88 Hawai'i 465, Frank v. Hawaii Planing Mill Foundation, 20343

Citation967 P.2d 662
Decision Date29 May 1998
Docket NumberNo. 20343,20343
Parties88 Hawai'i 465 Peter FRANK, Plaintiff-Appellant, v. HAWAII PLANING MILL FOUNDATION, et al., Defendants-Appellees, and HAWAII PLANING MILL FOUNDATION and Hawaii Planing Mill, Ltd., Defendants and Third-Party Plaintiffs-Appellees, v. HM BLACK, INC. dba Express Employment, Third-Party Defendant-Appellee.
CourtCourt of Appeals of Hawai'i

Page 662

967 P.2d 662
88 Hawai'i 465
Peter FRANK, Plaintiff-Appellant,
HAWAII PLANING MILL FOUNDATION, et al., Defendants-Appellees,
Ltd., Defendants and Third-Party Plaintiffs-Appellees,
HM BLACK, INC. dba Express Employment, Third-Party Defendant-Appellee.
No. 20343.
Intermediate Court of Appeals of Hawai'i.
May 29, 1998.
Certiorari Granted July 2, 1998.

Page 664

[88 Hawai'i 467] Arthur Y. Park, Laurent J. Remillard, Jr., and John C. McLaren (Park Kim Yu & Remillard, of counsel) on the briefs, Honolulu, for plaintiff-appellant.

Dean E. Ochiai, on the brief, Honolulu, for defendants and third-party plaintiffs-appellees.



In this appeal, we have been asked to determine whether an employee of a temporary employment agency is precluded by Hawai'i Revised Statutes (HRS) § 386-5 (1993), 1 the exclusive remedy provision of the Hawai'i Workers' Compensation Law, from bringing a negligence action against a customer of the agency for injuries sustained while the employee was assigned to and working on the premises of the customer. The Third Circuit Court (circuit court) concluded that the employee was so barred and accordingly, granted partial summary judgment as to this issue.

We reverse the order granting partial summary judgment, vacate the judgment below, and remand for further proceedings consistent with this opinion.


The facts underlying this case appear to be undisputed. Plaintiff-Appellant Peter Frank (Frank) was an employee of Third-Party Defendant-Appellee HM Black, Inc., dba Express Employment (Express), a company that leased its employees on an "as-needed" basis to various businesses in Hawai'i County. In an advertising brochure, Express represented that it provided "quality temporary personnel" who were "screened, tested and referenced[.]" Express also advertised:

No hidden costs or contracts

We cover all payroll related extras including: Work Compensation, TDI, FICA, Health and Unemployment insurance.

We do the paperwork

Handle claims and reporting, saving you time and money.

Page 665

88 Hawai'i 468] Insured

Express employees are covered by 1 Million per occurence [sic] for liability and $100,000 for employer's liability.

Sometime prior to July 19, 1993, Defendants-Appellees Hawaii Planing Mill Foundation and/or Hawaii Planing Mill, Ltd. (collectively, HPM Defendants) apparently entered into a contract with Express, 2 whereby Express agreed to provide HPM Defendants with additional workers for HPM Defendants' mill operations in exchange for a fee to "cover [Express's] expenses, including all applicable wages; all applicable federal, social security and state taxes; all applicable worker's [sic] compensation premiums; all other benefits required by law; and [Express's] profit." Pursuant to the contract, Express assigned Frank to work for HPM Defendants at their mill. However, HPM Defendants remained free to "accept or reject" Frank. Furthermore, while Frank worked for HPM Defendants, he was under the direction and control of HPM Defendants' supervisory staff and used HPM Defendants' equipment to perform his job-related functions. That is, HPM Defendants had "the power and authority to dictate the time and place [of Frank's work]; work rules; manner of work; quality; and all other aspects of [Frank's] performance at [HPM Defendants' mill]."

On July 19, 1993, Frank permanently injured his right hand while operating a radial saw at HPM Defendants' mill. After sustaining his injury, Frank, pursuant to HRS chapter 386, 3 filed a claim for workers' compensation benefits through Express. After reviewing Frank's case, the workers' compensation insurance carrier for Express approved the claim and awarded workers' compensation benefits to Frank.


On July 12, 1995, Frank filed the underlying complaint against HPM Defendants, alleging that HPM Defendants' negligence had resulted in the injuries Frank sustained at HPM Defendants' mill. On August 29, 1995, HPM Defendants answered the complaint and filed a third-party complaint against Express, seeking defense, contribution, and indemnification against any and all claims by Frank. In answering the third-party complaint, Express raised numerous defenses, among which was that the third-party claim was barred by HRS § 386-5.

On June 7, 1996, HPM Defendants filed a motion for partial summary judgment, claiming that pursuant to HRS § 386-5 (1993), Frank's exclusive remedy was for the workers' compensation benefits he had already received through Express's insurance carrier. HPM Defendants argued that because they controlled Frank's work performance and paid for Frank's workers' compensation insurance coverage through their agreement with Express, they were also Frank's employer for workers' compensation purposes and were thus entitled to the immunity afforded by HRS § 386-5.

