Session of 1999
         
SENATE BILL No. 269
         
By Committee on Commerce
          
2-9
          
  9             AN  ACT concerning workers compensation; relating to self-employed
10             subcontractors; amending K.S.A. 1998 Supp. 44-505, 44-508, 44-532
11             and 44-543 and repealing the existing sections.
12      
13       Be it enacted by the Legislature of the State of Kansas:
14             Section  1. K.S.A. 1998 Supp. 44-505 is hereby amended to read as
15       follows: 44-505. (a) Subject to the provisions of K.S.A. 44-506 and amend-
16       ments thereto, the workers compensation act shall apply to all employ-
17       ments wherein employers employ employees within this state except that
18       such act shall not apply to:
19             (1) Agricultural pursuits and employments incident thereto, other
20       than those employments in which the employer is the state, or any de-
21       partment, agency or authority of the state;
22             (2) any employment, other than those employments in which the em-
23       ployer is the state, or any department, agency or authority of the state,
24       wherein the employer had a total gross annual payroll for the preceding
25       calendar year of not more than $20,000 for all employees and wherein
26       the employer reasonably estimates that such employer will not have a
27       total gross annual payroll for the current calendar year of more than
28       $20,000 for all employees, except that no wages paid to an employee who
29       is a member of the employer's family by marriage or consanguinity shall
30       be included as part of the total gross annual payroll of such employer for
31       purposes of this subsection, except when the employer is a self-employed
32       subcontractor under circumstances wherein K.S.A. 44-503, and amend-
33       ments thereto, would otherwise apply;
34             (3) any employment, other than those employments in which the em-
35       ployer is the state, or any department, agency or authority of the state,
36       wherein the employer has not had a payroll for a calendar year and
37       wherein the employer reasonably estimates that such employer will not
38       have a total gross annual payroll for the current calendar year of more
39       than $20,000 for all employees, except that no wages paid to an employee
40       who is a member of the employer's family by marriage or consanguinity
41       shall be included as a part of the total gross annual payroll of such em-
42       ployer for purposes of this subsection;
43             (4) the employment of any firefighters who are members of a fire-

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  1       men's relief association for whom a valid statement of election to except
  2       such members from the provisions of the workers compensation act has
  3       been filed with the director by the governing body of such firemen's relief
  4       association as provided in K.S.A. 44-505d and amendments thereto; or
  5             (5) services performed by a qualified real estate agent as an inde-
  6       pendent contractor. For the purposes of this act a qualified real estate
  7       agent shall be deemed to be an independent contractor if such qualified
  8       real estate agent is licensed by the Kansas real estate commission as a
  9       salesperson under the real estate brokers' and salespersons' license act
10       and for whom: (A) Substantially all of the remuneration, whether or not
11       paid in cash, for the services performed by such individual as a real estate
12       salesperson is directly related to sales or other output, including the per-
13       formance of services, rather than to the number of hours worked; and
14       (B) the services performed by the individual are performed pursuant to
15       a written contract between such individual and the person for whom the
16       services are performed and such contract provides that the individual will
17       not be treated as an employee with respect to such services for state tax
18       purposes.
19             (b) Each employer who employs employees in employments which
20       are excepted from the provisions of the workers compensation act as
21       provided in subsection (a) of this section, shall be entitled to come within
22       the provisions of such act by: (1) Becoming a member in and by main-
23       taining a membership in a qualified group-funded workers' compensation
24       pool, as provided by K.S.A. 44-581 to 44-591, inclusive, and amendments
25       thereto; or (2) filing with the director a written statement of election to
26       accept thereunder. Such written statement of election shall be effective
27       from the date of filing until such time as the employer files a written
28       statement withdrawing such election with the director. All written state-
29       ments of election or of withdrawal of election filed pursuant to this sub-
30       section shall be in such form as may be required by the director by rules
31       and regulations.
32             (c) This act shall not apply in any case where the accident occurred
33       prior to the effective date of this act. All rights which accrued by reason
34       of any such accident shall be governed by the laws in effect at that time.
35             Sec.  2. K.S.A. 1998 Supp. 44-508 is hereby amended to read as fol-
36       lows: 44-508. As used in the workers compensation act:
37             (a) "Employer" includes: (1) Any person or body of persons, corpo-
38       rate or unincorporate, and the legal representative of a deceased em-
39       ployer or the receiver or trustee of a person, corporation, association or
40       partnership; (2) the state or any department, agency or authority of the
41       state, any city, county, school district or other political subdivision or
42       municipality or public corporation and any instrumentality thereof; and
43       (3) for the purposes of community service work, the entity for which the

