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Posted on Thursday, October 16, 2014

How Does a Construction Contractor Not Slip and Fall Over Its Own Contract?

Ensuring that a construction contract clearly defines who is responsible for work-related injuries and related workers compensation benefits is critical, otherwise unanticipated statutory liability could surface, like a roofing contractor learned in Associated Aluminum Products and Builders Mutual Insurance Company v. Elvira-Menez et al., No. 2301-13-2 (Va. App. Sept. 16, 2014). In this recent case out of the Virginia Court of Appeals, the Court found that the prime contractor, Associated Aluminum Products (“AAPCO”) had to pay workers compensation benefits to a worker that slipped and fell off of a roof at its worksite, even though the worker was employed by a subcontractor, a Mr. Rodney Blair.Blair arranged workers compensation insurance through a third party, Mr. Ronnie Jenkins. Jenkins received the payments from AAPCO, and the Court found that this arrangement was a mere ruse to let Blair latch onto Jenkins’ licenses and benefits. AAPCO believed that Jenkins was the subcontractor, and that Blair was the sub-sub, but none of these assumptions were documented in a written contract. Ultimately, the Court found that Blair was the actual employer, and not Jenkins.
The Appeals Court found that the following factors meant that Blair was the actual employer:

  • AAPCO received payment requests directly from Blair;
  • AAPCO contacted Blair regarding available projects;
  • Blair completed projects without any involvement from Jenkins;
  • AAPCO did not give any updates to Jenkins regarding project work; and
  • Jenkins was only aware of the project’s status after it was completed.

Because Blair was uninsured, the Court found that AAPCO was liable for workers compensation benefits as the injured worker’s statutory employer.

The take-away lesson of this case is for contractors to always ensure that a written contract is in place before a construction project begins. The contract must carefully define which party is actually responsible for workers compensation benefits and accidents on the worksite. Failing to do so can result in unforeseen liability and costs and these pitfalls can be avoided by ensuring a proper contract is in place before the project starts.

Katie Lipp is an attorney with the Washington, DC regional business law firm Berenzweig Leonard, LLP, and the head of its construction law team. Katie can be reached at klipp@berenzweiglaw.com.

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