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Ohio Workers’ Compensation System is Different

Many of the new out-of-state employers entering Ohio as a result of the developments in the oil and gas, and frac sand industry are unsuspectingly operating without proper workers’ compensation coverage, according to the law firm of Steptoe & Johnson. Without the proper workers’ compensation coverage from the Ohio State Insurance Fund, these out-of-state employers are at risk of being non-complying employers and subject to significant liability for any non-complying claims.

The first thing out-of-state employers need to know is that Ohio’s workers’ compensation system is different. Ohio is one of a few remaining monopolistic workers’ compensation systems in the country. Every employer in the state must obtain workers’ compensation coverage from the Ohio Bureau of Workers’ Compensation (BWC) or obtain permission to be self-insured.

Steptoe & Johnson has been contacted by Kevin R. Abrams, chief of employer services for the BWC, to discuss their concern for workers’ compensation coverage for out-of-state employers. He indicates:

Many out-of-state employers are not aware of the significant differences between Ohio workers’ compensation coverage requirements and that provided by the out-of-state employer’s private workers’ compensation coverage. The common misconception is that the “All States Endorsement” provided through an out-of-state employer’s insurance policy will provide coverage for their employees while temporarily in Ohio. Unfortunately, Ohio R.C. 4123.54 significantly limits the workers’ compensation coverage for out-of-state employees temporarily in Ohio.

Basically, out-of-state employers must obtain Ohio workers’ compensation coverage for their employees working temporarily in Ohio, unless their state extends the same reciprocal exemption for Ohio employers. If they do not, and most do not, extend the same reciprocal coverage for Ohio employees, Ohio will not exempt that state’s employers from requiring Ohio coverage for that state’s employees temporarily in Ohio.

Another area of concern is the potential liability of general contractors for the workers’ compensation liability of their sub-contractors. A number of out-of-state employers are mistakenly relying on language in a subcontracting agreement to shield them from workers’ compensation liability of the subcontractor’s employees.

Ohio R.C. 4123.01 transfers liability of a non-complying subcontractor to the general contractor. While a properly drafted subcontracting agreement is possible to protect the general contractor from this type of liability, the general contractor must make certain the subcontractor has valid Ohio workers’ compensation coverage. If not, the general contractor may be responsible for the workers’ compensation liability of the non-complying subcontractor.

Obtaining Ohio workers’ compensation coverage is fairly simple. The challenge is determining which premium program is the best option. The Ohio Bureau of Workers’ Compensation offers a number of different premium programs that can make a significant difference in the amount of premiums employers pay.