South Carolina Supreme Court Removes Employer Protections for Contract Workers

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South Carolina Supreme Court Removes Employer Protections for Contract Workers

The Supreme Court of South Carolina has recently issued a ruling which limits protection offered by the statutory employee doctrine for injuries suffered by contract workers. This significantly increases the tort liability employers face when hiring contract workers.

In this case, an employee of a construction company ultimately died as a result of exposure to asbestos related to the maintenance work the employee performed in a polyester fiber plant. The employee and later the employee’s estate filed a lawsuit against the plant.

The defendant alleged that the employee was a statutory employee, and thus the only remedy available was through the Workers Compensation Act. Previous to the outcome of this case, the state’s statutory employee doctrine regarded contract workers as “statutory employees” from filing tort suits when they met any of the following requirements:

  • If the employee is an important part of the employer’s trade or business
  • If the employee is a necessary, essential, and integral part of the employer’s business
  • If the work has previously been performed by employees of the employer

If any of these requirements were met, an employee could not file a suit for tort violation. Instead, the employee is limited to only pursuing recovery from the Workers’ Compensation Act. This provided a large number of employers with an affirmative defense providing considerable protection from tort claims.

However, in this case, the state’s Supreme Court held that the doctrine’s three-part test was confusing, inherently conflicting, and difficult to apply. Additionally, the court found that it simply did not reflect the reality that in a modern economy, it is an ordinary business practice to subcontract work that the company could do with its own employees. Further, the court found that the doctrine appeared to be more focused upon providing employers with immunity than upon its actual intent, which was to prevent employers from simply contracting out work in order to evade liability.

The court, therefore, decided to discard the three-part test and adopt a new form of the rule that would better match the doctrine to its original intent. The court decided that in order to defend a position to outsource, a suitable test would be if the manager of a business has a reasonable belief that their workforce is not equipped to perform a given job or that the company’s financial interests would be better served by outsourcing instead of doing so simply to avoid paying to insure workers.

If this test is applied, then it will be determined that the job in question is not an integral part of the business, and thus the doctrine does not apply. Therefore, the employer can be sued by the employee for the injuries they incurred.

When making this decision, the court did consider the argument that if a non-employee worker was covered by workers’ compensation, there was no need for them to be able to recover damages in tort. However, the court felt that the immunity given to the employer in this situation was a collateral benefit of the doctrine being considered and not one of the purposes of the doctrine. Having a non-employee worker covered by Workers’ Compensation Insurance satisfies public policy, which tends to prefer these workers to be covered by this insurance. However, giving immunity to the employer really doesn’t further this public policy.

What this means for employers is that this case opens the door for employees of contractors and subcontractors to file many more tort liabilities. However, the ramifications of this case are yet to be seen, and it is possible that the case will continue with further challenges.