Does a small public construction job in Texas still need a workers' comp coverage certificate?

Plain-English summary

The chancellor of the University of North Texas asked the Attorney General several questions about a workers' compensation rule for government construction work. Labor Code section 406.096 required a governmental entity that enters into a "building or construction contract" to make the contractor certify in writing that it carries workers' compensation insurance for each employee on the public project, and required subcontractors to give the general contractor matching certificates. The university wanted to know how far that requirement reached.

The office gave layered answers. It would not catalog which specific jobs (installing carpet in one office, replacing a window pane, small sheet-metal work, pipe fitting, an elevator or fire-alarm service contract) count as "building or construction," because that turns on the facts of each job, and resolving fact questions is not part of the opinion process. But assuming a job did qualify as a building or construction contract, the office concluded section 406.096 applied no matter how small the contract was. There was no de minimis exception, so even a $50 carpet repair or a $150 plate-glass replacement carried the certificate requirement if it was a building or construction contract. The office reasoned that the statute showed no intent to exempt small contracts and that workplace injuries can happen during minor tasks too.

The office also concluded the university is not a "hiring contractor" under Labor Code section 406.141 when it hires a company to build or extend a campus building, because it is not acting as a "contractor" in the ordinary sense (it is not undertaking to provide goods or services to someone else; the company it hires is). Finally, the office concluded that a section 406.145 agreement, which establishes that an independent contractor is not the hiring contractor's employee, does not satisfy section 406.096's certificate requirement, because that agreement does not certify that workers' compensation coverage is actually being provided.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Labor Code provisions discussed here were relatively new in 1994, having been recodified from the 1989 Workers' Compensation Act in 1993. Texas has amended its workers' compensation and public-contract coverage rules since then. The section numbers and the analysis reflect the law as it stood in 1994. Read this page for the office's reasoning, and verify the current statute before relying on any specific provision.

What the opinion meant for those who asked

For the university and other public entities: The opinion concluded that the certificate requirement of section 406.096 reached every qualifying building or construction contract, regardless of size, so a public entity could not skip the requirement for small jobs. It also concluded that a university hiring a company to do construction on its own campus was not itself a "hiring contractor" under section 406.141.

For contractors and subcontractors bidding on public jobs: The opinion treated the written certificate of workers' compensation coverage as a condition on building or construction contracts with the state or a political subdivision, even on low-dollar jobs. It also concluded that an agreement merely classifying an independent contractor as a non-employee (under section 406.145) did not stand in for the section 406.096 certificate, because it did not certify that coverage was actually in place.

On which jobs count as "building or construction": The opinion declined to answer. The office said whether a particular job (carpet installation, glass replacement, sheet-metal work, pipe fitting, or an annual elevator or fire-alarm service contract) is "building or construction" depends on additional facts and is outside what an AG opinion decides. The page does not resolve that question either; it depended on the facts of each job.

Common questions

Did a small public construction job still need a workers' compensation certificate?
Yes, if the job was in fact a "building or construction contract." The office found no de minimis exception in section 406.096, so even a $50 carpet repair or a $150 window-glass replacement carried the certificate requirement.

Why didn't the cost of small contracts change the answer?
The office reasoned that the statute showed no legislative intent to exempt small contracts, and that injuries can happen during even minor tasks. It assumed the legislature anticipated the added cost and decided coverage was worth it.

Was the University of North Texas a "hiring contractor" when it hired a construction company?
No. The office concluded the university was not a "hiring contractor" under section 406.141, because in hiring a company to build or extend a campus building it was not itself acting as a "contractor" undertaking to provide goods or services to someone else.

Could an agreement classifying someone as an independent contractor replace the coverage certificate?
No. A section 406.145 agreement establishes that an independent contractor is not the hiring contractor's employee, but it does not certify that workers' compensation coverage is actually being provided, so the office concluded it did not satisfy section 406.096.

Which exact jobs counted as "building or construction"?
The office did not say. It treated that as a fact question outside the opinion process, so the answer depended on the specifics of each job.

