Parties Who Hire Independent Contractors Are Not Liable For Injuries Sustained By Contractor's Employees Even Where Hiring Party's Failure to Comply with Cal-OSHA Regulations Contributed To Injury

By: Grace Chan
September 27, 2011

In Privette v. Superior Court, the California Supreme Court held that, when employees of independent contractors are injured on the job, they cannot sue the entity that hired the contractor for work.  The rationale for this holding was that workplace injuries are covered by workers' compensation insurance, the cost of which is included in the contract price paid by the hiring entity. 

In the recent case of SeaBright v. US Airways, Inc., the California Supreme Court considered whether the Privette rule applied even when the hiring entity failed to comply with workplace safety requirements.  US Airways uses a conveyor to transport luggage at San Francisco International Airport.  While the airport is the actual owner of the conveyor, US Airways operates the conveyor under a permit and is responsible for its maintenance.  US Airways hired an independent contractor, Lloyd W. Aubrey Co. ("Lloyd"), to maintain and repair the conveyor.  US Airways did not direct Lloyd's employees in their work. 

The conveyor did not have certain safeguards that were required by applicable workplace safety regulations.  Anthony Verdon Lujan was an employee of Lloyd.  He inspected the conveyor as part of his duties and sustained injuries when his arm got caught in the conveyor's moving parts.  He filed for workers' compensation benefits and SeaBright Insurance Company, Lloyd's workers' compensation insurance, paid benefits.  SeaBright then sued US Airways, alleging that it caused Lujan's injuries and sought to recover the amount paid out in benefits to Lujan.  Lujan intervened as a plaintiff, asserting causes of action for negligence and premises liability. 

US Airways moved for summary judgment, citing the Privette rule.  It also relied on the California Supreme Court decision in Hooker v. Department of Transportation, which held that a hirer of an independent contractor could be liable for workplace injuries sustained by the contractor's employees if the hirer retained control over the contractor's work and its exercise of that control affirmatively contributed to the workplace injury.  SeaBright opposed US Airways' motion for summary judgment and argued that the lack of safeguards on the conveyor violated Cal-OSHA regulations and that the safeguards would have prevented Lujan's injuries. 

The trial court granted summary judgment in US Airways' favor and SeaBright appealed.  The Court of Appeal held that, under Cal-OSHA requirements, US Airways had a non-delegable duty to ensure that its conveyor was equipped with the safeguards.  It further held that whether the lack of safeguards caused Lujan's injury was a question of fact  precluding summary judgment.  It thus reversed the trial court's ruling and US Airways petitioned the California Supreme Court for review. 

The Supreme Court began its analysis by explaining that two questions govern the assignment of tort liability: (1) did the defendant owe the plaintiff a duty of care; and (2) if so, what standard of care applied.  Plaintiffs argued that Cal-OSHA regulations imposed a duty of care on US Airways that extended to Lloyd employees and that US Airways could not delegate that duty to Lloyd. 

The Court stated that Privette, along with a series of subsequent cases, provide that the hiring entity of an independent contractor presumptively delegates to the contractor its tort law duty to provide a safe work environment for the contractor's employees.  The issue in this case, however, was whether the hiring entity can be liable because of its failure to comply with Cal-OSHA regulations.  The Court explained that this issue turns on whether the tort law duty to comply with Cal-OSHA regulations for the benefit of the contractor's employees is non-delegable. 

The non-delegable duties doctrine provides that a party owing duties to others may not evade those duties by claiming to have delegated them to an independent contractor.  The doctrine applies when the duty preexists the hiring of the independent contractor and does not arise from the contract with the contractor.  Here, the Court held that, while US Airways owed a preexisting duty to its own employees that certainly could not be delegated, any tort law duty that US Airways owed to Lloyd's employees arose because of the contract with Lloyd.  Thus, those duties did not fall within the non-delegable duties doctrine. 

Moreover, the Court stated that the rationale in Privette was equally applicable and supported the policy favoring delegation in this matter.  Specifically, the cost of workers' compensation is presumptively incorporated into the contract price paid by the hiring entity to the contractor.  The Court further noted that workers' compensation law limits independent contractor liability.  In light of this limitation, it would be unfair to allow independent contractor employees to obtain tort damages from the hiring entity when employees of the hiring entity would not be able to recover damages from independent contractors.  The Court thus held that the plaintiffs could not recover in tort from US Airways and reversed the judgment of the Court of Appeal. 

This case affirms the Privette rule and limits liability for entities who hire independent contractors.  The result could have been different, however, if US Airways had directed the Lloyd employees' work.  Whether a party is truly an independent contractor for purposes of liability issues, as well as numerous other legal issues such as wage and hour laws, depends on multiple factors, including whether the hiring entity has control or the right to control the worker with regard to the work and the manner in which it is performed.  Employers who hire independent contractors should be careful to ensure that those contractors are not inadvertently converted to employees.  Note that simply calling it an independent contractor agreement is not generally determinative of whether a party is truly an independent contractor. 

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