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  1       community service work is being performed and the governmental agency
  2       which assigned the community service work, if any, if either such entity
  3       or such governmental agency has filed a written statement of election
  4       with the director to accept the provisions under the workers compensa-
  5       tion act for persons performing community service work and in such case
  6       such entity and such governmental agency shall be deemed to be the joint
  7       employer of the person performing the community service work and both
  8       shall have the rights, liabilities and immunities provided under the work-
  9       ers compensation act for an employer with regard to the community serv-
10       ice work, except that the liability for providing benefits shall be imposed
11       only on the party which filed such election with the director, or on both
12       if both parties have filed such election with the director; for purposes of
13       community service work, "governmental agency" shall not include any
14       court or any officer or employee thereof and any case where there is
15       deemed to be a "joint employer" shall not be construed to be a case of
16       dual or multiple employment.
17             (b) "Workman" or "employee" or "worker" means any person who
18       has entered into the employment of or works under any contract of serv-
19       ice or apprenticeship with an employer. Such terms shall include but not
20       be limited to: Executive officers of corporations; professional athletes;
21       persons serving on a volunteer basis as duly authorized law enforcement
22       officers, ambulance attendants, mobile intensive care technicians, fire-
23       fighters, but only to the extent and during such periods as they are so
24       serving in such capacities; persons employed by educational, religious and
25       charitable organizations, but only to the extent and during the periods
26       that they are paid wages by such organizations; persons in the service of
27       the state, or any department, agency or authority of the state, any city,
28       school district, or other political subdivision or municipality or public
29       corporation and any instrumentality thereof, under any contract of serv-
30       ice, express or implied, and every official or officer thereof, whether
31       elected or appointed, while performing official duties; persons in the serv-
32       ice of the state as volunteer members of the Kansas department of civil
33       air patrol, but only to the extent and during such periods as they are
34       officially engaged in the performance of functions specified in K.S.A. 48-
35       3302 and amendments thereto; volunteers in any employment, if the em-
36       ployer has filed an election to extend coverage to such volunteers; minors,
37       whether such minors are legally or illegally employed; and persons per-
38       forming community service work, but only to the extent and during such
39       periods as they are performing community service work and if an election
40       has been filed an election to extend coverage to such persons. Any ref-
41       erence to an employee who has been injured shall, where the employee
42       is dead, include a reference to the employee's dependents, to the em-
43       ployee's legal representatives, or, if the employee is a minor or an inca-

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  1       pacitated person, to the employee's guardian or conservator. Unless there
  2       is a valid election in effect which has been filed as provided in K.S.A. 44-
  3       542a and amendments thereto, such terms shall not include individual
  4       employers, limited or general partners or self-employed persons, except
  5       a self-employed subcontractor performing work as a contractor.
  6             (c)  (1) "Dependents" means such members of the employee's family
  7       as were wholly or in part dependent upon the employee at the time of
  8       the accident.
  9             (2) "Members of a family" means only surviving legal spouse and
10       children; or if no surviving legal spouse or children, then parents or grand-
11       parents; or if no parents or grandparents, then grandchildren; or if no
12       grandchildren, then brothers and sisters. In the meaning of this section,
13       parents include stepparents, children include stepchildren, grandchildren
14       include stepgrandchildren, brothers and sisters include stepbrothers and
15       stepsisters, and children and parents include that relation by legal adop-
16       tion. In the meaning of this section, a surviving spouse shall not be re-
17       garded as a dependent of a deceased employee or as a member of the
18       family, if the surviving spouse shall have for more than six months willfully
19       or voluntarily deserted or abandoned the employee prior to the date of
20       the employee's death.
21             (3) "Wholly dependent child or children" means:
22             (A) A birth child or adopted child of the employee except such a child
23       whose relationship to the employee has been severed by adoption;
24             (B) a stepchild of the employee who lives in the employee's
25       household;
26             (C) any other child who is actually dependent in whole or in part on
27       the employee and who is related to the employee by marriage or consan-
28       guinity; or
29             (D) any child as defined in subsections (3)(A), (3)(B) or (3)(C) who
30       is less than 23 years of age and who is not physically or mentally capable
31       of earning wages in any type of substantial and gainful employment or
32       who is a full-time student attending an accredited institution of higher
33       education or vocational education.
34             (d) "Accident" means an undesigned, sudden and unexpected event
35       or events, usually of an afflictive or unfortunate nature and often, but not
36       necessarily, accompanied by a manifestation of force. The elements of an
37       accident, as stated herein, are not to be construed in a strict and literal
38       sense, but in a manner designed to effectuate the purpose of the workers
39       compensation act that the employer bear the expense of accidental injury
40       to a worker caused by the employment.
41             (e) "Personal injury" and "injury" mean any lesion or change in the
42       physical structure of the body, causing damage or harm thereto, so that
43       it gives way under the stress of the worker's usual labor. It is not essential

