Article by Alana Staniszewski, Esq.
The Pennsylvania Superior Court recently dove into the depths of the Pennsylvania Workers’ Compensation Act (“the Act”) in reviewing an appeal of a $5.6 million judgment in favor of an injured worker against a general contractor for injuries he sustained working on a job site. A general contractor, McCarthy Construction, Inc. (“McCarthy’), had been hired by the Norwood Library to replace its roof and perform other projects. McCarthy subcontracted with RRR, the injured worker’s (“Yoder”) employer, to carry out some of the roofing work. The Court, in a decision consistent with precedent, reinforced the general contractor’s right to statutory immunity pursuant to Section 302(b) of the Act, reversing the jury’s verdict that had been in favor of Yoder, and vacated the judgment.
Under the Act, a general contractor is secondarily liable for payment of workers’ compensation benefits in the event that a subcontractor defaults on payment to an injured worker within their employ. 77 P.S. §462. While this does not mean that the general contractor is the “actual” employer of the injured worker, the Act establishes a vertical relationship through this assignment of secondary liability, and the general contractor is then termed the “statutory employer” of the injured worker. Key to the analysis of this specific case is that statutory employers are granted immunity from tort in work-related injuries sustained by subcontractor employees. Meaning, that if McCarthy was found to be Yoder’s statutory employer, it was immune from Yoder’s negligence suit.
In order to establish immunity as a statutory employer, McCarthy needed to satisfy five (5) elements as set forth by the Pennsylvania Supreme Court in McDonald v. Levinson Steel Co., 153 A. 424, 426 (Pa. 1930). Notably missing from the elements is a requirement that the statutory employer actually pay workers’ compensation benefits to the injured worker. To qualify for statutory immunity, McCarthy had to prove that:
- McCarthy was under contract with the owner or one in position of the owner—here Norwood;
- The premises were occupied or under the control of McCarthy;
- The subcontract with RRR was made by McCarthy;
- McCarthy entrusted part of its regular business to RRR; and
- Yoder was an employee of RRR.
Prior to addressing the McDonald elements, the Court quickly disposed of Yoder’s argument that McCarthy had waived its right to assert the statutory employer defense by failing to timely plead the defense. The Court emphasized that the statutory employer defense cannot be waived and may be raised at any time during the litigation. Finding that McCarthy had not waived the defense, the Court went on to find that McCarthy met each element of the McDonald test and was immune from Yoder’s negligence suit.
This case serves as a reminder that the Act protects both Employers and injured workers, despite its remedial and humanitarian nature that tends to favor injured workers. The concept of a statutory employer provides a humanitarian purpose in allowing an injured worker to receive workers’ compensation benefits despite their immediate employer defaulting on payments. However, the Act also provides protection against additional tort liability to statutory employers burdened with potential or actual liability for workers’ compensation benefits should an injured worker seek damages through civil court. Here, McCarthy never had to pay workers’ compensation benefits to Yoder in order to be deemed a statutory employer. However, the defense still applied. By making the defense unwaivable, the Court and the legislature have emphasized the importance of the employer’s ability to assert it in order to maintain a balance in the system.
Notably, Yoder did attempt to have the Superior Court overturn precedent concerning the applicability of the statutory employer defense despite McCarthy never having paid workers’ compensation benefits. Given the “humanitarian purposes” of the act and the current tide of Workers’ Compensation jurisprudence, it will be interesting to see if the Pennsylvania Supreme Court will address this issue in the future. For now, statutory employers with potential and actual secondary liability may rest easy.