A residential contractor in Tennessee discovers that a subcontractor has been working without workers' compensation coverage. What is the contractor's primary liability under Tennessee law?
Correct Answer
D) Full liability for any injuries to the subcontractor's employees
Under Tennessee workers' compensation law, the primary contractor is fully liable for injuries to subcontractor employees if the subcontractor lacks proper workers' compensation coverage.
Why This Is the Correct Answer
Under Tennessee Code Annotated § 50-6-113, a principal contractor becomes the statutory employer of a subcontractor's workers when that subcontractor lacks workers' compensation insurance. This means the prime contractor bears full liability for any workplace injuries suffered by those uninsured subcontractor employees — including both medical costs and lost wages — exactly as if those workers were direct employees.
Why the Other Options Are Wrong
Option A: No liability if the subcontractor is properly licensed
Licensing status is irrelevant to workers' compensation liability. A subcontractor can be fully licensed and still lack insurance coverage. Tennessee's statutory employer doctrine attaches based on insurance status, not licensure. Relying on a subcontractor's license without verifying their insurance certificate exposes the prime contractor to full liability.
Option B: Limited liability up to $25,000 per incident
Tennessee law imposes no $25,000 cap on a principal contractor's workers' compensation exposure for uninsured subcontractor employees. Liability is open-ended and covers all medical costs, lost wages, and permanent disability benefits as determined by the Workers' Compensation Court.
Option C: Liability only for medical expenses, not lost wages
Workers' compensation benefits in Tennessee are not split between medical-only and wage-only coverage. A successful claim typically includes medical treatment, temporary total disability (TTD) payments, permanent partial or total disability awards, and vocational rehabilitation — all of which the prime contractor would be responsible for as the statutory employer.
Memory Technique
Think 'No Certificate = No Shield.' If the sub has no workers' comp certificate, the prime contractor becomes their de facto insurer and absorbs ALL liability. Picture yourself as the safety net that catches everything when the sub has no net of their own.
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