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  1       that such lesion or change be of such character as to present external or
  2       visible signs of its existence. An injury shall not be deemed to have been
  3       directly caused by the employment where it is shown that the employee
  4       suffers disability as a result of the natural aging process or by the normal
  5       activities of day-to-day living.
  6             (f) The words "arising out of and in the course of employment" as
  7       used in the workers compensation act shall not be construed to include
  8       injuries to the employee occurring while the employee is on the way to
  9       assume the duties of employment or after leaving such duties, the prox-
10       imate cause of which injury is not the employer's negligence. An em-
11       ployee shall not be construed as being on the way to assume the duties
12       of employment or having left such duties at a time when the worker is
13       on the premises of the employer or on the only available route to or from
14       work which is a route involving a special risk or hazard and which is a
15       route not used by the public except in dealings with the employer. An
16       employee shall not be construed as being on the way to assume the duties
17       of employment, if the employee is a provider of emergency services re-
18       sponding to an emergency.
19             The words, "arising out of and in the course of employment" as used
20       in the workers compensation act shall not be construed to include injuries
21       to employees while engaged in recreational or social events under cir-
22       cumstances where the employee was under no duty to attend and where
23       the injury did not result from the performance of tasks related to the
24       employee's normal job duties or as specifically instructed to be performed
25       by the employer.
26             (g) "Burden of proof" means the burden of a party to persuade the
27       trier of facts by a preponderance of the credible evidence that such party's
28       position on an issue is more probably true than not true on the basis of
29       the whole record.
30             (h) "Director" means the director of workers compensation as pro-
31       vided for in K.S.A. 75-5708 and amendments thereto.
32             (i) "Health care provider" means any person licensed, by the proper
33       licensing authority of this state, another state or the District of Columbia,
34       to practice medicine and surgery, osteopathy, chiropractic, dentistry, op-
35       tometry, podiatry or psychology.
36             (j) "Secretary" means the secretary of human resources.
37             (k) "Construction design professional" means any person who is an
38       architect, professional engineer, landscape architect or land surveyor who
39       has been issued a license by the state board of technical professions to
40       practice such technical profession in Kansas or any corporation organized
41       to render professional services through the practice of one or more of
42       such technical professions in Kansas under the professional corporation
43       law of Kansas or any corporation issued a certificate of authorization un-

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  1       der K.S.A. 74-7036 and amendments thereto to practice one or more of
  2       such technical professions in Kansas.
  3             (l) "Community service work" means: (1) Public or community serv-
  4       ice performed as a result of a contract of diversion or of assignment to a
  5       community corrections program or conservation camp or suspension of
  6       sentence or as a condition of probation or in lieu of a fine imposed by
  7       court order; or (2) public or community service or other work performed
  8       as a requirement for receipt of any kind of public assistance in accordance
  9       with any program administered by the secretary of social and rehabilita-
10       tion services.
11             (m) "Utilization review" means the initial evaluation of appropriate-
12       ness in terms of both the level and the quality of health care and health
13       services provided a patient, based on accepted standards of the health
14       care profession involved. Such evaluation is accomplished by means of a
15       system which identifies the utilization of health care services above the
16       usual range of utilization for such services, which is based on accepted
17       standards of the health care profession involved, and which refers in-
18       stances of possible inappropriate utilization to the director for referral to
19       a peer review committee.
20             (n) "Peer review" means an evaluation by a peer review committee
21       of the appropriateness, quality and cost of health care and health services
22       provided a patient, which is based on accepted standards of the health
23       care profession involved and which is conducted in conjunction with util-
24       ization review.
25             (o) "Peer review committee" means a committee composed of health
26       care providers licensed to practice the same health care profession as the
27       health care provider who rendered the health care services being
28       reviewed.
29             (p) "Group-funded self-insurance plan" includes each group-funded
30       workers compensation pool, which is authorized to operate in this state
31       under K.S.A. 44-581 through 44-592 and amendments thereto, each mu-
32       nicipal group-funded pool under the Kansas municipal group-funded pool
33       act which is covering liabilities under the workers compensation act, and
34       any other similar group-funded or pooled plan or arrangement that pro-
35       vides coverage for employer liabilities under the workers compensation
36       act and is authorized by law.
37             (q) On and after the effective date of this act, "workers compensation
38       board" or "board" means the workers compensation board established
39       under K.S.A. 1998 Supp. 44-555c and amendments thereto.
40             Sec.  3. K.S.A. 1998 Supp. 44-532 is hereby amended to read as fol-
41       lows: 44-532. (a) Where the payment of compensation of the employee
42       or the employee's dependents is insured by a policy or policies, at the
43       expense of the employer, or the employer is a member of a qualified

