Harger v. Structural Services, Inc.

Decision Date17 April 1996
Docket Number22,530 and 22,533,Nos. 22,527,s. 22,527
PartiesRoland N. HARGER, Sr. and Connie A. Harger, Plaintiffs-Petitioners, v. STRUCTURAL SERVICES, INC. and Jaynes Corporation, Defendants-Respondents. Eloy R. ROMERO, Petitioner-Respondent, v. SHUMATE CONSTRUCTORS, INC. and Transamerica Insurance Group, Respondents-Petitioners, and Fay's Painting Company and United States Fidelity & Guaranty Company, Employer and Insurer. Roland N. HARGER, Sr. and Connie A. Harger, Plaintiffs-Respondents, v. STRUCTURAL SERVICES, INC., Defendant-Petitioner, and Jaynes Corporation, Defendant.
CourtNew Mexico Supreme Court

MINZNER, Justice.

In this appeal we consider the application and effect of NMSA 1978, Section 52-1-22 (Repl.Pamp.1991), a part of the Workers' Compensation Act, NMSA 1978, §§ 52-1-1 to -70 (Repl.Pamp.1991 & Cum.Supp.1995) (Act). Section 52-1-22 sometimes imposes liability for the payment of workers' compensation benefits to a worker on someone other than the worker's actual employer. Section 52-1-22, however, expressly excludes the employer of an independent contractor from liability. In this opinion we will use the term "statutory employer" to describe someone upon whom Section 52-1-22 imposes liability for paying compensation benefits, but we note here that the term "constructive employer" is probably more descriptive.

Section 52-1-22 reads as follows:

52-1-22. Work not casual employment.

As used in the Workers' Compensation Act, unless the context otherwise requires where any employer procures any work to be done wholly or in part for him by a contractor other than an independent contractor and the work so procured to be done is a part or process in the trade or business or undertaking of such employer, then such employer shall be liable to pay all compensation under the Workers' Compensation Act to the same extent as if the work were done without the intervention of such contractor. The work so procured to be done shall not be construed to be "casual employment".

The Court of Appeals opinion from which the present appeal arises consolidated two cases, Romero v. Shumate Constructors, Inc. and Harger v. Structural Services, Inc., 119 N.M. 58, 888 P.2d 940 (Ct.App.1994), cert. granted, 119 N.M. 21, 888 P.2d 467 (1995). The two cases illustrate the potential operation of Section 52-1-22 in the context of a general contractor and its subcontractors. Initially, Section 52-1-22 identifies the worker's statutory employer. Romero illustrates the initial identification. Then the question that logically follows is whether a statutory employer may claim the immunity from tort liability generally conferred on employers by the Act's exclusivity provisions. See §§ 52-1-6(E), -8, -9. Harger illustrates the significance of the initial identification in resolving the second question. Because the Court of Appeals fully laid out the facts of the two cases, we will not repeat them here. We will include additional facts as relevant to our discussion.

The Court of Appeals held that the relevant subcontractors were not independent contractors for purposes of Section 52-1-22. Romero, 119 N.M. at 69, 888 P.2d at 951. Consequently, the Court concluded that the general contractors were the employers responsible for paying workers' compensation benefits. Finally, the Court concluded that the general contractor sued in tort in Harger was immune under the Act. Id. at 70, 888 P.2d at 952. In reaching its opinion, the Court of Appeals rejected the common-law emphasis on the "right-to-control" in distinguishing an employee from an independent contractor. Rather, the Court adopted a special test to serve the purposes it had identified as underlying Section 52-1-22. While the test is thoughtful and would serve well the policies identified by the Court, we were not persuaded that those policies are either explicit or implicit in the Act. Accordingly, we granted petitions for certiorari to address two central questions: (1) whether the Court of Appeals correctly construed the term "independent contractor" in Section 52-1-22; and (2) whether the Court of Appeals correctly concluded that an employer liable for workers' compensation benefits under Section 52-1-22 may claim immunity from tort.

