In this personal injury action arising out of a workplace accident, this court is called upon to interpret the standard for determining, under La.Rev.Stat. 23:1061 as amended in 1989, whether contract work falls within the trade, business or occupation of an alleged principal who is asserting a statutory employer defense.
At the time of the accident, plaintiff was an employee of Republic Contractors, a subcontractor on a modernization project at a pulp mill operated by Riverwood International USA, Inc. Riverwood, which was engaged in the business of producing paper products at its mill, contracted with Republic for construction work in various phases of Riverwood's project to modernize its facilities.
Riverwood's mill produced and recycled white liquor, an essential ingredient used in the processing of wood chips to make paper, through two identical systems. Each system contained a lime conveyor that delivered lime to the slaker. Riverwood contracted with Republic to remove the existing conveyors and to replace them with state-of-the-art electronically controlled conveyors. The contract price for this work was $72,871.71.
During the first phase of the project, Republic replaced one of the conveyors while production at the mill was shut down. When the first phase was completed, the mill resumed production. The second phase then began, with only one of the mill's dual lines operating. During this second phase, plaintiff was injured while performing part of the contract work.
At the time of his injury, plaintiff was working as one of Republic's four-man crew replacing the second conveyor. He lost his footing, falling approximately thirty feet from the tank on which he was standing and rolling
Plaintiff filed this tort action against Riverwood, alleging both strict liability and negligence. Riverwood filed a motion for summary judgment, asserting that plaintiff was performing work that was an integral part of Riverwood's trade, business or occupation so as to render plaintiff a statutory employee whose exclusive remedy was workers' compensation.
The trial court granted the motion and rendered judgment in favor of Riverwood. On plaintiff's appeal, the court of appeal reversed. 26,741 (La.App.2d Cir. 6/21/95), 658 So.2d 715. We granted Riverwood's application for certiorari, 95-1830 (La.11/3/95), 661 So.2d 1370, because the case presented a significant unresolved issue of law for which this court should provide guidance to lower courts and litigants, and because there were conflicting decisions among the state courts of appeal. La.Sup.Ct.R.X, §§ 1(a)(1) and 2.
History of Statutory Employer Doctrine
Prior to the 1989 amendment, La.Rev.Stat. 23:1061, which had remained virtually unchanged since the 1914 adoption of the Workers' Compensation Act, provided:
Because compensation responsibility is keyed to the existence of an employment relationship, the Act from its inception addressed the possibility of an employer's interposing an independent contractor or subcontractor between itself and its injured worker in order to avoid compensation liability. The statutory solution, adopted by most state compensation laws, was to deem an entity that attempted to evade compensation responsibility to be a statutory employer and to impose contingent compensation responsibility on that entity. Wex S. Malone & H. Alston Johnson, III, Workers' Compensation Law and Practice, 13 Louisiana Civil Law Treatise, § 121 (3d ed. 1994).
The Louisiana provision for imposing compensation responsibility on such devious employers is La.Rev.Stat. 23:1061. The original purpose of Section 1061 clearly was to preclude a principal from contracting out "the essential economic activities of an enterprise to impecunious sub-contractors so as to exculpate himself from compensation liability." Meche v. Farmers Drier & Storage Co., 193 So.2d 807 (La.App. 3d Cir.), cert. denied, 250 La. 369, 195 So.2d 644 (1967). To achieve that purpose, Section 1061 created an additional source of compensation recovery for the injured employee, subjecting any person (called a principal or statutory employer) to compensation liability when that person undertakes work that is part of his trade business or occupation by means of a contract with another or when that person contracts to perform work and sub-contracts a portion of that work to another. Moore v. RLCC Technologies, Inc., 95-2621 (La.2/28/96), 668 So.2d 1135 (citing Malone & Johnson, supra, § 128).
Nothing in the Act expressly provided, or even suggested, that a principal was entitled to any tort immunity, even if the principal
In 1950, this court, and not the Legislature, granted tort immunity to a principal for the first time. In Thibodaux v. Sun Oil Co., 218 La. 453, 49 So.2d 852 (1950), without any discussion of the absence in Section 1061 or 1032 of any grant of tort immunity to a principal, or of a principal's apparent ability to avoid any compensation liability, or of the question whether immunity should be conferred only if a principal actually pays compensation, this court maintained an exception of no cause of action which limited an injured employee's remedy against a principal to workers' compensation.
