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David Thurman has worked for himself all his life, not minding the long hours and uncertain income of being an
independent tradesman in the housing industry.
At least he is his own boss, Thurman said.
After 30 years in construction, Thurman, now 60, says he's never been seriously hurt installing siding, and has never
filed a claim for Workers' Compensation.
And until now, he's never had to pay for it, because as a sole proprietor he could opt out of Workers' Compensation
insurance for himself.
But a new law passed by the state Legislature is about to change that, and Thurman says it will likely be the nail in
the coffin of his dying business.
Thurman and thousands of other workers across Tennessee will be subject to the new law passed by the Legislature which
states that sole proprietors and partners in construction businesses can't opt out of workers' comp anymore, even if
they have their own health insurance and private disability insurance to cover their costs in case of an injury.
It's a law that threatens the livelihood of Thurman and scores of other small shops who make up a big part of the
building industry's subcontractor class, according to some experts.
Starting Jan. 1, Thurman, for instance, will have to pay $28.72 out of every $100 he makes for Workers' Comp insurance.
That's $5,169.60 out of the $18,000 Thurman made last year, and the big chunk he will now have to pay is likely to shut
him down.
"I have to make a living some way or another, but I'm not giving someone a third of my paycheck just so I can go to
work," Thurman said.
"A lot of these guys are mom-and-pops who work for themselves. If they have to pay this, they raise their price and then
I have to raise my price. Essentially, it's a tax on the new homebuyer," said Ron Jones of Gallatin-based Randy Jones
Construction, which subcontracts out most of its work.
"I can see both sides. I know they want Workers' Comp premium paid on everybody that's working on a job. The cost of
getting care is astronomical. But a lot of these guys are working week-to-week or paycheck-to-paycheck. A small
contractor just doesn't have the money."
When the Legislature changed the law on Workers' Compensation last session, it was aimed at unscrupulous operators who
avoided paying Workers' Comp on their employees. The intent was to ensure that everyone in the construction industry be
covered in case they were injured on the job. The net effect was a gain for the insurance industry.
But one consequence was to slap the smallest of businesses with huge premiums at a time when they can least afford it.
Premiums range from less than one percent of pay for draftsmen to close to 30 percent for high-risk occupations such as
roofers, carpenters and framers.
"Depending on where you fall on the spectrum, it's as high as $15,000," said Jim Brown, Tennessee director of the
National Federation of Independent Business. "The construction market has imploded, and exorbitant amounts could put
them out of business.
"The intent of the law was excellent, but the effect is the law went too far."
Searching For An Answer
The action was necessary to clarify the law and attach a policy to everyone working on a job site, said Ashley Arnold,
general counsel for Insurors of Tennessee, a trade organization for independent insurers. In the past, when a
subcontractor or employee was injured on a job site and didn't have Workers' Comp, anyone from the general contractor
on up to the developer could ultimately be responsible.
Now, as subcontractors get their insurance bills for next year, legislators, homebuilders groups and small business
associations are being flooded with phone calls.
"These are people who are desperate right now," said Susan Ritter, executive vice president of the Home Builders
Association of Tennessee. "And they're very sad phone calls because there's nothing we can do until we go into session."
What Ritter means is that legislators have to wait until January to reverse any of the new rules. But the message is
getting out. Sen. Diane Black, R-Gallatin, met on the issue recently with members of her constituency.
And Sen. Tim Barnes, D-Adams, said he and Rep. Joe Pitts, D-Clarksville, plan to introduce a bill in both houses in the
session's first or second week that creates an exemption.
"We're sounding the alarm now. It's a very critical time for the small independent businessman," Barnes said. "If they
abide by the law, many of them will go out of business.'"
Until then, the Tennessee Department of Commerce & Insurance has been working on creating a new classification that
reduces some owners' premiums from $28.72 per $100 of pay to $6.33 per $100.
"Class 5604" would include construction executives, supervisors or foremen overseeing job sites, not performing actual
construction work, said Mike Shinnick, Workers' Compensation manager at the TDCI. If it goes through, it would take
effect at the same time the new law does and provide a measure of relief for some construction occupations not directly
wielding hammers.
But it won't help tradesmen like Thurman who do the work themselves and hire help when needed, paying for their
employee's Workers' Comp but not their own. Now he's living off savings from better years as he watches contractors go
bankrupt all around him.
With the homebuilding business less than a third of what it was, it's already hard enough to eke out $18,000 a year,
and Thurman said the new 28 percent premium will end his independent way of life for good.
"If I have to go work at Walmart and greet people at the door I will, but I'm not going to give them a third of my
money," Thurman said. "That's not right."
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Jeannie Naujeck