The Statutory Employer Defense: Can an Invalid Indemnification Clause Result in Big Liability?

Louisiana’s statutory employer defense grants a contractor the exclusive remedy provisions of the Louisiana Workers’ Compensation Act where there is a statutory employer relationship between a principal (the statutory employer) and an injured employee’s immediate employer (contractor). To become a statutory employer, a principal must enter into a written contract with the contractor to perform work that is a part of the principal’s trade, business, or occupation. When a statutory employer relationship is established, the principal’s liability to a contractor’s employee is limited to compensation under the Louisiana Workers’ Compensation Act. Further, where the principal pays compensation, it is entitled to indemnification from the contractor.

A recent decision by the Louisiana Third Circuit Court of Appeal addressed whether the invalidity of an indemnification clause in a contract between a principal and contractor negated the statutory employer defense. In that case, the plaintiff was an employee of Wastewater Specialties (‘Wastewater”) who was assigned to repair a boiler at a facility owned by Entergy Gulf States Louisiana (“Entergy”).  Prior to the commencement of work, Wastewater and Entergy entered into a contract in which Entergy was to be indemnified for personal injury claims brought by Wastewater employees irrespective of fault.

While working at the facility, the plaintiff injured himself and thereafter filed a lawsuit against Entergy seeking damages for bodily injuries. In its answer, Entergy asserted that it was immune from tort liability as a statutory employer under the Louisiana Workers’ Compensation Act. The trial court granted Entergy’s motion for summary judgment finding that it was a statutory employer immune from liability for its negligence. On appeal, plaintiff argued that Entergy was not entitled to the statutory employer defense because it violated Louisiana Revised Statute 9:2780.1(B), which invalidates construction contracts containing indemnification or hold harmless clauses in favor of a negligent party. Plaintiff argued that because the Wastewater-Entergy contract was unenforceable, Entergy could not fulfill the requirements for the statutory employer defense. The appellate court disagreed, noting that the statutory employer defense and La.R.S. 9:2780.1 addressed distinct subject matter, and that there was nothing suggesting that La.R.S. 9:2780.1 was meant to negate the statutory defense. Thus, it was held that the trial court did not commit error by finding that Entergy was a statutory employer despite the problems with the Wastewater-Entergy contract.

Blanks v. Entergy Gulf States Louisiana, LLC