Opinion ID: 1179749
Heading Depth: 1
Heading Rank: 3

Heading: Statutory Employer Is the Work Part of the Principal's Trade or Business?

Text: In Lessley v. Kansas Power & Light Co., 171 Kan. 197, 231 P.2d 239 (1951), a public utility (KP&L) was engaged in the production, sale, and transmission of electric power. The company was authorized by its articles of incorporation to build and construct power plants and power houses. The issue was whether the work being performed by Lessley, who was injured while an employee of a subcontractor, was part of KP&L's trade or business. We relied on Williams v. Cities Service Gas Co., 139 Kan. 166, 30 P.2d 97 (1934), and Purkable v. Greenland Oil Co., 122 Kan. 720, 253 Pac. 219 (1927). We concluded KP&L was a public utility with the express power to build and construct power plants. The result was that the new power plant construction work for which KP&L had contracted was a part of KP&L's trade or business. Lessley, 171 Kan. at 208. Cargill invokes Lessley as support for the trial court's summary judgment ruling in the case at bar. In Hataway v. Procter & Gamble Manufacturing Co., 195 Kan. 335, 405 P.2d 350 (1965), we permitted an injured worker to maintain a common-law negligence action. Hataway, an employee of a construction company, was injured during construction of an addition to Procter & Gamble's plant. Hataway sued Procter & Gamble. The trial court granted Procter & Gamble's motion for summary judgment on the grounds that Hataway's sole remedy was under the Workers Compensation Act. The issue on appeal was whether Procter & Gamble was Hataway's statutory employer under K.S.A. 44-503(a): Was the work being done by Hataway and his immediate employer part of Procter & Gamble's trade or business? Procter & Gamble relied on Lessley. We distinguished Lessley, reasoning that KP&L, as a public utility, was authorized by its articles of incorporation to do all things necessary for the conduct of a general electric business, and also to build and construct power plants. 195 Kan. at 337; see Zehring, 232 Kan. at 708. Reversing summary judgment in Hataway, we reasoned: [T]he construction of the Tide Building was not work which the manager of the Procter & Gamble soap company would ordinarily have done through employees of the business of manufacturing soaps and detergents. 195 Kan. at 340. In Woods v. Cessna Aircraft Co., 220 Kan. 479, a construction company employee was killed during construction of a hangar for Cessna Aircraft Company (Cessna). The employee's father brought a wrongful death action against Cessna. The trial court granted summary judgment to Cessna, finding the construction work was an integral part of Cessna's business. We observed that the Hanna tests may overlap and are in the alternative. 220 Kan. at 484. If either test is met K.S.A. 44-503 applies. We found no evidence under the second Hanna test that Cessna employees had previously constructed hangars or that Cessna had the necessary skilled employees and equipment to complete the work. We reversed summary judgment for Cessna, citing 1A Larson, Workmen's Compensation Law § 49.12 (1973); 81 Am.Jur.2d, Workmen's Compensation § 128, p. 808; and 99 C.J.S., Workmen's Compensation §§ 107-09. 220 Kan. at 486. In Zehring v. Wickham, 232 Kan. 704, we did not state which of the two Hanna tests had been satisfied. The Wickham Glass Company, a glazing contractor, had carried on its own construction in the past (the second Hanna test). The construction of an addition, which was to house a large glass tempering oven, a piece of equipment integral to the business, was part of Wickham's overall operation (the first Hanna test). The use of both tests is consistent with our statement in Woods that the two Hanna tests may overlap. Our most recent application of the Hanna tests is found in Hollingsworth v. Fehrs Equip. Co., 240 Kan. 398. Hollingsworth, an employee of contractor John T. Cody Corporation (Cody), was injured at a Farmland Industries, Inc., (Farmland) fertilizer plant. Hollingsworth sued Farmland for negligence. The trial court granted Farmland's motion for summary judgment on the basis that Farmland was a statutory employer of Hollingsworth. The Farmland plant employed 270 workers, including 90 maintenance personnel. Operation of the Farmland plant required periodic shutdowns for normal maintenance and repairs. Following such a shutdown, a leak occurred in a heat boiler requiring a complete plant shutdown. Cody was employed to do the repair, which required replacement of the tube bundle in the boiler. The Farmland plant kept spare tube bundles for such a purpose. The trial court relied on Lessley to find that the work being performed by Cody and Hollingsworth was necessarily inherent in and an integral part of Farmland's trade or business. We affirmed the trial court's ruling and reliance on Lessley. 