In Yoder v. McCarthy Constr., Inc., 2023 Pa. Super. LEXIS 36 the Pennsylvania Superior Court recently denied a $5.59 million verdict to an injured worker. When Jason Yoder fell through a hole in the roof while doing repairs to Norwood Public Library, he sustained a catastrophic back injury. Yoder, working for subcontractor RRR Contractors, Inc. (RRR), then sued the General Contractor on the job, McCarthy Construction, Inc. Significantly, Yoder had also filed a workers’ compensation claim against RRR. This had settled via a Compromise and Release Agreement (C&R) which identified Yoder as the employee and RRR as the employer as parties to the C&R. As part of the C&R, Yoder resigned his employment from RRR.
Following a jury trial, Yoder was awarded $5 million in damages which amounted to approximately $5.59 million with delay penalties. McCarthy appealed to the Superior Court arguing that he was Yoder’s statutory employer and, as such, was immune from a lawsuit under the PA Workers’ Compensation Act (Act). The Superior Court, under the Exclusive Remedy provisions of the Act, agreed with McCarthy and reversed the jury award as legally improper.
In Pennsylvania, a statutory employer is, essentially, a master who is not a contractual or common-law one but is made one by the Act. To establish an entity or person as a statutory employer, the employee must establish:
(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 entrusted to such subcontractor;
(5) An employee of such subcontractor.
If these elements are established, the statutory employer will enjoy the benefit of immunity such as a normal employer.
The relevant facts and arguments of the case were that McCarthy had hired RRR to do the roofing repairs of the library. Yoder was an employee for RRR when he fell through the roof and sustained his injuries. Before the Trial Court, Yoder argued that he was not an employee of RRR but an independent contractor. The owner-independent contractor “employer-employee” relationship test is a test of the totality of the circumstances and is much more difficult to establish than the statutory employer discussed above. The trial court agreed with Yoder, that he was not an employee of RRR. However, highlighting the Compromise and Release agreement and resignation with RRR, the Superior Court found that Yoder was an employee of RRR, therefore fulfilling the fifth and final prong of the statutory employer test.
These issues most commonly arise in construction cases between general contractors and the employees of often uninsured subcontractors. Statutory Employers are liable to pay compensation to employees of subcontractors unless the subcontractor has workers’ compensation insurance. The title of the statutory employer is typically determined by the vertical relationship between the general contractor and subcontractors. Based on the foregoing, employer immunity extends to favor a statutory employer as defined by the Act. The statutory employer immunity classically applies in favor of a general contractor in control or possession of the construction site under a contract with an owner of the land, in a claim by an injured employee of a subcontractor due to injuries sustained on the job site.
As such, the Act makes it clear that the liability of the employer to employees is exclusively under the Act. Under PA law, it has long been held that an employer’s immunity from tort liability is confirmed in the Act. On its face, however, this decision does not seem necessarily fair to Yoder, who was significantly injured and is stuck on receiving the settlement from RRR. If McCarthy was not the correct third party to pursue in litigation, then who was? In this situation, there was seemingly little recourse for Yoder to collect the full value of his injuries/disability. We have to wonder if this matter will pop back up down the line in front of the Supreme Court.
Employers, especially in construction, should always be aware of these standards. Yoder was undoubtedly entitled to benefits under the Act; those benefits were significantly less than the $5.59 million that was awarded. When looking at possible claims from the employees of subcontractors, these are the first standards that employers/general contractors should always consider.