Contracts for Multi-Employer Projects Should Clearly Address Local Workers’ Comp Regimes

Yesterday, the U.S. District Court for the Eastern District of Louisiana granted summary judgment to a refinery owner and two of that company’s employees in a suit brought by a worker who had been injured while working at the refinery.  Specifically, the worker suffered chemical burns when a substance sprayed onto the worker and through his personal protective equipment.  The worker was employed by a contractor and not the refinery owner directly.  The worker brought several claims, but of most importance here are the worker’s negligence claims against the refinery owner and two of the refinery owner’s employees.

As is true in most jurisdictions, Louisiana recognizes the “statutory employer” concept as part of its workers’ compensation regime.  In Louisiana, a statutory employer relationship exists when either there is a written contract that recognizes the principal (here, the refinery owner) as a statutory employer (responsible for workers’ compensation) or whenever the services or work provided by the contractor (the direct employer of the worker) are contemplated or included in a contract between the principal and any person or entity other than the worker’s direct employer.

In the case, the refinery owner’s contract with the contractor contained the necessary language for the refinery owner to avail itself of the workers’ compensation regime’s exclusivity for recovery for injuries (thus precluding the worker’s negligence claims against both the refinery owner and the refinery owner’s employees). Specifically, the contract stated, “Performance of any Work by [Contractor] constitutes their recognition and agreement that a statutory employer relationship as contemplated in [the specific Louisiana code section] … exists between the [Contractor] and [the refinery owner]. Such statutory employer relationship applies to [Contractor’s] direct, borrowed, special or statutory employees. Further, the parties acknowledge that the Work to be performed under this Agreement is an integral part of, or essential to, the ability of [refinery owner] to generate its own goods, products or services.”

The Court found found that the contract created a rebuttable presumption that the refinery owner was the worker’s statutory employer and that the worker failed to rebut the presumption by demonstrating that the work was not an integral part of or essential to the refinery owner’s ability to generate its goods, products, or services.  The Court dismissed all of the worker’s negligence claims because they were subject to the worker’s compensation regime’s exclusivity remedy.

The case is a reminder that for any multi-party project, ensure that the contracts contemplate the local jurisdiction’s workers’ compensation regime and include any requisite verbiage.  Be wary of using form contracts from a different jurisdiction.



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