240 Kan. at 404-05. We also found evidence satisfying the second Hanna test: (1) a third of the 270 employees were maintenance personnel and (2) Farmland's employees had replaced tube bundles in the past. Bright argues that Lessley is an anomaly and does not remain viable today. Hollingsworth, Zehring, and Hanna have embraced language from Lessley. In Hataway, (Procter & Gamble was the defendant) we distinguished Lessley on the grounds that KP&L, the defendant in Lessley, was a public utility with express powers to build and construct power plants. Hataway, 195 Kan. at 340. The K.S.A. 44-503(a) tapestry we have judicially woven over the past 65 years does not present the earnest viewer with an easily recognizable pattern for statutory employer identification. In Hanna, we noted that each case must be determined on its own particular facts and circumstances. 196 Kan. at 159. We endorse the rationale expressed by Larson's treatise on workers compensation: In some of the closer cases, which in the abstract look as though they might be decided either way, the courts rely heavily upon evidence of the past practice of this employer and employers in a similar business.... ... [T]he test is not one of whether the subcontractor's activity is useful, necessary, or even absolutely indispensable to the statutory employer's business, since, after all, this could be said of practically any repair, construction or transportation service. The test (except in cases where the work is obviously a subcontracted fraction of a main contract) is whether this indispensable activity is, in that business, normally carried on through employees rather than independent contractors. (Emphasis added.) 1C Larson, Workmen's Compensation Law § 49.16(j), pp. 9-105 - 9-106 (1991). In Woods, we reversed summary judgment. We reasoned that construction work, such as the building of a factory structure, is ordinarily outside the trade or business of a manufacturing or mercantile establishment. However, if the business customarily carries on a program of construction, replacement, and maintenance or has handled its own construction work, a contract for such construction falls within K.S.A. 44-503(a). Woods relied on Larson, Workmen's Compensation Law. 220 Kan. at 486. The section of Larson cited in Woods is found in the 1991 edition at 1C Larson, Workmen's Compensation Law § 49.16(c), pp. 9-56 - 9-72, and states as follows: Ordinarily construction work, such as building a factory structure, installing a conveyor system, .. . would be considered outside the trade or business of a manufacturing or mercantile establishment. But if the defendant is a business which by its size and nature is accustomed to carrying on a more or less ongoing program of construction, replacement, and maintenance, perhaps even having a `construction division,' or which can be shown to have handled its own construction in the past, a job of construction delegated to a contractor will be brought within the statute. (Emphasis added.) The first test of Hanna, whether the work is inherent in and an integral part of the principal's trade or business, asks what other similar businesses do. Applied to the case at bar, would a similar grain elevator do the work at issue through employees or contract the work to millwrights? Overlap with the second test of Hanna (whether the particular principal would normally do the work through its own employees) may occur. Even if other similar businesses would not perform the work through employees, the particular principal may make such work a part of its trade or business by its own past actions. We disapprove of our prior decisions to the extent that they conflict with the analysis of the Hanna tests set out in this opinion. Viewing the uncontroverted evidence in the case at bar, in the light most favorable to Bright, Cargill has not shown, as a matter of law, that the work being performed by Bright and Southwest, replacing the C-house leg drive, was inherent in and an integral part of Cargill's trade or business. Cargill's uncontroverted facts only show that the C-house leg drive was a necessary and integral piece of equipment which had to be replaced. The facts supporting our conclusion are: (1) Cargill's work order deemed the work abnormal replacement; (2) the C-house leg drive had been in place for 30 years without the need for replacement; and (3) the replacement required metal fabrication work to accomplish structural modification. Cargill presented no evidence that other similar businesses would undertake such work through their own employees. The Second Hanna Test Cargill set forth the following as uncontroverted facts supporting the second Hanna test (whether the work being performed by Southwest and Bright is work that would ordinarily have been done by the employees of Cargill). 