Pennsylvania Supreme Court Reaffirms Statutory Employer Doctrine in Construction Accident Cases

04.11.14

The Pennsylvania Supreme Court reversed the trial court and Superior Court and reaffirmed the nearly 100-year-old statutory employer doctrine and held that a general contractor at a construction site was not liable, as a matter of law, for injuries sustained by a worker of a subcontractor. The ruling, in Patton v. Worthington Associates, Inc., on March 26, 2014, was much anticipated in the construction accident area since the courts below arguably changed the longstanding statutory employer doctrine available to general contractors.

In Patton, an employee of a carpentry subcontractor was injured while working on a church general contractor, Worthington, had been contracted to repair. During the project, the plaintiff was pinned under a scissor lift after he inadvertently drove it into a hole causing it to tip. He fell 14 feet and sustained serious injuries, including fractured vertebrae. The plaintiff filed a civil action against Worthington and contended the company failed to maintain safe job conditions at the job site. Worthington had entered into a standard-form subcontract with Patton Construction, Inc. The plaintiff, Earl Patton, was both the sole shareholder of Patton Construction and an employee who performed the  work.

Normally, a court would analyze the general contractor/subcontractor arrangement under the longstanding five-part test enunciated by the Pennsylvania Supreme Court in 1930 in the seminal case of McDonald v. Levinson Steel Co, 302 Pa. 287, 153 A. 424 (1930). Under McDonald, a general contractor enjoys immunity from suit if it is found to be a statutory employer pursuant to Section 302(b) of the Pennsylvania Workers’ Compensation Act, 77 P.S. 462. The general contractor must meet the following test:

  1. An employer who is under contract with an owner or one in the possession of an owner;

  2. Premises occupied or under control of such employer;

  3. A subcontract made by such employer;

  4. Part of the employer's regular business entrusted to subcontractor, and;

  5. An employee of such subcontractor.

Instead of reviewing the relationship between Worthington and Patton, through the McDonald prism, the trial court held and the Superior Court affirmed, a separate preliminary question that was provided by the trial court to the jury. The jury question posed was: “Is Plaintiff Earl Patton, an independent contractor or an employee with respect to Worthington Construction?” The jury held that the plaintiff was an independent contractor of Worthington and could not then avail itself of the statutory employer doctrine. The jury then returned a verdict in favor of the plaintiff and against Worthington in the amount of $1.5 million.

In a unanimous decision, the Pennsylvania Supreme Court reversed. In a strongly worded decision, the High Court held that general contractors at a construction site have been denominated “statutory employers” relative to workers’ compensation immunity as enunciated in the Workers’ Compensation Act. The High Court held: “The Legislature’s purpose in imposing this status upon general contractors was remedial, as it wished to ensure payment of workers’ compensation benefits in the event of defaults by primarily liable subcontractors.” The Court noted that the general contractors enjoy such immunity under the workers’ compensation action “even where the statutory employer has not been required to make any actual benefit payments.” The Supreme Court held: “As explained above, a century ago, this Court established that, per the terms of Section 302(b), a conventional relationship between a general contractor maintaining control of a jobsite and a subcontractor implicates the statutory employer concept relative to employees of the subcontractor working there.”

The Court further criticized the lower courts for “inappropriately layer[ing] common-law concepts on to a distinctive statutory regime.” The High Court continued its criticism stating “the governing law should have been applied by the trial court at the summary judgment stage, before the case ever reached trial, and certainly our error-correcting court should have recognized and vindicated this law on appeal.”

The Supreme Court never applied and/or addressed the five-part McDonald case stated above. The court merely stated that the relationship between the general contractor and the subcontractor here was not one of an independent contractor situation and that immunity afforded under the statutory employer doctrine under Section 302(b) of the Workers’ Compensation Act must be applied. It does not appear though that the Court altered at all the five-part test of McDonald but simply did not attempt to see whether Worthington met each of the five prongs. The Supreme Court did note, however, that had Patton been under contract with the owner and not Worthington that the doctrine would not have applied.

Even more interesting though is the concurring opinion of Justice Max Baer. He wrote that given the “clear and unambiguous language” of the Workers’ Compensation Act that the general contractor enjoyed statutory employer immunity in this case. He wrote:

Nevertheless, it remains undisturbed within Pennsylvania's statutory scheme as an irrational relic of a bygone era. I respectfully urge our colleagues in the General Assembly to eliminate the doctrine, so that it no longer serves as blanket immunity for general contractors, thwarting a victim's right to recover from a tortfeasor, and an innocent subcontractor-employer's right to recoup workers' compensation benefits through subrogation; while adversely impacting worker safety by eliminating the traditional consequences (money damages) when a general contractor's negligence harms a subcontractor's employee.

This opinion is important in that it reaffirms, without qualification, the general proposition that a general contractor enjoys statutory employer immunity for any injury to an employee of a subcontractor at a worksite. Provided that the five-part test of McDonald, is still met, general contractors should seek to invoke this doctrine whenever possible. Assuming that general contractors have contracted directly with the owner and the subcontractor and continue to exercise general control of the worksite, the decision provides a strong basis for immunity from a suit brought by an injured employee of a subcontractor at a construction site.

This decision should assist the employer of the injured worker which would normally enjoy traditional workers compensation immunity, but has been joined in the lawsuit by the general contractor based on a contractual indemnity clause in the subcontract where workers compensation immunity has been waived. In these instances, depending on the precise language of the contractual indemnity clause, if the general contractor enjoys immunity from suit under this doctrine, then there is simply nothing for the joined subcontractor to indemnify by way of damages. A joined subcontractor which enjoys workers compensation immunity could still be responsible for the general contractor’s defense costs based on the wording of the particular contractual indemnity clause.

Further, this decision would appear to make the party or subcontractor which caused the injured worker’s injuries more of a target defendant.

Finally, it remains to be seen whether the Legislature will take up the call of Justice Baer to amend the Workers’ Compensation Act to rescind and/or modify the statutory employer doctrine. For now though, there is no doubt that the Supreme Court has put the teeth back into the statutory employer doctrine.

For more information please contact Richard Stabinski at rstabinski@wglaw.com or 215.825.7215.

Media Contacts

Sara L. De Long
267.295.3377
sdelong@wglaw.com

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