Rolick v. Collins Pine Co.

Decision Date05 February 1991
Docket NumberNo. 90-3313,90-3313
Citation925 F.2d 661
PartiesWilliam ROLICK, Appellant, v. COLLINS PINE COMPANY; and Collins Pine Company, t/d/b/a Kane Hardwood Division.
CourtU.S. Court of Appeals — Third Circuit

Janice G. O'Reilly (argued), Berger, Kapetan, Malakoff & Meyers, Pittsburgh, Pa., for appellant.

Edward C. Schmidt (argued), Rose, Schmidt, Hasley & DiSalle, Pittsburgh, Pa., for appellees.

Before BECKER and NYGAARD, Circuit Judges, and POLLAK, District Judge. *


NYGAARD, Circuit Judge.

In this diversity case we must decide whether William Rolick is an independent contractor or a statutory employee within the meaning of the Pennsylvania Workmen's Compensation Act, 77 Pa.Stat.Ann. Secs. 1-1603 (Purdon 1987) ("PWCA"). Rolick was a logger. One winter day while cutting timber in the Allegheny National Forest, Rolick was struck by a birch tree which broke his neck. He is now a quadriplegic. At the time of the accident, Rolick was cutting timber for the Nortim Corporation ("Nortim") and Collins Pine Company, Kane Hardwood Division ("Kane") and sued Kane to recover for those injuries. After a nonjury trial, the district court decided that Rolick was a statutory employee of Kane within the meaning of the PWCA and, therefore, dismissed his complaint, limiting Rolick to a remedy from workmen's compensation. We will reverse.


Kane entered into a Timber Sale Contract with the United States Department of Agriculture, Forest Service, allowing Kane to cut and remove timber from a tract of land in Pennsylvania. Kane then entered into a Logging Services Contract with Nortim, a logging insurance group, to select, hire, schedule, and monitor loggers who would actually cut and haul the timber. Nortim agreed to make workmen's compensation insurance available to the loggers and introduce a mandatory safety awareness program. Nortim in turn hired the Pennsylvania Forestry Association to monitor and instruct the loggers on safety practices. Nortim employees also monitored the loggers to insure that the work was performed in accordance with contract requirements and provided field instructions on what and where to cut.

Rolick entered into a Cutting and Hauling Agreement with Nortim to fell, skid and/or haul the timber. The agreement designated Rolick an independent contractor and outlined his unconditional right to control work methods as well as his workmen. Nortim paid Rolick for the timber he cut, did not withhold social security or income tax from his check, and, because he was a contractor, issued him a 1099 federal tax form instead of an employee's W-2 form at the end of the year. Kane waived any right to control the loggers' methods, and the logging contract referred to them as independent contractors.

On the work site, Rolick performed his contractual obligations. Nortim never told him how to do the job, when to begin and end, how long to work, what tools and equipment to use or how many or which employees to use. Although Rolick understood that he would be considered an employee for workmen's compensation purposes, he actually paid for this coverage. Nortim merely deducted premium payments from Rolick's check.

While working under this agreement, Rolick suffered neck and back injuries from the falling tree and filed this suit. Following a bench trial on the specific issue of Rolick's employee/independent contractor status, the court directed the parties to file memoranda on the applicability of sections 302(a) and 302(b) of the PWCA, 77 Pa.Stat.Ann. Secs. 461, 462. The district court then dismissed Rolick's claim, concluding Rolick was an employee of subcontractor Nortim within the meaning of the PWCA, a statutory employee of Kane, and limited by Pennsylvania law to his workmen's compensation remedy. 708 F.Supp. 111.


The sole issue on appeal is whether the district court properly concluded that Kane was Rolick's statutory employer and entitled to tort immunity. The material facts are not at issue. The district court's decision depends upon interpretation and application of Pennsylvania law. Thus, our review is plenary. Dent v. Cunningham, 786 F.2d 173, 175 (3d Cir.1986).


The PWCA provides benefits to injured employees regardless of fault. See 77 Pa.Stat.Ann. Secs. 1-1603 (Purdon 1987). Employers bear the cost of these benefits and the PWCA protects them from other tort liability for work-related accidents. 77 Pa.Stat.Ann. Sec. 481(a). Kohler v. United States, 602 F.Supp. 747, 748 (W.D.Pa.), aff'd, 779 F.2d 43 (3d Cir.1985).