Background and statutory framework

Section 406.096 of the Labor Code had been recodified in 1993 from the 1989 Workers' Compensation Act (formerly V.T.C.S. article 8308-3.23(c), (d)), which the Seventy-third Legislature repealed and reenacted without substantive revision as title 5 of the Labor Code (Acts 1993, 73d Leg., ch. 269, § 1). Subsection (a) required a governmental entity entering a building or construction contract to make the contractor certify in writing that it provides workers' compensation coverage for each employee on the public project; subsection (b) extended that to subcontractors; subsection (e) defined "building or construction" to include erecting, remodeling, extending, repairing, or demolishing a structure, or otherwise improving real property through similar activities, and defined "governmental entity" to mean the state or a political subdivision, including a municipality.

The university's questions ran through the related subchapter G provisions on independent contractors. Section 406.141 defines a "hiring contractor" as a general contractor or subcontractor who subcontracts work to others, and section 406.121 defines "general contractor" and "subcontractor." Drawing on those definitions and on Black's Law Dictionary's definitions of "general contractor," "contractor," and "business," together with the rule of construction in Government Code section 312.002(b) (words used in a trade take their trade meaning), the office concluded that a "hiring contractor" and a "general contractor" are the entity that is granted a contract, not the entity that grants one. A university that hires a company to extend a campus building is not undertaking to provide goods or services to another, so it is not a "contractor" and therefore not a "hiring contractor." Because the university's concern was limited to construction on its own campus buildings, the office did not decide whether some other governmental entity might, in some situation, be a hiring contractor. On the last question, the office read section 406.145, which lets a hiring contractor and an independent contractor agree that the independent contractor is not an employee, as doing something different from section 406.096: the 406.145 agreement addresses employment status, not proof of coverage, so it does not certify that coverage is actually being provided and does not meet the 406.096 certificate requirement.

Citations

Statutory provisions discussed:

• Labor Code § 406.096 (certificate of workers' compensation coverage on public building or construction contracts; subsections (a), (b), (d), (e))
• Labor Code § 406.121 (definitions of "general contractor" and "subcontractor")
• Labor Code §§ 406.141–406.145 (subchapter G; "hiring contractor," independent-contractor agreements)
• Gov't Code § 312.002(b) (trade or technical words take their trade meaning)
• V.T.C.S. article 8308-3.23(c), (d) (former codification, 1989 Workers' Compensation Act)
• Acts 1993, 73d Leg., ch. 269, § 1 (recodification as title 5 of the Labor Code)

Secondary authority discussed:

• Black's Law Dictionary 198, 326, 683 (6th ed. 1990) ("business," "contractor," "general contractor")

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0300
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1994/dm0300.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

August 11, 1994

Mr. Alfred F. Hurley
Chancellor
University of North Texas
P.O. Box 13737
Denton, Texas 76203-6737

Opinion No. DM-300

Re: Whether there is a de minimis exception to the requirement that certain companies that enter into a "building or construction contract" under Labor Code section 406.096 with the state or a political subdivision of the state must provide workers' compensation insurance for their employees, and related questions (RQ-596)

Dear Mr. Hurley:

You ask us to determine what constitutes a "building or construction contract" within section 406.096 of the Labor Code.[1] Section 406.096 provides, in pertinent part, as follows:

(a) A governmental entity that enters into a building or construction contract shall require the contractor to certify in writing that the contractor provides workers' compensation insurance coverage for each employee of the contractor employed on the public project.

(b) Each subcontractor on the public project shall provide such a certificate relating to coverage of the subcontractor's employees to the general contractor, who shall provide the subcontractor's certificate to the governmental entity.

. . . .

(d) The employment of a maintenance employee by an employer who is not engaging in building or construction as the employer's primary business does not constitute engaging in building or construction.

(e) In this section:

(1) "Building or construction" includes:

(A) erecting or preparing to erect a structure, including a building, bridge, roadway, public utility facility, or related appurtenance;

(B) remodeling, extending, repairing, or demolishing a structure; or

(C) otherwise improving real property or an appurtenance to real property through similar activities.

(2) "Governmental entity" means this state or a political subdivision of this state. The term includes a municipality.

