Opinion ID: 373863
Heading Depth: 1
Heading Rank: 3

Heading: liability of national van lines and transport indemnity

Text: 32 The final issue raised in this petition is the liability of National Van Lines and its insurer, Transport Indemnity Company, as the contractor of Eureka's interstate business. Section 904(a) of the LHWCA provides in relevant part: 33 In the case of an employer who is a subcontractor, the contractor shall be liable for and shall secure the payment of such compensation to employees of the subcontractor unless the subcontractor has secured such payment. 34 National Van Lines is liable to Riley under this provision if, and only if, Eureka served as a subcontractor to National within the meaning of the statute. The ALJ ruled that Eureka was such a subcontractor of National Van Lines, 48 but this ruling was reversed by the Board. 49 The Board's decision is appealed to this court by petitioners Riley and the Director of OWCP. 35  The basis for the Board's decision is not fully clear from its opinion. After setting out the law governing the imposition of workmen's compensation liability on general contractors, 50 the Board stated without further explanation: 36 The relationship of National Van Lines and Eureka Van Lines(,) the Board concludes, is not the contractor-subcontractor relationship contemplated by Section 4 (33 U.S.C. § 904). We agree with National Van Lines that Eureka was acting under an independent agency or contractor agreement   . 37 JA 57. 38 Ordinarily, our review of such decisions by the Board is limited: the decision will be affirmed unless it is unsupported by substantial evidence or inconsistent with applicable law. 51 Such deference is made difficult in this case by the failure of the Board to explain how its conclusion follows from its statement of the facts. Moreover, we should note that we are freer to undertake an independent examination of this portion of the case because the Director of OWCP opposes the Board's decision on the liability of National Van Lines and Transport Indemnity. Cf. General Electric Co. v. Gilbert, 429 U.S. 125, 144-145, 97 S.Ct. 401, 50 L.Ed.2d 343 (1976) (difference in interpretation of Title VII by Equal Employment Opportunity Commission and Wage and Hour Administrator prevented the Court from strict deference to the appropriate agency). Since OWCP is the policymaking body in the area of workmen's compensation, 52 and since the Board's decision involves a policy judgment, we believe that this conflict between agencies necessitates a more searching review by this court. B 39 The Agency Agreement in effect between Eureka and National Van Lines at the time of Riley's accident did not employ the words contractor or subcontractor with respect to the parties. 53 Eureka was denominated an agent of National Van Lines; the agreement specifically disclaimed any employer-employee relation between National Van Lines and Eureka or its employees. Obviously, the terminology used in the agreement is not dispositive of this case. 40 Eureka did not possess an ICC Motor Carrier's license of its own. It therefore could not, and did not, transport cargo outside the Washington, D.C. metropolitan area except as an agent of National Van Lines. Eureka conducted its interstate haulage in the name of National Van Lines, in accordance with National's instructions expressed in a manual called the Agent's Guide, in trucks decorated with National's name, colors, and insignia. Although Eureka was not contractually obligated to accept any particular shipment for National's customers, in practice Eureka solicited orders for National and made extensive deliveries under National's direction. The contractual obligations for interstate haulage remained with National Van Lines, as did the right to payment. Although Eureka retained substantial discretion over the details of its operations, National reserved the right to train Eureka employees involved in performing National's contracts, and to reject employees who did not successfully complete this training. 41 This court has never interpreted the general contractor's liability provision of Section 904(a). In doing so now, we are guided by the experience of the many jurisdictions with similar provisions that have considered the question. 54 We are also guided by the purpose of the provision, which is to protect injured employees engaged in a common enterprise from the irresponsible failure of their immediate employers to insure. By imposing secondary liability on the general employer or contractor, the provision deters unscrupulous employers from dividing their work among a number of smaller, uninsured entities, and creates an incentive for the general employer to insist that his subcontractors be adequately insured. 55 42 A general employer will be held secondarily liable for workmen's compensation when the injured employee was engaged in work either that is a subcontracted fraction of a larger project or that is normally conducted by the general employer's own employees rather than by independent contractors. 56 The most common form of the relationship and that represented by the Eureka-National agreement is where the general employer delegates the performance of portions of its contractual obligations to other firms. 43 For example, in DeMola v. Riccio, 61 App.Div.2d 854, 401 N.Y.S.2d 919 (3d Dep't 1978), the general employer, a towing company, contracted with the city to remove abandoned vehicles from the streets. It further arranged with a second towing company the immediate employer of the injured worker for the second company to perform some of the work in exchange for the right to the proceeds of the sale of the scrapped vehicles. This second firm was not adequately insured. When the injured employee sought further payments, the court held the general employer liable. In Thorsheim v. State, 469 P.2d 383, 388-389 (Alaska 1970), the court announced these two requirements for the relationship, under a statute substantially identical to the District of Columbia provision: (1) the existence of a contractual obligation on the part of a person held to be a contractor, and (2) a subletting of a part of that obligation to the person held to be a subcontractor. 57 44 This statement of the law does not differ substantially from that expressed by the Board in its opinion. The Board said that Section 904 has been applied in cases where a contractor entered into a contract with a third party to perform a service. The contractor then delegated its duties to the subcontractor. JA 57. The Board's error was not in its statement of the law, but in the application of that law to the facts of this case. National Van Lines contracted with various shippers to carry cargo interstate; it then delegated a portion of its contracts to Eureka. There is no doubt that Eureka employees performed work that would normally be performed by National Van Lines's own employees. Applying the generally accepted test for contractor liability, we must conclude that National Van Lines is liable under Section 904. 45 To accept the Board's conclusion would allow National Van Lines to avoid liability to workers performing National's contracts, even though National's subcontractor was inadequately insured. This would defeat the purpose of Section 904(a) and, more important, deny the benefit of the law to injured workers who need its protection. 58 46 National Van Lines cannot complain of unfair surprise in this decision. In its agreement with Eureka, National required that Eureka obtain workmen's compensation insurance as required by law. 59 The reason National would impose such a requirement is to protect itself from liability under Section 904(a). National Van Lines could have avoided any Section 904(a) liability simply by ensuring that Eureka comply with the contract. Having failed to enforce its contractual rights, National may not now shift its loss to the hapless Riley.