In the view of some respected commentators, the Thibodaux decision distorted Section 1061, which was "intended to broaden the scope of recovery available to laborers," but which "has in fact been applied to limit this recovery." George W. Pugh, Jr., Judge Albert Tate, Jr. and the Employee Personal Injury Action: An Overview, 47 La.L.Rev. 993, 1004 (1987). In any event, the Thibodaux decision shifted the use of Section 1061 from its intended compensatory purpose of providing an injured worker with an additional source of compensation to a defensive use of the statutory employment concept which precluded an injured worker's tort recovery without any quid pro quo from the principal who, because of his ability to avoid compensation liability, effectively became immune both in tort and in compensation.
This shift from the original purpose of Section 1061 is significant from both a procedural and a policy standpoint. Procedurally, this shift changed the burden of proof from the plaintiff seeking compensation to the defendant seeking to invoke the statutory employment relationship as an affirmative defense. As a policy matter, Section 1061, when invoked to further its intended compensatory purpose that an injured worker's true employer would be responsible for compensation, was accorded a liberal construction because of the beneficial purpose of the Workers' Compensation Act. Williams v. Shell Oil Co., 677 F.2d 506, 508 (5th Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 570, 74 L.Ed.2d 933 (1982); Malone & Johnson, supra, § 126. However, when Section 1061 began to be used defensively by a principal seeking to avoid tort liability to the employee of a contractor, the same policy concerns were not applicable.
Despite these policy considerations, the Thibodaux decision, in judicially expanding tort immunity to a principal, also established a liberal interpretive analysis of the central issue of the statutory employment relationship, i.e., whether the contract work was part of the alleged principal's trade, business or occupation. The Thibodaux decision enunciated a liberal "integral relationship" standard for defining the scope of the statutory employment relationship.
In Thibodaux, Sun Oil, an oil producer, contracted with J.C. Chance Well Service to perform work, including drilling a well. Chance subcontracted part of the work, including fishing lost tools out of the well, to Houston Oil Field Material. As a result of the collapse of an oil derrick belonging to Sun Oil, an employee of Houston was injured and an employee of Chance was killed.
This court also affirmed, reasoning that "[t]he drilling of wells, the reworking if necessary, and the `fishing out' of well tools and implements which become stuck in the course of drilling the well are all interrelated and component parts, though different phases, of oil production. In other words, both Thibodaux and Baker were performing services in connection with work which was part of the business, trade and occupation of Sun Oil Company, or so closely related thereto as to become an integral part thereof." 49 So.2d at 854 (emphasis added).
The underscored language, although not expressly announced as the standard for determining trade, business or occupation, became the basis for the so-called integral relationship test which was used in cases following Thibodaux to liberally construe tort immunity in favor of principals.
Under the liberal integral relationship test—also referred to as the "essential to business" test—few instances of contract work were held not to be a part of the principal's business. See Foster v. Western Electric Co., 258 So.2d 153 (La.App. 2d Cir. 1972) (holding that the operation of a plant cafeteria was part of the plant owner's business); Slocum v. Lamartiniere, 369 So.2d 201 (La.App. 3d Cir.), cert. denied, 372 So.2d 569 (1979) (holding construction of new building was part of a grocer's business).
Trend toward Narrow Construction of Statutory Employer Defense
At first, Thibodaux's liberal integral relationship test for the statutory employer defense was virtually all-encompassing. However, the courts began to recognize some factors which tended to take the contract work outside of the principal's trade, business or occupation, even under the test referred to in Thibodaux. One area that traditionally has been considered outside the principal's business is that of new construction and reconstruction of the principal's buildings and facilities.
This court in Reeves v. Louisiana and Ark. Ry. Co., 282 So.2d 503 (La.1973), held that an oil company's engaging a contractor to construct a new petroleum coking unit at its refinery was not part of its business operations.
Despite suggestions that this court reconsider its 1950 Thibodaux decision,
The 1976 amendment to Section 1032, in conferring tort immunity to a principal when the work being performed is a part of the principal's trade, business or occupation, tracked verbatim the language in Section 1061 defining a principal.
During the ten years following the 1976 amendment, this court began to reexamine "the expansive trend taken by the courts in recent years in the so-called statutory employer cases." Rowe v. Northwestern Nat'l Ins. Co., 471 So.2d 226, 229 (La.1985)(Lemmon, J., concurring). This decade may be characterized as a time of judicial uneasiness with an expansive interpretation of a principal's trade, business or occupation. Malone & Johnson, supra, § 364. In a series of cases, this court began a discernable shift from a liberal to a more restrictive construction of the statutory employer defense.
