Statutory Employer

The Usual Course of Business: Contractors vs. Statutory Employers under Missouri Workers’ Compensation Laws

On October 13, 2020, the Missouri Court of Appeals for the Eastern District affirmed the decision of a St. Louis County trial court that granted a paper distributor—Midland Paper Company (“Midland”)—summary judgment in a negligence lawsuit brought by an employee of a contractor—CRH Transportation (“CRH”) that Midland retained to deliver its products. See Sebacher v. Midland Paper Company, -- S.W.3d --, 2020 WL 6038682 (Mo. Ct. App. Oct. 13, 2020).

The central issue in the case was whether, under Missouri’s Workers’ Compensation Law, Midland qualified as a “statutory employer.” Because the Court ultimately concluded Midland was a “statutory employer,” the Workers’ Compensation Law barred the employee from bringing a workplace negligence claim against Midland.

Factual and Procedural Background

Robby Sebacher (“Sebacher”) worked for CRH as a truck driver. Midland contracted with CRH for CRH to hire truck drivers to deliver Midland’s products from its Hazelwood, Missouri facility. This Hazelwood facility was one of 18 distribution facilities of Midland, and it was the only one at which Midland regularly contracted with a third party to handle delivery of its products.

Midland’s contract with CRH required CRH to acknowledge its truck drivers were solely the employees of CRH. It further required CRH to handle all traditional aspects of employment with respect to the truck drivers, such as hiring, firing, recordkeeping, and maintaining Workers’ Compensation insurance. It also required CRH to have drivers work a minimum of 40 hours per week during the one-year term of the contract.

One of Midland’s employees allegedly assaulted Sebacher while he was at the Hazelwood facility. Sebacher sued this employee for assault and battery, and sued Midland for negligent supervision, training and retention of the employee in question. In response, Midland raised the affirmative defense that it was Sebacher’s “statutory employer” under Missouri Workers’ Compensation law and thus Sebacher’s remedies for his injuries were limited to those specified under that law.

Midland moved for summary judgment on the basis of this affirmative defense. The Circuit Court of St. Louis County granted this motion. Sebacher appealed.

Analysis

On appeal, the Eastern District began its analysis by addressing the “exclusive remedy” and “statutory employer” provisions of Missouri Workers’ Compensation law. The Court stressed the following definition of “statutory employer” and the fact that such definition was crafted to prevent employers from avoiding liability under the Workers’ Compensation law by hiring “independent contractors” to perform its usual business:

"Any person who has work done under contract on or about his premises which is an operation of the usual business which he there carries on shall be deemed an employer and shall be liable under this chapter to such contractor, his subcontractors, and their employees, when injured or killed on or about the premises of the employer while doing work which is in the usual course of his business."(emphasis added).

In light of this definition, the Court acknowledged the parties did not dispute that Sebacher performed work for Midland pursuant to the CRH contract and that Sebacher’s injury occurred on Midland’s premises; however, the Court turned to the main issue implicated by the definition of “statutory employer”: was Sebacher performing a type of work within the “usual course” of Midland’s business?

The Court ultimately concluded he was, based on the Missouri Supreme Court’s definition of “usual business.” The Court noted the Missouri Supreme Court has defined “usual business” as “those activities (1) that are routinely done (2) on a regular and frequent schedule (3) contemplated in the agreement between the independent contractor and the statutory employer to be repeated over a relatively short span of time (4) the performance of which would require the statutory employer to hire permanent employees absent the agreement.” (citing McCracken v. Wal-Mart Stores E., LP, 298 S.W.3d 473, 480 (Mo. banc 2009).

Looking at the record before it, the Court noted the following facts as the basis for its conclusion that Midland was a “statutory employer” of Sebacher:

  1. Sebacher was at Midland’s facility to pick up products for delivery;
  1. Sebacher regularly performed this work for Midland pursuant to its CRH contract;
  1. The CRH contract contemplated repeated delivery services by the truck drivers each week over a year; and
  1. Midland would have to use its own employees to deliver products (as it does at its facilities other than Hazelwood) if CRH truck drivers did not.

In so concluding, the Court reasoned and found that, because “Midland is a distributor of paper and packaging supplies….[i]ts usual business…is to distribute and deliver its products to its customers.” (emphasis added).

Sebacher argued “product delivery” was specialized and distinct from distribution, citing McCracken. However, the Court rejected this argument, drawing a distinction between this case and the facts of McCracken, which involved a delivery driver for a contractor that served a retail store, Wal-Mart—not a distribution company whose usual business is “product delivery.”

Takeaway

There are a couple takeaways from this case. First, the “usual business” requirement is not black and white. “Product delivery” is not always a part of a company’s usual business, but it can be, depending on how one describes or frames the company’s usual business in relation to the work in question.

Second, a company should understand that contracting out work and disclaiming employer status will not insulate them from liability under Missouri Workers’ Compensation law for injuries sustained by a contractor’s employees, if one can reasonably argue that the work performed by such employees is part of the company’s usual business. On the other hand, however, exposure to Workers’ Compensation liability may, in turn, protect such a company from negligence or personal injury lawsuits like the one brought in this case.

No matter your business or employment circumstances, hiring knowledgeable and experienced counsel to understand your potential legal rights and obligations is critical to avoid unanticipated liabilities. Contact us to learn more.

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