DAN MORALES

ATTORNEY GENERAL 

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Mr. Abed F. Hurley chancellor University ofNorth Texas P.O. Box 13737 Denton, Texas 76203-6737 August 11,1994
Opiion No. DM-300
Re: Whether there is a de minimis exception to the requirement that certain wmpsnies that enter into a “building or wnstruction contract” under Labor Code section 406.096 with the state or a political subdivision of the state must provide workers’ wmpensation insurance for their employees, and related questions (RQ-596)
Dear Mr. Hurley:
You ask us to determine what constitutes a “building or construction wntract” within section 406.096 of the Labor Code.1 Section 406.096 provides, in pertinent part, as follovvs: (a) A governmental entity that enters into a building or

wnstruction wntract shah require the contractor to certity in writing that the wntractor provides workers’ compensation insurance coverage for each employee ofthe contractor employed on the public project. (b) Each subcontractor on the public project shall provide such a certhicate relating to wverage of the subwntractor’s employees to the genera) contractor, who shah provide the subcontractor’s certiticate to the govemmentsl 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 wnstitute engaging in building or wnstruction.

%cction 406.0% oftheLaborCedewasfcmerly cxnlikdas V.T.C.S. article8308-3.23(c), (d) (1925). a provision

ofthe 1989 Workers’CompeoYltion An (the“act”). The .Smnly-thirdLc&latm lepealcdtheactsnd mnaacdifwithoutsubstantiverrvision,astiUe5oftbcLaborc4de. Acts1993, 73dLeg., ch.269,s 1,at 1132.

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(e) In this section: (1) “Building or construction” includes: (A) erecting or preparing to erect a structure, including abuikliig, 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) “Ciovemmental entity” means this state or a political subdivision ofthis state. The term includes a municipality.

In particular, you also ask whether section 406.0% applies to the following types of jobs: (1) the fbmishing and installation of an item in a building (such as

the instaMion 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 nndtImctioning 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 tire 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 wnstitutes “building or wnstruction” as defined in section 406.096(e)(l). Resolution of questions of fact is not a tbnction of the attorney general opinion process. For this reason, we cannot amplify the statutory definition of “buildi or construction” to provide a formula for determining whether or not thesejobs are “building or construction contracts.”
On the assumption that suchjobs are “building or construction wntracts,” you ask whether section 406.096 of the Labor Code applies to them, no matter how small the subject matter ofthe 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 performsnce of even minor tasks, so we can think ofno reason to interpret this section as applying only to large contracts.
You contend that ifthis provision applies to smalljobs such as a $50 carpet repair or a $150 plate glass replacement, then the University of North Texas will not be able to

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hire for minorjobs many ofthe smaller and less expensive independent wntractors that do not provide workers’ compensation coverage to their employees. It is obvious that the maintenance ofworkers’ compensation wverage will entail costs that may be factored into the rates charged for services provided by the covered wntractor in a building or construction contract. Ifthe etTectof section 406.096 isto place an added cost burden on agovernmental entity, we believe that the legislature anticipated this effect and determined that the added cost was justitied by the be&its of requiring coverage. We therefore conclude that section 406.096 applies to all contracts falling within its terms regardless of the size ofthe subject matter.
You next ask whether a “governmental entity” as detined in section 406.096(e)(2) may he a “hiring wntractor” as defined in Labor Code section 406.141, which begins subchapter G of chapter 406. Subchapter G establishes that in certain construction wntracts, see Labor Code 5406.142, an “independent contractor” as defined in section 406.141(2), and not the “hiring contractor” as defined in section 406.141(l), isresponsible for the provision of sny workers’ compensation to any ofits employees, see id. 5406.143, unless the hiring contractor and the independent contractor enter into an agreement making the hiring contractor the employer ofthe independent contractor and its employees for the purpose ofproviding workers’ compensation coverage, see id. 5406.144.
To answer this question we will need to consider the meaning of the phrase hiring contractor asused insubchapterG. Section 406.141 defineshiringconmcfor asfollows:

In this subchapter: (1) “Hiring contractor” means a general wntractor or subcontractor who, in the wurse of regular business, subcontracts all or part ofthe work to be performed to other persons. Section 406.121, inturn, definesgeneral contractor andsubcontmctor asfollows:

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 ofthe work or services that the general contractor has undertaken to perform.

