Fonner v. Shandon, Inc.

• Decision Date: 21 January 1999
• Citation: 724 A.2d 903,555 Pa. 370
• Parties: William FONNER, Appellant, v. SHANDON, INC. and Jendoco Construction Corporation, Appellees.
• Court: Pennsylvania Supreme Court

724 A.2d 903

555 Pa. 370

William FONNER, Appellant, v. SHANDON, INC. and Jendoco Construction Corporation, Appellees.

Supreme Court of Pennsylvania.

Argued March 4, 1997.

Decided January 21, 1999.

John A. Bacharach, Pittsburgh, for William Fonner.

Thomas Fallert, Jason A. Archinaco, Pittsburgh, for Shandon, Inc. and Jendoco Const. Corp.

Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO and NEWMAN, JJ.

OPINION OF THE COURT

CASTILLE, Justice.

The issue on appeal is whether, following changes in 1974 to the Workers' Compensation Act (the "Act")¹ that made it mandatory for employers to provide workers' compensation coverage, a general contractor is a "statutory employer" under the Act so that the general contractor is immune from suit by an injured worker for common law negligence, where the subcontractor directly employing the injured worker carried workers' compensation insurance which paid benefits to the worker. Because we find that a general contractor in this situation is entitled to the status of a "statutory employer" under the Act, we hold that the general contractor is immune from suit and, therefore, we affirm the order of the Superior Court.

The relevant facts to this appeal are not in dispute. In 1991, Shandon, Inc. ("Shandon") owned a facility located in Findlay Township, Pennsylvania. On April 26, 1991, Shandon hired appellee, Jendoco Construction Corporation ("Jendoco"), as the general contractor for a construction project which consisted primarily of building an addition to an existing structure at the facility. In May, 1991, appellee entered into a sub-contract with Olde Cast Stone Products ("Olde Cast") for the installation of pre-fabricated concrete panels. Olde Cast, in turn, sub-contracted this work to PreCast Services ("PreCast"). Appellant was employed by PreCast.

On August 2, 1991, appellant was installing the pre-fabricated concrete panels at the Shandon facility when the line on his welding equipment snagged on an unknown object. While appellant walked towards the edge of the building frame to free the snag, appellant slipped and fell off the unguarded edge of the building and onto a pile of lumber below. Appellant alleges that the fall caused him to sustain serious permanent injuries.² As a result of his injuries, appellant began receiving workers' compensation benefits from PreCast's workers' compensation carrier.

On March 26, 1993, appellant filed a complaint against Shandon and Jendoco for negligently failing to provide a safe work environment since neither party had placed a guardrail around the perimeter of the building as required by safety regulations. On January 31, 1995, Shandon and Jendoco filed motions for summary judgment. The trial court granted Shandon's motion and dismissed it from the case because, as the owner of the property, Shandon had no duty to maintain a safe workplace on behalf of its general contractor's employees.³ The trial court also granted Jendoco's motion for summary judgment and dismissed it from the case on the basis that Jendoco, as the general contractor, was the statutory employer of appellant who was immune from suit pursuant to Section 203 of the Act.⁴

The Superior Court, in a memorandum opinion and order, affirmed the trial court's grant of summary judgment in favor of Jendoco. We granted allocatur in order to decide whether, following changes in 1974 to the Act that made it mandatory for employers to provide workers' compensation coverage, a general contractor is entitled to immunity from suit for common law liability for negligence as a "statutory employer" under the Act even though the subcontractor which directly employed the injured worker carried workers' compensation insurance which paid benefits to the worker.

Section 203 of the Act, which is part of Chapter 2 of the Act (Damages by Action at Law), was last amended in 1939 and provides that:

An employer who permits the entry upon premises occupied by him or under his control of a laborer or an assistant hired by an employe or contractor, for the performance upon such premises of a part of the employer's regular business entrusted to such employe or contractor, shall be liable to such laborer or assistant in the same manner and to the same extent as to his own employe.