The Berry Decision
The restrictive construction of the statutory employment relationship, when used as a defense, culminated in Berry v. Holston Well Service, Inc., 488 So.2d 934 (La.1986). In Berry, this court criticized the "integral relationship" test, noting that this "almost limitless standard yielded inconsistent and often illogical results since almost everything could be said to be integrally related to the principal's trade, business or occupation." Id. at 937. Further, this court declared that it was expressly "abandon[ing] the `integral relation' test" and was adopting a test "more in line with the purpose of sections 1032 and 1061." Id. Accordingly, this court enunciated the following three-tier analysis for determining whether contract work is part of an alleged principal's trade, business or occupation:
Id. at 937-39.
Thus the Berry decision changed the law by precluding statutory employer status as a defense when (1) the work was specialized per se, or (2) when the principal was not actually engaged in the contract work at the time of the accident. Malone & Johnson, supra, § 364. The second tier of the socalled Berry test, however, was a list of some of the factors that the courts had considered in determining statutory employment in the ten years preceding Berry.
In an apparent response to Berry's pronouncement of situations in which the statutory employer defense is absolutely precluded, the Legislature in 1989 amended La.Rev. Stat. 23:1061 to add the following sentence, which directly tracks several of the factors enumerated in Berry, to the first paragraph of Section 1061:
The issue which prompted our grant of certiorari in this case is the effect of the 1989 amendment on the three-tiered Berry analysis for determining statutory employer status and on the jurisprudence preceding Berry.
Present Standard for Determining Statutory Employer Defense
The starting point in our analysis is the statutory language of Section 1061, as amended in 1989.
The majority of Louisiana appellate courts
We conclude, agreeing with Professor Johnson, that the 1989 amendment was designed primarily to overrule the part of Berry dealing with specialization per se and to declare that a finding of specialization is not determinative of the absence of a statutory employment relationship.
We therefore hold that the appropriate standard under the amended Section 1061 for determining whether the contract work is part of the alleged principal's trade, business or occupation is for the court to consider all pertinent factors under the totality of the circumstances. The presence or absence of any one factor is not determinative, and the presence of one factor may compensate for the lack of another.
Thus the determination of whether the contract work was part of the principal's trade, business or occupation is a factual issue to be resolved on a case-by-case basis. Lewis v. Exxon Corp., 441 So.2d 192 (La. 1983). Once the Legislature declared in 1989 that no single factor is determinative, the fact-based nature of the inquiry virtually necessitates a multi-factored, case-by-case factual inquiry under the totality of the circumstances.
For these reasons, the judgment of the court of appeal is affirmed.
KIMBALL, Justice, dissenting.
I believe the legislature intended to overrule the Berry v. Holston Well Service
At the time of Berry, this court was "shift[ing] its interpretive analysis regarding the statutory employer defense from one which favored a liberal application" to a more restrictive interpretation.
Based upon the foregoing, I would reverse the court of appeal's judgment and reinstate the judgment of the trial court, which applied the integral relation test to the facts of this case. Accordingly, I respectfully dissent.
VICTORY, Justice, dissenting.
In my view the majority's test will produce the same result in almost every case as if the Berry test were applied, a result the Legislature was clearly attempting to change.
Reasons dissenting from denial of Rehearing by Justice Marcus filed 11-15-96
MARCUS, Justice, dissenting.
On further consideration, I am of the opinion that the dissents were correct, that is, the legislature intended to overrule the Berry decision and return to the "integral relation" test outlined by this court in Thibodaux. In my view, the majority's test will produce the
From these cases it will be readily seen that the test is not one of whether the subcontractor's activity is useful, necessary, or even absolutely essential to the statutory employer's business, since, after all, this could be said of practically any repair, construction or transportation service. The test (except in cases where the work is obviously a subcontracted fraction of a main contract) is whether this indispensable activity is, in that business, normally carried on through employees rather than independent contractors.
Ordinarily construction work, such as building a factory structure, installing a conveyor system ... would be considered outside the trade or business of a manufacturing or mercantile establishment. But if the defendant is a business which by its size and nature is accustomed to carrying on a more or less ongoing program of construction, replacement, and maintenance, perhaps even having a `construction division,' or which can be shown to have handled its own construction in the past, a job of construction delegated to a contractor will be brought within the statute.
Arthur Larson, 1C Workmen's Compensation Law § 49.16(j) (emphasis added).