Special Employees and Workers’ Compensation Issues in Personal Injury Cases

Because we have expertise in both employment and personal injury matters, Harris Grombchevsky LLP can navigate complicated legal issues like the “special employment” doctrine in a personal injury case. Take, for example, a gentleman we represented who fell from a forklift while working as an aircraft mechanic, consequently suffering serious head and neck injuries that ultimately left him a permanent quadriplegic. The defendant corporation asserted that our client was its “special employee,” and therefore claimed an exclusive remedy defense under the Workers’ Compensation Act. If successful, this defense would have immunized the corporation from any action and disposed of the case on summary adjudication. Instead, we preemptively filed a motion for summary adjudication of the employer-employee relationship issue, which ultimately led to a settlement sufficient to assure that our severely injured client could afford proper life care.

The “special employment” doctrine is a critical restraint on recovery for people seriously injured on the job is the exclusivity of the limited remedy available under the workers’ compensation system. A Plaintiff’s status as an employee or “special employee” limits the worker’s remedies to those provided by workers’ compensation and shields employers from potential tort liability. The distinction between employees, special employees, and independent contractors can have a significant impact on the recovery available to Plaintiffs who are severely injured on the job.

California courts have placed a considerably heavier burden on parties asserting special employment as a defense to a civil action than on the parties seeking to negate it. To assert a special employment defense, the defendant must satisfy an eight-factor test to prove the existence of an employer-employee relationship. In contrast, the California Supreme Court has held that Plaintiff needs to only show “evidence to the contrary that negates the existence of the employment relationship.”

Special Employment

A proper understanding of the “special employment” doctrine during the initial screening of a potential client’s claim, as well as during the discovery phase of the case, by Plaintiffs’ and Claimants’ counsel can dramatically impact the care and quality of life their clients receive. Conversely, defense counsel can radically limit their clients’ exposure.

A “special employment” relationship arises when an employer lends an employee to another employer and relinquishes to the borrowing employer all right of control over the employee’s activities. The borrowed employee is held to have two employers— the original or “general” employer and a second, the “special” employer.

A dual employment relationship may exist if more than one individual or company has the right to control or direct an employee in the performance of their work or if an employee is under a contract of hire with two different employers. Under the “joint employment” or “dual employers” test, the court examines whether one employer, while contracting in good faith with an otherwise independent company, has retained for itself sufficient control of the terms and conditions of the employment of the employees who are employed by the other employer.

The law recognizes that an employee can be employed by more than one employer simultaneously for the same services, and the main test of an employment relationship is the special employer’s “right to control the manner and means of accomplishing the result desired”. However, a pervasive theme of court opinions on this topic is that dual or special employment analysis requires a number of factual determinations.

When deciding whether or not the doctrine of dual employers will apply, the court will look at the totality of the circumstances, including factors such as the nature and degree of control over employees, the day-to-day supervision of employees, including discipline, the authority to hire and fire employees, the power to set conditions of employment, and control of employee records and payroll, with a special emphasis placed upon the extent to which the defendant controls the Plaintiff’s performance of employee duties.

While dual employment does not necessarily exist whenever two entities affect the actions of a single employee, it may exist if two employers exercise substantial control over the employee by participating in the selection, hiring, and paying of the employee, by having the power to discharge the employee, and by controlling the employee in the performance of his or her duties. It is also significant if the two employers contribute equally to the wages and to the maintenance of the equipment, have equal rights to the use of the equipment, and have equal control over the individual.

Kowalski, Shell Oil Company and Peterson Company

One of the landmark cases regarding the special employment doctrine, Shell Oil Company hired the Peterson Company to perform maintenance work at the Shell refinery in Martinez. Shell and Peterson entered into a written agreement that provided that Peterson would be the general employer of Peterson employees and Shell would be their special employer. The contract gave Shell “the right to fully control the details and means of doing the work hereby contracted for,” but the contract also vested supervision of Peterson’s employees in Peterson. Kowalski, one of the employees provided by Peterson, amputated his arm with a saw that was provided by Shell. When Kowalski sued Shell to recover damages, Shell claimed that Kowalski was its employee whose exclusive remedy was workers' compensation.

The California Supreme Court noted that the contract between Peterson and Shell was ambiguous. Kowalski provides that,

“Since a contract is not conclusive evidence of the existence of the right to control, the courts have looked to a number of factors as evidentiary indicia of the existence of a special employment relationship. The paramount consideration appears to be whether the alleged special employer exercises control over the details of an employee’s work. Such control strongly supports an inference that a special employment exists.”

Kowalski also notes various factors that support the finding of a special relationship: the power to discharge a worker, the nature of the services, whether skilled or unskilled, whether the work is part of the employer’s regular business, the duration of the employment period, and who supplies the work tools. Payment of wages is not determinative, but it appears to be a factor to consider. The Kowalski Court noted that the existence of a special employment relationship tends to be indicated when “(1) the employee provides unskilled labor, (2) the work he performs is part of the employer's regular business, (3) the employment period is lengthy, and (4) the employer provides the tools and equipment used. Evidence to the contrary negates the existence of a special employment relationship.”

Another factor is whether the employee consented to the special employment relationship with the understanding that he may forego the ability to sue the special employer at common law for negligence, and whether the parties believed they were creating an employment relationship. The court concluded that there was not a special employment relationship.

Finally, Kowalski discusses the importance of analyzing the degree to which the purported special employer actually supervises the employee’s work.

“In the present case, the uncontradicted evidence shows that Shell did not exercise any control over Kowalski’s duties. He was at all times under the direct supervision of Peterson’s carpenter foreman. Shell’s carpenter foreman, the person most likely to have the authority to direct the details of Kowalski’s work, testified that he had no such right, had never supervised Kowalski, and did not know of any Shell employee who did. Shell’s carpenter foreman and the manager of its safety department, as well as Peterson’s carpenter foreman, testified that Shell’s involvement with Peterson’s carpentry crew was limited to the giving of instructions as to the size and locations of scaffolds needed by Shell. “

It is important to note that a “borrowing employer” does not need to have all the rights of control for a special employment relationship to exist. Brassinga described factors that suggest control and so-called “non-control” factors that must be explored in determining whether a special employment relationship exists. Because the case was on appeal from summary judgment and a directed verdict, these matters had not been fully considered by a jury, so the court remanded for the numerous factual determinations needed to establish whether a special employment relationship existed.

Under California law, a Plaintiff’s status as an employee, special employee, or independent contractor has a significant impact on the recovery available to Plaintiffs who are injured on the job. Thus, a thorough under- standing of a Plaintiff’s employment status is crucial to attorneys when making a determination of the remedies available outside of the workers’ compensation system.

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