10. Cargill's employees had the skill and equipment to perform the work being done by Southwest. They performed similar work on several occasions in the past. 11. The type of work being performed by Southwest was work that Cargill's maintenance employees would normally perform if they had time. In its memorandum in support of summary judgment, Cargill relied on the following summarized deposition testimony of its maintenance and elevator supervisors. The supervisors were familiar with the work. The general description of the work was replacing a motor and reducer. Cargill did not have time to do the job with its employees. The work is the type of work which Cargill performs and has performed on other occasions. Cargill's work force had the capability of doing the work but Cargill did not do the work because it was short-handed and there were other duties its employees needed to do. Bright controverted the supervisors' deposition testimony with deposition testimony of four other Cargill employees. The four employees had been employed by Cargill for 8.5, 6.5, 11, and 14 years, respectively. The summarized testimony of the four Cargill employees reflected that the kind of work that was being done by Southwest was not the kind one would expect to or normally see a Cargill employee perform. It is the kind of work that is normally contracted out; the type left to professionals that know what they are doing. The 6.5-year employee had never seen Cargill employees do that kind of work. It is the kind of work that ordinarily would not be done by Cargill employees. The 11-year employee had never done that kind of work. He did not know of anyone else in the plant who had replaced a leg chain drive, reducer, or motor in a leg drive such as Southwest was doing. The 14-year employee agreed that the work Southwest was doing was not the kind of work that normally would be done by Cargill employees. He had never seen any Cargill employees undertake that kind of job. Bright maintains that Cargill may not rely on the deposition testimony cited in support of its uncontroverted fact because the depositions were not on file in the district court as required by K.S.A. 1991 Supp. 60-256. We need not address the argument for two reasons: (1) Bright did not raise this issue below, Plummer Development, Inc. v. Prairie State Bank, 248 Kan. 664, 671, 809 P.2d 1216 (1991); and (2) the issue is moot because we find that Bright sufficiently controverted Cargill's uncontroverted facts, precluding summary judgment. Cargill argues that the deposition testimony used by Bright to controvert Cargill's uncontroverted facts is from nonmaintenance employees at Cargill who did not know about Cargill's maintenance procedures; therefore, such deposition testimony may not be used to controvert Cargill's uncontroverted facts which are supported by supervisor depositions. Bright counters that this is a credibility issue for the trier of fact. We agree with Bright. Viewing the evidence in the light most favorable to Bright, as we must, Bright has controverted Cargill's uncontroverted facts, ¶¶ 10 and 11. A genuine issue of material fact, the K.S.A. 44-503(a) status of Cargill, exists which precludes summary judgment. We reverse the trial court's granting of Cargill's motion for summary judgment. LSI's Appeal  The Second Relationship Bright and LSI were the only parties when the case was submitted to the jury. LSI asserts trial court error, contending: (1) Its motion for directed verdict should have been sustained because the borrowed servant doctrine makes Cargill solely liable for Nanny's negligence; (2) the jury was not instructed properly on: (a) the borrowed servant doctrine, and (b) Cargill's negligence independent from Cargill's vicarious liability for Nanny's negligence; (3) Nanny was Bright's fellow servant and immune from liability under K.S.A. 1991 Supp. 44-501; consequently, LSI's is not vicariously liable for Nanny's negligence and LSI's motion for a directed verdict should have been sustained; and (4) the entire K.S.A. 1991 Supp. 60-19a01 pain and suffering statutory limit of $250,000 should not have been imposed on LSI as the jury found LSI only 40% at fault. Rulings of the Trial Court The trial court denied LSI's motion for directed verdict on the borrowed servant issue, reasoning that a question of fact was presented for the jury to determine (whether Nanny was Cargill's borrowed servant or the dual employee of LSI and Cargill). As to the fellow servant issue, the trial court found K.S.A. 1991 Supp. 44-501 (workers compensation immunity) inapplicable.