Finlay v. Storage Technology Corp.

• Decision Date: 07 November 1988
• Docket Number: No. 87SC93,87SC93
• Citation: 764 P.2d 62
• Parties: Deborah M. FINLAY, Petitioner, v. STORAGE TECHNOLOGY CORPORATION, Respondent.
• Court: Colorado Supreme Court

Page 62

764 P.2d 62

Deborah M. FINLAY, Petitioner, v. STORAGE TECHNOLOGY CORPORATION, Respondent.

No. 87SC93.

Supreme Court of Colorado En Banc.

Nov. 7, 1988.

Rehearing Denied Nov. 28, 1988.

Miller, Hale & Harrison, David B. Harrison, Boulder, for petitioner.

The Law Firm of Thomas J. de Marino, Bonner E. Templeton, Denver, for respondent.

LOHR, Justice.

The plaintiff, Deborah M. Finlay (Finlay), brought this negligence action against the defendant, Storage Technology Corporation (Storage Technology), seeking damages for injuries sustained while providing janitorial services to Storage Technology during the course of her employment with Allied Maintenance Corporation (Allied). After a non-jury trial, the trial court entered judgment for defendant Storage Technology, concluding that Storage Technology was a "statutory employer" of Finlay under the Workmen's Compensation Act of Colorado and therefore was immune from common-law negligence liability. The Colorado Court of Appeals affirmed in Finlay v. Storage Technology Corp., 733 P.2d 322 (Colo.App.1986). We agree that Storage Technology was Finlay's statutory employer and that the Workmen's Compensation Act of Colorado, Articles 40 to 54 of Title 8, 3B C.R.S. (1986) (workers' compensation act), provides the exclusive remedy for her injuries. Therefore, we affirm the judgment for the defendant.

I.

Storage Technology is a manufacturer of computer peripheral equipment involving data retrieval. Allied contracted to provide janitorial services to Storage Technology. ¹ On March 14, 1983, Finlay was employed by Allied and worked at the Storage Technology plant in Louisville, Colorado, as a janitor. On that day she was cleaning a restroom at Storage Technology when a tile fell from the ceiling and struck her, forcing her wrist into a sink and causing permanent injuries. Finlay received workers' compensation benefits under coverage provided by Allied's insurance carrier.

Finlay sued Storage Technology for negligence. Storage Technology answered and asserted as an affirmative defense that it was the statutory employer of Finlay under section 8-48-101(1), 3B C.R.S. (1986), and was therefore immune from common-law negligence liability under section 8-42-102, 3B C.R.S. (1986). The case was tried to the court. Finding that Allied's janitorial services were a routine and regular part of Storage Technology's total business enterprise, the trial court held that Storage Technology was Finlay's statutory employer within the meaning of the workers' compensation act.

Finlay appealed and a majority of the court of appeals panel affirmed the trial court, noting that the general test for determining whether a company has statutory employer status under the workers' compensation act is whether the work contracted out is part of the "regular business operation" of the constructive employer. The court of appeals held that the fact that Allied's janitorial services were "to be provided on a routine and regular basis indicates they are part of the regular business operation [of Storage Technology]." Finlay v. Storage Technology Corp., 733 P.2d at 324. ² We granted Finlay's petition for certiorari to determine whether the court of appeals applied the correct standard in evaluating whether Storage Technology was Finlay's statutory employer.

II.

A.

The primary purpose of the workers' compensation act is to provide a remedy for job-related injuries, without regard to fault. See, e.g., Travelers Ins. Co. v. Savio, 706 P.2d 1258, 1263-64 (Colo.1985); Frohlick Crane Service, Inc. v. Mack, 182 Colo. 34, 38, 510 P.2d 891, 893 (1973). The statutory scheme grants an injured employee compensation from the employer without regard to negligence and, in return, the responsible employer is granted immunity from common-law negligence liability. Buzard v. Super Walls, Inc., 681 P.2d 520, 522 (Colo.1984). To be afforded this immunity, an employer must be a "statutory employer" as contemplated by the workers' compensation act. Travelers Ins. Co., 706 P.2d at 1264 ("if either the injury or a party's status falls outside the ambit of the [workers' compensation act], then the liability and exclusivity provisions of the [a]ct are inapplicable"). Although a given company might not be a claimant's employer as understood in the ordinary nomenclature of the common law, it nevertheless might be a statutory employer for workers' compensation coverage and immunity purposes. O'Quinn v. Walt Disney Prod., 177 Colo. 190, 194-95, 493 P.2d 344, 346 (1972); Snyder v. Industrial Comm'n, 138 Colo. 523, 526, 335 P.2d 543, 545 (1959).

