The South Carolina Supreme Court recently issued a landmark decision that narrowed the statutory employee doctrine and increased the likelihood companies can be held liable for injuries suffered by their contractor or subcontractor workers.
The decision in Keene v. CAN Holdings LLC (August 11, 2021) upheld a $16 million jury award to the family of a maintenance worker at a polyester fiber plant who died following years of asbestos exposure. The worker, Dennis Seay, was an employee of Daniel Construction, a firm contracted to provide maintenance and repair work at Hoechst Fibers Inc.’s plant.
“Though Keene is a new decision and its full effects have yet to be seen, its ruling is significant, and employers should understand that the [statutory employee] doctrine may no longer act as a shield against tort liability for injuries suffered by contract workers,” Stephen Bell of law firm Cranfill Sumner LLP wrote in a JD Supra blog post.
Eric Rumbaugh, a partner with law firm Michael Best & Friedrich LLP, was surprised by the decision. “This certainly makes South Carolina an outlier,” he told SIA.
According to court records, the contract required Daniel to purchase workers’ compensation insurance for the workers and required Hoechst to pay an annual fee and reimburse the construction company for certain costs, including the workers’ compensation insurance premiums.
Dennis Seay was employed by Daniel and worked various maintenance and repair positions at the Hoechst plant. His day-to-day tasks exposed him to asbestos; he was diagnosed with mesothelioma, a cancer caused by inhaling asbestos fibers, which he eventually died from.
Throughout the litigation, CNA Holdings argued Seay was a statutory employee and the Workers’ Compensation Law provided the exclusive remedy for his claims. The three tests for determining whether a worker is a statutory employee include whether the worker’s activities are an important part of the trade or business of the employer; are a necessary, essential, and integral part of the business of the employer; or have been previously performed by employees of the employer.
The circuit court disagreed and denied CNA Holdings’ motion for summary judgment. A Spartanburg County jury awarded Seay’s estate $14 million in actual damages and $2 million in punitive damages. The trial court denied CNA Holdings’ motion for judgment notwithstanding the verdict, again finding Seay was not a statutory employee. The court of appeals affirmed.
Prior to Keene, South Carolina’s statutory employee doctrine precluded “statutory employees” from suing their employer in tort, according to JD Supra. Rather, such workers were subject to South Carolina’s exclusivity doctrine and were limited to recovery under the Workers’ Compensation Act. As a result, many employers have enjoyed immunity from suit by asserting the statutory employee doctrine as an affirmative defense to tort claims.
“The key question parties must answer when deciding whether the doctrine applies is whether the work contracted out is part of the owner’s trade, business or occupation,” Bell wrote in his post. “To bring application of the doctrine in line with its intent, the court disregarded the three-part test and adopted a form of the business judgment rule:
“If a business manager reasonably believes her workforce is not equipped to handle a certain job, or the financial or other business interests of her company are served by outsourcing the work, and if the decision to do so is not driven by a desire to avoid the cost of insuring workers, then the business manager has legitimately defined the scope of her company’s business to not include that particular work,” according to Bell. In short, courts will honor the company’s decision to have the work performed by someone other than an employee, the doctrine will not apply, and the company can be sued in tort for injuries suffered by the worker.