Peck v. DELAWARE COUNTY BD. OF PRISON

Citation814 A.2d 185,572 Pa. 249
PartiesJohn PECK, Appellee, v. DELAWARE COUNTY BOARD OF PRISON INSPECTORS, Appellant.
Decision Date31 December 2002
CourtPennsylvania Supreme Court

Brian Scott Frantum, Thomas C. Gallagher, for Delaware County Board of Prison Inspectors.

Michael J. Dougherty, for John Peck.

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

OPINION ANNOUNCING THE JUDGMENT OF THE COURT

Justice NEWMAN.

We granted this appeal to determine whether the Delaware County Board of Prison Inspectors ("the Board") is the "statutory" employer, pursuant to Section 203 of the Workers' Compensation Act ("the Act"),1 of John Peck ("Appellee"), a corrections officer at the Delaware County Prison ("Prison"), employed by the Wackenhut Corrections Corporation ("Wackenhut"). We hold that the Board is not the statutory employer of Appellee.

FACTUAL AND PROCEDURAL BACKGROUND

The Board is the entity statutorily empowered to oversee the operations of the Prison. Prior to September of 1995, the corrections officers at the Prison, including Appellee, were employees of the Board. In August of 1995, the Board "privatized" the management and operation of the Prison by entering into an agreement with Wackenhut. Subsequent to this agreement, the Board dismissed all of the Prison corrections officers, including Appellee. See Delaware County v. Delaware County Prison Employees Independent Union, 552 Pa. 184, 713 A.2d 1135, 1136 (1998)

. Wackenhut immediately employed most of these corrections officers, including Appellee. Id. at 1136. On September 10, 1996, in the course of his duties, Appellee slipped in a puddle of water and fell while attempting to close a heavy door. The fall caused injuries to Appellee's left shoulder, which required two surgeries. Appellee filed a workers' compensation claim against his employer, Wackenhut, and was awarded benefits.

The instant matter arises from a tort action that Appellee brought against the Board, which Appellee alleges was negligent for failing to maintain the Prison in a safe condition. The Board moved for summary judgment on the grounds that it enjoyed immunity from suit pursuant to Section 203 of the Act because, the Board claims, it qualifies as Appellee's statutory employer. The trial court granted summary judgment, finding that the Board is the statutory employer of Appellee and, therefore, immune from suit. On appeal, the Commonwealth Court reversed, holding that the Board is not the statutory employer of Appellee because: (1) the Board does not meet the statutory employer test articulated in McDonald v. Levinson Steel Co., 302 Pa. 287, 153 A. 424 (1930), and (2) Appellee is an employee of an independent contractor, Wackenhut. We granted allocatur to examine the statutory employer doctrine in the context of the privatization of a service that was once exclusively a public function: the operation of local prisons. In other words, did the Board, which formerly employed Appellee as a prison corrections officer when it operated and managed the Prison, lose its immunity from suit under the Act when it contracted with Wackenhut to operate and manage the Prison? We hold that it did and, accordingly, affirm the Commonwealth Court.

DISCUSSION

We begin our analysis with an explanation of the "statutory" employer doctrine. What is a statutory employer? "A statutory employer is a master who is not a contractual or common-law one, but is made one by the Act." McDonald, 153 A. at 425. There are two primary provisions in the Act that define the rights and responsibilities of a statutory employer: Sections 203 and 302(b).

Section 302(b) explains the obligations of the statutory employer:

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 compensation to such laborer or assistant 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....

77 P.S. § 462. The purpose of this provision is clear: to ensure the payment of compensation benefits by a financially responsible party in the injured worker's chain of employment from subcontractor to general contractor. See, e.g., Fonner v. Shandon, Inc., 555 Pa. 370, 724 A.2d 903, 907 (1999)

(Section 302(b) "provides that a statutory employer can be held liable for benefits under the Act in reserve status"); Smith v. Workmen's Compensation Appeal Board (Miller), 152 Pa.Cmwlth.77, 618 A.2d 1101, 1103 (1992),

petition for allowance of appeal denied, 537 Pa. 636, 642 A.2d 489 (1994) (Section 302(b) evidences "a clear intent to place primary responsibility for payment of worker's compensation benefits upon the first financially responsible employer in the subcontractor chain, even if that employer is not the one primarily liable").

