In a March 26, 2014 decision, the Pennsylvania Supreme Court unanimously reinstated the traditional “statutory employer defense” as it pertains to a general contractor’s liability for injuries its subcontractor’s employees sustain.
Prior to the Superior Court’s decision in Patton v. Worthington Assocs., 43 A.3d 479, 484 (Pa. Super. 2012), the Pennsylvania Worker’s Compensation Act was the exclusive remedy for workers injured during the scope of their employment. The immunity wasn’t limited to “traditional employers,” however, and extended to protect “statutory employers” from liability. The classic statutory employer scenario results where a property owner hires a general contractor, who hires a subcontractor to do specialized work on the jobsite, and an employee of the subcontractor is injured in the course of his employment. Under the Act, a general contractor usually is liable to pay workers’ compensation benefits to its subcontractor’s employees if the subcontractor defaults on its obligation to pay. 77 P.S. § 461. Because the general contractor is secondarily liable for workers’ compensation benefits, the general contractor was also historically immune from tort suits involving work-related injuries to its subcontractor’s employees. See 77 P.S. § 52.
To determine whether a statutory employer relationship existed, a general contractor traditionally had to prove the following five elements:
1) an employer who is under contract with an owner or one in the position of an owner; 2) premises occupied by, or under the control of, such employer; 3) a subcontract made by such employer; 4) part of the employer’s regular business is entrusted to such subcontractor; and 5) an employee of such subcontractor. McDonald v. Levinson Steel Co., 153 A. 424 (Pa. 1930).
In 2012, the Pennsylvania Superior Court departed from the basic 5-part test and held that before reaching the first prong of the McDonald test, a jury must first determine whether a subcontractor’s employee is an employee or an independent contractor with respect to the general contractor. Patton v. Worthington Assocs., 43 A.3d 479, 484 (Pa. Super. 2012) (“The issue of whether or not Patton is an independent contractor focuses on [the general contractor’s] ability to meet the first prong of the McDonald test, specifically whether [the general contractor] qualifies as an ‘employer.’”). If the injured party was an independent contractor, the statutory employer test was inapplicable, and the subcontractor’s employee could recover additional tort damages from the general contractor.
In Patton, the Christ Methodist Church hired Worthington Associates, Inc. to serve as general contractor for a construction project. Worthington then hired Patton Construction, Inc., to serve as a carpentry subcontractor on the project. Earl Patton was both the owner and sole employee of Patton Construction. While working on the project Patton was severely injured when he fell from a scissor lift, and filed suit against Worthington alleging the general contractor was “negligent in failing to provide a safe work place.” Patton, 43 A.3d 482. Worthington moved for summary judgment, alleging it was a “statutory employer under the Workmen’s Compensation Act…and therefore immune from tort liability.” Id. The trial court denied the motion, and after a three-day jury trial, the jury found Worthington was an independent contractor with respect to Patton, and awarded Patton $1.5 million in tort damages.
On appeal, Worthington argued the trial court misinterpreted the statutory employer test and stated that “the right to statutory immunity is clear given that it meets all five elements required for such immunity as set forth…in McDonald.” Id. at 483. The Superior Court disagreed, and held that if Patton was an independent contractor with respect to Worthington, Worthington could not meet the first prong of the McDonald test (which requires an employer to be under contract with a property owner) and the statutory employer defense was therefore inapplicable. In determining whether Patton was an independent contractor, the Superior Court focused on the degree of control Worthington had over him. Id. at 485 (“Broadly stated, if the contractor is under the control of the employer he is a servant; if not under such control, he is an independent contractor.”). In a unanimous decision, the Pennsylvania Supreme Court squarely rejected the lower courts’ analysis, and emphasized that the lower courts “inappropriately layered common-law concepts onto a distinctive statutory regime.” The Court reasoned that subcontractors are in fact “dependent contractors, not independent ones,” for purposes of Workers’ Compensation Act immunity, and, in effect, re-legitimized the McDonald test articulated above. The Supreme Court’s decision shifted the balance back in favor of general contractors at the expense of a subcontractor’s employees.
Although constrained to agree with the majority opinion on the basis of legal precedent, Justice Baer stressed in his concurring opinion that the “statutory employer” doctrine “thwart[s] a victim’s right to recover from a tortfeasor,” and also “adversely impact[s] worker safety by eliminating the traditional consequences (money damages) when a general contractor's negligence harms a subcontractor's employee.” Accordingly, he argues the Pennsylvania Legislature should amend the Workers’ Compensation Act to immunize general contractors from liability, only where its subcontractor has failed to maintain workers’ compensation insurance itself. While the Pennsylvania Legislature has yet to respond to Justice Baer’s comments, perhaps because of how recently the Court issued its decision, it remains to be said what precisely the Patton decision’s impact will be.