In particular, you also ask whether section 406.096 applies to the following types of jobs:

(1) the furnishing and installation of an item in a building (such as the installation of carpeting for a single office, or a wall system to divide a room in half etc.); (2) the service or repair of a certain item (such as the replacement of a glass window pane; the repair of a malfunctioning electronic door; resealing seams and restretching a carpet, etc.); (3) small sheet metal projects; (4) specialized pipe fitting work; or (5) annual service contracts for services such as elevator maintenance and fire alarm maintenance.

We cannot answer this question because the determination in each case may depend on a consideration of additional facts to determine whether the job constitutes "building or construction" as defined in section 406.096(e)(1). Resolution of questions of fact is not a function of the attorney general opinion process. For this reason, we cannot amplify the statutory definition of "building or construction" to provide a formula for determining whether or not these jobs are "building or construction contracts."

On the assumption that such jobs are "building or construction contracts," you ask whether section 406.096 of the Labor Code applies to them, no matter how small the subject matter of the contract may be. We see in the statutory language no indication of a legislative intent to except small contracts from the coverage requirement of section 406.096. Furthermore, injuries at the work place may occur during the performance of even minor tasks, so we can think of no reason to interpret this section as applying only to large contracts.

You contend that if this provision applies to small jobs such as a $50 carpet repair or a $150 plate glass replacement, then the University of North Texas will not be able to hire for minor jobs many of the smaller and less expensive independent contractors that do not provide workers' compensation coverage to their employees. It is obvious that the maintenance of workers' compensation coverage will entail costs that may be factored into the rates charged for services provided by the covered contractor in a building or construction contract. If the effect of section 406.096 is to place an added cost burden on a governmental entity, we believe that the legislature anticipated this effect and determined that the added cost was justified by the benefits of requiring coverage. We therefore conclude that section 406.096 applies to all contracts falling within its terms regardless of the size of the subject matter.

You next ask whether a "governmental entity" as defined in section 406.096(e)(2) may be a "hiring contractor" as defined in Labor Code section 406.141, which begins subchapter G of chapter 406. Subchapter G establishes that in certain construction contracts, see Labor Code § 406.142, an "independent contractor" as defined in section 406.141(2), and not the "hiring contractor" as defined in section 406.141(1), is responsible for the provision of any workers' compensation to any of its employees, see id. § 406.143, unless the hiring contractor and the independent contractor enter into an agreement making the hiring contractor the employer of the independent contractor and its employees for the purpose of providing workers' compensation coverage, see id. § 406.144.

To answer this question we will need to consider the meaning of the phrase hiring contractor as used in subchapter G. Section 406.141 defines hiring contractor as follows:

In this subchapter:

(1) "Hiring contractor" means a general contractor or subcontractor who, in the course of regular business, subcontracts all or part of the work to be performed to other persons.

Section 406.121, in turn, defines general contractor and subcontractor as follows:

In this subchapter:

(1) "General contractor" means a person who undertakes to procure the performance of work or a service, either separately or through the use of subcontractors. The term includes a "principal contractor," "original contractor," "prime contractor," or other analogous term. The term does not include a motor carrier that provides a transportation service through the use of an owner operator.

. . . .

(5) "Subcontractor" means a person who contracts with a general contractor to perform all or part of the work or services that the general contractor has undertaken to perform.

The statutory definition of general contractor is consistent, for the most part, with that found in Black's Law Dictionary:

One who contracts for the construction of an entire building or project, rather than for a portion of the work. The general contractor hires subcontractors (e.g. plumbing, electrical, etc.), coordinates all work, and is responsible for payment to subcontractors. Also called "prime" contractor.

BLACK'S LAW DICTIONARY 683 (6th ed. 1990).

Although the foregoing Labor Code provisions do not define hiring contractor or general contractor in terms expressly limiting the phrases to include a person who is a "contractor," it is helpful to consider the meaning of the word contractor in order better to understand these phrases. Black's defines contractor, in part, as:

One who contracts to do work for another. This term is strictly applicable to any person who enters into a contract, but is commonly reserved to designate one who, for a fixed price, undertakes to procure the performance of works or services on a large scale, or the furnishing of goods in large quantities, whether for the public or a company or individual.

