Statutory employers are established by the Pennsylvania Workers’ Compensation Act (“the Act”), whereas direct employers are established by contract or common law. Under the Act, a contractor who subcontracts any part of his or her contract may be considered a statutory employer according to the Statutory Employer Doctrine. The purpose of the doctrine is to provide injured employees of subcontractors a form of legal redress in situations where subcontractors do not carry workers’ compensation insurance.
The Statutory Employer Defense
Contractors who qualify as statutory employers may be liable for paying workers’ compensation to the subcontractor’s employees who become injured on the job. Employers who are deemed statutory employers are granted tort immunity and may claim the legal defense of the exclusive remedy rule, which states that workers’ compensation is generally the exclusive remedy for employees seeking compensation or damages for work-related injuries.
Statutory Employer Test
Under Section 302(a) of the Act, three elements must be established for a contractor to be considered a statutory employer:
- a contract between a contractor and a subcontractor;
- the contract must involve a regular or recurrent part of the contractor’s business, occupation, profession, or trade, and;
- the subcontractor must not have secured payment of workers’ compensation benefits.
Section 302(b) of the Act sets forth the “McDonald Test” for determining whether a contractor will be liable for its subcontractor’s employees’ workers’ compensation benefits. The test involves five factors that must be established for an owner or contractor to be deemed a statutory employer in accordance with the case, McDonald v. Levinson Steel:
- a contract with an employer who is the owner of land (or in the position of an owner);
- the premises are occupied or under the control of the employer;
- the employer made a subcontract;
- the subcontractor was entrusted with part of the contractor’s regular business; and
- an employee of the subcontractor is injured.
Secondary Liability
If a statutory employer is found liable, then he or she may be responsible for paying workers’ compensation benefits to the subcontractors’ employees for work-related injuries. However, the statutory employer may then seek reimbursement from the subcontractor for those expenses. The statutory employer is only secondarily liable to the subcontractor, meaning the statutory employer may only have to pay if the subcontractor failed to maintain workers’ compensation insurance to cover the costs associated with the workplace injury.
There are many factors to consider when determining whether a contractor is eligible for statutory employer status. Those who subcontract work in Pennsylvania should be aware that they must require their subcontractors to carry workers’ compensation insurance and gather proof of such coverage or else risk possibly be subject to secondary liability as a statutory employer.
Philadelphia, PA Workers’ Compensation Attorneys at Larry Pitt & Associates, P.C. Help Workers Who Have Been Denied Benefits
If you were injured on the job, you may be entitled to workers’ compensation benefits as well as other forms of compensation and damages. Contact a Philadelphia workers’ compensation attorney at Larry Pitt & Associates, P.C. to discuss your options. Our experienced attorneys can help you obtain the maximum compensation to which you are entitled. For a free consultation, complete our online contact form or call us at 888-PITT-LAW.
We assist injured workers in Berks County, Bucks County, Chester County, Delaware County, Montgomery County, Philadelphia County and throughout Pennsylvania, including those in the communities of Abington, Ambler, Ardmore, Bala Cynwyd, Bensalem, Clifton Heights, Crum Lynne, Darby, Downingtown, Doylestown, Drexel Hill, Essington, Folcroft, Glenolden, Haverford, Havertown, Holmes, Kutztown, Lansdowne, Media, Merion Station, Morton, Narberth, Norristown, Norwood, Philadelphia, Prospect Park, Quakertown, Reading, Roxborough, Sharon Hill, Upper Darby, West Chester and Wynnewood.
