Work-related injuries, especially in construction, are not uncommon. However, the outcomes in workers’ compensation cases vary because the contractual relationship between the parties is often not clear. Under Louisiana law, workers’ compensation is provided to an employee if they’re injured by an accident “arising out of” and “in the course of” his employment with a statutory employer. However, the issue centers on whether the defendant is a statutory employer thereby limiting the plaintiff to workers’ compensation as their sole remedy. If a valid, written contract recognizes the existence of a statutory employer relationship, it creates a rebuttable presumption; this requires careful interpretation of the terms of the contract.
On August 12, 2008, Louis Fox (hereinafter “plaintiff”), employee of Foster Wheeler North America Corp. (hereinafter “Foster”), was assisting with the installation of boiler units at the Rodemacher Power Station near Lena. While working inside a cyclone tower, the plaintiff alleged that he sustained an injury when an object fell from above striking his head and neck. The plaintiff sought damages beyond workers’ compensation against several defendants including CLECO Power (hereinafter “CLECO”), owner of the power station, and general contractor Shaw Constructors, Inc. (hereinafter “Shaw”).
The installation of the boiler units was the result of a written contract between CLECO Power, owner of the station, and Shaw Constructors, Inc. As general contractor, Shaw selected Stone and Webster, Inc. (hereinafter “Stone”) to take charge of engineering and procurement services. Stone then entered into a purchase order agreement with Foster for the sale and installation of the boiler units.
The issue in the lawsuit was whether Shaw entered directly into a subcontract with Foster when Stone entered into the purchase order agreement thereby making Shaw the plaintiff’s statutory employer. The trial court cited two circumstances when a statutory employer relationship is created: (1) under the “two contract” theory (a.k.a. standing in the “middle” of the two contracts) and (2) the existence of a written contract recognizing the principal as the statutory employer. Shaw based its statutory immunity on the two contract theory. The two contract theory is applicable when (i) the principal enters into a contract with a third party; (ii) pursuant to that contract, work must be performed; and (iii) in order for the principal to fulfill its contractual obligation to perform the work, the principal enters into a subcontract for all or part of the work performed.
The trial court focused on the third element after concluding there was no question the first two elements were met because Shaw entered into a contract with CLECO and, pursuant to that general contract, work was performed. The plaintiff argued Shaw entered into a subcontract with Stone, who then subcontracted part of its work to Foster. The trial court however determined that Foster contracted with Shaw after citing a provision in the Corporate Guaranty that read in-part “Whereas, Purchaser (Stone) as agent for contractor (Shaw) and FWNA (Foster Wheeler) have entered into that certain purchase order for two CFB Boilers.” The court concluded this provision made clear that Stone was acting on behalf and for the benefit of Shaw, as the principal of Stone and granted Shaw and CLECO summary judgment.
The Court of Appeals, Third Circuit, affirmed the summary judgment motion for similar reasons. First, in the “Consent to Assignment” document included in the Stone- Foster agreement the court noted that it listed CLECO Power as owner, Shaw as contractor, and Foster as subcontractor. The court found this document clearly indicated that Foster was a subcontractor of Shaw. In addition, the provision in the Shaw-Stone contract authorized Stone to be responsible for “procurement services” and therefore empowered Stone to act on behalf of Shaw. Thus, the plaintiff was limited to workers’ compensation damages because Shaw was their statutory employer.
This case is a valuable reminder for injured workers to review the terms of their employment contract before seeking damages beyond workers’ compensation from an employer. An effective review of an employment contract should be conducted under the guidance of an attorney. If you’re an injured worker and looking for legal counsel, contact the Berniard Law Firm for immediate assistance from an experienced attorney.