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  1       group-funded workers compensation pool, the insurer or the qualified
  2       group-funded workers compensation pool shall be subrogated to the
  3       rights and duties under the workers compensation act of the employer so
  4       far as appropriate, including the immunities provided by K.S.A. 44-501
  5       and amendments thereto.
  6             (b) Every employer shall secure the payment of compensation to the
  7       employer's employees by insuring in one of the following ways: (1) By
  8       insuring and keeping insured the payment of such compensation with an
  9       insurance carrier authorized to transact the business of workers compen-
10       sation insurance in the state of Kansas; (2) by showing to the director that
11       the employer carries such employer's own risk and is what is known as a
12       self-insurer and by furnishing proof to the director of the employer's
13       financial ability to pay such compensation for the employer's self; (3) by
14       maintaining a membership in a qualified group-funded workers compen-
15       sation pool. The cost of carrying such insurance or risk shall be paid by
16       the employer and not the employee.
17             (c) The knowing and intentional failure of an employer to secure the
18       payment of workers compensation to the employer's employees as re-
19       quired in subsection (b) of this section is a class A misdemeanor.
20             (d) In addition, whenever the director has reason to believe that any
21       employer has engaged or is engaging in the knowing and intentional fail-
22       ure to secure the payment of workers compensation to the employer's
23       employees as required in subsection (b) of this section, the director shall
24       issue and serve upon such employer a statement of the charges with
25       respect thereto and shall conduct a hearing in accordance with the Kansas
26       administrative procedure act, wherein the employer may be liable to the
27       state for a civil penalty in an amount equal to twice the annual premium
28       the employer would have paid had such employer been insured or
29       $25,000, whichever amount is greater.
30             (e) Prior to July 1, 1999, the director shall not assess such a fine
31       against a self-employed subcontractor for failure of the subcontractor to
32       secure compensation for the subcontractor personally, however, the di-
33       rector shall enforce the provisions of this section for failure of the sub-
34       contractor to secure compensation for any other employee of the sub-
35       contractor as otherwise provided by law.
36             (f) Any civil penalty imposed or final action taken under this section
37       shall be subject to review in accordance with the act for judicial review
38       of agency actions in the district court of Shawnee county.
39             (g) All moneys received under this section for costs assessed or mon-
40       etary penalties imposed shall be deposited in the state treasury and cred-
41       ited to the workers compensation fund.
42             (h)  (1) Every insurance carrier writing workers' compensation insur-
43       ance for any employment covered under the workers compensation act

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  1       shall file, with the director or the director's designee, written notice of
  2       the issuance, nonrenewal or cancellation of a policy or contract of insur-
  3       ance, or any endorsement, providing workers compensation coverage,
  4       within 10 days after such issuance, nonrenewal or cancellation. Every such
  5       insurance carrier shall file, with the director, written notice of all such
  6       policies, contracts and endorsements in force on the effective date of this
  7       act.
  8             (2) Every employer covered by the workers compensation act who is
  9       a qualified self-insurer shall give written notice to the director or the
10       director's designee, if such employer changes from a self-insurer status
11       to insuring through an insurance carrier or by maintaining a membership
12       in a qualified group-funded workers compensation pool, such notice to
13       be given within 10 days after the effective date of such change. Every
14       self-insurer shall file with the director annually a report verifying the
15       employer's continuing ability to pay compensation to the employer's
16       employees.
17             (3) Every employer covered by the workers compensation act who is
18       a member of a qualified group-funded workers compensation pool shall
19       give written notice to the director or the director's designee, if such em-
20       ployer changes from a group-funded workers compensation pool to in-
21       suring through an insurance carrier or becoming a self-insurer, such no-
22       tice to be given within 10 days after the effective date of such change.
23             (4) The mailing of any written notice or report required by this sub-
24       section (d) in a stamped envelope within the prescribed time shall comply
25       with the requirements of this subsection.
26             (5) The director shall provide by regulation for the forms of written
27       notices and reports required by this subsection (d).
28             (i) As used in this section, "qualified group-funded workers compen-
29       sation pool" means any qualified group-funded workers compensation
30       pool under K.S.A. 44-581 through 44-591 and amendments thereto or
31       any group-funded pool under the Kansas municipal group-funded pool
32       act which includes workers compensation and employers' liability under
33       the workers compensation act.
34             (j) A private firm shall not be eligible to apply to become a self-insurer
35       unless it has been in continuous operation for at least five years or is
36       purchasing an existing self-insured Kansas firm, plant or facility and the
37       operation of the purchased firm, plant or facility: (1) Has been in contin-
38       uous operation in Kansas for at least 10 years; (2) has generated an after-
39       tax profit of at least $1,000,000 annually for the preceding three consec-
40       utive years; and (3) has a ratio of debt to equity of not greater than 3.5
41       to 1. As used in this subsection, "debt" means the sum of long-term
42       borrowing maturing in excess of one year plus the current portion of long-
43       term borrowing plus short-term financial institution borrowing plus com-

