The Pennsylvania Supreme Court Limits the Application of the Construction Workplace Misclassification Act

07.11.18

Category: Pennsylvania

In a recent decision the Pennsylvania Supreme Court addressed the scope of the Construction Workplace Misclassification Act (CWMA) and determined that it did not apply to an individual engaged in remodeling work for a restaurant to make him an employee for purposes of workers' compensation coverage. See: Department of Labor and Industry, Uninsured Employers Guaranty Fund v. WCAB (Lin and Eastern Taste) No. 27 EAP 2017, decided June 26, 2018.

The material facts were undisputed and included the following: Eastern Taste is a restaurant, not a construction business. The injured worker, Lin, was hired by the owner to do remodeling work before the restaurant opened for business. There was no written contract. The husband of the restaurant owner was in charge of what needed to be done but he did not direct specific activities because Lin was a seasoned remodeler. The materials were provided by the owner, but Lin used his own tools. Lin was to be paid on a per diem basis. During the work Lin fell and sustained spinal injuries rendering him a paraplegic. Eastern Taste did not maintain workers' compensation insurance.

The Workers' Compensation Judge denied Lin's claim for benefits concluding that Lin's work was not conducted in the regular course of Eastern Taste's business and he was not an employee of Eastern Taste. However, the Judge noted that the result would be entirely different if the CWMA applied. That Act allows individuals who perform services in the construction industry for remuneration to be classified as independent contractors only if certain specific conditions are met including a written contract, freedom from control and engagement in an established trade. The Workers' Compensation Judge determined that the CWMA did not apply because Eastern Taste is a restaurant in the restaurant business and not in a construction business.

The Pennsylvania Supreme Court heard the injured worker's appeal to address the issue of whether the decision of the Commonwealth Court that the CWMA applies only when the putative employer's industry or business is construction was in error. The Court found the terms of the CWMA, "an individual who performs services in the construction industry," ambiguous. Therefore the Court used principles of statutory construction, including legislative history, to interpret the meaning of "construction industry" ultimately concluding that means a "business entity that performs construction services, namely erection, reconstruction, demolition, alteration, modification, custom fabrication, building, assembling, site preparation and repair work." The Court stated that CWMA does not apply where the putative employer is not in the business of construction. Because Eastern Taste was in the restaurant business, not the construction business, the CWMA did not apply. Lin was an independent contractor not an employee of Eastern Taste.

The Court rejected the broad application of the CWMA urged by the injured worker finding that the CWMA was enacted primarily to address perceived abuses only in the construction industry and a broad application would lead to an absurd result where various property owners engaging painters, plumbers, electricians and carpenters would trigger employment relationships, obligations for workers' compensation benefits and potentially administrative and criminal penalties under the CWMA and the Workers' Compensation Act (WCA).

Comment: This decision limiting the CWMA to putative employers engaged in the construction industry is a common sense interpretation of a statute designed to address problems specific to that industry. It also provides some assurance to those who engage contractors, but who are not operating a construction business, that they will not be unexpectedly exposed to various obligations and potential penalties under the WCA and the CWMA. For those engaged in claims handling, the potential applicability of the CWMA must start with an analysis of the putative employer's specific industry or business.

For more information, please contact Stephen Potako, at spotako@wglaw.com or 267.765.4132.

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Lexi Burchmore
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