Workers' Compensation Defense

Key Points:

• Statutory employer immunity is still a powerful shield for general contractors. The court declined to overrule the doctrine and left any policy change to the General Assembly, preserving a major tort-exposure limitation on construction losses.
• The defense is “jurisdictional” and not waivable. Reaffirming LeFlar, the court reiterated that the Workers’ Compensation Act deprives common pleas courts of jurisdiction over negligence suits against employers/statutory employers, so the issue can be raised even if not timely pled.
• The court reaffirmed the five-part McDonald test and the importance of allowing a defendant the opportunity to build a record to meet it.

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On October 23, 2025, the Pennsylvania Supreme Court issued an important decision in Yoder v. McCarthy Constr., Inc., 345 A.3d 668 (Pa. 2025), reaffirming the strength and continued viability of the statutory employer doctrine under the Pennsylvania Workers’ Compensation Act. The court held that general contractors who satisfy the statutory employer test remain immune from third-party negligence claims brought by injured subcontractor employees, even where workers’ compensation benefits are paid by another entity. For insurers and employers in the construction industry, the decision provides welcome clarity and reinforces a critical limitation on tort exposure arising from workplace injuries.

It is important to understand the concept behind this legal framework. The general notion is that an injured worker’s proper avenue for relief is the Workers’ Compensation Act. Thus, because an injured worker can seek relief pursuant to the administrative processes provided in the Act, the employer is generally afforded immunity from tort claims relating to the injury. The Act further provides a framework to address a situation where a subcontractor fails to pay benefits to an injured worker. In this scenario, the general contractor is held secondarily liable as a statutory employer. Of course, in exchange for this liability, the general contractor is awarded the same tort immunity the subcontractor enjoys. This all makes perfect sense, but what happens when an injured employee of the subcontractor is receiving benefits from the subcontractor pursuant to a workers’ compensation claim? Courts have held that the statutory employer immunity still protects the general contractor from tort liability, and in the instant case, the Pennsylvania Supreme Court resisted efforts to overturn that precedent.

In the case at issue, McCarthy, a general contractor, entered into a construction contract with the Borough of Norwood to perform work on the Norwood Public Library. Included in the work to be completed was the installation of a new roof, and McCarthy subcontracted with RRR Contractors, Inc.. Yoder was an employee of RRR working on the project when he fell through an uncovered hole in the roof of the building, sustaining permanently disabling injuries.

Yoder filed a complaint for negligence against McCarthy on May 10, 2018. On February 6, 2020, McCarthy filed an answer and new matter asserting affirmative defenses, seeking to bar or limit Yoder’s claim. Yoder moved to strike McCarthy’s answer and new matter as untimely, a request the trial court granted. McCarthy sought to preclude Yoder from presenting evidence on liability based on a statutory employer defense and Yoder argued that McCarthy had waived that defense. The trial court granted Yoder’s motion to preclude McCarthy’s statutory employer defense, ruling that McCarthy had not established he was a statutory employer and, thus, was not afforded immunity. The case went to a jury trial, where McCarthy was found negligent, awarding Yoder $5 million.

Following the verdict, the trial court denied McCarthy’s post-trial request for a judgment notwithstanding the jury’s verdict and entered judgment in favor of Yoder. McCarthy appealed to the Superior Court, who vacated the trial court’s judgment and remanded the case for entry of judgment in favor of McCarthy. In doing so, the Superior Court first concluded that the trial court erred in denying McCarthy’s motion for post-trial relief, holding that the precedent in LeFlar v. Gulf Creek Industrial Park #2, 515 A.2d 875 (Pa. 1986) established that a lack of subject matter jurisdiction in the context of common law actions in tort for negligence against employers is not a waivable affirmative defense. The defense may be raised at any time and may be raised by the court sua sponte. The Superior Court then went through each of elements set forth in McDonald v. Levinson Steel Co., 153 A. 424 (Pa. 1930) to determine whether McCarthy satisfied the five-part statutory employer test. The court concluded that McCarthy did. Specifically, McCarthy established that it was under contract with the borough, it occupied or controlled the premises, it entered into a subcontract with RRR, it entrusted a regular part of its business to RRR, and Yoder was an employee of RRR. Accordingly, the Superior Court found that McCarthy was a statutory employer of Yoder and, thus, immune from tort liability.

On appeal to the Pennsylvania Supreme Court, Yoder raised three issues. He first argued that the court should overrule Fonner v. Shandon, Inc., 724 A.2d 903 (Pa. 1999). In Fonner, the court had addressed the argument that the amendments to the Act in 1974 limited the tort immunity enjoyed by general contractors to only instances where the statutory employer actually pays benefits to the subcontractor’s employee. The court was not persuaded by Yoder’s arguments and reaffirmed the holding in Fonner. The general notion behind the holding in Fonner was that if the General Assembly had intended for the 1974 amendments to limit tort liability for general contractors to only those contractors who paid benefits to an injured subcontractor, they would have amended the statutory employer provision in Section 302(b) of the Act.

Next, Yoder argued that the court should overrule their decision in LeFlar, specifically the holding that the statutory employer defense is unwaivable, as it is a challenge to the common pleas court’s subject matter jurisdiction. Again, the court was not persuaded, reasoning that in order to overrule prior precedent, the principles of stare decisis apply, requiring the court to find a special justification for overruling LeFlar. The court found that Yoder was unable to establish any such justification.

Lastly, Yoder argued that McCarthy failed to establish the first, second, and fourth elements of the McDonald test. The court got into a lengthy legal discussion about whether the Superior Court abused its discretion by exceeding its scope of review on appeal, ultimately finding that it did. However, they also held that the trial court improperly divested McCarthy of an opportunity to develop the record when they denied his motion for summary judgment based on the statutory employer defense without explanation. Thus, the case will go back down to the trial court level where it will be determined whether McCarthy satisfies the McDonald test.

Therefore, in a practical sense, the Pennsylvania Supreme Court held that general contractors will continue to enjoy tort liability from injured subcontractors, regardless of whether they are paying benefits to an injured subcontractor. Additionally, a general contractor can raise the statutory employer defense at any time, and the defense is not waivable. Until the General Assembly amends Section 302(b) of the Act, this will continue to be the rule of the Commonwealth.

John Paul works in our Scranton, PA office. He can be reached at (570) 496-4617 or JPAbda@mdwcg.com.