Expand and Contract: Developments in Workers' Compensation Exclusive Remedy

April 3, 2019

By: Michael J. Nunez and Kelsey L. Maxwell

USLAW Magazine

Broadly speaking, the workers compensation exclusive remedy provision holds that employers are immune from liability for injuries incurred by employees during the course of employment. This exclusive remedy provision is codified in a number of states in order "to give efficacy to the theoretical "compensation bargain" between the employer and employee." Privette v. Superior Court, 5 Cal. 4th 689, 697. While this rule is routinely applied when the injured party is an employee of the employer, a question often arises as to whether the exclusion applies to an employer (or landowners) when the injured party is an employee of an independent contractor or subcontractor. States vary in how widely or narrowly this doctrine is applied when it comes to employees of independent contractors, subcontractors, or other hirees and in the last few years, various states have taken steps to either expand or contract the application of this doctrine.

Nevada

Most recently, Nevada has expanded this doctrine as it applies to employees of independent contractors and subcontractors. Dating back decades, Nevada has afforded independent contractors and subcontractors the same status as employers when it comes to "exclusive remedy" so long as the contractor is in the same trade, business, profession or occupation as the employer of the injured worker. Nevada refers to this analysis as the "normal work test." The defining question of the "normal work test" is whether the work being performed is normally, in that business, carried on through employees rather than independent contractors.

In the recent unpublished decision of Sedano v. Houston, the court concluded that Sedano was bound by the exclusive remedy rule where the court determined that Houston was not performing a specialized repair. 2018 Nev. App. Unpub. LEXIS 280, *3-5. Sedano worked at a residential construction site when Houston's employee, who was operating a crane to install roof trusses, lowered a truss onto Sedano. There, Sedano's employer was not qualified to use cranes so it hired Houston to perform crane work on the project. The court determined Houston was hired to provide a service directly in furtherance of the overall project (i.e., building a residential structure)." Thus, the exclusive remedy defense applied. Sedano v. Houston is compared to D&D Tire, Inc. v. Ouellette.

In D & D Tire, Inc. v. Ouellette, an employee of Allied, hired to perform tire service work on mining equipment, was injured when an employee of a third-party, Purcell, who was repairing the Allied employee's truck, backed the truck into the Allied employee. 131 Nev. Adv. Rep. 47, 352 P.3d 32, 34. The Supreme Court concluded that the Purcell employee was sent to the work site for the purpose of specialized repairs on the truck and therefore was not a statutory employee of Allied. Id. at, 352 P.3d at 37.

Washington

Similarly in Washington, the Court of Appeals recently decided a case (Am. Hotel & Lodging Ass'n v. City of Seattle, 2018 Wash. App. LEXIS 2890), challenging the validity of a ballot initiative in the state. Initiative 124 (I-124) established health, safety, and labor standards for hotel employees within Seattle. In part, the initiative conferred subject matter jurisdiction on a state court to resolve work-related injury claims. The Court of Appeals instructed the trial court to enter summary judgment in favor of the challenging parties in part, because the initiative conflicted with key provisions of Washington's workers' compensation system by creating a private cause of action that does not exist under Washington law. The Court explained that Washington's Industrial Insurance Act represents a "grand compromise" between industry and labor to remove workplace injuries from the court system and to provide injured workers with a swift, no-fault compensation system for on-the-job injuries. Accordingly, the Court held that even if a city could lawfully enact worker safety provisions that are stricter than those imposed by the Washington State Department of Labor and Industries, the city cannot confer subject matter jurisdiction on a state court to resolve work-related injury claims when, by statute, the Washington legislature has abolished that very jurisdiction more than a century ago. This was a clear affirmation of the State's exclusive remedy rule.

California

California on the other hand has gone in a different direction, narrowing the scope of the application of this doctrine to employees of independent contractors and subcontractors. The leading case in California regarding property owners' liability to employees of independent contractors working on its land is Privette v. Superior Court, 5 Cal. 4th 689. In Privette, the California Supreme Court limited the breadth of the peculiar risk doctrine, concluding that it does not extend to hired contractor's employees. The Court reasoned that because the Workers' Compensation Act shields an independent contractor from tort liability to its employees, applying the peculiar risk doctrine to the independent contractor's employees would illogically and unfairly subject the hiring person to greater liability than that faced by the independent contractor whose negligence caused the employee's injury. This principle however is subject to many exceptions and the scope of those exceptions is expanding.

For example, in 2018, California's Second District Court of Appeals heard the case of Gonzalez v. Mathis, 20 Cal. App. 5th 257 which focused on the "hazardous conditions" exception. In reviewing a lower Court's ruling on a Motion for Summary Judgment, the Court analyzed scope of this exception as it pertained to a concealed hazard. Generally when there is a known safety hazard on a hirer’s premises that can be addressed through reasonable safety precautions on the part of the independent contractor the hirer delegates the responsibility to take such precautions to the contractor, and is not liable to the contractor’s employee if the contractor fails to do so. See Kinsman v. Unocal Corp., 37 Cal.4th 659, 673-674 (2005). However, if the hazard is concealed from the contractor, but known to the landowner, liability may attach. The recent Gonzalez case took this exception further and held that while generally a hirer cannot be held liable for injuries resulting from open or known hazards the contractor could have remedied through the adoption of reasonable safety precautions, similarly the hirer can be held liable when he or she exposes a contractor (or its employees) to a known hazard that cannot be remedied through reasonable safety precautions. Thus the hazardous conditions exception seems to apply not only to concealed conditions, but obvious conditions if the contractor cannot remedy the condition. This holding widens the number of exceptions to Privette's rule of "no liability" for landowners.

Oregon

Recent case law in Oregon has similarly limited the scope of this exclusion. In the case of Bundy v. NuStar GP, LLC, 362 Ore. 282, Oregon's Supreme Court analyzed ORS 656.019 to determine whether the "claim" includes subsequent claims. ORS 656.019 states, "an injured worker may pursue a civil negligence action for a work-related injury that has been determined to be not compensable because the worker has failed to establish that a work-related incident was the major contributing cause of the worker's injury only after an order determining that the claim is not compensable has become final." The questions this Court considered was whether "the claim" refers to the initial claim for workers compensation only, or whether it includes subsequent claims. In Bundy the Plaintiff initially received workers compensation for injuries sustained while working, but later claims were denied workers compensation and thus Plaintiff sought recovery for these subsequent claims via civil litigation. The defense argued that as Plaintiff received workers compensation for his injuries initially, such compensation was his exclusive remedy. The Supreme Court disagreed and agreed with Plaintiff that a single work-place incident can give rise to multiple individual "claims." Accordingly, the workers compensation exclusion has been limited in Oregon in that the same workplace injury can give rise to both workers compensation claims, and civil lawsuits.

In sum, while hirers are often categorically immune from liability for injuries to its employees or employees of its independent contractors when workers' compensation insurance is available, various jurisdictions are expanding on, or limiting this application.