Opinion ID: 2670492
Heading Depth: 3
Heading Rank: 2

Heading: LBP's Trade, Business or Occupation

Text: The undisputed facts, material to the analysis of whether Reed's construction of the Park warehouses was part of LBP's trade, business, or occupation under the terms of Code § 65.2- 302(A), are as follows. LBP, a Virginia limited liability company, was organized by Lauer, its owner and sole member, for the purpose of acquiring, holding, improving, managing, leasing and selling real estate, as set forth in its operating agreement. 5 LBP was specifically organized to effect that purpose through the Park property project. Upon its acquisition of the Park property, LBP was, in fact, responsible for the property being commercially developed, and for the sale and 5 In this context, Black's Law Dictionary defines the word improve to mean: To develop (land) . . . . Black's Law Dictionary 826 (9th ed. 2009). 21 lease of the warehouse units that were constructed on the property. LBP received its income from the sale and lease of those warehouse units. With no employees or equipment, LBP implemented its organizational objectives through Lauer, independent contractors and consultants. LBP acquired the Park property as totally undeveloped, raw land. In developing the property, LBP obtained, among other things: numerous studies regarding the financial viability of developing the Park property, the practicality of construction, and the risk of development; appraisals; bids from contractors; various government permits, bonds and approvals; and construction financing. LBP made the decision to improve the Park property by the construction of the Park warehouses, obtained the necessary approvals for their construction, and procured an architect to design them. After interviewing various contractors to construct the warehouses, LBP selected Reed. LBP and Reed then entered into a contract making Reed solely responsible for constructing the warehouses to the agreed specifications. LBP hired an owner's representative to oversee the construction process, serving as [Lauer's] eyes and ears as to what's going on with the project, as Lauer explained. Lauer had weekly meetings with this representative regarding the progress of the construction. The architect that designed the warehouses also 22 inspected, on LBP's behalf, Reed's work over the course of the warehouses' construction. Lauer made the ultimate decision on any construction issues. The majority, without acknowledging it, evidently accepts Rodriguez' central argument that because LBP did not, and could not, construct the Park warehouses itself, Reed's construction of the warehouses was not a part of LBP's trade, business, or occupation; rather, LBP was merely investing in real estate, placing LBP outside the purview of the definition of statutory employer in Code § 65.2-302(A) for that part of the Park's development. This argument is unavailing as it conflicts with the express terms of Code § 65.2-302(A), which imposes workers' compensation liability on an owner, as a statutory employer, when the owner undertakes through an independent contractor the whole or any part of the work that is a part of [the owner's] trade, business or occupation. (Emphasis added). The statute thus contemplates that an owner such as [LBP] can subcontract all its work yet remain liable under the Act. Henderson, 233 Va. at 381, 355 S.E.2d at 598. Hence, under our case law, a defendant's business structure and number of employees have never been considerations in deciding whether [it] is entitled to the [A]ct's immunity from a common law suit 23 as a statutory employer. Evans, 239 Va. at 132, 387 S.E.2d at 779. As this Court has previously explained, an owner may perform or execute work that is part of [its] trade, business, or occupation through contractors or subcontractors, directly employing no workers for the purpose. Smith v. Horn, 232 Va. 302, 305, 351 S.E.2d 14, 16 (1986) (emphasis added) (citing Anderson v. Thorington Const. Co., 201 Va. 266, 272-73, 110 S.E.2d 396, 400-01 (1959)). But if the work performed by an employee of the contractor or subcontractor is [such a] part . . . the worker is deemed the statutory employee of the owner, and the owner is liable for compensation as though the worker were [its] own employee. Id. at 305-06, 351 S.E.2d at 16. LBP utilized a business model for its development of the Park property that required no direct employees for the construction of its Park warehouses. However, LBP should be unable to thereby escap[e] statutory employer status. Henderson, 233 Va. at 381, 355 S.E.2d at 598. [T]he whole [warehouse construction] work undertaken by [LBP] was performed by Reed, LBP's independent contractor, in a manner contemplated by Code § 65.2-302(A). The undertaking was in furtherance of the express purposes for which LBP was established, and comprised the main component of the Park property's intended development and use. From the beginning, 24 LBP's plan was to acquire the Park property in its unimproved state, improve the property through the construction of the Park warehouses, and then sell or lease the warehouse units. The construction of the Park warehouses was thus necessarily an integral part of LBP's trade, business or occupation under the terms of Code § 65.2-302(A). It is therefore inconsequential that LBP did not make money off of the construction [of the warehouses] itself, as Lauer acknowledged, with Reed being paid to construct them. Even if LBP had performed the construction with employees of its own, it would not have made money off of the construction itself, as the project's owner (i.e., LBP would not have received payments for its own construction work). In either case, LBP's income would have been generated at the point of sale and/or lease of the warehouse units, just like any other owner-developer of a similar project (with or without its own construction crew). By the very nature of commercial real estate development, the developer generates income upon completion of the project from the sale or lease of the developed property or some portion of it. Nonetheless, we have never deemed the point at which income is generated from a commercial undertaking to be dispositive in determining an entity's trade, business or occupation under Code § 65.2-302(A), and I see no good reason for doing so here. 25 Finally, the majority's stated reasons for rejecting LBP's reliance on Pfeifer plainly support the counter-position. Applying Code § 65.2-302 in Pfeifer, we held that an independent contractor's installation of gas lines undertaken for a condominium development project was a part of the trade, business, or occupation of the owner-developer, Linkhorn Bay Associates, L.L.C. (Linkhorn Bay). Much like LBP, Linkhorn Bay was a limited liability company that was organized for the purpose of developing condominiums, had no employees and subcontracted all the work to various subcontractors. Id. at 265, 546 S.E.2d at 718. In attempting to distinguish Pfeifer, the majority points to the fact that Linkhorn Bay had been formed solely to build and develop condominiums. The majority then concludes that installing the natural gas lines and connecting them to the condominium units were obviously part of its business purpose to build the condominiums. This observation seems to simply ignore the fact that LBP's development of the Park property by the construction of warehouse units was undisputedly in furtherance of LBP's organizational and business purpose, as set forth in LBP's operating agreement. It would thus be completely illogical to contemplate that somehow installation of natural gas lines to those warehouse units would be a part of LBP's business purpose 26 to build those units, but the actual construction of the units would not be a part of that purpose. Accordingly, I would hold the circuit court correctly concluded that LBP was Ubaldo's statutory employer because Ubaldo, as Reed's employee, was performing work that was a part of LBP's trade, business, or occupation at the time of his workrelated accident. Given the undisputed facts before it, the circuit court's conclusion was dictated by both the express terms of Code § 65.2-302(A) and the statute's remedial purpose. 6