It is a strange situation. You are working on a job site, when one of your subcontractors says he’s got to run, one of his boys has hurt himself. You wish him well, make sure he’s on schedule or hopefully won’t fall behind and then you’re on to the next task. After all, it wasn’t one of your guys that was hurt, so it’s not really your concern… right?
Not so fast my friend. Virginia Code 65.2-302(A) states that when any person (referred to as “owner”) undertakes to perform or execute any work that is part of his trade, business, or occupation and contracts with any other person (referred to herein as a subcontractor) for the execution or performance by or under such subcontractor of the whole or any part of work undertaken by such owner, the owner shall be liable to pay to any worker employed in the work any compensation under the Virginia Workers’ Compensation Act which he would have been liable to pay if he had immediately employed the worker. That is a long-winded way to say if you are doing work that is part of your business/trade/occupation and you contract with someone to do some of that work on one of your projects, and they are injured, even though they are a subcontractor, you may still be responsible for treating them like an employee.
It gets better… 65.2-302(C) goes further and identifies that when that subcontractor in turn contracts with still another person (also referred to as a “subcontractor”) for the performance or execution by or under the last subcontractor of the whole, or any part of the work undertaken by the first subcontractor, then the liability of the owner or contractor shall be the same.
To illustrate, say we have Steve’s Contracting Service, which handles a wide variety of land development, from tree clearing to construction site preparation. Steve’s Contracting takes on a job and subcontracts part of the work to Mandy’s Earth Movers. Mandy’s decides that it needs some more labor on this particular task so it reaches out to a certain never-do-well laborer, John, who agrees to take on a few tasks that Mandy’s will need to do at Steve’s job site.
At Steve’s job site, John gets hit with a brick, resulting in a nasty-looking injury to his head. The circumstances of how he was hit with that brick are highly suspicious, but the story seems to be that it was a loose brick that just happened to fall from the site. Who is going to be responsible? Notwithstanding any other defenses, the first claim is going to be that John is on his own. He is an independent contractor who engaged in this limited work, right? Maybe. For the sake of argument, let’s agree that he is going to be determined to be an employee of Mandy’s. So now Mandy’s will be responsible, right? The buck stops there? Maybe, BUT… what if Mandy’s forgot to renew its workers’ comp insurance or thought it wasn’t even needed? Is poor John out of luck? Not yet. John may still be able to look all the way up to Steve’s Contracting Service. In some circumstances, John may be able to have Steve’s declared his “statutory employer” and be entitled to benefits through his business…even though Steve has no idea who this guy is and would never bring in such a shady figure. In this scenario, Steve may well be on the hook.
Contractors and Subcontracting is a great way to make sure you are using some of the best laborers in the business. It is a great way to utilize certain skill sets without having to keep them on the payroll full-time, but there is also a degree of exposure. There are also several exceptions and rules that will ultimately determine whether an individual may be able to qualify you as his statutory employer under the Workers’ Compensation Act.
If you find that you now have a touch of heartburn thinking about some of those loveable ne’er-do-wells that you’ve seen near your job sites, and you are suddenly struck with mild curiosity as to whether you could be responsible for something they do, feel free to give us a call. We’ll help you review your practices, policies, and procedures, and try to set you up to make use of the best practices and protocols. If you have any questions or would like to know more about these or other issues, or if you have specific questions related to this article, please contact John Stacy (jstacy@setlifflaw.com) at (804) 377-1263, or Steve Setliff (ssetliff@setlifflaw.com) at (804) 377-1261.
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