Amends TCA Title 4; Title 50, Chapter 6 and Title 56.

ON MARCH 22, 2021, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 1285, AS AMENDED. AMENDMENT #1 rewrites this bill and revises and rearranges certain present law provisions governing construction services providers, the penalties for noncompliance of insurance requirements, and the exemption from having workers' compensation insurance, as discussed below. The changes to present law made by this amendment will be effective from July 1, 2021, until July 1, 2024, at which time the law as it existed prior to this amendment will be reinstated. SUBPOENAS Under present law, the administrator of the bureau of workers' compensation or the administrator's designee may issue a subpoena to require an employer doing business in the state to produce material that may be relevant to or reasonably calculated to lead to the discovery of relevant information necessary to determine whether an employer is subject to the Workers' Compensation Law, or has secured payment of compensation pursuant to the Law, and to determine the amount of any monetary penalty that is required to be assessed against an employer for failure to secure payment of compensation pursuant to the Law. This amendment revises the subpoena provisions to authorize the administrator or designee to issue and serve subpoenas for the attendance of witnesses at administrative hearings and for the production of materials held by the employer or third parties that may be relevant, or reasonably calculated, to lead to the discovery of relevant information necessary to determine whether the employer is subject to the law. This amendment adds that: (1) Such information must be submitted to the bureau within 21 calendar days of service of the subpoena; (2) 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; (3) Failure to timely comply with the subpoena issued and served 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 $50.00 per day per subpoena until the requested information is provided, or $5,000 per subpoena, whichever is less; (4) In addition to civil penalties: (A) If a person refuses to obey a subpoena to appear for an administrative hearing or to produce evidence requested by the administrator or designee, then the administrator or 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; and (B) 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 designee in obtaining an order to enforce the subpoena; (5) An employer or entity who is aggrieved pursuant to this provision may appeal; and (6) Assessed penalties must be deposited in the employee misclassification education and enforcement fund established by the present law. This amendment also authorizes the administrator or designee, upon receipt of sufficient information to give reasonable cause that an employer may be in violation of the Law, to inspect and investigate the places of employment and pertinent conditions and records; and to question privately an employer, owner, operator, agent, worker, or employee. The administrator or designee may request, and the general contractor must provide, a list of amounts paid by the general contractor to subcontractors on the jobsite. MISCLASSIFICATION Generally under present law, it is a violation for a construction services provider to misclassify employees to avoid proper classification for premium calculations by certain understatements or concealments. A construction services provider who commits such a violation is subject to a penalty of up to the greater of $1,000 or one and one-half times the average yearly workers' compensation premium for such construction services provider based on the appropriate assigned risk plan advisory prospective loss cost and multiplier minus the premium dollars paid on the policy that was the object of the understatement or concealment. Present law provides that the above-described laws have no effect upon a construction services provider's or carrier's duty to provide benefits under the Law or upon any of the construction services provider's or carrier's rights and defenses under the Law; this amendment removes this provision. This amendment revises other present law provisions governing misclassification, expands the scope of the law to all employers (instead of only construction services providers as referenced above), and combines the provision with the provisions governing failure to maintain workers' compensation insurance coverage, as discussed below. INSURANCE NONCOMPLIANCE Present law sets out penalties for noncompliance with insurance requirements under the Law. This amendment applies such penalties to an employer who: is required to secure or maintain insurance and fails to do so; or 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. This amendment also revises the present law provisions regarding penalties (described above), including: (1) Second penalty for failing to secure payment of workers' compensation. Under present law, the second monetary penalty must be equal to the average yearly workers' compensation premium for such employer. This amendment requires the second penalty to be assessed, immediately due and payable, equal to the greater of $1,000 or an amount equal to the accurate average yearly workers' compensation premium. Present law contains certain provisions whereby a second penalty is held in abeyance pending a contested hearing, if one is conducted. Under this amendment, the second penalty will be held in abeyance if coverage is timely obtained; (2) Period of noncompliance. Under present law, if the administrator or designee determines the period of noncompliance is less than one year, any assessed monetary penalty must be prorated; however, the monetary penalty must not be less than an amount equal to one month's premium of the average yearly workers' compensation premium for the employer based on the appropriate assigned risk plan advisory prospective loss cost and multiplier. This amendment replaces applicable timeframe from "one year" to "12 consecutive months" and provides that in the case of construction