Defense Base Act (DBA) insurance is a form of workers compensation insurance that is generally required for all public works contracts performed abroad. In some cases, a waiver may be granted by the Secretary of the Department of Labor (DOL) that exempts an employer from standard DBA insurance rates. However, DOL policy prevents waivers from being granted to citizens or legal residents of the United States, or to employees hired in the U.S.
Even if an employee is waived, the contractor must still provide workers compensation coverage against the risk of a work-related injury or death. Adequate coverage must be provided by the host or home country of the employee, and must include liability for capture, detention, war-hazard injuries, or death of the employee. The insurance must also provide compensation for the beneficiaries of the employee in the event of death.
Types of DBA Waivers
There are two basic types of DBA insurance waivers: specific and geographic.
Contract Specific Waivers: This type of insurance waiver may be granted if a contractor is found to be adequately “self-insured” or if the contractor has been found to have purchased workers compensation insurance that offers coverage that is equivalent to the protection offered by the Defense Base Act and War Hazards Act.
Geographic Waivers: A geographic waiver may be granted if the host country providing workers compensation offers adequate coverage to the foreign worker or local national employee performing work on a contract in that country.
Active DBA Waivers
The Secretary of Labor is able to waive an application of the Defense Base Act in association with any contract, class of employees, or work location. Once granted, the waiver only remains valid if alternative workers compensation benefits are offered to the waived employee. If the employee is not covered by any local workers compensation laws, the waiver has no effect on foreign and local nationals working under U.S. contracts. There is currently a list of active DBA waivers in countries outside the U.S., including:
- American Samoa
- Czech Republic
- South Korea
- United Kingdom
Requesting a Waiver
Contractors can request a DBA waiver from coverage if they have adequate documentation of alternative workers compensation or equivalent insurance. Waivers requested by a contractor are to be submitted to the Department of Labor who will then grant or deny the waiver. Application of a DBA insurance waiver should be submitted on Labor Department Form BEC 565 – Request for Waiver – Defense Base Act.
If a waiver is granted, the contractor must have another form of workers compensation coverage for employees. This provides protection for the employee in the country where work will be performed or will provide coverage from the country of the employee’s nationality. Department of Defense (DoD) may also request waivers if sufficient proof of coverage is offered. A request for a new DBA insurance waiver must be made in writing on Form BEC 565 and then signed by the head of the agency or department of the United States government.
Waiver of Coverage
Defense Base Act insurance coverage is required for employees of contractors, as well as their subcontractors. The only exception is when a waiver from the U.S. Department of Labor is submitted and granted. Blanket waivers associated with DBA insurance requirements have been issued for foreign nationals by the Department of Labor in more than 100 countries. These are countries in which the United States Agency for International Development (USAID) has or has had programs.
While foreign national employees who are granted a waiver are exempt from the requirement to secure DBA insurance, there are some other things to consider. Both foreign national employees and their employers must be provided workers compensation benefits as prescribed in foreign laws. DBA insurance waivers do not apply to any citizen of the U.S., resident of the U.S., or anyone hired in the U.S. When applying for a DBA insurance waiver, the employee must meet certain requirements. The contract must be a public-work contract that is to be performed outside the United States. The contract must also be financed or approved under the Foreign Assistance Act of 1961 and must not be excluded by FAR 28.305.
Minimizing Insurance Costs
Many contractors look for ways to reduce their DBA insurance costs. One of the best ways to save is through the applicability of DBA insurance waiver coverage for local and third country nationals working under a contract. DBA insurance waivers may be issued as a cost-saving benefit to government contractors such as U.S. government (USG) workers. However, waivers can only be issued when alternative workers compensation coverage is available. For many contractors, finding alternative insurance coverage is more affordable than DBA insurance.
There are currently 14 blanket waivers that are applicable to DoD contracts. However, it’s important to know that all waivers issued within the last four years have an expiration date. When applying for a waiver, make sure that you meet all requirements. In addition to having an alternative source of compensation such as worker’s compensation, employer’s liability, or social security, the agency letting the contract must also recommend that the waiver be granted. If for some reason you cannot obtain an alternative and adequate form of insurance, you must obtain DBA insurance as all government contracts require contractors to have coverage. Failure to obtain insurance could result in fines and a possible loss of contract.
Today, nearly any contract with a U.S. government agency that requires work outside the United States (whether military in nature or not), typically requires Defense Base Act coverage. If you need assistance with obtaining DBA insurance for your employees, or if you want help navigating through the DBA insurance waiver process, we can help. Business Benefits Group (BBG) is a full-service agency providing affordable and comprehensive insurance strategies. Call our Fairfax, VA office today to speak to one of our friendly consultants or request a consultation online.