Opinion ID: 2451797
Heading Depth: 2
Heading Rank: 2

Heading: Size-Restriction as a Defense

Text: The basis for Brown's claim against Canterbury Corporation is T.C.A. § 50-6-113(a), which provides in pertinent part that [a] principal, or intermediate contractor, or subcontractor shall be liable for compensation to any employee injured while in the employ of any of his subcontractors and engaged upon the subject matter of the contract to the same extent as the immediate employer. T.C.A. § 50-6-113(a) (emphasis added). As its first defense to liability, Canterbury Corporation contends that it is not covered by the Tennessee Workers' compensation law because it has less than five employees and is thus exempt under T.C.A. §§ 50-6-102(a)(4) and 50-6-106(4). Our research has failed to turn up a Tennessee case directly on point, although the reasoning in other cases interpreting T.C.A. § 50-6-113 leads us to the conclusion that the five-employee limitation in the workers' compensation statute has no applicability in this case. As Professor Larson has pointed out, Tennessee is one of some 43 states that impose workers' compensation liability on statutory employers, i.e., those who get part of their regular work done by the employees of a subcontractor and are held responsible for work-related injuries sustained by those employees, if the subcontractor is uninsured. Larson, Workmen's Compensation, § 49.14 (1991). The principal purpose of such a statutory scheme is to protect employees of irresponsible and uninsured subcontractors by imposing ultimate liability on the presumably responsible principal contractor, who has it within his power, in choosing subcontractors, to pass upon their responsibility and insist upon appropriate compensation for their workers. Id. In this case, Canterbury Corporation, through its general partner, contracted with Cofer Construction to have the latter secure workers' compensation coverage on its own employees but failed to make certain that Cofer Construction had done so. (Ken Johnston testified that Canterbury officials in Tennessee thought the certificate of coverage was on file in Indiana, and those in Indiana assumed it was in Tennessee.) Under T.C.A. § 50-6-113, Canterbury is now liable to Cofer Construction's employees to the same extent as [Cofer Construction would be]. T.C.A. § 50-6-113(a). If Canterbury Corporation qualifies, in the language of subsection (a), as a principal, or intermediate contractor or subcontractor, it can raise only those defenses to liability that Cofer Construction can raise. Because there is no allegation, nor any proof, that Cofer Construction employs fewer than five employees, it could not plead T.C.A. § 50-6-106 as a defense, and, as a result, neither can Canterbury Corporation. Indeed, there is one Tennessee case, decided under the predecessor statute to § 50-6-113(a), that holds the principal contractor liable even when the subcontractor employs fewer than five employees and would otherwise be exempt from coverage under the workers' compensation statute under normal circumstances. In Maxwell v. Beck, 169 Tenn. 315, 317, 87 S.W.2d 564, 565 (1935), the Court rejected the principal's argument that the phrase to the same extent as the immediate employer limits liability under the size-restriction provision in the compensation statute, where the immediate employer has fewer than five employees. In examining the potential consequences of accepting the principal's narrow interpretation, the Court said: To limit the liability thus created to cases where the immediate employer is liable under the Act, would place it within the power of the principal contractor to evade the Act by letting work to subcontractors who would stay beyond the reach of the statute by employing less than five persons and not electing to accept the Act. Such construction would be hostile to the very purpose and intent of the Act. Id. Accord, Bowling v. Whitley, 208 Tenn. 657, 348 S.W.2d 310 (1961). We therefore hold that § 50-6-113(a) requires that a principal contractor be held liable for the uninsured work-related injuries of its subcontractor's employees, even though it is not required to provide workers' compensation coverage for its own employees. This holding is consistent with recent opinions of this Court interpreting § 50-6-113. See, e.g., Acklie v. Carrier, 785 S.W.2d 355, 357 (Tenn. 1990), in which we noted: The purpose of this statute is to insure as far as possible to all workers payment of benefits when they are injured in the course and scope of their employment by passing coverage from employers who might not have coverage under the Workers' Compensation Act to intermediate or principal contractors who do have coverage. See also Stratton v. United Inter-Mountain Telephone Co., 695 S.W.2d 947, 951 (Tenn. 1985).