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Carroll, 67, of Felton, started a part-time business repairing air-conditioning and heating systems in February 2006 after working full-time for others for 27 years. It kept him busy and helped out with bills that his retirement checks didn't quite cover.

Then early this year he got a letter from his insurance company, saying the laws had changed and he would have to start paying workers' comp insurance -- at $2,400 a year.

"If they make me do it, I'm going to just have to quit," says Carroll, who pulled in about $3,000 for 2006. "All I'd be doing is paying insurance. There's no sense in me working for nothing."

Delaware has struggled for years with rising workers' comp rates, which some say stifle economic growth and make it tough for local businesses to compete with those in neighboring states. Various studies have shown Delaware ranking in the top five or 10 highest states for workers' comp.

Senate Bill 1, approved unanimously by the General Assembly and signed into law on Jan. 17, undertook the first comprehensive reform of Delaware's workers' compensation laws since they were enacted in the early 1900s.

"It's wonderful. It's like your car insurance going down," said Will Robinson, CEO of George & Lynch Inc., an infrastructure construction company in Dover.

But independent contractors and sole proprietors such as Carroll, who were exempt from paying workers' comp in the past, are suddenly facing a burden they never expected. Workers' comp for sole proprietors can cost up to $5,000 per year.

"All contractors, subcontractors, and independent contractors are required to obtain workers' compensation insurance coverage immediately, if they have not already done so," the Delaware Department of Labor said in a statement released Feb. 17. Penalties of $10 to $250 dollars per day may be applied for anyone not carrying the required insurance, the department said.

"I had a fit," said Carroll's wife, Dottie, who immediately e-mailed Delaware's insurance commissioner and called her state representative. "With our finances and our bills, there's no way we can afford this."

Delaware Department of Labor's Office of Workers' Compensation received "hundreds of calls," primarily from independent contractors and sole proprietors in the construction industry, said office administrator John Kirk. "And we realized, we have an issue here."

"We believe that even if you are a sole proprietorship and you are a one-person shop, you should be covered. You should have workers' comp insurance," says Edward Capodanno, president of Associated Builders and Contractors, a Wilmington-based trade group. "S.B. 1 says everybody's in. If you're in this, you should have workers' comp insurance."

But lawmakers say S.B. 1 was aimed at closing loopholes that let people abuse or get around the system -- for example, a general contractor who would hire eleven employees but call them "independent contractors" to avoid paying insurance.

"No one ever intended for the true sole proprietor to be negatively impacted," said Rep. William A. Oberle Jr., R-Beechers Lot, the chief House sponsor of S.B. 1. "That's a legitimate exemption and it should stay in place."

The amendment would push back the enforcement deadline from Jan. 17, when the bill became law, to July 17, giving people more time to shop for insurance.

It would also add language to allow sole proprietors to incorporate their business, call themselves an executive officer and opt out of paying workers' comp, said Kirk, of the Department of Labor. The same exemption would work for limited liability companies and partnerships, Kirk said.

"I have not seen anything that takes sole proprietors out of this act, and I don't see S.B. 68 making that change," says Foltz. "Nobody proposed that there would be an executive officer work-around for the sole proprietor. If that's the work-around that's being sought, it's an impractical and improbable work-around."

ABC's Capodanno said he believed the "executive officer" reference is just that -- an executive officer or a board member of a company, not an independent contractor on a job site. "What S.B. 68 is trying to say is that we're trying to opt out the executive officers of a company because they've never been covered before and they're not really doing construction work," he said.

"Senate Bill 68 still needs further refinement. I'm not sure the language is all there yet," said C. Scott Kidner, state director of the NFIB, the National Federation of Independent Business Owners. Kinder said he still believed the intent of the bill was that sole proprietors get insurance like everybody else.

"If we allow the level of exemptions that occurred before reform, I'm not sure we've accomplished anything," said Kidner. " 'All in' was an important stance to take for all business owners in the state."

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