All but a handful of states have “statutory-employer” or “contractor-under” provisions within their workers’ compensation laws that make a general contractor liable for compensation to the employee of a subcontractor–usually when the subcontractor is uninsured, but sometimes without reference to the insured status of the subcontractor–doing work which is part of the business, trade or occupation of the principal contractor [see Larson’s Workers’ Compensation Law, § 111.04[a]. Since the general contractor is thereby, in effect, made the employer for the purposes of the state compensation act, it generally enjoys the regular immunity of an employer from third-party suit brought by the subcontractor’s employee or dependents.
The corollary, of course, is that the general contractor remains subject to suit if the work being performed by the subcontractor’s employee is not part of the business, trade or occupation of the principal contractor. Can a task that is far beyond the ordinary resources of the general contractor be considered a part of its business, trade or occupation? Stated somewhat differently, particularly in an emergency, where a contractor’s staff of employees and assortment of equipment are overwhelmed by the task at hand and must seek assistance from beyond normal business channels, is it really fair to say that subcontractors hired to assist are helping the general contractor with its business, trade or occupation?
This issue is illustrated by a recent decision from a Kentucky appellate court [Reichwein v. Jackson Purchase Energy Corp., 2012 Ky. App. LEXIS 185 (Sept. 21, 2012)]. JPEC, a rural electric cooperative, serves several western Kentucky counties. Connexus Energy Corporation is a Minnesota electrical cooperative. In 2000, Connexus and JPEC each signed “mutual aid agreements” stating that, when requested, each cooperative would render assistance to other participating electrical cooperatives in maintaining their power systems. Pursuant to the agreement, after rendering assistance, the aiding company would submit an invoice of all charges incurred to be paid by the requesting company.
In early 2009, an ice storm occurred in western Kentucky causing widespread power outages. The Federal Emergency Management Agency (FEMA) and the Kentucky Division of Emergency Management issued a federal emergency declaration for numerous Kentucky counties. Because of the widespread outages, in accordance with the mutual aid agreement, JPEC requested assistance from Connexus.
Reichwein, a Minnesota resident and a Connexus employee, was sent to Kentucky to assist JPEC. On February 10, 2009, Andrew sustained fatal injuries when a JPEC electric pole snapped as he attempted to climb it. His widow filed a tort action alleging wrongful death action and loss of spousal and parental consortium. In its answer, JPEC asserted the statute of limitations and up-the-ladder immunity as defenses. It later filed a motion for summary judgment arguing that all claims, except the claim for loss of parental consortium, were barred by the statute of limitations because the complaint was not filed within one year of the surviving spouse’s appointment as personal representative of her husband’s estate. The motion was granted, leaving the loss of parental consortium as the only remaining claim.
JPEC again moved for summary judgment, contending in relevant part that the parental consortium claim was barred by the exclusive remedy provisions of the Kentucky Workers’ Compensation Act. The trial court granted JPEC’s motion and the widow appealed. The appellate court indicated that in order for up-the-ladder immunity to apply, the deceased employee must have been injured while performing work which was a regular and recurrent part of JPEC’s business [KRS 342.610(2)]. The Court continued that repairing power lines was customary, usual, normal and repeatedly performed as part of JPEC’s business by its employees. At the time of his accident, the deceased was repairing an electrical line, precisely the same duty routinely and recurrently performed by JPEC employees.
The estate emphasized the existence of a FEMA emergency, arguing that because the 2009 emergency was a rare event and a situation beyond JPEC’s recovery capabilities, the work performed by the deceased was not part of JPEC’s regular and recurrent work. Citing General Elec. Co. v. Cain, 236 S.W.3d 579, 605 (Ky. 2007), the Supreme Court of Kentucky held that merely because the quantity of the work to be performed was beyond the resources of a contractor did not mean that the work performed was not a regular and recurrent part of its business. The court noted that in Cain, the supreme court upheld a summary judgment for a contractor who obtained outside assistance “for jobs that involved more work than employees could handle, even on an overtime basis, or for jobs that had to be performed in a tight time frame.”
The appellate court concluded that there was no dispute that JPEC was required to maintain and restore electrical power to its customers, that while the demands created by the ice storm and the FEMA emergency necessitated that JPEC seek outside assistance in restoring power, it remained a regular and recurrent part of its business. Therefore, JPEC was the contractor and Connexus was the subcontractor at the time of the deceased’s accident, and JPEC was entitled to up-the-ladder immunity.