Storage Technology contends that it is Finlay's statutory employer under section 8-48-101, 3B C.R.S. (1986):

(1) Any person, company, or corporation operating or engaged in or conducting any business by leasing or contracting out any part or all of the work thereof to any lessee, sublessee, contractor, or subcontractor, irrespective of the number of employees engaged in such work, shall be construed to be an employer as defined in articles 40 to 54 of this title and shall be liable as provided in said articles to pay compensation for injury or death resulting therefrom to said lessees, sublessees, contractors, and subcontractors and their employees or employees' dependents. The employer, before commencing said work, shall insure and keep insured his liability as provided in said articles, and such lessee, sublessee, contractor, or subcontractor, as well as any employee thereof, shall be deemed employees as defined in said articles....

(2) If said lessee, sublessee, contractor, or subcontractor is himself an employer in the doing of such work and, before commencing such work, insures and keeps insured his liability for compensation as provided in articles 40 to 54 of this title, neither said lessee, sublessee, contractor, or subcontractor, its employees, or its insurer shall have any right of contribution or action of any kind, including actions under section 8-52-108, against the person, company, or corporation operating or engaged in or conducting any business by leasing or contracting out any part or all of the work thereof, or against its employees, servants, or agents.

Subsection 8-48-101(1) makes general contractors ultimately responsible for injuries to employees of subcontractors. Edwards v. Price, 191 Colo. 46, 52, 550 P.2d 856, 860 (1976), appeal dismissed, 429 U.S. 1056, 97 S.Ct. 778, 50 L.Ed.2d 773 (1977). Its purpose is to prevent employers from avoiding responsibility under the workers' compensation act by contracting out their regular work to uninsured independent contractors. Hefley v. Morales, 197 Colo. 523, 526, 595 P.2d 233, 235 (1979); Frohlick, 182 Colo. at 38, 510 P.2d at 893. Of course, section 8-48-101 was not intended to permit double recovery. Under subsection 8-48-101(2), if a subcontractor "has obtained insurance [its employee] cannot reach 'upstream' to [the general contractor] to establish tort liability; [the general contractor is] immune from suit as any insured employer would be." Buzard, 681 P.2d at 523.

By its terms, subsection 8-48-101(1) applies only to companies conducting "business" by contracting out "any part or all of the work thereof." Thus, the ultimate issue in this case is whether Storage Technology was "contracting out any part or all of [its] work" to Allied. The resolution of this issue requires us to consider the breadth of the terms "business" and "the work thereof" as contemplated by section 8-48-101(1).

We have previously described the test for whether statutory employer status exists under section 8-48-101 as whether the work contracted out is part of the "regular business" of the alleged employer. San Isabel Elec. Ass'n v. Bramer, 182 Colo. 15, 19, 510 P.2d 438, 440 (1973); Pioneer Construction Co. v. Davis, 152 Colo. 121, 125, 381 P.2d 22, 24 (1963). We have not, however, definitively stated whether the "regular business" test is limited to a consideration of the primary business of the alleged employer or encompasses broader aspects of the alleged employer's total business operation.

Finlay urges us to adopt a narrow construction of the "regular business" test. Such a construction would result in statutory responsibility and immunity only if the contracted activities directly relate to the alleged employer's primary business activities. Finlay further argues that applying a narrow construction of the "regular business" test to this case leads to the conclusion that janitorial services are ancillary to Storage Technology's primary business of manufacturing and marketing computer equipment. Accepting Finlay's argument would require us to hold that Storage Technology was not her statutory employer, leaving her free to pursue her common-law negligence claim.

Storage Technology, on the other hand, asserts that the court of appeals applied the appropriate standard by referring to the alleged employer's "total business operation" and "consider[ing] the elements of routineness, regularity, and the importance of the contracted service to the regular business" of the alleged employer. Storage Technology further argues that because Allied's janitorial services were a regularly needed part of Storage Technology's total business operation, Storage Technology qualifies as Finlay's statutory employer.

B.

In support of her argument for a narrow construction of the "regular business" test, Finlay relies primarily on three early Colorado Supreme Court cases, Pioneer Construction Co. v. Davis, 152 Colo. 121, 381 P.2d 22 (1963); Meyer v. Lakewood Country Club, 122 Colo. 110, 220 P.2d 371 (1950); and American Radiator Co. v. Franzen, 81 Colo. 161, 254 P. 160 (1927). In American Radiator, we held that an employee of a window cleaning company that cleaned windows twice a month for American Radiator, a manufacturer of heating plants, was not American Radiator's statutory employee and therefore could not claim workers' compensation benefits...