On June 24, 1996, Frank filed his memorandum in opposition to HPM Defendants' motion for partial summary judgment, asserting that (1) the court lacked jurisdiction to determine the workers' compensation issues raised by the motion because, pursuant to HRS § 386-73 (1993), 4 original jurisdiction to decide such issues rested with the state director of labor and industrial relations (labor director); and (2) in the alternative, HPM Defendants did not satisfy the statutory requirements to be considered Frank's "employer" under HRS chapter 386 and thus,

Page 666

[88 Hawai'i 469] did not qualify for immunity from suit under HRS § 386-5.

On August 5, 1996, the court issued its order granting HPM Defendants' motion for partial summary judgment. In its order, the court entered the following Findings of Fact and Conclusions of Law:

A trial court has the jurisdiction to rule on defenses based upon HRS § 386-5 in tort actions. See e.g.: Evanson v. University of Hawaii, 52 Haw. 595 [483 P.2d 187] (1971); Kamali v. Hawaiian Electric Light Co., 54 Haw. 153 [504 P.2d 861] (1972).

[HPM] Defendants were the borrowing employer of [Frank] in a borrowed employee context, with [Express] being the lending employer.

Under the plain language of HRS § 386-1, in a borrowed employee context, the borrowing employer is considered to be the employer of the employee. However, if the borrowing employer does not secure compensation to the employee as provided for in HRS § 386-121, then the lending employer is considered to be the employer.

One means for fulfilling the requirement of securing compensation to the employee is for the borrowing employer to directly provide workers' compensation coverage on behalf of the employee. However, [HPM] Defendants have not provided materials which indicate that they directly provided workers' compensation coverage for [Frank].

On the other hand, consistent with Ghersi v. Salazar, 883 P.2d 1352 (S.Ct.Utah 1994), the requirement may be met by [HPM] Defendants' payment to the lending employer of a fee, a portion of which was used to pay for workers' compensation coverage for [Frank]. This conclusion is based upon at least the following:

1) As a practical matter, [HPM] Defendants have met the requirements of securing compensation to [Frank] by indirectly purchasing workers' compensation coverage through the lending employer, [Express].

2) If an employee is allowed to sue in tort, the borrowing employer in a temporary labor services context, the employee would have more rights than ordinarily received in a typical employer-employee relationship.

Ordinarily, an employee is allowed workers' compensation benefits, but is not allowed to sue the employer in tort. However, in a temporary labor services context, if the employee can sue the borrowing employer in tort, the employee would be able to both receive workers' compensation benefits from the lending employer and sue the borrowing employer.

Further, in the temporary labor services context, if the employee suffers a work-related injury, it is most likely that the injury would be one suffered while engaged in services provided to the borrowing employer rather than the lending employer.

Simply put, if the lending employer were a temporary labor services provider, the employee, a carpenter, and the borrowing employer, a general building contractor, an employee would most likely suffer a work-related injury on a job site performing construction work for the borrowing employer. It is less likely that the employee would suffer a work-related injury while filling out paper work at the lending employer's office.

This being the case, if an employee can sue a borrowing employer in tort in a temporary labor services context, then, in most instances of work-related injury, the employee would be able to both receive workers' compensation benefits from and sue in tort the employers. Again, this is more than what is contemplated in the ordinary employer-employee relationship.

3) Fonseca v. Pacific Construction Co., 54 Haw. 578 [513 P.2d 156] (1973) is distinguishable for at least the following reasons: (a) there[,] the general contractor's liability was considered to be contingent and secondary while in this case the borrowing employer's liability is primary; (b) by contract, [Express] assumed whatever obligation [HPM]

Page 667

[88 Hawai'i 470] Defendants had to provide workers' compensation coverage for [Frank], and (c) there were significant indicia of an employer-employee relationship between [Frank] and [HPM] Defendants.

On September 11, 1996, Frank filed a motion for relief from judgment or to alter judgment, which the court denied on October 15, 1996. After all remaining claims between the parties were dismissed by stipulation, final judgment was entered on December 2, 1996. This timely appeal followed.


I. Whether the Circuit Court Had Subject Matter Jurisdiction Over Frank's Claim.

Frank initially contends that the circuit court lacked subject matter...

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  • 88 Hawai'i 140, Frank v. Hawaii Planing Mill Foundation, 20343
    • United States
    • Supreme Court of Hawai'i
    • 15 Septiembre 1998
    ...and all other aspects of [Frank's] performance at [HPM Defendants' mill]." Frank v. Hawaii Planing Mill Foundation, 88 Hawai'i 465, 468, 967 P.2d 662, 665 On July 19, 1993, while operating a radial saw at HPM's planing mill, Frank suffered permanent injuries to his right hand. He made a wor......

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