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Construction Company's Violation Of Minority Business Contract Does Not Remove Protection Of Exclusive Remedy Doctrine For Special Employer

In a case being consider for publication, Janela v. Roman Asphalt Co., et al., Docket No. A-3852-04T3 (App. Div. October 11, 2006), the New Jersey Appellate Division has once again looked at the issues surrounding dual/special employment. The single most important principle of workers’ compensation jurisprudence is the exclusive remedy doctrine. The exclusive remedy doctrine describes the workers' compensation system's "historic trade-off" where employees relinquish their right to pursue common law, or negligence, actions against their employers for work-related injuries in exchange for prompt and automatic entitlement to the statutory benefits. In some cases, a worker may have concurrent employers. This type of employment scenario is known as dual employment, lent employment or special employment. It occurs most often when the employment involves a temporary staffing agency or a construction contractor/subcontractor scenario.

For example, when an employee is assigned by a staffing agency to another business' job site, pursuant to a contract between the staffing agency and the business, that employee is considered to be an employee of both the staffing agency and the assigned business. The business employing the worker through the staffing agency is referred to as a "special employer," while the staffing agency is sometimes referred to as the "general employer." Both entities, the general and special employers, are responsible for providing workers' compensation coverage, sometimes under an apportionment method, to an injured worker. Likewise, both the general and special employers enjoy the protection from negligence actions under the exclusive remedy doctrine.

In Janela, the issue of dual employment arose in the context of a government construction contract. The facts are fairly straight forward. RaeBeck Construction Co. won a paving contract at Newark Liberty Airport. The contract called for the bidder to be a minority/women’s business enterprise or small business enterprise. This contract required RaeBeck to exercise direct control over the project and to certify that RaeBeck did not share its staff with another other affiliated or parent company. These requirements were designed to ensure that the contactor was, in fact, a minority or small business enterprise and was not sub-contracting the work to a non-minority/small business contractor.

On the date of the accident, Mr. Janela was struck by a compressor, fracturing his skull and killing him. Although RaeBeck’s workers’ compensation carrier paid Mrs. Janela and their children dependency benefits, Mrs. Janela filed a negligence action against another company, Roman, which actually did the paving work. Fact testimony indicated that, contrary to the contract requirement, RaeBeck had no presence at the job site and that RaeBeck had no role in hiring or supervising any employees. Testimony also revealed that Roman lent all of the employees to RaeBeck to complete the work, although RaeBeck wrote all of the checks for the employees’ wages.

In analyzing Roman’s Motion for Summary Judgment, the trial court looked to the five-part test used to determine special employment status:

(1) whether the employee has an express or implied contract;

(2) whether the work being done by the employee is essentially that of the special employer;

(3) whether the special employer has the right to control the details of the work;

(4) whether the special employer pays the employee's wages; and

(5) whether the special employer has the power to hire, discharge or recall the employee.

The trial court dismissed the negligence action against Roman, finding Roman to be the general employer and RaeBeck to be the special employer. The Appellate Division affirmed the decision dismissing the action against Roman. Thus, both Roman and RaeBeck were protected by the exclusive remedy doctrine, despite the violations of the specific government contract stipulations to avoid such an employment relationship:

Such manipulation as may have occurred between RaeBeck and Roman to circumvent the …bidding qualifications and contract requirements cannot be seen to negate the legal rules governing workers’ compensation and eligibility to pursue a civil action claim. (Emphasis added). The special set-asides the Port Authority sought to effect, and the assurances it required that the successful bidder would conform to its standards in every particular, can have no bearing on the interpretation or applicability of the law governing rights and remedies between employers and employees. If RaeBeck deserves to be sanctioned for its ostensible avoidance of its contract obligations, that cannot be accomplished by holding Roman to be amenable to a civil action claim in contravention of established legal standards defining employment relationship.

The dual/special employment analysis is fact sensitive. When analyzing a new claim involving dual/special employment, an immediate and comprehensive investigation of the employment relationship is essential. Obtaining documentation such as contracts, job descriptions, employment handbooks, payroll records, and even incorporation or partnership documents is a key strategy in the investigation. Likewise, early identification and interviews of the owners, managers, and contractors can further assist in determining the degree of control an entity had over an injured worker, which is the most important factor in determining dual/special employment. If your business involves the potential for a dual/special employment relationship, consult with counsel to determine your potential liability for workers’ compensation benefits.

* Bob is an associate who works in our Cherry Hill, New Jersey, office. He can be reached at (856) 414-6009 or rjfitzgerald@mdwcg.com.