By Kevin L. Connors, Esquire

Without question, construction accidents account for a significant number of personal injury lawsuits, being no less true with respect to workers’ compensation claims.

Historically, the intersection between personal injury and workers’ compensation had created a unique statutory defense for general contractors who met the five part test first articulated by the Pennsylvania Supreme Court in McDonald v. Levinson Steel, 153 A. 424 (1930), entitling general contractors who might be secondarily liable for workers’ compensation payments to injured employees of the general’s subcontractors, to assert the statutory immunity provisions of Section 302(b) of the Pennsylvania Workers’ Compensation Act, thereby barring the injured employee of the subcontractor from suing the general contractor in tort liability for personal injuries.

Specifically, Section 302(b) of the Pennsylvania Workers’ Compensation Act sets forth:

“Any employer who permits the entry upon premises occupied by him or under his control of a laborer or an assistant hired by an employe or contractor, for the performance upon such premises of a part of such employer’s regular business entrusted to that employe or contractor, shall be liable for the payment of compensation to such laborer or assistant unless such hiring employe or contractor, if primarily liable for the payment of such compensation, has secured the payment thereof as provided for in this act. Any employer or his insurer who shall become liable hereunder for such compensation may recover the amount thereof paid and any necessary expenses from another person if the latter is primarily liable therefor.”

This provision of the Pennsylvania Workers’ Compensation Act immunizes the general contractor from liability for tort liability for the work-related injuries sustained by a subcontractors’ employees, as the general contractor would otherwise be liable for the workers’ compensation benefit payments that the subcontractors’ injured employee would be entitled to receive, in the absence of the subcontractor being insured for workers’ compensation benefits.

The viability of a general contractor being able to assert the statutorily-imposed immunity embodied in Section 302(b) of the Pennsylvania Workers’ Compensation Act became the subject of raised eyebrows, throughout the construction and insurance industries, after the Pennsylvania Superior Court had affirmed, in 2012, a Trial Court ruling that resulted in a Jury Verdict of $1,500,000.00 in favor of the Plaintiffs, the Pattons, and against Worthington Associates, after the Trial Court, in denying Worthington’s Motion for Summary Judgment, had asked the Jury to determine, acting as the fact-finder that it was supposed to be, whether the Plaintiff was an independent contractor or an employee of Worthington Associates, with the Jury finding that Patton was an independent contractor, there being no bar or immunity preventing the Jury from awarding damages to Patton for his claim of construction accident negligence against Worthington, if Patton was determined to be an independent contractor and not an employee of a subcontractor.

On March 26, 2014, the Pennsylvania Supreme Court reversed the Superior Court’s ruling in Patton, reaffirming the validity and viability of the Statutory Employer Doctrine as legislated under Section 302(b) of the Pennsylvania Workers’ Compensation Act, with the Supreme Court’s ruling being built upon its determination of the following fundamentals:

• That Worthington was a general contractor, engaged by a property owner to build an addition to a Bucks County Church;
• That Worthington, as a general contractor, in the course of being hired by the property owner, was in control of the property where the construction was being performed;
• That Worthington, as the general contractor, hired, in turn, Patton Construction, a corporation that performed carpentry, to do carpentry work in the construction phase of the addition;
• That the Plaintiff, Earl Patton, who was the President of Patton Construction, was nevertheless an employee of Patton Construction, and was not, therefore, an independent contractor, nor was he an employee of Worthington;
• That Patton, while working at the construction site that was under the control and direction of Worthington, fell and was injured in 2001;
• That Worthington would have become secondarily liable for the payment of workers’ compensation benefits to Patton, had Patton’s employer, Patton Construction, not carried insurance for workers’ compensation claims;
• That Patton sued Worthington, alleging that Worthington’s failure to maintain safe conditions had caused Plaintiff’s personal injuries and damages; and,
• That, under Sections 203 and 302(b) of the Pennsylvania Workers’ Compensation Act, that Patton was clearly an employee of a subcontractor, and that he was not an independent contractor, with Worthington clearly being the general contractor, entitled to the statutory immunity from tort liability provided under Section 302(b) of the Pennsylvania Workers’ Compensation Act.

In reaching this conclusion, the Supreme Court, in an Opinion authored by Justice Saylor, held that Patton was, as a matter of law, a subcontractor, and not an “independent contractor”, further finding that Patton’s relationship with the property owner was a derivative one, arrived at through a conventional subcontract between Patton’s employer and Worthington, the general contractor.

Citing from the 1920 Pennsylvania Supreme Court Decision in Qualp v. James Stewart Co., 109 A. 2d 780 (Pa. 1920), Justice Saylor referred to the following passage in Qualp:

“the…original contractor in control of the premises to perform the work and then engaged to do…is regarded by the Workers’ Compensation Law as the employer to those engaged on or about the work within the scope of the undertaking…this relation of employer to those employed about the premises includes only those whose work is a part of that embraced within the terms of the (original contractors’) contract with the owner. The work of the contractor, on the same premises, in furtherance of the owner’s general plan, on the same structure or enterprise, performing under another and different contract with the owner is, as to the person under consideration, the work of an independent contractor under the law, and his employees or those under him must look to him for compensation. Each is separate and distinct, operating within his own sphere, though engaged on the same general work.”

