VALUE IN BEING DEEMED “STATUTORY EMPLOYER” UNDER WORKERS COMPENSATION LAW

Posted on October 29, 2022October 29, 2022 by Edward Garber

When it comes to workers compensation law, as a contractor, there are a couple of important considerations. One, you will be deemed a statutory employer. And two, you want your subcontractors (and, of course, yourself) to have workers compensation insurance so that you can enjoy the protection of workers compensation immunity. Workers compensation immunity provides immunity to an employer (i.e., a statutory employer) by workers compensation insurance becoming the exclusive form of liability.

A recent non-construction case, Bar-Harbour Tower Condominium Association, Inc. v. Bellorin, 47 Fla.L.Weekly D2114a (Fla. 3d DCA 2022), illustrates the importance of these considerations. Here, a condominium association per its governing documents (i.e., declaration of condominium) was authorized to contract for valet parking services for its unit owners. An employee of the valet company (hired by the association) got hurt and sued the association. The association argued it should be deemed a statutory employer under workers compensation law and, as such, entitled to workers compensation immunity. The trial court disagreed, and the association appealed. The Third District Court of Appeal held the association was the statutory employer and, thus, workers compensation immunity did apply.

When it comes to the determination of a statutory employer, Florida Statute s. 440.10(1)(b) provides: “In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.”

“For the association to be a contractor (and thus [injured employee’s] statutory employer) under section 440.10, it must show that it has a contractual obligation to provide [valet] services to the unit owners,” and that it “sublet[ ] any part or parts of [the] contract work to a subcontractor,” “To be considered a contractor under section 440.10, [the association’s] ‘primary obligation in performing a job or providing a service must arise out of a contract.‘ ” “Furthermore, the ‘primary obligation’ refers to an obligation under the prime contract between the contractor and a third party, not to any agreement between the contractor and subcontractor.” Notably, “[t]he contractual obligation may be either express or implied-in-fact; however, it cannot be based on a duty purely imposed by statutory or common law.”

Bar Harbour Tower Condominium Association, supra (internal citations omitted).

The association’s declaration of condominium is a contract with unit owners. The declaration of condominium authorized the association to provide valet services so “the association’s primary obligation to provide valet services to the unit owners arose under a contract, the declaration of condominium, and not from its general statutory duty to manage and maintain the condominium property.” Bar Harbour Tower Condominium Association, supra. (This authorization does not derive from Florida’s Condominium Act as there is no statutory duty for associations to provide valet services.) The association, per the declaration of condominium, sublet the valet services to another company, which was the injured employee’s employer. Therefore, the association was a statutory employer and entitled to the protection of workers compensation immunity.

Being deemed a statutory employer is important in the construction framework. This reinforces why workers compensation insurance is important – to immunize tort liability from injured employees and become the exclusive form of liability.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

YOU NEED TO BE A CONTRACTOR FOR WORKERS’ COMPENSATION IMMUNITY TO APPLY

Posted on October 18, 2020October 18, 2020 by Edward Garber

If you are a contractor, you are aware of workers’ compensation immunity when it comes to injuries on the site; and, if not, you should be. It is this workers’ compensation immunity (where workers compensation is the exclusive form of liability for an injured employee) which is why a contractor should generally always want to ensure its subcontractors have workers’ compensation insurance. Workers’ compensation immunity would protect a contractor that is being sued by a subcontractor’s employees that are injured on the job. For more information on workers’ compensation immunity, please check out this article and this article.

In this regard, Florida Statute s. 440.10(1)(b) provides:

In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.

(If the subcontractor does not have workers’ compensation insurance, the contractor is deemed the statutory employer and its workers’ compensation insurance would apply. Otherwise, the subcontractor’s workers compensation insurance would apply.)

However, it is important to understand that workers’ compensation immunity applies to contractors, and not to owners. For example, in Tampa Electric Co. v. Gansner, 45 Fla. L. Weekly D2358a (Fla. 2d DCA 2020), a public utility company hired an electrician to perform maintenance work at its generating facility. Two of the electrician’s employees were injured when an access door at the generating facility blew open. The injured employees and their families filed a personal injury lawsuit (negligence lawsuit) against the public utility company. The public utility company asserted workers’ compensation immunity as an affirmative defense and moved for summary judgment on this defense. The trial court denied the summary judgment finding that the public utility company “is not entitled to workers’ compensation immunity because it is not the statutory employer of either [of the injured employees of the electrician].” Gansner, supra.