services providers, the prorated penalty will not be less than $1,000; (3) Response to the bureau's certified letter. Under present law, an employer must provide, within 15 calendar days of receipt of a letter notifying the employer of noncompliance, either proof that the employer had secured payment of compensation or a verifiable sworn affidavit, with supporting documentation, that the employer is exempt. Under this amendment, the employer must provide the bureau, within 10 calendar days of receipt of the letter, proof that the employer secured payment of workers' compensation insurance at all times or that the employer has not engaged in misclassification of its employees; (4) Decision regarding proof. Present law details when the bureau may or may not impose penalties dependent on if the employer responds to the letter or provides a sworn affidavit. This amendment revises such provisions to provide that if the bureau determines that sufficient proof is not provided, as discussed in item (3) above, then the administrator or designee must issue a decision ordering the employer to secure payment of workers' compensation insurance coverage and assessing the following penalties: (A) A penalty equal to 1/2 times the accurate average yearly workers' compensation premium, or if the employer is engaged in the construction industry, the greater of $1,000 or one and 1/2 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; and (B) If applicable, a second penalty as discussed in item (1) above; (5) Contested hearing. Under present law, if a contested case hearing is requested, it must be scheduled to be heard in a timely manner, not to exceed 45 calendar days from the date of the employer's request for a hearing. Under this amendment, the hearing must be scheduled within 60 calendar days from the date of receipt by the bureau of the employer's request for a contested case; (6) Failure to comply on multiple occasions. Under present law, in the event an employer engaged in the construction industry fails to comply with the Law by failing to secure payment two or more times within a five-year period, the employer is permanently prohibited from obtaining an exemption and the administrator must notify the secretary of state of such prohibition. Additionally, the administrator must issue a monetary penalty against the employer that is greater than $3,000 or three times the average yearly workers' compensation premium for each second or subsequent violation. This amendment clarifies if an employer or successor in interest fails to comply 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 will be presumed to be willful and subject to the rebuttal by the employer or successor in interest with clear and convincing evidence to the contrary; (8) Waiver for good cause. The administrator or the administrator's designee may waive a penalty against a penalized owner, or member of an LLC, of a construction services provider, or successor in interest to a construction services provider, for good cause. This amendment authorizes such waiver of a penalty against a general contractor; and (9) Referral to the Tennessee bureau of investigation (TBI) or district attorney. Under present law, in addition to the penalties for misclassification of employees by construction service providers, the department of labor and workforce development must refer cases involving business operations in violation of such provision to the TBI or the appropriate district attorney general. This amendment extends this provision to misclassification by all employers. This amendment also adds 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 one thousand $1,000 or the unpaid premium, which is calculated as one and 1/2 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 WARRANT This amendment provides that, in addition to other remedies in the Law, if any employer defaults in payment of penalties after due notice, 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. This amendment authorizes the administrator or designee 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. MISCELLANEOUS This amendment also: (1) Adds to the present law provision regarding filing of construction services provider exemption applications that an exemption that is fraudulent, or where the exemption holder is determined to be an employee, will be void; (2) Adds to the present law provision regarding revocation of construction services provider's exemption by the secretary of state that if a construction services provider fails to notify persons for whom the provider is currently providing services of the revocation, then the person for whom the provider provided services is not liable for workers' compensation insurance for the construction services provider; (3) Clarifies the present law provision whereby, with certain exceptions, a general contractor, intermediate contractor, or subcontractor is liable for compensation to any 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; (4) Adds to the present law provision governing construction services providers and regarding liability of a general contractor, intermediate contractor or subcontractor that: (A) The assessment of retroactive fees or premiums are prohibited pursuant to exempted time periods; and (B) 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. Also, 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; and (5) Revises the present law provision whereby the uninsured employers fund must be used for payment of the costs incurred by the bureau of workers' compensation to administer the assessment of and collection of penalties for noncompliance with the insurance requirements and the cost of administering the fund to provide an exception for funds collected due to violations involving misclassification. Under this amendment, those funds will be deposited in the employee misclassification education and enforcement fund, and other funds from penalties for noncompliance with the insurance requirements will be place in the uninsured employers fund to use for the purposes set out in present law.