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  1       mercial paper borrowing, and "equity" means the sum of the book value
  2       of stock plus paid-in capital plus retained earnings. The method for cal-
  3       culating the amount of security required of self-insureds shall be reviewed
  4       by an actuary every five years, beginning in fiscal year 1997. The costs for
  5       these actuarial studies shall be paid from the workers compensation fee
  6       fund.
  7             (k) A corporation or other entity whose current identity is attributable
  8       to a merger or other transformation whereby the whole or a substantial
  9       part of a previous entity's assets and income have been transferred to it,
10       and its liabilities have not increased beyond the financial review require-
11       ments of the director, which qualified under its previous identity as a self-
12       insurer under other provisions of this statute, and amendments thereto,
13       may apply for renewal as a self-insurer under its new name. The director
14       may grant the application for renewal if satisfied that the new entity meets
15       all necessary financial criteria for renewal that would have been applied
16       to the previous self-insured entity. An application under these provisions
17       shall be limited to an entity seeking renewal based upon the prior self-
18       insured status of another entity or entities.
19             Sec.  4. K.S.A. 1998 Supp. 44-543 is hereby amended to read as fol-
20       lows: 44-543. (a) As used in this section:
21             (1) "Nonprofit organization" means those nonprofit organizations ex-
22       empt from federal income tax pursuant to section 501(c) of the internal
23       revenue code of 1986, as in effect on the effective date of this act.
24             (2) "Compensation" does not include actual and necessary expenses
25       that are incurred by a volunteer officer, director or trustee in connection
26       with the services that the volunteer performs for a nonprofit organization
27       and that are reimbursed to the volunteer or otherwise paid.
28             (3) "Volunteer officer, director or trustee" means an officer, director
29       or trustee who performs services for a nonprofit organization but does
30       not receive compensation, either directly or indirectly, for those services.
31             (b) Any employee of a corporate employer who owns 10% or more
32       of the outstanding stock of such employer, may file with the director,
33       prior to injury, a written declaration that the employee elects not to accept
34       the provisions of the workers compensation act, and at the same time,
35       the employee shall file a duplicate of such election with the employer.
36       Such election shall be valid only during the employee's term of employ-
37       ment with such employer. Any employee so electing and thereafter de-
38       siring to change the employee's election may do so by filing a written
39       declaration to that effect with the director and a duplicate of such election
40       with the employer. Any contract in which an employer requires of an
41       employee as a condition of employment that the employee elect not to
42       come within the provisions of the workers compensation act, shall be void.
43       Any written declarations filed pursuant to this section shall be in such

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  1       form as may be required by regulation of the director.
  2             (c) Any noncompensated volunteer officer, director or trustee of a
  3       nonprofit corporation as defined in clause 3 (3) of subsection (a) may
  4       elect to be covered by the provisions of the workers compensation act by
  5       filing with the director, prior to injury, a written declaration that the
  6       officer, director or trustee elects to accept the provisions of the workers
  7       compensation act, and at the same time, the person shall file a duplicate
  8       of such election with the employer and the employer's insurance company
  9       or qualified group-funded workers compensation pool.
10             (d) A self-employed subcontractor performing work for a contractor
11       may file with the director, prior to injury, a written declaration that the
12       subcontractor elects not to accept the provision of the workers compen-
13       sation act, and at the same time, the subcontractors shall provide a du-
14       plicate of such written election to the contractor for which the self-em-
15       ployed subcontractor is performing work. Any subcontractor so electing
16       and thereafter desiring to change the election may do so by filing an
17       election to that effect with the director and a duplicate of such election
18       with the contractor for which the subcontractor is performing work.
19             (e) Any written declarations filed pursuant to this section shall be in
20       such form as may be required by regulation of the director.  
21       Sec.  5. K.S.A. 1998 Supp. 44-505, 44-508, 44-532 and 44-453 are
22       hereby repealed.
23        Sec.  6. This act shall take effect and be in force from and after its
24       publication in the statute book.