On appeal, the Second District agreed with the trial court. The public utility company would be entitled to the protection of workers’ compensation immunity as the statutory employee of the injured employees of the electrician only if it was a contractor that sublet a portion of its work to the electrician. The Second District reviewed authority that found that to be considered a contractor, the party’s “primary obligation in performing a job or providing a service must arise out of a contract [with a third party].” Gansner, supra, (quotation and citation omitted). Although the public utility company tried to come up with a creative argument based on the utility company’s work for its customers, the appellate court was not persuaded:

We therefore conclude that [the public utility company] is not the statutory employer of either [of the electrician’s injured employees]. Although [the public utility company] promises to exercise reasonable diligence to provide power to its customers pursuant to its tariff, nothing in the tariff — or in any other source that it has identified — imposes upon it a contractual obligation to its customers to maintain its electrical generating equipment. Instead, its obligation to maintain its equipment arises purely out of an administrative regulation and thus is not an obligation that it can “sublet” to a third party for purposes of section 440.10(1)(b) absent a concomitant contractual obligation. The trial court, therefore, correctly denied [the public utility company’s] motion for summary judgment based on workers’ compensation immunity.

NEED TO BE A “CONTRACTOR” TO BE PROTECTED BY WORKERS COMPENSATION IMMUNITY

Posted on August 31, 2015August 31, 2015 by Edward Garber

Previously, I discussed the concept of “statutory employer” in the framework of workers compensation. Again, this concept is based on language in Florida Statute s. 440.10(1)(b) that provides:

In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.

The recent case of Slora v. Sun ‘N Fun Fly-In, Inc., 40 Fla. L. Weekly D 1966a (Fla.2d DCA 2015) discussed the meanings of the term “contractor” and “contract work” as used in this section:

The statutory terms “contractor” and “contract work” plainly and unambiguously posit a party performing work pursuant to a contract with another. Thus, to be immune from tort liability as a contractor, a defendant’s primary obligation in performing a job or providing a service must arise out of a contract.

Slora, supra (quotation and citation omitted).

In this case, a company operated airshows for the general public. To put on these airshows, the company had to fill out various forms and get approval from the Federal Aviation Authority. The Federal Aviation Authority required security to be provided at airshow events. The company put on an airshow and hired a security company to provide the security services for the event. During the airshow, however, an employee of the security company got hurt. This employee sued the company that put on the airshow for her injuries. The company argued it should be immune from such claim under workers compensation immunity that provides that contractors that comply with Florida Statute 440.10 are immune from tort liability (absent an intentional tort).

The trial court agreed with the company and granted summary judgment in its favor finding it was immune from liability and could not be properly sued by the injured employee of the security company. The appellate court reversed based on the meanings of “contractor” and “contract” as used in Florida Statute s. 440.10. Particularly, the appellate court held that there was no evidence that the Federal Aviation Authority contracted the company to put on the airshow event (or that the company undertook an implied obligation to the Federal Aviation Authority). Thus, if the company was not contracted by the Federal Aviation Authority, it could not be a “contractor” as used in the statute since it was not performing work pursuant to a contract with another. And, if the company was not a contractor per the statute, the company could not be immune from tort liability under workers compensation law.

WORKERS COMPENSATION (PART TWO) — STATUTORY EMPLOYER AND CONTRACTORS

Posted on March 14, 2015March 14, 2015 by Edward Garber

To follow-up on the article Workers Compensation—Tidbits on Construction Projects, the recent opinion in Roof Painting By Hartzell, Inc./Summit Holdings-Claims Center v. Hernandez, 2015 WL 641199 (Fla. 1^st DCA 2015) touches upon the application of a statutory employer in the construction context.

Here, a contractor was hired to provide pressure cleaning and related services. The contractor, in turn, subcontracted the labor to perform the services through another company (e.g., subcontractor). Both the contractor and subcontractor that provided the labor had workers compensation insurance. A laborer (retained by the subcontractor) was injured in performing the pressure cleaning services. The issue was which workers compensation carrier should be responsible: the subcontractor’s carrier or the contractor’s carrier.

Florida Statute s. 440.10(1)(b) provides:

In case a contractor sublets any part or parts of his or her contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment, and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.

Since the injured laborer was hired by the subcontractor, the subcontractor’s workers compensation carrier should cover the injured laborer’s claim.

Section 440.10 forms what is referred to as the “statutory employer” concept. For instance, if the subcontractor does not obtain applicable workers compensation insurance, then under this section, the general contractor is liable (as the general contractor is the statutory employer). It is this reason that contractors that subcontract a portion of their services to others need workers compensation coverage!

