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Do You Use Subcontractors? Then Read On As Maryland's Highest Court Clarifies Your Role in the Case of Worker's Injury

February 4, 2011

Principal contractors in Maryland can breathe a sigh of relief – the Maryland Workers’ Compensation law does not make them responsible for the injuries that a subcontractor’s employees suffer on an out-of-state jobsite.  Nor do they have to ensure the subcontractor maintains workers’ compensation insurance policies in multiple states.  You may find yourself asking what the big deal is – after all, principal contractors have never had these requirements.

Maryland’s highest court recently decided that a principal contractor was not liable for the workers' compensation benefits of an employee of its subcontractor, when the employee suffered an accidental injury while working on a jobsite in the District of Columbia.  The employee filed a claim for worker’s compensation benefits in Maryland.  The subcontractor had workers' compensation insurance coverage in the District of Columbia but not in Maryland.  The court had to decide whether the principal contractor or Maryland’s Uninsured Employers' Fund would pay the employee’s benefits.

Generally, Maryland Workers’ Compensation law provides that a principal contractor is liable for the injuries of a “covered” employee of a subcontractor.  A “covered” employee includes employees who work both in and outside of Maryland.  The Uninsured Employer’s Fund argued that the employee was a “covered” employee of the subcontractor, and, therefore, should be compensated by the contractor.  The court determined, however, that the employee must be “covered” not only as to the subcontractor but also as to the contractor.  The court reasoned that if the employee were directly employed by the contractor, his employment would have been wholly in the District of Columbia, he would not have been “covered,” and thus the contractor would not have been liable for the employee’s benefits.  Therefore, since the principal contractor could not have been liable for workers’ compensation benefits if it had directly employed the injured employee, it was also not liable under these facts.  The court also decided that a general contractor is not responsible to ensure that its subcontractors maintain workers’ compensation coverage for their employees.

For more information on the this and other construction-related topics, contact Scott Burns.

Source: W. M. Schlosser Co. v. Uninsured Employers' Fund, Court of Appeals of Maryland.

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