In order to ensure that employees of subcontractors in construction and other industries are covered by workers’ compensation insurance, O.C.G.A. § 34-9-8 provides that, in certain situations, a “principal, intermediate, or subcontractor” may be liable for workers’ compensation benefits to an employee of its subcontractor.
In order to ensure that employees of subcontractors in construction and other industries are covered by workers’ compensation insurance, O.C.G.A. § 34-9-8 provides that, in certain situations, a “principal, intermediate, or subcontractor” may be liable for workers’ compensation benefits to an employee of its subcontractor. In this way, principal contractors are encouraged to require their subcontractors to carry workers’ compensation insurance and cannot avoid liability if those subcontractors fail to do so. Because the principal contractor would not otherwise be liable to the subcontractor’s employee for workers’ compensation were it not for this statute, the principal contractor is said to become the “statutory employer” of the employee.
Four elements must be in place for this “statutory employer” provision to apply. First, the defendant “principal, intermediate, or subcontractor” must itself be subject to the Workers’ Compensation Act. Second, there must be a true “contractor/subcontractor” relationship between the employee’s immediate employer and the defendant. Third, the injured employee must meet the legal definition of an “employee,” rather than an independent contractor. Fourth, the subcontractor employee’s injury must occur “on, in or about the premises on which the principal contractor has undertaken to execute work or which are otherwise under his control or management.” O.C.G.A § 34-9-8(d). The Georgia Court of Appeals recently addressed the scope of this “premises” requirement in Axon Timber Co. v. Wilson.
Axson Timber Company obtained the right to cut timber on land in and . Axson subcontracted the actual cutting of the timber to a separate company, Rice Timber Company, who in turn subcontracted to White Trucking Company the job of delivering the timber to customers. The claimant, Kenneth Wilson, was employed driving trucks for White Trucking. He injured his back as he was getting out of a truck at a customer’s delivery site, a mill in . Because White Trucking did not have workers’ compensation coverage, attempted to obtain benefits from both Axson Timber and Rice Timber under O.C.G.A § 34-9-8.
At a hearing in front of the administrative law judge, Axson and Rice argued that because the claimant was injured at a delivery site, he was not injured “on, in or about the premises” on which Axson or Rice had undertaken to execute work or otherwise controlled or managed. However, the ALJ found that the customer’s property was a site where Axon and Rice had undertaken to execute work. Therefore, because the other three elements were met, Axson and Rice were “statutory employers” of and were required to provide workers’ compensation benefits to him.
In finding that O.C.G.A. § 34-9-8’s “premises” requirement had been satisfied, the ALJ relied on AmericalMut. Liability Ins. Co. v. Fuller, 123 App. 585 (1971). In that case, a trucking company subcontracted interstate shipments to a separate trucking company. An employee of the subcontractor was injured when he fell from his truck on a highway in . The Court of Appeals held that the highways were the “premises” where the principal trucking company had undertaken to execute work. Therefore, the principal trucking company was liable to the injured employee for workers’ compensation benefits as a “statutory employer.”
The ALJ’s decision in Axson Timber was affirmed by the Appellate Division and . The Georgia Court of Appeals, however, reversed the decision on the grounds that Axson and Rice did not qualify as “statutory employer.” Specifically, the Court noted that “[a]lthough Fuller could be extended to cover the facts in the present case, this Court has already refused to do so.” To support that statement, the Court referenced its decision in Gramling v. Sunshine Biscuits, 162 App. 863 (1982).
In Gramling, Sunshine Biscuits hired a subcontractor, Bennett Motor Express, to deliver to its customers.Gramling, an employee of Bennett Motor Express, was injured while delivering goods at the customer’s location. When Gramling brought a tort suit against Sunshine Biscuits, Sunshine defended on that grounds that it was a “statutory employer,” and therefore Gramling’s tort suit was barred by the exclusive remedy provision of O.C.G.A. § 34-9-11. (That doctrine establishes that where an employee is protected by the rights and remedies of the Workers’ Compensation Act, that employee is precluded from pursuing a civil liability claim against the employer, such as a negligence claim, for injuries sustained on the job.) The Court, however, ruled that Sunshine was not a “statutory employer,” deciding not to “extend the word ‘premises’ to include the premises of the shipper's customer to which the goods were delivered.” at 864. The Court noted specifically that it did not appear that the legislature intended the “shipper/carrier relationship” to fall under the “statutory employer” definition.
In Axson Timber, the Court acknowledged that while the issue in Gramling was tort immunity, “the quid pro quo for the statutory employer’s potential liability is immunity from tort.” In other words, the holding ofGramling – that a customer’s delivery location is not a “premises” under O.C.G.A. 34-9-8 – is applicable whether the principal contractor is arguing that it is a “statutory employer” in order to avoid tort liability (as in Gramling) or arguing that it is not a “statutory employer” in order to avoid liability for workers’ compensation benefits (as in Axson Timber). Furthermore, the Court noted that, as a policy matter, imposing workers’ compensation liability on a principal contractor for an injury occurring on premises over which that employer had no control “would render the [principal contractor] an insurer, which was not the intent of the Workers’ Compensation Act.” The Court therefore ruled that neither Axson nor Rice were ’s statutory employers, and were not liable for workers’ compensation benefits.
In short, the Court of Appeals’ holding in Axson Timber was a policy decision. In fact, the Court acknowledged this by stating that “Fuller could be extended to cover the facts in the present case.” The Court could have accepted a broader reading of the “premises” requirement, thereby expanding the definition of the “statutory employer” and exposing contractors to additional liability for workers’ compensation benefits. Instead, the Court’s narrow interpretation of the “premises” requirement emphasizes the need for a connection between the defendant and the injury, and allows principal contractors a clearer understanding of when they might be liable for workers’ compensation benefits when subcontracting out work.
Of course, it is important to note that rulings like these can be a “double-edged sword” for potential statutory employers. While O.C.G.A. § 34-9-8 exposes employers to liability for workers’ compensation benefits for workers who otherwise would not even be considered their employees, the exclusive remedy doctrine also serves to eliminate the potential for tort liability, which could be considerably more costly for those employers. Therefore, as was the case in Gramling, there may be situations where the employer would prefer a broader definition of “premises,” in order to avoid a tort suit. However, presumably the risk of tort liability will be limited in most cases where the facts are similar to Axson Timber, i.e., the principal contractor has no control over the premises where the injury occurs.