77 P.S. § 52. The term "contractor" as used in this provision includes "a subcontractor to whom a principal contractor has sublet any part of the work which such principal contractor has undertaken." 77 P.S. § 25. In construing Section 203 of the Act, this Court, in the seminal case of McDonald v. Levinson Steel Co., 302 Pa. 287, 153 A. 424 (1930), determined that the term "employer" in Section 203 was synonymous with the principal contractor for a particular job and that the term "contractor" was synonymous with the subcontractor for that job. This Court then described the following five elements essential to the creation of a "statutory employer" relationship so that the statutory employer would be immune from a suit for negligence:

(1) An employer who is under contract with an owner or one in the position of an owner. (2) Premises occupied by or under the control of such employer. (3) A sub-contract made by such employer. (4) Part of the employer's regular business intrusted to such subcontractor. (5) An employee of such subcontractor.

McDonald, 302 Pa. at 294-95, 153 A. at 426. This five-part test has consistently been cited by the courts below as the test which should be applied when determining statutory employer liability.

Appellant recognizes this Court's decision in McDonald and argues that if it were applied to this case, Jendoco would be a statutory employer which would be immune from his negligence suit. Appellant, however, argues that certain amendments to Section 302(b) of the Act,⁵ which made it mandatory for employers to provide compensation coverage, implicitly amended Section 203 of the Act so that a general contractor like Jendoco is no longer a statutory employer entitled to immunity. Conversely, Jendoco argues that since Section 302(b) concerns the payment of compensation for a work-related injury, its amendment has no effect on a provision such as Section 203 which deals with the tortious liability under the Act for certain parties. Our determination of which argument is correct depends on an analysis of the relevant statutes.

Prior to the 1974 amendment to Section 302(b) of the Act, it was presumed that a contractor or an employer had agreed to pay compensation. However, the pre-1974 Section 302(b) contained what has been termed as "elective compensation" language. The elective compensation language allowed a contractor or an employer, if they met the terms of the statute, to opt not to pay compensation as called for in the Act. See Cranshaw Construction, Inc. v. Ghrist, 290 Pa.Super. 286, 292, 434 A.2d 756, 759 (1981)

.

Section 302(b)'s elective compensation language was removed by the 1974 amendments to the Act. As noted above, the 1974 amendments made it mandatory for a contractor or an employer to secure compensation coverage for its employees. Section 302(b), as amended in 1974, provides that:

Any employer who permits the entry upon premises occupied by him or under his control of a laborer or an assistant hired by an employe or contractor, for the performance upon such premises of a part of such employer's regular business entrusted to that employe or contractor, shall be liable for the payment of such compensation, unless such hiring employe or contractor if primarily liable for the payment of such compensation, has secured the payment thereof as provided for in this act. Any employer or his insurer who shall become liable hereunder for such compensation may recover the amount thereof paid and any necessary expenses from another person if the latter is primarily liable therefor.

77 P.S. § 462 (emphasis added). The employer and contractor referred to in this provision are defined the same way as in Section 203 of the Act. Appellant argues that the "unless" language which was part of the 1974 amendment to Section 302(b) implicitly amended Section 203 by adding a sixth element to the McDonald statutory employer test: whether the contractor or employer actually paid benefits to the injured claimant.

Appellant's argument fails for two reasons. First, despite amending Section 302(b) in 1974, the General Assembly never amended Section 203 of the Act even though existing case law allowed statutory employers to escape liability if someone else was primarily responsible for paying compensation benefits. In Capozzoli v. Stone Webster Engineering Corp., 352 Pa. 183, 42 A.2d 524 (1945), this Court interpreted Section 302(b) of the Act as it existed prior to the 1974 amendment. In Capozzoli, the administratrix of the estate of a worker who was killed while performing his job for a subcontractor sought to recover in a wrongful death lawsuit from a party who was found to be the deceased worker's statutory employer. This Court affirmed the dismissal of the common law suit against the statutory employer on the basis that the sole remedy against the subcontractor and the statutory employer was the payment of compensation under Section 302(b) of the Act. In doing so, this Court stated that an agreement by a subcontractor to provide for compensation insurance does not remove the statutory employer from the protection of the Act, even though it may operate to relieve the statutory employer from directly paying compensation by placing that primary responsibility upon the subcontractor. See also Swartz v. Conradis, 298 Pa. 343, 148 A. 529 (1929) (contractor and subcontractor agreed that subcontractor would carry compensation insurance; contractor still entitled to immunity of Section 203 from common law suit as the statutory employer of the subcontractor's injured employee since contractor assumes reserve status in case subcontractor cannot pay benefits).

As noted above, the amended...