Friday, April 4, 2014

PA Supreme Court reverses $1.2 million Jury Verdict based on Statutory Employer Immunity

In construction related injury cases, the concept of the "Statutory Employer" status of the general contractor can be decisive of liability issues.

The General Rule (no pun intended) is that a General Contractor has secondary liability for worker compensation benefit payments to the injured employee of it's subcontractors. If the subcontractor does not have work comp insurance coverage for its employees, then the General Contractor is responsible for benefit payments. The Legislative purpose for imposing this responsibility upon General Contractors was remedial, they wanted to ensure payment of work comp benefits to injured workers, in the event of a default by the subcontractor, who should have been primarily responsible. See: Section 302(b), 77 P.S. 462.
Qualp v. James Stewart Co,. 109 A. 780 (Pa. 1920) [cited by Patton at slip opinion page 2].

The Statutory Employer enjoys the same immunity (as a traditional employer would) from liability in tort, related to the work injury. The Workers' Compensation Act is the exclusive remedy of the injured worker against one's employer. This immunity will apply, even where the Statutory Employer has not been required to make any actual benefit payments.
 See: Fonner v. Shandon, Inc., 724 A.2d 903 (Pa. 1999). 

What are the limits, if any, of this Statutory Employer Doctrine?

Patton v. Worthington Associates Inc., No. 32 MAP 2013, a recent opinion of the Supreme Court of Pennsylvania authored by Mr. Justice Saylor on March 26, 2014 addressed this question.

Factual and Procedural Background
The facts in Patton are rather straightforward.
Patton fell and injured his back while working at a construction site in October 26, 2001.
Nearly 12 1/2 years later, we have a final decision in this litigation.

Patton was the sole employee (and principal) of Patton Construction Inc.
Patton Construction Inc. entered into a standard subcontract agreement with Worthington Associates, Inc., to perform carpentry work at a Levittown Church. Worthington was the general contractor at this job.

Patton filed civil action against Worthington asserting that they failed to maintain safe conditions at this jobsite. At trial, Worthington moved for Summary Judgment on the basis that is was Patton's statutory employer and was immune from civil suit. This Motion was denied, as were subsequent motions.

Trial court identified the issue in controversy and determined that a general contractor is not a statutory employer, relative to employees of an independent contractor.

Question: was Patton an independent contractor or employee with respect to Worthington?
This  interrogatory was submitted to the jury. The jury returned a verdict in the amount of $1.5 million. (also finding Patton 20% comparatively negligent).

Superior Court affirmed in a divided opinion.

Supreme Court Reversal of Superior Court affirmation of Trial Court. 

The Supreme Court opinion "paused to observe" that:
  •  Worthington contracted with Patton Construction Inc, not Patton in his personal capacity.
  • Patton, himself had no contract with Worthington and accordingly he could not be considered an independent contractor, or even a contractor for purposes of Sections 203 or 302(b) of the Workers' Compensation Act.
  • Patton was not a common law employee of Worthington, he was an employee of Patton Construction Inc.

The Supreme Court noted that the Trial Court set up an errant dichotomy for the jurors, by requesting their response to the "independent contractor versus employee" question.

In terms of Patton's relationship with Worthington, as an individual, Patton was not in either category!

As correctly stated by Worthington in its appeal, the only accurate answer is that: 
Patton is an employee of Patton Construction Inc.
Patton Construction Inc. stands as a subcontractor in its relationship to Worthington. 

The Supreme Court opinion reviewed the historical interpretation of the Statutory Employer concept.
Conventional subcontractors are dependent contractors, not independent contractors, for purposes of the Workers' Compensation Act, Sections 203 and 302(b). 

Their employees are not contractors at all, nor, at least in the absence of special circumstances, are they employees of the general contractor. Patton, slip opinion page 9.
Patton's status as the principle owner of Patton Construction Inc. does not alter the analysis or outcome. 

The jury verdict was reversed as Worthington has statutory employer status under these facts.
Worthington has immunity from the civil tort action of Patton.

Practice Pointers:

1. This case discusses legal concepts, which are difficult for the non-workers compensation professionals. The Statutory Employer concept and liability issues must be reviewed by legal counsel, experienced in workers' compensation matters. The issue of  immunity for civil litigation is significant. In this case it was decisive.

2. When addressing a construction related injury, it is prudent to interview the parties and review the contracts to develop a correct outline and analysis of the relationship of each party to the other. 

3. Cudos to Worthington for persevering and confirming the correct method of analysis of this Statutory Employer issue. Mr Justice Saylor has authored an opinion that provides clear legal reasoning for our future assessment of this issue.

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