Generally, only employers standing in a direct master-servant relationship with an injured worker may be liable for workmen's compensation benefits. But a narrow statutory exception to this principle provides that, under certain very limited circumstances, an employer not standing in a direct master-servant relationship with an injured worker may nonetheless become liable for workmen's compensation benefits. The exception, which creates the status of a so-called "statutory employer," is embodied in section 203 of the Workmen's Compensation Act:

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

77 Pa.Stat.Ann. Secs. 52, 462 (Purdon Supp.1990).

Sixty years ago this somewhat opaque statutory provision was translated by the Pennsylvania Supreme Court, in the leading case of McDonald v. Levinson Steel Co., 302 Pa. 287, 294-95, 153 A. 424 (1930), into serviceable language which, to this day, remains the governing rule:

To create the relation of statutory employer under section 203 of the act (77 P.S. Sec. 52), all of the following elements essential to a statutory employer's liability 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 is entrusted to such subcontractor. (5) An employee of such subcontractor.

Ordinary employers who, under the Workmen's Compensation Act, are required to provide workmen's compensation benefits for those with whom they are in a direct master-servant relationship, are, of course, given by the Act the quid pro quo of immunity from tort liability for the work-related injuries of their employees. The Act does not in terms provide statutory immunity for statutory employers. But the courts of Pennsylvania have fashioned a cognate common law immunity. The test of eligibility for such immunity is the five-element test of statutory employer status prescribed by McDonald, supra. The Pennsylvania Supreme Court has insisted that the test be complied with in every particular--an insistence evidently born of the court's concern that some employers will endeavor "to escape the effect of the Compensation Act so that they will not be compelled to pay compensation or carry insurance, and, on the other hand ... when faced with liability at common law ... strive vigorously to come under the sheltering protection of the act." McDonald, 302 Pa. at 292, 153 A. 424. To allay this concern, the Supreme Court of Pennsylvania determined that (ibid.):

It will be better for the efficient administration of the Compensation Act to construe it literally as to the obligations created, leaving those under the common law that were apparently intended to be so, and under the Compensation Act those intended.

Heeding the admonition of the Supreme Court, the Superior Court has rigorously patrolled claims of statutory employer status. "These [McDonald ] criteria must be applied strictly, particularly where an allegedly negligent contractor seeks asylum from common law liability." Travaglia v. C.H. Schwertner & Son, 391 Pa.Super. 61, 570 A.2d 513, 518 (1989). See also, Stipanovich v. Westinghouse Electric Corporation, 210 Pa.Super. 98, 231 A.2d 894 (Pa.Super.1967).

In this case the parties have stipulated that the first four McDonald elements are satisfied. That is to say, the parties are in agreement that (1) defendant Kane entered into a contract with the Forest Service authorizing Kane to cut timber from a forest tract managed by the service; (2) Kane thereupon exercised control over the tract; (3) Kane entered into a subcontract with Nortim under which the latter was to arrange for the actual logging operations; and (4) Kane thereby entrusted a portion of its "regular business" to Nortim. The remaining issue is whether the fifth McDonald element is met--i.e., whether plaintiff Rolick was "[a]n employee of ... subcontractor" Nortim.


When our jurisdiction is based upon diversity, we must ascertain and apply state law. When presented with a novel issue of law, or where applicable state precedent is ambiguous, absent or incomplete, we must determine or predict how the highest state court would rule. Erie Castings Company v. Grinding Supply, Inc., 736 F.2d 99, 100 (3d Cir.1984). Here, where the issue before us falls outside the scope of precise issues on which the Pennsylvania Supreme Court has spoken, proper regard must also be given to the decisions of its intermediate appellate court. Burke v. Maassen, 904 F.2d 178, 184 (3d Cir.1990).

An intermediate appellate state court ... is datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise.

West v. AT & T Company, 311 U.S. 223, 237, 61 S.Ct. 179, 183, 85 L.Ed. 139 (1940). See also Wisniewski v. Johns-Manville Corporation, 759 F.2d 271, 273-74 (3d Cir.1985) (although lower state court decisions are not controlling on an...

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