Section 203 provides the rights enjoyed by the statutory employer:

An employer who permits the entry upon premises occupied by him or under his control of a laborer of 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. Although not apparent from its express terms, the language from Section 203 stating that the statutory employer "shall be liable to such laborer or assistant in the same manner and to the same extent as to his own employe" confers upon the statutory employer immunity from suit. This is because Section 303(a) of the Act, 77 P.S. § 481(a), makes the workers' compensation system the exclusive remedy for an injured employee seeking redress from an employer for an on-the-job injury. Section 203, by placing the statutory employer in the same position as the "contractual" or "common law" employer of the injured worker for tort liability purposes, entitles the statutory employer to the same immunity from suit that would be enjoyed by the "contractual" or "common law" employer.

But who is the statutory employer under the Act? More than seventy years ago, we addressed this question in McDonald. We offered the following formula:

To create the relation of statutory employer under section 203 of the act ... all of the following elements must be present: (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 subcontract made by such employer. (4) Part of the employer's regular business intrusted [sic] to such subcontractor. (5) An employee of such subcontractor.

McDonald, 153 A. at 426. The classic statutory employer situation is in the construction industry, where a property owner hires the general contractor, who hires a subcontractor to do specialized work on the jobsite, and an employee of the subcontractor is injured in the course of his employment. See Cranshaw Construction Inc. v. Ghrist, 290 Pa.Super. 286, 434 A.2d 756 (1981)

(general contractor immune from suit as statutory employer of injured employee of carpentry subcontractor). In those situations, the general contractor who meets the five-part McDonald test qualifies as the statutory employer of the subcontractor's employee, and is immune from suit by that employee.

In determining whether a party is a statutory employer, courts should construe the elements of the McDonald test strictly and find statutory employer status only when the facts clearly warrant it. The Superior Court has explained the basis for close scrutiny of claims of statutory employer immunity:

[V]ery great care ... must be exercised before allowing an employer to avoid his liability at common law by asserting that he is a statutory employer. Section 203 of the [Act], which was designed to extend benefits to workers, should not be casually converted into a shield behind which negligent employers may seek refuge.

Travaglia v. C.H. Schwertner & Son, Inc., 391 Pa.Super. 61, 570 A.2d 513, 515 (1989), petition for allowance of appeal denied, 527 Pa. 618, 590 A.2d 758 (1990) (quoting Stipanovich v. Westinghouse Electric Corp., 210 Pa.Super. 98, 231 A.2d 894, 898 (1967)).

Courts should hesitate to afford the "shield" of statutory employer immunity, particularly in light of our decision in Fonner. In Fonner, we considered whether the 1974 amendment to Section 302(b) of the Act amended Section 203 by implication. Prior to the 1974 amendment, Section 302(b) of the Act contained "elective" compensation language, which allowed a statutory employer to opt out of the workers' compensation system with respect to employees of subcontractors. Fonner, 724 A.2d at 905. A statutory employer who opted out of the workers' compensation system was relieved of the obligation to pay benefits to the injured worker, but also lost the immunity from suit provided by the Act. Cf. Swartz v. Conradis, 298 Pa. 343, 148 A. 529, 530 (1929). The 1974 amendment to Section 302(b) eliminated this option for statutory employers, however, obliging them to provide workers' compensation benefits for the injured employees of subcontractors but making them only secondarily liable in the event the subcontractor failed to provide coverage. In Fonner, we decided whether, when the General Assembly amended Section 302(b) in 1974, it intended to similarly amend Section 203 so that a statutory employer would enjoy immunity from suit only when it had actually paid workers' compensation benefits pursuant to Section 302(b). We rejected this argument. We held that if the General Assembly intended to amend Section 203 to require, as a precondition to statutory employer immunity, that the statutory...

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