We conclude that the term "independent contractor" in Section 52-1-22 should be construed as a common-law term; that is, it should continue to be construed as it has been construed in cases arising under the Act. However, for purposes of clarifying our case law, we adopt the Restatement (Second) of Agency approach for determining whether one acting for another is an independent contractor. See Restatement (Second) of Agency § 220(1) (1958). While this approach emphasizes the "right-to-control," it recognizes the significance of a variety of factors in evaluating the "right-to-control." Further, we conclude under both our cases and the Restatement (Second) of Agency approach that the Court of Appeals erred in characterizing the two general contractors in this case as statutory employers under Section 52-1-22 as a matter of law. Finally, we conclude that a statutory employer liable under Section 52-1-22 for workers' compensation benefits is immune from tort liability the same as are other employers. We affirm in part, reverse in part, and remand for further proceedings.

I. Independent Contractor Status

The Court of Appeals relied on contemporary public policy considerations to ascribe a modern definition of "independent contractor" to the Act's use of that term. Relying on the premise that the Act should be far- reaching, the Court of Appeals concluded that "the legislature intended a narrower class of employers to escape workers' compensation liability than can escape vicarious tort liability under the common law." Romero, 119 N.M. at 66, 888 P.2d at 948. To give effect to this legislative intent, the Court of Appeals adopted a test for determining independent contractor status that departed from existing New Mexico case law. The Court determined that a subcontractor would not be an independent contractor for purposes of Section 52-1-22 unless the subcontractor's relationship to the general contractor survived both a "right-to-control" test and a "relative-nature-of-the-work" test. Id. at 67, 888 P.2d at 949. The Court identified the Act's basic purpose as ensuring that industry carry the burden of compensating workers for injuries they suffered in the course of their employment. Therefore, by adopting a stricter test for independent contractors, the Act would cover a broader category of workers. While the policy considerations identified by the Court of Appeals majority are undoubtedly sound, we do not believe they reflect the legislature's intent as expressed in the language currently contained in Section 52-1-22.

The legislature enacted Section 52-1-22 in 1917 in a form close to its present form as part of New Mexico's first workers' compensation legislation. See 1917 N.M.Laws, ch. 83, § 12(o). Workers' compensation liability attaches to a party other than the employer if two conditions are met: (1) that the work is done by "a contractor other than an independent contractor," and (2) that the work is "a part or process in the trade or business or undertaking" of the employer of the contractor. 1929 N.M.Laws, ch. 113, § 12(o). The only modification of this section has been the addition of the terms "or undertaking" to the phrase "in the trade or business of such employer." See id. Apart from this slight modification of the second condition, the legislature has retained the express exclusion embodied in the original provision for employers of independent contractors in all subsequent versions of the Act. See id.; 1937 N.M.Laws, ch. 92, § 6(o); 1965 N.M. Laws, ch. 295, § 15; 1989 N.M.Laws, ch. 263, § 16.

Section 52-1-22 preceded Section 52-1-23 in the 1917 legislation. Section 52-1-23 currently reads:

52-1-23. Contractor becoming employer in casual employment.

For purposes of the Workers' Compensation Act [this article], where any employer procures any work to be done wholly or in part for him by a contractor where the work so procured to be done is casual employment as to such employer, then such contractor shall become the employer.

The text of Section 52-1-23, like the text of Section 52-1-22, has remained essentially unchanged from the original. See 1917 N.M. Laws, ch. 83, § 12(p).

In these two statutes the legislature apparently attempted to provide a general answer or answers to the question of who should be considered the employer for purposes of the Act when one employer contracts with another employer or with an employee. Under Section 52-1-23, when the work so procured is casual employment as to the contractor's employer, the "contractor shall become the employer." Section 52-1-23. However, under Section 52-1-22, if the work so procured "is a part or process in the trade or business or undertaking of such employer," and the contractor involved is not an independent contractor, then the employer shall be treated as the employer under the Act, regardless of whether the work so procured is casual.1 Section 52-1-22.

In initially incorporating and subsequently retaining the common-law concept of "independent contractor," the legislature probably relied on certain rules of construction. "The interpretation of well-defined words and phrases...

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