Opinion ID: 2670492
Heading Depth: 2
Heading Rank: 1

Heading: lbp's statutory employer status

Text: By the terms of the Act's exclusive remedy provision, Code § 65.2-307(A), 3 the rights and remedies provided in the Act are exclusive of all other rights and remedies that a covered employee and his beneficiaries might otherwise possess as a result of the employee's job-related accident. Under this statute, an injured employee and his beneficiaries are precluded from maintaining a common law action against the employee's immediate employer for an injury sustained in the course of alternative argument that, even if LBP was Ubaldo's statutory employer, LBP waived its defense of immunity under the Act because LBP did not purchase workers' compensation insurance or qualify as a self-insurer. 2 The majority discusses and disposes of Rodriguez' jurisdictional argument in footnote 4 of its opinion. 3 Code § 65.2-307(A) states: The rights and remedies herein granted to an employee when his employer and he have accepted the provisions of this title respectively to pay and accept compensation on account of injury or death by accident shall exclude all other rights and remedies of such employee, his personal representative, parents, dependents or next of kin, at common law or otherwise, on account of such injury, loss of service or death. 18 employment when the employee and the employer have accepted the Act's provisions. See Hudson v. Jarrett, 269 Va. 24, 29, 606 S.E.2d 827, 829 (2005); Pfeifer v. Krauss Const. Co., 262 Va. 262, 266, 546 S.E.2d 717, 719 (2001). An exception, however, to the Act's exclusive remedy provision is set forth in Code § 65.2-309(A), which permits the employee to bring a common law action against a third-party tortfeasor, provided the tortfeasor is an other party within the meaning of the Act. Crocker v. Riverside Brick & Supply Co., 273 Va. 235, 238-39, 639 S.E.2d 214, 216 (2007); Anderson v. Dillow, 262 Va. 797, 799-800, 553 S.E.2d 526, 527 (2001). An owner such as LBP, which is not the injured employee's immediate employer, is nonetheless under the canopy of the [A]ct and entitled to the immediate employer['s] statutory immunity from common-law actions if the owner qualifies as the injured employee's statutory employer, thereby negating other party status. Evans v. Hook, 239 Va. 127, 131, 387 S.E.2d 777, 779 (1990). The test for determining whether an owner becomes a statutory employer is set forth in Code § 65.2-302(A) as follows: When any person (referred to in this section as owner) undertakes to perform or execute any work which is a part of his trade, business or occupation and contracts with any other person (referred to in this section as subcontractor) for the execution or performance by or under such 19 subcontractor of the whole or any part of the work undertaken by such owner, the owner shall be liable to pay to any worker employed in the work any compensation under this title which he would have been liable to pay if the worker had been immediately employed by him. The project owner is thus deemed to be the statutory employer of the independent contractor's employees if those employees are engaged in work that is a part of the owner's trade, business, or occupation. 4 If so, the owner is rendered liable to those employees for workers' compensation benefits. The purposes of Code § 65.2-302(A) are to afford protection to 'the employees of [independent contractors] who are not financially responsible,' Bassett Furniture Industries, Inc. v. McReynolds, 216 Va. 897, 902, 224 S.E.2d 323, 326 (1976) (quoting Sears, Roebuck & Co. v. Wallace, 172 F.2d 802, 810 (4th Cir. 1949)), and to prevent an owner from escaping liability under the Act by the simple expedient of subcontracting away work which is part of its trade, business, or occupation. Henderson v. Central Tel. Co. of Va., 233 Va. 377, 381, 355 S.E.2d 596, 598-99 (1987). These purposes are reflective of the highly remedial nature of the Act, id. at 382, 355 S.E.2d at 599; Board of Supervisors of Amherst County v. Boaz, 176 Va. 126, 134, 10 4 The employees, in turn, become the statutory employees of the owner. Crocker, 273 Va. at 238-39, 639 S.E.2d at 216. 20 S.E.2d 498, 501 (1940), which is to be construed to effect its fundamental purpose of providing workers with statutory compensation for accidental injuries resulting from the hazards of their employment. Henderson, 233 Va. at 382, 355 S.E.2d at 599; Feitig v. Chalkley, 185 Va. 96, 98, 38 S.E.2d 73, 75 (1946). Accordingly, in this case, even though Rodriguez does not seek workers' compensation benefits from LBP, our consideration of this appeal is nevertheless governed by the principles that apply in a case where coverage is sought. Henderson, 233 Va. at 382, 355 S.E.2d at 599.
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