Statutory Employment in Workers Compensation Law in Virginia
After you file a workers compensation claim you may see and hear many terms that you’ve never heard of before. This can be frustrating and confusing.
Those of you who are electricians, construction workers, and union members who were hurt on the job may have heard the term “statutory employer.” This article explains who is a statutory employer under Virginia workers compensation and why you should care.
Who is a Statutory Employer?
Virginia Code Section 65.2-302 explains who is a statutory employer in Virginia. It states:
When any person (referred to in this section as “owner”) undertakes to perform or execute any work which is a part of his trade, business or occupation and contracts with any other person (referred to in this section as “subcontractor”) for the execution or performance by or under such subcontractor of the whole or any part of the work undertaken by such owner, the owner shall be liable to pay to any worker employed in the work any compensation under this title which he would have been liable to pay if the worker had been immediately employed by him.
When any person (referred to in this section as “contractor”) contracts to perform or execute any work for another person which work or undertaking is not a part of the trade, business or occupation of such other person and contracts with any other person (referred to in this section as “subcontractor”) for the execution or performance by or under the subcontractor of the whole or any part of the work undertaken by such contractor, then the contractor shall be liable to pay to any worker employed in the work any compensation under this title which he would have been liable to pay if that worker had been immediately employed by him.
The purpose of Virginia’s statutory employer statute is to prevent an owner or contractor from escaping liability under the Workers’ Compensation Act by subcontracting away work that is part of its trade, business, or occupation. The statutory employer statute protects the employees of subcontractors who are not financially responsible and expands the definition of “employer” to bring within the Act independent contractors and subcontractors who are performing work that is part of the owner’s trade, business, or occupation. The Virginia Workers’ Compensation Act is designed to protect injured employees.
Why Does it Matter if Someone is a Statutory Employer?
There are two situations where the statutory employer issue is usually litigated in Virginia workers comp cases.
The first situation is when an injured employee’s actual employer does not have workers compensation insurance, even though it’s supposed to, and is unable to provide workers compensation benefits financially. The employee’s work accident attorney will file a claim against the owner or general contractor, arguing that it is the statutory employer. The person or company that the claim is filed against will likely defend the claim to avoid having to pay benefits.
The second situation is when an injured employee is receiving temporary total disability benefits and has filed a third party personal injury lawsuit. The defendant in the civil suit may try to show that it is the statutory employer so that the personal injury lawsuit is barred under the workers comp exclusivity provision. With a personal injury lawsuit the injured employee may recover much more than he or she would in a workers compensation case. This is because compensation for punitive damages and pain and suffering is permitted in a personal injury case.
How to Decide if an Owner or Contractor is a Statutory Employer in Virginia
When determining whether a person or company is a statutory employer, the question is whether the injured employee is engaged in the “trade, business, or occupation” of the owner or contractor. The Virginia Supreme Court has said:
The test is not one of whether the subcontractor’s activity is useful, necessary, or even absolutely indispensable to the statutory employer’s business, since, after all, this could be said of practically any repair, construction or transportation service. The test (except in cases where the work is obviously a subcontracted fraction of a main contract) is whether this indispensable activity is, in that business, normally carried on through employees rather than independent contractors.
Shell Oil Co. v. Leftwich, 212 Va. 715, 722 (1972).
The Shell Oil test has two parts: the normal work test and the subcontracted fraction test.
Normal Work Test
When determining whether an employee was hurt while performing work that was normally done by the owner’s employees rather than independent contractors, the Commission will look at:
- How important the work performed is to the employer’s business
- Whether the employer had contracted out this type of work in the past
- The size of the employer’s maintenance staff
- Routine work performed by the employer
- How often the employer performed this type of work
- If the employer would have used its own employees if the subcontractor was not available
Subcontracted Fraction Test
If the work out of which the work-related accident arose was a subcontracted fraction of a contract, but not part of the trade, business, or occupation of the owner, then the general contractor who hired the subcontractor to perform that fraction is the statutory employer. This is true regardless of whether the injured employee works for the subcontractor or a subcontractor of the primary subcontractor.
Stranger to the Work Test
When an injured employee who works for the owner or general contractor files a workers comp claim against a subcontractor, the Commission must use a “stranger to the work” test instead of the “normal work” test. The Workers Compensation Act will not extend to work-related accidents caused by third parties who are strangers to the trade, occupation, or business of the employer for whom the injured employee worked.
Cases Involving Statutory Employer Law in Virginia
Princess Anne Builders, Inc. v. Faucette, 37 Va. App. 102 (2001): In this case a general contractor in the home-building business was found to be the statutory employer of an employee of a tree service company because the general contractor’s contract called for the trimming of trees.
Carmody v. F.W. Woolworth Co., 234 Va. 198 (1987): In this case a portrait photographer who had a licensing agreement to operate a photography department in a retail department store was a statutory employee because the retail aspect of the photographer’s job was part of the department store’s trade or business.
Bergen v. Fourth Skyline Corp., 501 F.2d 1174 (4th Cir. 1974): In this case a construction worker who was hurt by a person delivering mixed concrete to the job site could bring a personal injury lawsuit against the delivery person. The court found that the delivery person was a stranger to the business of constructing a building.
Practical Considerations in Statutory Employer Claims
Many injured employees do not find out that their employer has failed to purchase workers compensation insurance coverage until after they’re hurt on the job. Fortunately you may have remedies. But you’ll need an experienced attorney to conduct discovery and help you determine whether you have a workers comp claim, a third party lawsuit, or both.
Call, text, or email Corey Pollard for a free consultation. We’re here to help you recover after a work related accident. Come see how we’ve helped hundreds of workers obtain benefits and top-dollar workers compensation settlements.