Importantly, contractors that comply with the requirements of section 440.10 are protected by the exclusiveness of liability provisions in Florida Statute s. 440.11. This means the contractor is immune from lawsuits (such as tort-related lawsuits) from injured workers with workers compensation being the exclusive form of liability absent any intentional tort committed by the contractor. See Fla.Stat. s. 440.11. “Because section 440.11(1) of the Florida Statutes makes the liability to secure [workers] compensation imposed by section 440.10(1) the exclusive form of liability imposed by Chapter 440 on an employer, once an employer acquires and maintains workers’ compensation insurance for the benefit of its employees, it becomes immune from suit.” VMS, Inc. v. Alfonso, 147 So.3d 1071, 1073 (Fla. 3d DCA 2014).

WORKERS COMPENSATION — TIDBITS ON CONSTRUCTION PROJECTS

Posted on March 11, 2015March 11, 2015 by Edward Garber

Workers compensation is a “must have” insurance in the construction industry.

Certain officers are entitled to be statutorily exempt from workers compensation (pursuant to Florida Statutes Chapter 440). See Fla.Stat. s. 440.02(15). But, if exempt, these officers are not entitled to receive workers compensation benefits. The reason to obtain an exemption is to avoid paying premium for these officers.

For an applicant to receive a statutory exemption for a corporation:

-The corporation must be registered as an active Florida company (with Florida’s Division of Corporations).

-The applicant must be identified as an officer (with Florida’s Division of Corporations).

-The officer must own at least 10% of the corporation.

-No more than three officers can be exempt.

-The exemption is valid for 2 years.

For an applicant to receive a statutory exemption for a limited liability company, the above requirements pertaining to a corporation are applicable except for the applicant being required to be identified as an officer.

An applicant that satisfies the exemption requirements will receive a Certificate of Election to be Exempt that will identify the dates the exemption is in effect.

Notably, sole proprietors, independent contractors, and partners may also receive a Certificate of Election to be Exempt and not recover workers compensation benefits. See Fla.Stat. s. 440.05.

While there is a statutory exemption for the officer/owner-employee, there is not one for the nonofficer/nonowner-employee. Thus, if the construction company relies on full time or part time nonofficer-employees, workers compensation is required for these employees.

Additionally, general contractors need to ensure that every subcontractor it hires has workers compensation or a valid Certificate of Election to be Exempt.

Florida Statute s. 440.10(1)(b) states:

In case a contractor sublets any part or parts of his contract work to a subcontractor or subcontractors, all of the employees of such contractor and subcontractor or subcontractors engaged on such contract work shall be deemed to be employed in one and the same business or establishment; and the contractor shall be liable for, and shall secure, the payment of compensation to all such employees, except to employees of a subcontractor who has secured such payment.

As also explained in Barrs v. LMF Construction, OJCC Case No. 10-002222KAS, 2010 WL 4270050 (Fl.Off.Judge Comp.Cl. 2010):

Under a statutory employer analysis a contractor is protected from workers’ compensation liability for the employees of a subcontractor, an independent contractor, or sole proprietor if an officer of a corporation or the subcontractor validly elects exemption from coverage by filing a written notice pursuant to Section 440.05 Fla. Statutes, 2009; or has otherwise secured the payment of compensation coverage as a subcontractor for the work performed by the subcontractor. This is a vertical analysis starting with the general contractor on top. The general is responsible unless those in the vertical chain below have either secured workers’ compensation coverage or are under a valid exemption.

For instance, in Smith v. Larry Rice Construction, 730 So.2d 336 (Fla. 1^st DCA 1999), a general contractor was building a Taco Bell. The general contractor subcontracted the framing to a subcontractor. The subcontractor did not independently secure workers compensation benefits; rather, it leased employees from a labor leasing company that secured workers compensation for these laborers. The subcontractor then engaged a sub-subcontractor –really, a sole proprietor and his crew as additional labor–to perform a portion of its framing scope of work. The sole proprietor / sub-subcontractor was injured on the project. While the sole proprietor / sub-subcontractor had a Certificate of Election to be Exempt, the exemption had expired at the time he was hurt. The sole proprietor sought workers compensation benefits but these benefits were denied. He argued that the general contractor constituted his statutory employer (per Fla.Stat. s. 440.10) and is liable for his workers compensation benefits. The First District Court of Appeal agreed and found that the injured sole proprietor was a statutory employee of the general contractor and entitled to receive workers compensation benefits.