Virginia Lawyers Weekly VA Lawyers Weekly
Where an employer hires an independent contractor to “perform or execute any work which is a part of his trade, business or occupation and contracts” the South Carolina Workers’ Compensation Law treats the contractor as if “the work[er] had been immediately employed by him.”
Despite this, three independent contractors severely injured when a pump exploded during maintenance can sue the “employer” because, when an employer makes a “legitimate business decision” to outsource a portion of its work, the contractors it hires to perform that work are not “statutory employees” for workers’ compensation purposes.
Background
These consolidated tort actions arise out of a 2016 industrial accident at a South Carolina chemical manufacturing plant. Three independent contractors of Eastman Chemical Company were severely injured, one of them fatally, when a pump exploded during maintenance.
Eastman contends that the plaintiffs’ injuries are covered by workers’ compensation, and that the South Carolina Workers’ Compensation Law’s exclusive remedy thus deprives the courts of subject matter jurisdiction to hear their personal injury actions. The plaintiffs, on the other hand, point to an express exemption in the Act for “injuries resulting from acts of a subcontractor of the employer,” which preserves a tort remedy for workers who are independent contractors of a business owner.
But the Act clarifies that not all independent contractors are exempt from its coverage. When an employer “undertakes to perform or execute any work which is a part of his trade, business or occupation and contracts” with an independent contractor to complete that work, the terms of the Act apply as if “the work[er] had been immediately employed by him.” The district court concluded that the plaintiffs’ maintenance and repair work was indeed part of Eastman’s “trade, business or occupation” and that it therefore lacked subject matter jurisdiction to hear their tort claims.
Three months later, the South Carolina Court of Appeals decided, in Keene v. CNA Holdings, LLC, 827 S.E.2d 183 (Ct. App. 2019), that maintenance contractors are not, as a general matter, manufacturers’ statutory employees. The plaintiffs moved for reconsideration in light of Keene.
The district court stated that Keene did not change the court’s conclusion that “maintenance on a line that produces chemicals that Eastman sells is an important part of Eastman’s trade, business, or occupation.” This court consolidated the appeals and then put the case in abeyance pending the South Carolina Supreme Court’s review of the Court of Appeals’ decision in Keene.
Analysis
The South Carolina Supreme Court has now clarified, in Keene, that when an employer makes a “legitimate business decision” to outsource a portion of its work, the contractors it hires to perform that work are not “statutory employees” for workers’ compensation purposes.
Here, when Eastman sold the Calhoun County plant in 2011 and laid off nearly all 400 of its workers, it made a “legitimate business decision to outsource” its operations and maintenance work. Eastman does not claim that it still employs production, maintenance or repair workers at the plant. And it has never claimed that its outsourcing operation was somehow illegitimate or “driven by a desire to avoid the cost of insuring workers.” Eastman conceded at oral argument that it does not allege illegitimate motivations, and there is nothing in the record that could support such a finding.
Indeed, it is uncontested that the plaintiffs here were insured by – and received worker’s compensation from – their direct employer. Under a straightforward application of Keene, these undisputed facts are sufficient to resolve the case. It follows that the plaintiffs, independent contractors performing maintenance at the time of the 2016 pump explosion, were not statutory employees and may bring personal injury actions.
Eastman nevertheless contends that this court should affirm the district court’s decision because that court correctly applied South Carolina’s prior precedent and the Keene decision should apply only prospectively. The court disagrees. The South Carolina Supreme Court has decided Keene, and Keene applies to this case.
Mundy
Eastman’s co-defendant, Mundy Maintenance Service and Operations LLC, employed the contractors who made the initial attempt to clear the drainpipe before the explosion. This court’s holding that the plaintiffs are independent contractors and not statutory employees under Keene means that their suits may proceed against Mundy as well as against Eastman.
Reversed and remanded.
Zeigler v. Eastman Chemical Company, Case Nos. 19-1643, 19-1646, 19-1647, Nov. 23, 2022. 4th Cir. (Harris), from DSC at Orangeburg (Childs). Louis M. Bograd for Appellant. Allen Mattison Bogan and Keith D. Munson for Appellees. VLW 022-2-247. 26 pp.
