WORKERS’ COMPENSATION-IMMUNITY-STATUTORY EMPLOYER

Yoder v. McCarthy Constr., Inc., 2023 Pa. Super. LEXIS 36 (January 31, 2023) (Bender, P.J.E.)  Appellant, McCarthy Construction, Inc. (“McCarthy”), appeals from the $5,590,650.69 judgment entered in favor of Appellee, Jason Yoder, and against McCarthy following a jury trial. In its appeal, McCarthy asks us to determine whether it qualifies as Mr. Yoder’s statutory employer under the Workers’ Compensation Act (“WCA”), such that it is immune from suit.  Pertinent to our review, under Section 302(b) of the WCA, 77 P.S. § 462, general contractors take on secondary liability for the payment of workers’ compensation benefits to the injured employees of their subcontractors. See Patton v. Worthington Associates, Inc., 625 Pa. 1, 89 A.3d 643, 645 (Pa. 2014). Thus, if the subcontractor-employers default, these general contractors must pay workers’ compensation benefits to the subcontractor-employees. As such, although they are not the actual employers of the subcontractor-employees, general contractors are considered “statutory employers” of the subcontractor-employees due to their treatment under the WCA. Our legislature’s “purpose in imposing this status upon general contractors was remedial, as it wished to ensure payment of workers’ compensation benefits in the event of defaults by primarily liable subcontractors.” In exchange for assuming secondary liability for the payment of workers’ compensation benefits, statutory employers under Section 302(b) have immunity in tort for work-related injuries sustained by subcontractor-employees. To establish this statutory-employer relationship so that the statutory employer is immune from a suit for negligence, our Supreme Court has held that the following five elements must be present:  (1) An employer who is under contract with an owner or one in the position of an owner[;] (2) 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 [e]ntrusted to such subcontractor[;] (5) An employee of such subcontractor.  McDonald v. Levinson Steel Co., 302 Pa. 287, 153 A. 424, 426 (Pa. 1930). If these elements are met, statutory employers enjoy immunity “by virtue of statutory-employer status alone, such that it is accorded even where the statutory employer has not been required to make any actual benefit payment.” See Patton, 89 A.3d at 645 (citing Fonner v. Shandon, Inc., 555 Pa. 370, 724 A.2d 903, 907 (Pa. 1999)) (footnote omitted).  For the following reasons, we determine that McCarthy qualifies as Mr. Yoder’s statutory employer under the five-part McDonald test and is therefore entitled to tort immunity. Accordingly, we are compelled to reverse the judgment entered in favor of Mr. Yoder and remand for the entry of judgment in favor of McCarthy.  Before an employer will be considered a statutory employer for purposes of the statutory[-]employer immunity defense under the [WCA], the following five elements must be present: (1) an employer who is under contract with an owner or one in the position of an owner; (2) 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 to such subcontractor; and (5) [the plaintiff is] an employee of such subcontractor.  Because an independent contractor can never be a statutory employee, the elements of the McDonald test governing the determination of whether an employer is a statutory employer within the meaning of the [WCA] cannot be met where a contractor is an independent contractor. Pennsylvania does not have an established rule to determine whether a particular … working relationship can be classified as employer-employee or owner-independent contractor but instead promulgates certain guidelines or factors. The factors which are considered, none being dispositive, include the following:  (1) control of manner in which the work is done; (2) responsibility for result only; (3) terms of agreement between the parties; (4) nature of the work/occupation; (5) skill required for performance; (6) whether one is engaged in a distinct occupation or business; (7) which party supplies the tools/equipment; (8) whether payment is by time or by the job; (9) whether work is part of the regular business of employer; and, (10) the right to terminate employment.  Here, [Mr.] Yoder was properly found to be an independent contractor of RRR.  First McDonald Element. The first McDonald element requires “[a]n employer who is under contract with an owner or one in the position of an owner.” McDonald, 153 A. at 426. “This part of the McDonald test consists of three distinct subelements: (1) an employer; (2) a contract, and; (3) an owner or one in the position of an owner.” Peck v. Delaware County Board of Prison Inspectors, 814 A.2d 185, 190 (Pa. 2002) (opinion announcing the judgment of the Court).  The classic statutory[-]employer situation is in the construction industry, where a property owner hires the general contractor, who hires a subcontractor to do specialized work on the jobsite, and an employee of the subcontractor is injured in the course of his employment. In those situations, the general contractor who meets the five-part McDonald test qualifies as the statutory employer of the subcontractor’s employee, and is immune from suit by that employee. Moreover, under the [WCA], a contractor need not be the general contractor on a construction project to qualify as a statutory employer. A contractor who is not the general contractor may still qualify for statutory employer status so long as the contractor can establish the elements of the McDonald test.  Braun v. Target Corp., 2009 PA Super 206, 983 A.2d 752, 764-65 (Pa. Super. 2009). See also McCarthy v. Dan Lepore & Sons Co., Inc., 724 A.2d 938, 941 (Pa. Super. 1998) (“Under the [WCA], a contractor need not be the general contractor on a construction project to qualify as a statutory employer. This Court has stated that a general contractor’s subcontractor on a construction project may also qualify as a ‘statutory employer’ with respect to its own subcontractor’s employees.”) (citations and footnote omitted); Grant v. Riverside Corp., 364 Pa. Super. 593, 528 A.2d 962, 966 (Pa. Super. 1987) (“[I]t is not mandatory that a contractor be the general contractor on a construction project to qualify as a statutory employer. A subcontractor under contract with the owner or with a contractor in the position of the owner, in sole or common control of the job premises, that subcontracts a part of its regular business to a second subcontractor, could qualify as a statutory employer of the second subcontractor’s employees.”) (citation omitted).  Thus, McCarthy does not need to have been the general contractor on the project, so long as the other elements of the McDonald test are established. Because McCarthy has a contract with the owner, we deem the first McDonald element satisfied.
