Requiring Workers’ Compensation | Why it is So Very Important to Consider Its Inclusion in Every Contract and More

It is surprising to hear from so many community association board members and managers looking to protect their community association that, when asked if they require all vendors to have workers’ compensation insurance as a required term in all of their contracts, it can be like looking at a deer in the headlights. In addition, for reasons explained below, if your community association provides services on a regular basis, such as valet, concierge, fitness programs, etc., then you may also want to consider amending the declaration of covenants or declaration of condominium to include a requirement that the association is contractually obligated to provide such services to its owners because this can help provide liability protection in favor of the association. However, this approach can lead to other problems if the association does not actually provide the required services.

According to the Florida Office of Insurance Regulation, workers’ compensation insurance is coverage purchased by the employer/business that provides benefits for job-related employee injuries, with a few exceptions. Florida law requires most employers to purchase workers’ compensation coverage. Under a workers’ compensation policy, employees are compensated for occupationally incurred injuries regardless of fault. This coverage makes employers immune from some injury lawsuits by employees, as the workers’ compensation policy will limit the type of recovery available to the employee.

However, there are many exceptions afforded to employers in which the employer is not required by statute to have workers’ compensation coverage. For example, a construction-related company is allowed up to three exemptions, and a non-construction-related company is allowed up to ten exemptions. If the employer is exempt from having to provide workers’ compensation coverage, then should an employee be injured on the association’s property, the association could bear the financial brunt of the liability for the injury.

Why is requiring workers’ compensation so very important? Because it helps protect the association from liability claims when an employee of a vendor is hurt on the association’s property. While Florida’s workers’ compensation laws do not guarantee protection, they sure go a very long way in helping to protect the association from claims by employees of vendors when they get hurt in your community.

Why is it a good idea to consider including regularly provided services as a requirement within the declaration of condominium or declaration of covenants? Because, under certain circumstances, the association can be considered a “statutory employer” under the workers’ compensation rules, meaning that the association is entitled to the same immunity protection that the injured employee’s employer is afforded.

In a recent case, Bal Harbor Towers Condominium Association, Inc. v. Martin Bellorin, 351 So.3d 96 (Fla. 3d DCA Oct. 19, 2022), the employee, Martin Bellorin, was injured while delivering luggage when a plastic panel fell from the ceiling of the elevator and hit his head. Subsequently, he filed a lawsuit against the association, alleging negligence based on a premises liability theory, and sought damages for his injury. During the trial court proceedings, the association sought to defend the case by arguing during its motion for summary judgment that it was entitled to workers’ compensation immunity because it was a “statutory employer.” The trial court disagreed and held that the workers’ compensation immunity did not apply to the association because, in this case, the declaration of condominium and bylaws were not a contract and, therefore, did not impose a contractual obligation upon the association to provide the valet services. However, the association appealed the trial court decision and prevailed.

On appeal, the association argued that its declaration of condominium was a contract and, in fact, provided a contractual obligation to provide the valet services to the unit owners at the condominium, and therefore it was entitled to the workers’ compensation immunity as a “statutory employer.” Pursuant to §440.10(1)(b), Florida Statutes,

in cases where a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.

Stated differently, a “statutory employer” is entitled to vertical immunity. A vertical relationship exists when a contractor (in this case, the association) sublets any part(s) of its contracted work to a subcontractor (in this case, the valet company). Thus, in the Bal Harbor Towers Condominium Association case, the association argued it should be deemed the “statutory employer” of the employees of the valet company.

As pointed out by the Appellate Court, for the Association to be a contractor under §440.10, it must show that it has a contractual obligation to provide the services to the unit owners, and that it sublet any part of the contract work to a subcontractor… to be considered a contractor under §440.10 the association’s primary obligation in performing a job or providing a service, must arise out of a contract… well-established Florida law provides that a declaration of condominium operates as a contract, thus the trial court erred  in finding that the Association did not have a contractual obligation to provide valet services to unit owners under its declaration of condominium, thereby determining that the Association was not entitled to worker’s compensation immunity as a statutory employer.

Therefore, the Appellate Court reversed the trial court’s non-final order denying the association’s motion for final sum-mary judgment and remanded the case back to the trial court for further proceedings.

The takeaway from the Bal Harbor Towers Condominium Association case is if the association is going to provide serv-ices on a regular basis to its members, then  amending the declaration to require providing such services will further help shield the association from liability claims from the association’s vendor’s employees. In addition, the association should consider requiring all vendors servicing the association and its members to have workers’ compensation insurance and provide proof of coverage prior to commencing work. Remember, the fact that a vendor may tell you they are exempt from workers’ compensation only means that if they or their employees are hurt on the association’s property, then the association is exposed to liability for damages. Be sure to talk about these important issues with the association’s legal counsel, and always, no matter the value of the contract, strongly consider asking association counsel to prepare the appropriate addendum to help better protect the interests of the association.