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Statutory Employer Doctrine: Alive and Well in Pennsylvania

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Most people are familiar with the concept of general contractors and/or subcontractors, particularly in the context of homebuilding and renovation. For years, general contractors were only responsible for paying Workers’ Compensation benefits to their subcontractors, and could not be sued in personal injury cases; this is because Pennsylvania treated them just like employers with W-2 workers, referring to them as “statutory employers.” In what would have been a dramatic shift in how work-related injury claims are handled, the Pennsylvania Superior Court placed general contractors on the hook for both Workers’ Compensation benefits and personal injury claims. This could have had far-reaching implications, including increased insurance and other costs to general contractors, which may have been passed on to others, including homeowners. The Pennsylvania Supreme Court, however, eliminated that risk — at least for now — by reversing the Superior Court decision. 

 

Like common law employers, “statutory employers,” under the Workers’ Compensation Act, enjoy immunity from liability in tort when it comes to work-related injuries.  One of the most common situations involving statutory employer immunity is the traditional general contractor-subcontractor paradigm. General contractors in Pennsylvania have immunity from civil claims made by injured employees of their subcontractors, as those employees’ exclusive remedy arises under the Workers’ Compensation Act. Immunity is extended to a general contractor because the general contractor is liable for workers’ compensation benefits of the subcontractor’s employees if the subcontractor defaults on its obligations. The concept of statutory employer immunity protects general contractors from being held liable for damages twice. Within the past few years, this long-standing principle came close to elimination; however, on March 26, 2014, the Pennsylvania Supreme Court definitively confirmed that the statutory employer defense continues to exist. Patton v. Worthington Assocs., 2014 Pa. LEXIS 788. 

 

Patton v. Worthington Associates was a personal injury case; Worthington was the general contractor on a construction project owned by Christ Methodist Church.  Patton, the sole owner of Patton Construction and subcontractor to Worthington, was injured when the wheel of the lift he was operating fell into a hole, causing the lift to topple over, trapping him beneath it. The question of whether Patton was an independent contractor or an employee of Worthington was submitted to the jury.  The jury found that Patton was an independent contractor, since he operated relatively freely from Worthington’s control; it concluded that Worthington could not be a statutory employer immune from suit for Patton’s injuries. The Superior Court affirmed the trial court, holding that a general contractor was not a statutory employer relative to an employee of its subcontractor. The case was appealed to the Supreme Court. 

 

On appeal, Worthington argued that the issue of whether a general contractor is a statutory employer is a question of law not to be determined by a jury. It further argued that a jury would always find the subcontractor’s employee not to be a true employee because it operates free from the general contractor’s control.  Subcontractors enjoy a good bit of independence from the control of the general contractors. As such, they will generally be found to be ‘independent contractors.’ Worthington argued that allowing juries to engage in this analysis would eviscerate the concept and purpose of statutory employer immunity, and would result in general contractors being liable to subcontractors’ employees not only for workers’ compensation benefits, but for damages in tort as well. 

 

The Supreme Court held that it was improper for the jury to determine whether Worthington was the statutory employer of Patton. The trial court’s instructions to the jury regarding whether Worthington exercised control over Patton basically ensured that Patton, and most subcontractor employees going forward, would always be determined to be independent contractors able to bring suit against general contractors for damages. The Supreme Court said that the conventional relationship between a general contractor and a subcontractor implicates the statutory employer concept, where the general contractor maintains control of a jobsite.        

 

As a result, the Supreme Court determined that Worthington was immune from suit because Patton Construction, Inc. and Worthington had the kind of traditional contractor-subcontractor relationship that had long been recognized as giving rise to statutory employer status.  This case shows that, given the inherent nature of the general contractor-subcontractor relationship, the issue of control and the traditional employee vs. independent contractor analysis cannot be the benchmark for determining statutory employer immunity.  The unanimous decision by the high Court makes clear that the traditional ‘statutory employer’ doctrine remains alive and well in Pennsylvania.  According to the Court, the statutory employer analysis should remain a simple one: employees of subcontractors are limited to bringing workers’ compensation claims against general contractors, while employees of independent contractors may bring civil liability suits against general contractors.

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