Workers’ Compensation Update:
PA Supreme Court Extends
Statutory Employer Concept
Beyond Typical Construction Site

A truck driver employed by F. Garcia &; Sons, (FG & S) was injured while transporting a shipment of tomatoes for its customer, Six L’s, between its Pennsylvania warehouse and a processing facility in Maryland.  Unfortunately FG & S did not carry workers’ compensation coverage on its employees, and the driver therefore sued Six L’s , arguing that it was his “statutory employer” under Section 302(a) of the Act.  Section 302(a) provides, in part, that “a contractor who subcontracts all or any part of a contract shall be liable for the payment of compensation to the employees of the subcontractor, unless the subcontractor primarily liable for the payment of such compensation has secured its payment as provided for in this Act.”  The section goes on to state that a person “contracts” with another when the work at issue is “of a kind which is a regular or recurrent part of the business, occupation, profession or trade of such person ….”

Historically, this section of the Act has been applied narrowly by the Courts, under the assumption that Subsection 302(b) limits the applicability of statutory employer liability to situations in which the “statutory employer” controls the premises on which the subcontractor’s employee was injured.  Since its 1930 decision in McDonald v. Levinson Steel, argued Six L’s, the Courts have consistently required that five (5) elements be proven to establish “statutory employer” liability under Sections 302(a) and (b):  (1) a contract between a subcontractor and contractor/owner; (2) the contractor/owner is in control of the premises where the injury occurred; (3) the alleged “statutory employer” entered into the contract at issue; (4) the work to be performed was part of the “statutory employer’s” regular business; (5) the injured worker was an employee of the subcontractor.  Six L’s argued that it could not be found to be the statutory employer, as the injury did not occur on its premises or at a location “controlled” by Six L’s.

Rejecting the argument advanced by Six L’s, the Supreme Court held that Section 302(a) and 302(b) are to be viewed broadly and cumulatively rather than narrowly.  Thus, if an injured worker can establish merely that his own employer is without coverage, and that it contracted with a customer to perform work “of a kind which is a regular or recurrent part of the business, occupation or trade of that customer,” that injured worker can now legally pursue workers compensation benefits against the customer.  Presumably, this holding will extend to “loaned” or “borrowed” employee situations, temporary hires and even to situations in which the contract between the entities is merely oral and not written.

The defense attorney representing Six L’s called the ruling a “game changer” for employers and noted that employers will have to pay close attention to all of its subcontractors, making sure that they are carrying proper workers’ compensation coverage and perhaps adding any long term contractors as “additional insureds” on its own policy coverage.  We will keep you posted concerning further developments and naturally, if you have specific questions or concerns, please feel free to contact Paul Clouser, Denise Elliott or Kate Shantz.