By: Workers’ Compensation Practice Group
The leaves are beginning to turn and the holiday season is quickly approaching, which means it is the time of year when retail establishments often take on additional employees. Some businesses contract out certain duties rather than having their own employees perform that work. In Virginia, a business that contracts out work can be liable as a “statutory employer” if an employee of the contractor is injured on the job.
Statutory employer issues often arise when the contractor for whom the claimant was working was uninsured at the time of the injury. In those cases, the claimant often seeks compensation from the business owner who hired the contractor, arguing that the business owner was his or her “statutory employer.”
The overarching rule under Virginia Code § 65.2-302 is that if the work performed by a subcontractor or contractor “is part of the owner’s trade, business, or occupation, the worker is deemed the statutory employee of the owner, and the owner is liable for compensation as though the worker were his own employee.’” Howcott v. The TJX Companies, Inc./Marshall’s, JCN VA02000021172 (June 9, 2016) (quoting Smith v. Horn, 232 Va. 302, 305-06, 351 S.E.2d 14, 16 (1986) (emphasis added)). Whether work is part of an owner’s trade, business, or occupation “‘depends upon the facts and circumstances of the particular case.’” Id. (quoting Rodriguez v. Leesburg Bus. Park, LLC, 287 Va. 187, 198, 754 S.E.2d 275, 281 (2014)).
On October 11, 2016, the Court of Appeals summarily affirmed the Full Commission’s Opinion in Howcott v. The TJX Companies, Inc./Marshall’s, JCN VA02000021172 (June 9, 2016), finding that TJX Companies, Inc./Marshall’s was liable for the claimant’s workers’ compensation benefits as a statutory employer. In this case, the claimant was an employee of Pro Touch, a contract cleaning service. The claimant was injured while performing janitorial services at a Marshall’s store. As Pro Touch had no record of insurance, the claimant, and the Uninsured Employer’s Fund argued that Marshall’s should be liable as a statutory employer. In answering that question, the Commission focused on a number of circumstances, including the claimant’s duties, Marshall’s exercise of control over the claimant, and the nature of Marshall’s business.
The claimant’s duties included mopping and buffing the sales floor, cleaning the bathroom, and cleaning the employee break room. The claimant was let into the store by a Marshall’s manager, and all cleaning supplies and equipment were provided by Marshall’s. The claimant received instructions through both the Marshall’s store manager and Pro Touch, and the claimant notified both Marshall’s and Pro Touch when he was going to miss work. On these facts, the Commission determined that Marshall’s exercised sufficient control over the claimant to be liable as a statutory employer.
The Commission reiterated that the issue is not whether the claimant’s duties were indispensable to the success of the business, but rather whether those duties would normally be performed by Marshall’s employees. Relying on Fowler v. International Cleaning Service, Inc., 260 Va. 421, 537 S.E. 2d 312 (2000), the Commission found that Marshall’s was a retail establishment, and “[t]he purpose of the store is to make retail sales to customers, and in order to achieve this purpose, it is essential that the store be clean, attractive, and safe.” Howcott, JCN VA02000021172 (June 9, 2016). The Commission further held that maintaining a clean establishment is “an ordinary and routine part of a retail business, ‘subcontracted out, not because it was beyond [the employer’s] capability, but because it was more economical and convenient . . . .’” Id. (quoting Roberts v. Huggins, 25 Va. Cir. 48, 52 (Rich. City Cir. Ct. 1990). Thus, because the claimant’s cleaning duties were a normal and essential part of Marshall’s business, Marshall’s could not escape liability by contracting with an outside cleaning company.
However, the Commission made clear that under slightly different circumstances it could be found that a business owner is not the statutory employer of a contract worker. For example, in Napper v. ABM Janitorial Services, 284 Va. 55, 726 S.E.2d 313 (2012), the Supreme Court of Virginia found that a call center business located in a commercial building was not the statutory employer of a claimant contracted to clean the call center. Because the offices were not a place for receiving customers and clients, maintaining a clean space was not a part of the call center’s business. The Commission also suggested that a retail store such as Marshall’s might not be the statutory employer of contracted maintenance repairmen, noting that “‘housekeeping is even more fundamental and routine to a retail business than would be maintenance . . . . A floor needs constant cleaning but only occasional repair.’” Howcott, JCN VA02000021172 (June 9, 2016) (quoting Roberts, 25 Va. Cir. at 52).
As you can see, the statutory employer doctrine is a very fact-specific analysis. For adjusters who encounter claims where a contract employee was injured, it is important to be mindful of the various factors that go into determining whether a business will ultimately be found liable.
