If your construction business is located in New Hampshire, a little known change in the law this past legislative session may result in an increase in your workers' compensation insurance premiums.
This spring, the New Hampshire legislature enacted HB 471 (now Chapter 323 of the laws of 2007), which among other things, amended the limited executive exclusion found in the workers' compensation law for corporations and limited liability companies that are engaged in the private construction industry in New Hampshire. This change was effective as of September 14, 2007, for new and renewed workers' compensation insurance policies.
The change in law outlined in this article was part of a more comprehensive change in workers' compensation law that now requires workers' compensation coverage for any type or size of business on state transportation and public works projects in New Hampshire.
The law before September 14, 2007
Under the old law and prior to September 14, if your business was subject to the workers' compensation law (that is, having more than three executives and/or other employees), you could elect to exclude up to three corporate executives or LLC managers from coverage under your workers' compensation policy; thereby, eliminating their payroll in the development of the premium. And if your construction business was not required to carry workers' compensation coverage by virtue of it not having any employees and your business had three or fewer corporate officers or LLC members, the old law did not require coverage.
Each of these scenarios has changed with the passage of HB 471/Chapter Law 323 in the last legislative session.
The law on and after September 14, 2007
The new law, as changed through HB 471/Chapter Law 323, 2007, revokes the election to exclude up to three of these executives when they are "actively engaged in on-site work to advance the goal of a construction project at a construction site within the State of New Hampshire." And it no longer matters whether the corporation or LLC has any employees. If they are involved in construction, they are deemed to be an "employer" and subject to workers' compensation coverage.
Now, if an individual who is excluded from coverage in accordance with RSA 281-A:18-a actively engages in on-site work at a construction site within the State of New Hampshire, even for only one day during the policy term, then the corporation or limited liability company shall be subject to pay an insurance company's premium covering that individual for the entire policy term. This means that additional premiums will be charged and the cost of operating your business will increase as a function of covering the cost of providing benefits to these executives. The additional premiums will be determined by that individual's annual compensation and scope of work.
According to an interpretation of the new law by the Attorney General's Office, the New Hampshire Department of Labor has indicated that a "construction site" means the place where work is done involving the classification codes of the National Council on Compensation Insurance.
It is important to note that these new changes involving private construction sites in New Hampshire only apply to corporations and LLCs. The changes do not apply to sole proprietorships or partnerships.
While not speculating on why this measure was passed into law this past year, it is known that some interest groups will be working to repeal this new law and other interest groups will be working to expand the scope of its application to construction businesses in New Hampshire. Look for updates on this matter and others in future issues of Good Company.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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