A contractor is a person who, in the pursuit of any independent business, undertakes to do a specific piece of work for another or other persons.

Id. at 326 (emphasis added). We believe that a "hiring contractor" under section 406.141 and a "general contractor" under section 406.121 do not include the entity that grants a prime contract—such entity not being a "contractor" in common usage—but may include the entity that is granted the contract. See Gov't Code § 312.002(b) ("If a word is connected with and used with reference to a particular trade or subject matter or is used as a word of art, the word shall have the meaning given by experts in the particular trade, subject matter, or art").

The University of North Texas, in hiring a company to extend a campus building, for example, does not act as a "hiring contractor" as that phrase is defined in section 406.141 because it does not act even as a "contractor" as that term is commonly understood. In regard to such a project, the university does not undertake to provide goods or services for another. The company would be the "contractor" because it undertakes to do the project for the university, and not vice versa. Nor does the university, we assume, make a "business"—that is, a "commercial activity engaged in for gain," BLACK'S LAW DICTIONARY 198—out of entering into contracts with companies to have its buildings extended (such contracts being, rather, merely necessary to the pursuit of the university's purposes as an educational and research institution); but the company that it hires probably does pursue a "business" of entering into contracts to extend buildings. Because your concern appears to be limited to contracts to perform "building or construction" on buildings on the university's campus, we do not need to engage here in speculation to determine whether any "governmental entity" as defined in section 406.096(e)(2) may in some situations be a "hiring contractor" as defined in Labor Code section 406.141. It suffices to conclude that the University of North Texas is not a "hiring contractor" as defined in Labor Code section 406.141(1) when it hires an individual or a company to perform on campus buildings any activity that constitutes "building or construction" for purposes of section 406.096.

You finally ask whether an agreement under Labor Code section 406.145 satisfies the requirements of a certificate of coverage under section 406.096, subsections (a) and (b). Section 406.145, which is part of subchapter G, provides that a joint agreement between the hiring contractor and an independent contractor affirming that the independent contractor is not an employee of the hiring contractor will establish as a matter of law that the subcontractor "is an independent contractor and not an employee, and is not entitled to workers' compensation insurance coverage through the hiring contractor unless an agreement is entered into under Section 406.144 to provide workers' compensation insurance coverage." Section 406.096 requires that the contractor, see id. § 406.096(a), and any subcontractors, see § 406.096(b), in a building or construction contract with a governmental entity certify in writing that each employee of the contractor or subcontractor that is working on the project is being provided workers' compensation insurance coverage. Because an agreement under section 406.145 does not certify that the contractor and any subcontractor are in fact providing workers' compensation coverage to its employees, we conclude that such an agreement would not satisfy the certificate requirements of section 406.096.

SUMMARY

Labor Code section 406.096 applies to every "building or construction contract" entered into by the State or a political subdivision of the State, no matter how small the subject matter of the contract may be. The University of North Texas is not a "hiring contractor" as defined in Labor Code section 406.141(1) when it hires an individual or a company to perform on campus buildings any activity that constitutes "building or construction" for purposes of section 406.096. An agreement under Labor Code section 406.145 between a hiring contractor and an independent contractor affirming that the independent contractor is not an employee of the hiring contractor does not certify that the contractor and any subcontractor is in fact providing workers' compensation coverage to its employees and therefore would not satisfy the certificate requirements of section 406.096.

DAN MORALES
Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

DREW DURHAM
Deputy Attorney General for Criminal Justice

JAVIER AGUILAR
Special Assistant Attorney General

RENEA HICKS
State Solicitor

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by James B. Pinson
Assistant Attorney General

[1] Section 406.096 of the Labor Code was formerly codified as V.T.C.S. article 8308-3.23(c), (d) (1925), a provision of the 1989 Workers' Compensation Act (the "act"). The Seventy-third Legislature repealed the act and reenacted it without substantive revision, as title 5 of the Labor Code. Acts 1993, 73d Leg., ch. 269, § 1, at 1132.