Statutory employer defense OK for general contractors: Pa. court

The Pennsylvania Supreme Court on Thursday explained that the statutory employer defense for general contractors who have not paid benefits to a subcontractor’s injured employee is not waivable in a decision overturning a Superior Court’s determination that a general contractor qualified for statutory employer immunity.

McCarthy Construction was the general contractor for a project to repair the Norwood Public Library. It subcontracted the roofing work to RRR Contractors, which named Jason Yoder as an employee, according to Yoder v. McCarthy Construction, Inc.

Mr. Yoder sustained critical injuries after he fell through an uncovered hole in the roof of the library, landing on the ground 20 feet below. Although he received workers compensation benefits from RRR, he also filed a negligence suit against McCarthy, which asserted the claim was barred by the exclusive remedy because it was his statutory employer.

Under Pennsylvania law, general contractors are secondarily liable for workers compensation benefits owed to a subcontractor’s employee if the subcontractor defaults. As such, although they are not the actual employers of the subcontractors’ employees, general contractors are considered statutory employers.

In exchange for assuming secondary liability for the payment of workers compensation benefits, general contractors who qualify as statutory employers have immunity in tort for work-related injuries sustained by subcontractor employees.

Mr. Yoder filed a pretrial motion to preclude McCarthy from presenting evidence on liability based on the statutory employer defense. A trial judge granted the motion, finding that McCarthy failed to qualify as a statutory employer. The judge also denied McCarthy’s request to charge the jury on the statutory employer defense after the close of evidence.

The jury returned a unanimous verdict in favor of Mr. Yoder for $5.6 million and the trial judge denied McCarthy’s motion for a judgment notwithstanding the verdict.

The Pennsylvania Superior Court vacated the verdict, ruling McCarthy’s failure to timely plead the statutory employer defense did not result in waiver, as the assertion of immunity implicates a trial court’s subject matter jurisdiction. The court said statutory employer immunity may be raised at any time so long as the proceedings are still open.

The court further explained that Pennsylvania uses a five-part test to determine whether a party qualifies as a statutory employer. The party must be under contract with an owner or in the position of an owner; occupy or control the premises where the accident occurs; have a subcontract with the injured worker’s employer; have entrusted part of its regular business to the subcontractor; and the worker must be an employee of the subcontractor.

The court found that McCarthy met all five elements of the statutory employer test, so it concluded that the company was immune from tort liability.

Since the trial judge precluded McCarthy from raising the statutory employer defense at trial, the Supreme Court said there was no record on which the Superior Court could have assessed whether McCarthy satisfied the first, second, and fourth elements of the statutory employer test.

“The Superior Court also was not permitted to scour the pre-trial and post-trial record to support its determinations on those elements,” the Supreme Court said. “We, therefore, conclude that the Superior Court abused its discretion by exceeding its scope of review when it scoured the entire record for evidence to support its determinations with respect to the first, second, and fourth elements.”

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