringing a lawsuit against the general contractor for personal injuries suffered on the job site.  This ruling, however, takes nothing away from the mandate that every general contractor should ensure that all employees for any subcontractor or sub-subcontractor maintain workers compensation insurance and/or an applicable exemption exists. 

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