JACK MARTONE, THE AMERICAN EQUITY UNDERWRITERS, INC.
On May 6, 2020, the U.S. Department of Labor (DOL) issued a new waiver covering the application of the Defense Base Act (DBA) in Guam. The DBA had previously been waived in its entirety with regard to DBA-covered contracts and work on U.S. military bases in Guam, both for local Guamanians (who are U.S. citizens) and for third-country nationals. The new waiver provides that DBA coverage is only waived for third-country nationals. This is consistent with the longstanding DOL policy not to waive DBA coverage for U.S. citizens. The Guam blanket waiver, now replaced, had been an exception to this policy designed to protect construction jobs for Guamanians. Presumably, this change is effective for injuries occurring on or after May 6, 2020.
For those new to the DBA – or need a memory refresher – let's review how Defense Base Act waivers work. The Defense Base Act is a workers’ compensation law that extends the benefits of the Longshore and Harbor Workers’ Compensation Act (Longshore Act) to employees outside of the continental United States under certain circumstances (under the DBA, Alaska and Hawaii are considered to be part of the continental U.S.) It was passed in 1941, supplemented in 1942 by the War Hazards Compensation Act (WHCA), and amended in 1953 and 1958 to broaden its coverage. More about the DBA and the WHCA can be found in this article.
How do Defense Base Act waivers work?
Section 1(e) of the DBA states, “Upon the recommendation of the head of any department or other agency of the United States, the Secretary of Labor, in the exercise of his discretion, may waive the application of this section with respect to any contract, subcontract, or subordinate contract, work location under such contracts, or classification of employees”.
Waiver requests are routinely granted by the DOL when submitted by the proper person in the proper form, but there are limits and conditions.
Waivers ordinarily do not apply to any employee who is a U.S. citizen, is hired in the U.S., or is a bona fide resident of the U.S. regardless of nationality. The one exception to this DOL policy had been Guam, discussed above.
There is a further, very important, consideration. There is a condition attached to every waiver. The condition is that employees covered by the waiver must receive workers’ compensation benefits pursuant to the provisions of the local laws. If this condition is not met, then the waiver is null and void and the DBA applies.
Federal agencies should insert in every contract the requirement that each contractor, before commencing performance under the contract, must provide and maintain for all waived employees such workers’ compensation insurance or injury and death benefit protection required by local law. It is important that this protection not exclude war hazards, since a waiver under the DBA also waives coverage under the WHCA for direct claims by injured employees. (More about war hazards here.)
A problem arises when there is no effective local workers’ compensation law. Where that is the case, you either apply the provisions of the DBA, or if you obtain a waiver of the DBA as to host country and third-country nationals, you make sure that the conditions for the application of the waiver are satisfied.
For third-country nationals, for example, you can provide home country or country of hire coverage. For host country nationals, if there is no existing law, you have a problem. What did the local law provide when and if it was in effect? What kind of existing health and disability coverage is available which approximates workers’ compensation protection? Does it include war risk protection? You must come up with something close to local coverage or else you must provide DBA benefits. The burden is on the contractor to make sure that his waiver meets all conditions.
Finally, the reference point for whether a waiver applies is where the contract is to be performed, not the country of origin of the worker.
ABOUT THE AUTHOR
John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers’ Compensation Programs, as the Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers’ Compensation. Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of AEU's Longshore Insider.
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