Thought Leadership

Key Points:

• A negligent employee is not liable in a civil action for damages for causing an injury to a co-worker under the workers’ compensation bar.
• In a civil action, the tests to determine whether there is a “borrowed employee/special employee” relationship include the traditional “control test” and the “business furtherance test.”
• The question of the whether there is a “borrowed employee/special employee” status is likely to be determined by a jury.

In the recent case of Pantano v. NY Shipping Assoc., 294 A.3d 1148 (N.J. 2023), the New Jersey Supreme Court addressed the legal test to be considered in determining whether an individual is a “borrowed employee” and, thus, protected from liability in a third-party civil action. More specifically, in this case, the court addressed whether an employer’s vicarious liability under the borrowed employee doctrine is a question of law to be decided by the court or, conversely, a question of fact reserved for the jury. The court held that the application of the multi-factor test—which can involve matters of disputed fact and witness credibility—is presumptively for a jury to determine. Moreover, a court should not resolve the borrowed employee issue unless the evidence concerning the factors is so one-sided that it warrants judgment in a moving party’s favor as a matter of law.

On November 19, 2013, the plaintiff, Philip Pantano, a mechanic employed by Container Services of New Jersey, was injured at work while attempting to move a heavy piece of equipment he had knocked on its side. Lawrence Giamella, who was also working on the site that day, tried to help Pantano move the equipment back into position with a forklift. As Giamella operated the forklift, a chain slipped, causing the equipment to crush Patano’s left foot, which was ultimately amputated. Pantano collected workers’ compensation benefits from Container Services. He and his wife also brought a personal injury action against multiple defendants, including Marine Transport, Inc. The main dispute concerned which entity or entities employed Giamella, Marine Transport, and/or Container Services. 

Both are related companies owned by Robert Castelo. The companies jointly lease and occupy a large shipping yard. Container Services is in the business of repairing shipping equipment. Marine Transport is in the trucking business, transporting containers from the shipyard to their destinations. Marine Transport’s employees regularly perform mechanical work for Container Services’ customers. The revenues from that mechanical work go to Container Services, and Container Services does not reimburse Marine Transport. Container Services is a union shop that requires it to pay its unionized workers time-and-a-half overtime wages on weekends and holidays. Marine Transport is not a union shop. Sometimes, Container Services’ unionized employees worked on Marine Transport’s payroll, on the weekends, at their regular weekday wages. All workers at the shared workplace were supervised by a manager paid exclusively by Container Services.

Pantano claimed that Marine Transport helped operate the yard and should have known about Container Services’ negligence. Following discovery, the remaining defendants moved for summary judgment. Marine Transport argued that it was not Giamella’s employer. Specifically, although Giamella was on Marine Transport’s payroll, Marine Transport raised the affirmative defense that he was a “borrowed servant/special employee” working for Container Services at the time of the accident. After deferring the motion until after the jury verdict, the judge granted Marine Transport’s motion to dismiss, concluding that Giamella was a borrowed employee working for Container Services when the accident occurred. The court stated: “(1) in every practical sense Giamella was a functional employee of Container Services due to Container Services’ control over his work, and (2) there was no evidence that Marine Transport derived an economic benefit by providing the services of Giamella to Container Services.” 

The Appellate Division reversed and reinstated the jury verdict. The appeals court expressed a reticence to resolve Giamella’s status as a matter of law, “…the facts central to the question, if not the very question itself, could have been determined by the jury.” The Appellate Division found the trial judge erred by performing a complete analysis of the factors and reaching a conclusion on the merits of the borrowed-employee question after weighing the evidence. The Appellate Division discerned that there was substantial evidence to support both main prongs of the borrowed servant analysis (control and business furtherance) in Patano’s favor. Specifically, the appeals court ruled there was “enough evidence for a jury to have found Marine Transport retained sufficient control of Giamella, especially because Marine Transport paid for Giamella’s forklift training after the accident.” The Appellate Division also disagreed with the trial judge that Marine Transport received no financial benefit, “…Marine Transport obviously received financial benefit from the arrangement, or it would not have participated in it.” The court found the idea that Marine Transport would simply donate Giamella’s labor to Container Services “not only inconceivable . . . but incongruent with the indulgent standard afforded the plaintiff when considering the evidence of record on a motion.”

Marine Transport then filed a petition for certification to the Supreme Court, raising several points. As its primary argument in its petition, Marine Transport contended that the borrowed-employee question “is purely a legal issue” that should not be decided by a jury. The court granted certification and noted that the case involved the application of the multi-factor test announced in Galvao v. G.R. Robert Construction Co., 846 A.2d 1215 (N.J. 2004), for evaluating whether a worker who negligently caused a plaintiff’s jobsite injury was a so-called “borrowed employee” of the plaintiff’s own employer. The grant of certification was confined to whether an employer’s vicarious liability under the borrowed-employee doctrine is a question of law to be decided by the court or, conversely, a question of fact reserved for the jury.

In affirming the Appellate Division’s reversal of the dismissal of Marine Transport, the Supreme Court historically noted that the case law before Galvao, plainly signified that a jury, not a judge, must evaluate whether a negligent worker was a “borrowed employee” of the special employer. In many instances, the general employer’s witnesses and proofs will clash with those presented and relied upon by the opposing side. Factual disputes about control and business advantage can readily turn on the assessment of the credibility of competing witnesses. Juries are well-suited to making those assessments, as they are for a host of other factual disputes entrusted to them at trial. 

Based on this historical analysis, the Supreme Court determined that nothing should change the traditional allocation of the jury’s role in borrowed employee disputes in most cases. However, if, under the well-established summary judgment standard, a court were to find that the evidence, viewed in the light most favorable to the non-moving party with all reasonable inferences, is so one-sided that there are no genuine issues of disputed material fact, the court could decide the issue without a jury. 

It is important to note that this case was not decided in the context of a workers’ compensation case but, rather, a civil action. The tests and case law in the New Jersey workers’ compensation forum for determining a general/special employee relationship are similar, but not the same. However, this case is illustrative of the fact that a claim involving issues of employment are some of the most complex and require extensive factual analysis. Many times, these issues are or can be resolved in the workers’ compensation forum first and will have a great impact, not only on your workers’ compensation benefit exposure, but also on your general liability exposure as well. If you have questions regarding your employment status, possible third-party liability exposure, or possible subrogation issues, you should contact your preferred counsel as soon as possible, regardless of where you are in the litigation process. 

*Bob is a shareholder in our Mount Laurel, New Jersey, office. He can be reached at 856.414.6009 or rjfitzgerald@mdwcg.com.

_{Defense Digest, Vol. 29, No. 3, September 2023, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2023 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}