As most are aware, the Superior Court’s ruling in Patton had created quite a ripple across the somewhat choppy surfaces of construction and insurance pools, with amici Briefs being submitted by interested parties on both sides of the issue, in which the construction and insurance industry argued in favor of what many had considered to be a well-articulated statutory immunity for general contractors, with the Plaintiffs’ bar, under arguments advanced by the Pennsylvania Association for Justice, arguing in favor of the Pennsylvania Superior Court’s Decision in Patton being affirmed.

In truth, the Superior Court’s analysis in Patton, 43 A.3d 479 (Pa. Super. 2012), would result in juries always being asked to decide whether a Plaintiff was an employee of a subcontractor, or, alternatively, an independent contractor with that determination then affecting whether or not the Statutory Employer immunity from liability did or did not apply, as it would always apply if the injured party was an employee of a subcontractor, and would never apply, under Superior Court’s analysis, if the Jury determined that the injured party was an independent contractor.

Validating a general contractor’s status as a Statutory Employer entitled to statutory immunity from tort liability, the Pennsylvania Supreme Court’s Decision in Patton is one certain to be embraced by both construction and insurance in the course of which there are nevertheless rippling tremors, as there always are when the “earth moves under our feet”, as the high-fiving of the general contractor and its insurer, negating potential liability that might actually be real, at least in tort, for secondary liability long ago negated by the mandatory insurance requirements of the Pennsylvania Workers’ Compensation Act, effective as of 1974, the consequence of which is that the employer and insurer ultimately responsible for the payment of workers’ compensation benefits to the injured employee of the subcontractor potentially have lost a right to claim recovery of their workers’ compensation subrogation lien, at least against a general contractor insulated from tort liability under Section 302(b) of the Pennsylvania Workers’ Compensation Act.

This was the central thrust of the concurring Opinion authored by Justice Baer, pointing out the obvious, that is that employers, whether general contractors or subcontractors, are required, under the Pennsylvania Workers’ Compensation Act, to maintain workers’ compensation insurance, and that it is, in fact, the rare instance in which a general contractor actually becomes secondarily liable for the payment of workers’ compensation benefits to the injured employee of a subcontractor, and that only occurs if the subcontractor has, in violation of their subcontract agreement with the general contractor, as well as in violation of the mandatory insurance requirements of the Pennsylvania Workers’ Compensation Act, failed to procure insurance for workers’ compensation claims.

Justice Baer’s point being, that prior to 1974, carrying workers’ compensation coverage was elective for employers, such that there was a public policy reason for the creation of the Statutory Employer immunity from tort liability, as the incidents with which general contractors became liable for the payment of workers’ compensation benefits to the injured employees of subcontractors was statistically much greater than it is has ever been post-1974, with the enactment of the mandatory insurance requirements under the Pennsylvania Workers’ Compensation Act, such that the Legislature legislated away the public policy reason for having the Statutory Employer immunity from tort liability as a protection for the general contractor being subject to a double whammy, paying both tort damages and workers’ compensation benefits.

That being said, Justice Baer did agree that the “clear and unambiguous language and the relevant provisions of the Workers’ Compensation Act, as consistently interpreted by decades of precedents from this Court”, constrained Justice Baer to agree with and join in the Majority Opinion.

While joining in the Majority Opinion, Justice Baer advocated for the legislature to eliminate what Justice Baer considers to be “an irrational relic from a bygone era”.

In the Opinion of Justice Baer, “a Statutory Employer doctrine serves one purpose: to provide immunity to a general contractor in tort, notwithstanding that it may have been a third-party tortfeasor.”

The position advocated by Justice Baer is that the Statutory Employer immunity should only be applied where the injured employee’s actual employer, the subcontractor, has failed to secure the statutorily-required workers’ compensation insurance, in which case the general contractor becomes the liable party for the payment of workers’ compensation benefits to the injured employee, as a Statutory Employer under the Pennsylvania Workers’ Compensation Act.

For Justice Baer’s view, that scenario would advance several public policy purposes, to include:

• Affirming the primary purpose of the Workers’ Compensation Act, being the payment of the statutorily-defined benefits to the injured worker, regardless of fault;
• Perpetuating the quid pro quo implicit in the immunity doctrine, simply begging the question as to who is actually paying for the workers’ compensation benefits, the general contractor as a Statutory Employer, or the actual employer, as the subcontractor;
• Thirdly, it would preserve the third-party claim contemplated under Section 319 of the Pennsylvania Workers’ Compensation Act, confirming the right of subrogation, where a third-party’s negligence, “in whole or in part”, has caused the employee’s injury, and created the liability for workers’ compensation payments; and,
• Lastly, it is Justice Baer’s view that removing this “irrational relic of a bygone era” would actually insure workplace safety, reducing construction site accident injuries, as both general contractor and subcontractor would be vested in reducing and eliminating the liabilities for both tort and workers’ compensation claims.

However cogently articulated, that issue was not before the Patton’s Court, and was not, therefore, relevant to the ultimate affirmation of the Statutory Employer immunity from tort liability doctrine, a doctrine of precedential significance undermined by the rulings of both the Trial Court and the Pennsylvania Superior Court.

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Questions concerning tort and/or contract liability that might arise in the context of casualty claims can be directed to Kevin L. Connors at [email protected] (Phone: 610-524-2100 Ext. 112).