First Circuit Finds Statutory Employer Relationship Can Exist Even Without Express Recognition

In a recent workers’ compensation case, Preston v. Southern University, the First Circuit upheld the decision of the trial court, finding that the statutory employer relationship can exist even without express recognition.

Workers’ Compensation Act

Under Louisiana law, workers’ compensation is the exclusive remedy that an employee may assert against his employer or fellow employees for work-related injuries that are not the result of an intentional act. The Workers’ Compensation Act extends the employer’s compensation obligation and its corresponding tort immunity to a “principal”, which is also referred to as a “statutory employer”, if there is either:

  1. a written contract recognizing the principal as a statutory employer; or
  2. when a principal has entered into a contract with a third party to perform work and then subcontracts out all or part of the work to fulfill their contractual obligation.

The first basis creates a presumption of a statutory employer relationship that can only be overcome by showing that the work being performed was not an integral or essential to the principal’s ability to generate their goods, products, or services.

Preston v. Southern University – Background

In the case of Preston v. Southern University, 2021 La. App. LEXIS 1070; 2020 0035 (La.App. 1 Cir. 07/13/21), the First Circuit addressed whether express recognition of statutory employer status is required in a written contract in order for a principal to avail itself of tort immunity.

In Preston, Southern University entered into a written contract in the form of a purchase order with Benbrook Contracting, LLC, whereby Benbrook was to perform debris cleanup around campus. The contract did not contain an express provision naming Southern University as a statutory employer; however, it did require Benbrook to obtain and provide proof of workers’ compensation insurance coverage and to name Southern as an additional insured.

While performing work pursuant to that contract, Benbrook’s employee was allegedly hurt when he fell into a large hole in the ground. The plaintiff sought and was awarded workers’ compensation benefits from Benbrook, but also pursued damages in tort against Southern.

Southern filed a motion for summary judgment urging that it was Preston’s statutory employer and, thus, immune from tort liability. The trial court agreed and dismissed Preston’s claims. Preston appealed.

First Circuit Ruling

The First Circuit upheld the decision of the trial court. In doing so, they noted that the Civil Code requires that a contract be construed as a whole, with each provision interpreted in light of the other provisions and without rendering any portions ineffective. After a review of the entire contract, the First Circuit found that the provisions requiring that Benbrook obtain proof of workers’ compensation insurance coverage and name Southern as an additional insured were sufficient to recognize Southern as a statutory employer of Benbrook’s employees. While acknowledging that express recognition had been required by other courts, the First Circuit maintained that the language of the statute was clear and unambiguous, and had to be applied as drafted by the legislature.