SC Workers’ Compensation Law: What is the Statutory Employee Doctrine?

What is SC’s statutory employee doctrine, and how could it affect your workers’ compensation case?

In the past, employers have been considered immune from lawsuits by the employees of contractors and subcontractors under SC Code § 42-1-400 and 410’s “statutory employee doctrine,” which the SC Supreme Court has, in the past, interpreted as 1) requiring workers’ compensation coverage for contractors and subcontractors’ employees and 2) providing immunity from tort liability when contractors and subcontractors’ employees were injured on the job.

In Keene v. CNA Holdings, decided August 11, 2021, the SC Supreme Court confirmed that they will be analyzing the statutory employee doctrine differently in future cases, making it easier, in some cases, for injured employees of contractors and subcontractors to sue the contracting business for negligence. In Keene, the Court makes it clear that:

1. The public policy the statutory employee doctrine is based upon is not to protect employers from lawsuits, and
2. The public policy the statutory employee doctrine is based upon is to ensure that workers are covered by workers’ compensation insurance.

WHAT IS THE STATUTORY EMPLOYEE DOCTRINE?

Employers often use contract laborers on job sites, sometimes because that is the best business decision under the circumstances, sometimes because the employer’s workforce doesn’t have the required skills to complete a particular job, and other times because the employer wants to avoid the expense of providing workers’ compensation insurance.

SC Code § 42-1-400 says that when an owner of a business hires a contractor to perform a task that is a “part of his trade, business, or occupation,” the owner is liable to pay the contractor’s employees the same workers’ compensation benefits that the worker would have had if the contractor’s workers were employed by the owner:

When any person, in this section and Sections 42-1-420 and 42-1-430 referred to as “owner,” undertakes to perform or execute any work which is a part of his trade, business or occupation and contracts with any other person (in this section and Sections 42-1-420 to 42-1-450 referred to as “subcontractor”) for the execution or performance by or under such subcontractor of the whole or any part of the work undertaken by such owner, the owner shall be liable to pay to any workman employed in the work any compensation under this title which he would have been liable to pay if the workman had been immediately employed by him.

Similarly, SC Code § 42-1-410 makes a contractor liable for workers’ compensation coverage for subcontractors’ employees:

When any person, in this section and Sections 42-1-420 to 42-1-450 referred to as “contractor,” contracts to perform or execute any work for another person which is not a part of the trade, business or occupation of such other person and contracts with any other person (in this section and Sections 42-1-420 to 42-1-450 referred to as “subcontractor”) for the execution or performance by or under the subcontractor of the whole or any of the work undertaken by such contractor, the contractor shall be liable to pay to any workman employed in the work any compensation under this title which he would have been liable to pay if that workman had been immediately employed by him.

This has had two effects on workers’ compensation coverage. First, it furthered the “public policy favoring inclusion under the Workers’ Compensation Law,” providing coverage to employees who may not otherwise have had recourse when they were injured on the job.

Second, it provided an almost blanket immunity for negligent employers who were able to 1) shift the burden of workers’ compensation coverage to contractors through contract provisions and 2) avoid tort liability.

IS THE INTENT OF THE STATUTORY IMMUNITY DOCTRINE TO PROVIDE IMMUNITY TO EMPLOYERS OR TO PROVIDE COVERAGE TO WORKERS?

In Keene, the SC Supreme Court reviewed the Court’s prior opinions, acknowledging that older cases like Marchbanks and Boseman tended to provide blanket immunity to employers who used contractors to complete tasks, but pointing out that, in recent years, the Court has moved away from allowing employers to use the statutory employee doctrine as a shield against liability.

In Keene, CNA Holdings (previously Hoechst) hired Daniel Construction Company to build a polyester fiber plant and then to provide maintenance and repair workers at the plant. Daniel Construction hired Dennis Seay as a maintenance and repair employee. Seay was exposed to asbestos in his job and eventually died from mesothelioma caused by inhaling asbestos fibers.

Daniel Construction was required by contract to maintain workers’ compensation insurance and Seay was (the Court assumes) compensated through Daniel Construction’s workers’ compensation policy. Keene, Seay’s daughter and personal representative of his estate, also pursued negligence, wrongful death, and survival actions against CNA Holdings.

CNA Holdings argued that they were immune from lawsuits under the statutory employee doctrine – since they were required to provide workers’ compensation insurance by law, and Daniel Construction provided the coverage, CNA Holdings argued that they were therefore immune from any lawsuit based on their negligence.

The Court disagreed. Although the Court acknowledged that this would have been the outcome in years past, the Court’s more recent decisions have moved away from this interpretation to find that the statutory employee doctrine was not intended to be a shield for employers – the purpose of the statute was to ensure the workers are covered, not to protect employers from lawsuits.

The Statutory Employee Doctrine is not a Shield for Employers to Avoid Liability

The purpose of the statute is not to provide immunity to employers, and the Court declines to allow it to be used as a shield by employers:

It is also important to note that the public policy at issue here is not to provide civil immunity to employers like Hoechst or their corporate successors like CNA Holdings. In Olmstead, the court of appeals wrote “the underlying rationale” of favoring coverage for workers “is not as pertinent where the statutory employe