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The statutory definition ofgeneral coniractor is consistent, for the most part, with that found inBlack’sLawDictionary:

One who wntracts for the construction of an entire building or project, rather than for a portion of the work. The general wntractor hires subcontractors (e.g. plumbii electrical, etc.), wordiites all work, and is responsible for payment to subwntractors. Also called “prime”contractor. BLACK’S LAWDICTIONARY

683 (6th ed. 1990). Although the foregoing Labor Code provisions do not define hiring wntructor or general contractor in teams expressly limiting the phrases to include a person who is a

“contractor,” it is helpibl to consider the meaning ofthe word contractor in order better to understand the these phrases. Bkxk’s defines coniracior, inpart, as:

One who wntracts to do workfor another. This term is strictly applicable to any person who enters into a contract, but is wmmonly resetved to designate one who, for a t&d price, undertakes to procure the performance ofworks or services on a large scale, or the tiunishing of goods in large quantities, wheiherfor thepublic or a compary orina?viaM. A wntractor is a person who, inthepursuii ofany idpendeni business, undertakes to do a specific piece of workfor another or otherpersons. Id. at 326 (emphasis added). We believe that a “hiring contractor” under section 45141 and a “genersl contractor” under section 496.121 do not include the entity that grurrrs a prime contract-such entity not being a “contractor” in wmmon usage-but may include the entity that is gronfed the contract. See Gov’t Code 5312.002(b) (“If a word is wnnected with and used with reference to aparticular trade or subject matter or is used as a word of art, the word shag 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 466.141 because it does not act even as a “contractor” as that term is wnnnonly understood. In regard to such a project, the university does not undertake to provide goods or servicesfor 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 “wmmercial activity engaged in for gain,” BLACK’S

LAWDICTIONARY

198-out of entering into wntracts 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

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that it hires probably does pursue a “busiiess” of entering into contracts to extend buildmgs. 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 “govemmentsl entity” as detined in section 406.096(e)(Z) may in some situations be a “hiring contractor” as defined in Labor Code section 406.14 1. It s&ices to conclude that the University ofNorth Texas is not a “hiring contractor” as detined in Labor Code section 406.141(l) when it hires an individuai or a wmpany to petform on campus buildings any activity that constitutes “building or wnstruction” for purposes of section 406.096.
You finally ask whether an agreement under Labor Code section 406.145 satisSes the requirements of a certiticate of wverage under section 406.096, subsections (a) and (b). Section 406.145, which is part of subchapter G, provides that ajoint agreement between the hiring contractor and an independent contractor aSInning 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’ wmpensation insursnw coverage.” Section 406.096 requires that the contractor, see id. 5406.096(a), and any subcontractors, see $406.096(b), in a building or construction wntract with a governmental entity certify in writing that each employee ofthe contractor or subcontractor that is working on the project is being provided workers’ compensation insurance wverage. 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 certitIcate requirements of section 406.096.

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SUMMARY
Labor Code section 406.096 applies to every “building or construction w&-act” 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 ofNorth Texas is not a “hiring contractor” as de&d in Labor Code section 406.141(l) when it hires an individual or a company to perfortn on campus buildings any activity that constitutes “building or wnstruction” for purposes of section 406.096. An agreement under Labor Code section 406.145 between a hhing contractor and an independent wntractor a&ming that the independent contractor is not an employee of the hiring wntractor 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 certiticate requirements of section 406.096.

DAN MORALES Attorney General ofTexas
JORGE VEGA Fii Assistant Attorney Genera)
DREW DURHAM Deputy Attorney General for Criminal Justice
JAVJER AGUILAR Special Assistant Attorney General
RENEA HICKS State Solicitor
SARAH.J. SHIRLEY Chair, Opinion Committee Prepsred by James B. Pinson Assistant Attorney General

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