Defense Digest, Vol. 30, No. 4, December 2024

Undefined Parties and the Statutory Employer Defense

By
Osama Samad

Key Points: 

  • A recent Pennsylvania Superior Court decision highlights the importance of clarity in contracts for employers asserting a statutory employer defense. 
  • Employers will not be able to successfully assert the statutory employer defense when there is ambiguity about contracting parties.
  • Contractors should ensure they are contracted with the owner of the property to protect against liability from a workplace accident.

In litigation involving workplace accidents, a common defense raised by a contractor is the statutory employer defense under the Pennsylvania’s Workers’ Compensation Act. The Act requires an employer to pay workers’ compensation benefits to employees injured in the course of their employment regardless of the employer’s own negligence. In return for assuming secondary liability for the payment of workers’ compensation benefits, a statutory employer is immune from suit brought by an employee for a work-related injury. 

A recent Pennsylvania Superior Court case highlights issues that may arise when a subcontractor’s agreement for a construction project is not properly executed. In Feldman v. CP Acquisitions 25, L.P., 2024 WL 4156993 (Pa. Super. Sept. 12, 2024), the Superior Court agreed with the trial court’s decision that a contractor could not avoid liability using the statutory employer defense when it is unclear who the contracting parties are in a subcontracting agreement.

In this case the plaintiff, Brian Feldman, suffered grievous injuries from a workplace electrocution accident during a tree removal project during the construction of an apartment building. Cross Properties engaged Altino Concrete Construction as a contractor to build an apartment building on a property they had recently acquired. Near the end of construction on this project, Cross Properties reached out to Vito Braccia, the owner of Altino Concrete Solutions and Braccia Construction, LLC (VBC), to remove trees on an adjacent property owned by the Southeastern Pennsylvania Transportation Authority (SEPTA). Mr. Braccia then subcontracted with Colonial Tree Service, Inc., for the tree removal project.

Mr. Braccia did not carry out any safety planning before the tree removal project, even though he was aware of a high-voltage power line on SEPTA’s property. Additionally, he failed to reach out to SEPTA for permission to enter the property or to have the power lines de-energized during the tree removal project. On the day of the project, Mr. Feldman was electrocuted when a current arced from the power line and through a crane hoist. As a result, Mr. Feldman suffered extensive and severe burns, and spent the next six weeks recovering in a hospital burn unit. Mr. Feldman filed and prevailed in a personal injury suit against the general contractor, developer, and related entities. 

VBC, the contractor for the tree removal, appealed the trial court’s decision in favor of Mr. Feldman. One argument raised by VBC on appeal was that, as the plaintiff’s statutory employer under section 302(b) of the Workers’ Compensation Act, they were immune from a personal injury suit brought by Mr. Feldman. 

The longstanding test to determine whether a person or entity qualifies as a statutory employer under this section was set forth by the Pennsylvania Supreme Court in McDonald v. Levinson Steel Co., 153 A. 424 (Pa. 1930). The McDonald test requires an employer satisfy each of the following elements to be considered a statutory employer under section 302(b):

  1. an employer who is under contract with an owner or one in the position of an owner;
  2. the premises occupied by or under the control of such employer; 
  3. a subcontract made by such employer; 
  4. part of the employer’s regular business entrusted [sic] to such subcontractor; and 
  5. an employee of such subcontractor.

It was undisputed that VBC was the contractor for the tree removal project. However, the respective representatives from Cross Properties and Colonial testified at trial that they believed they had an oral agreement with Altino Concrete Construction for the tree removal project, not VBC. As a result, the court determined there was no mutual understanding between the parties regarding who they were contracting with, which is essential for any contract. Therefore, the court held that VBC could not meet the first element of the McDonald test.

The court went further and noted that, even if a valid contract existed between Cross Properties and VBC, it would not help their case. They would still be unable to prove they had a contract with the property owner or someone in a similar position. This is because SEPTA was the actual owner of the property in question, not Cross Properties. As VBC never attempted to reach an agreement with SEPTA for the tree removal, they could not establish they were a statutory employer under Section 302(b). 

In conclusion, Feldman v. CP Acquisitions 25, L.P. underscores the importance of clearly defining contractual relationships in construction projects. The court’s ruling emphasizes that a lack of mutual understanding among contracting parties prevents the successful use of the statutory employer defense under the Pennsylvania’s Workers’ Compensation Act. 

Contractors should ensure that subcontracting agreements clearly identify all parties involved and confirm ownership of the work site. By doing so, they can better protect themselves against liability in workplace accidents and minimize potential legal disputes.

*Osama is an associate and a member of our Casualty Department. He works in our Philadelphia, Pennsylvania, office. 

 

Defense Digest, Vol. 30, No. 4, December 2024, 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. © 2024 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.