Ladies and Gentlemen:

I am filing with the Secretary of State House Bill 05-1318, "Concerning Workers Compensation Coverage for Workers in the Construction Industry." I vetoed this bill as of 11:01 a.m. today and this letter sets forth my reasons for doing so.

While I agree with the goal of H.B. 1318, to even the playing field for construction contractors, I am concerned about the unintended consequences that may result from the bill's implementation. General contractors are already required by law to have workers compensation insurance. However, independent contractors are currently exempt from that requirement. The problematic outcome occurs when certain property owners who are subject to this bill want to hire an independent contractor for maintenance or remodeling work.

This potentially negative impact stems from the definitions included in H.B. 1318. The bill defines a "construction site" as "a location where a structure is attached, or will be attached to real property is constructed, altered, or remodeled." Based upon this definition, H.B. 1318 includes any work done by independent owners of real estate on their property, including routine maintenance and rehabilitation efforts. Typically, these are investment properties, with a small number of units, where the property owner does not have a maintenance staff. This type of property owner will usually hire independent subcontractors, who often charge less than their larger counterparts, to perform needed maintenance and rehabilitation work.

H.B. 1318 puts property owners at risk of paying hefty fines ($500 per incident, per day), and will discourage them from using those small, independent contractors whom they typically employ. As an example, consider a person whose primary residence is in Arvada, but owns a tri- plex in Washington Park. Under H.B. 1318, if this property owner wants to hire someone to complete some electrical or painting work, he or she must prove that the person hired has workers compensation insurance. However, independent contractors are not required to have workers compensation insurance. Because of this confusion, owners of investment properties who normally use independent contractors to perform maintenance duties will hire, to avoid the risk of being fined, the bigger contractors who are more expensive, but require workers compensation insurance. This could put many independent contractors out of work, and increase costs for owners of small investment properties.

H.B. 1318 attempts to implement a "one-size-fits-all" solution on the construction industry. This approach will lead to unintended consequences that will negatively impact small, independent contractors and property owners. Accordingly, I have vetoed this bill.

Sincerely,

Bill Owens
Governor