Second McDonald Element. The second McDonald element requires that McCarthy occupy or control the premises. See McDonald, 153 A. at 426 (calling for “[p]remises occupied by or under the control of such employer”). Though only occupancy or control is required, we conclude that McCarthy has established both. Initially, with respect to occupancy, this Court has agreed that “an employer effectively occupied the premises when its supervisor was present at the site on a daily basis and when its employees were regularly present on the premises at the same time as the subcontractor’s employees.” Kelly v. Thackray Crane Rental, Inc., 2005 PA Super 169, 874 A.2d 649, 657 (Pa. Super. 2005) (citing Al-Ameen v. Atl. Roofing Corp., 151 F.Supp.2d 604, 607 (E.D. Pa. 2001)). Accord Braun, 983 A.2d at 765 (finding occupancy requirement satisfied where the company’s project manager was on site every day and easy to locate, and where the company kept a trailer on site).  Further, regarding control, this Court has stated that the contractor need not have control over the entire job premises, but only the part of the job premises where the injury occurred. See McCarthy, 724 A.2d at 942. We have also conveyed that “the fact that the subcontractor used its own supervisors to directly oversee the subcontractor’s employees does not mean the general contractor did not retain actual control over the project and premises in general.” Emery v. Leavesly McCollum, 1999 PA Super 26, 725 A.2d 807, 811 (Pa. Super. 1999) (en banc) (citation omitted). To exemplify, this Court has found the control requirement satisfied where the contractor had an on-site project superintendent who coordinated the work of various subcontractors and was responsible for overseeing the entire project, including the overall safety of the job site and that OSHA regulations were followed. Emery, 725 A.2d at 811, 811 n.3. See also Pastore v. Anjo Constr. Co., 396 Pa. Super. 58, 578 A.2d 21, 26 (Pa. Super. 1990) (determining that the second McDonald element was satisfied where the contractor had the “responsibility and authority to direct, manage and/or operate the construction project where the injury occurred” and where the contractor’s foreman helped to address problems arising out of the subcontractor’s work); Uzho v. Top Gun Construction, Inc., 253 A.3d 261, 2021 Pa. Super. Unpub. LEXIS 898, 2021 WL 1292781, at *5 (Pa. Super. filed Apr. 7, 2021) (deeming the second McDonald element satisfied where the contractor had a trailer on the premises and a project manager/superintendent who did scheduling and oversaw the entire worksite and subcontractors).  Third McDonald Element.  The third McDonald element calls for a subcontract made by McCarthy. Mr. Yoder does not dispute that McCarthy meets this requirement. Indeed, the record shows that McCarthy entered into a contract with RRR to, inter alia, “[r]emove and dispose of existing roofing systems down to existing wood roof deck.” Additionally, in its contract with Norwood Borough, McCarthy identified RRR as its subcontractor. Thus, we deem the third McDonald element satisfied.  Fourth McDonald Element. The fourth McDonald element demands that McCarthy entrusted a part of its regular business to RRR. See McDonald, 153 A. at 426 (mandating “[p]art of the employer’s regular business [e]ntrusted to such subcontractor”). This Court has determined that the fourth McDonald element “is met when the subcontracted work is an obligation assumed by a principal contractor under its contract with the owner, or one in the position of an owner.” Braun, 983 A.2d at 764 (citation omitted); see also Shamis, 81 A.3d at 970-71. The fourth McDonald] requirement is met when the subcontracted work is an obligation assumed by a principal contractor under its contract with the owner, or one in the position of an owner. Because McCarthy meets all five elements of the McDonald test, we are constrained to conclude that it is Mr. Yoder’s statutory employer, rendering it immune from tort liability.