Chapter 10 Exclusive Remedy

• Library: The Law of Workers’ Compensation Insurance in South Carolina (SCBar) (2019 Ed.)

Chapter 10 Exclusive Remedy

I. Introduction

A. The Rule

In circumstances in which the South Carolina Workers' Compensation Act covers an employee's work-related injury, the Act provides the exclusive remedy against the employer,¹ and the employee and his personal representative or next-of-kin are barred from suing the employer at common law. As detailed below, the immunity is conferred not only on the direct employer, but also statutory employers as well as co-employees.² The employee remains free, however, to bring an action against certain third-party tortfeasors.³

B. History and Purpose of the Rule

The exclusive remedy doctrine was enacted to balance the relative ease with which an injured employee can recover compensation under the Act.⁴ "The employee receives the right to swift and sure compensation; the employer receives immunity from tort actions by the employee."⁵ Prior to the enactment of workers' compensation laws, an injured employee was forced to sue the employer at common law. In order to recover compensation, the employee had to prove his injury was the fault of the employer (i.e., negligence) and had to withstand the employer's common law defenses of assumption of the risk, contributory negligence, and the fellow servant doctrine.⁶

In contrast, an employee whose injury is covered by workers' compensation is entitled to compensation regardless of fault.⁷ In exchange, the employee forfeits his right to sue the employer at common law.⁸

In some cases, the amount of compensation available under the Act may be substantially less than could be recovered in a successful common law action; but in other cases the employee will receive benefits he would not otherwise have enjoyed because of his inability to establish the employer's common law liability. This is a balance struck by the legislature in order to afford the widest practical coverage for work-related injuries.⁹

According to the South Carolina Supreme Court, compensating injured employees regardless of fault, but limiting their recovery to statutorily set amounts, "has worked to the advantage of society as well as the employee and employer."¹⁰

C. Employers' Duty to Raise as an Affirmative Defense

An employer who is sued in tort by an employee for a work-related injury has the burden of raising the exclusivity doctrine as a defense.¹¹ If such a defense is not raised, it is waived, and the employee may sue to recover tort damages.¹²

II. Coverage Under the Act

If the employer has accepted the provisions of the South Carolina Workers' Compensation Act, an employee who has been injured by an accident is precluded from suing the employer at common law.¹³ If the injury is the result of an "accident" covered under the Act, Section 42-1-540 requires the injured employee to proceed under the Workers' Compensation Act.¹⁴ "The immunity granted by the Act parallels the liability imposed by the Act."¹⁵

A. Requirement of an Employment Relationship

The South Carolina Workers' Compensation Act only applies to situations in which "the relationship of employer and employee exists at the time of the alleged injury for which the claim is made."¹⁶ Absent such a relationship, the exclusivity rule does not apply, and the worker may sue the "employer" at common law.

1. Time of the Relationship

Under the South Carolina Workers' Compensation Act, "a workers' compensation award is authorized if and only if the employer-employee relationship existed at the time of the alleged injury for which the claim is made."¹⁷ In Nash v. AT&T Nassau Metals, the court was asked to decide whether an employee who had been terminated and subsequently reinstated was employed at the time his claims for outrageous conduct arose.¹⁸ The court rejected the employer's argument that the employee's reinstatement "with his original effective service date" meant he had never legally left his employment, and remanded the case for factual development on that issue.¹⁹

2. Statutory Employees and Employers

"Where an employer is covered by Workers' Compensation, the Act is the exclusive remedy of an employee injured in the course and scope of employment. This exclusivity provision applies both to 'direct' employees and to those termed 'statutory employees...."'²⁰ Similarly, as the court of appeals stated in Neese v. Michelin Tire Corporation, "[i]f a worker is properly classified as a statutory employee, his sole remedy for work-related injuries is to seek relief under the Workers' Compensation Act, he may not maintain a negligence cause of action against his direct employer or his statutory employer."²¹ "The immunity granted by the Act parallels the liability imposed by the Act .... However, immunity under the Act is not limited only to those who have actually paid benefits; rather, the Act extends immunity to those who are potentially responsible for providing workers' compensation benefits."²² As detailed in Chapter 2, in certain circumstances, parties who do not have a direct employment relationship may still be considered "employers" and "employees" for purposes of workers' compensation.²³ Under the Act, owners, contractors, and subcontractors may be considered the statutory employers of those performing work that is part of the trade, business or occupation of the employer.²⁴ Statutory employers are immune to suit from their statutory employees.²⁵

For example, in Parker v. Williams & Madjanik, Inc., the South Carolina Supreme Court held that the employee of a subsubcontractor was barred from bringing a wrongful death claim against both the owner and general contractor, reasoning that the employee was the statutory employee of both.²⁶ The subcontractor was found liable under workers' compensation and benefits were awarded.²⁷ The owner and general contractor were relieved of paying both workers' compensation benefits and tort damages.²⁸ According to the court, such a result was reasonable:

As a practical matter both absorbed the cost of coverage through their contracts with those who agreed to actually perform the work. This seems to have been the General Assembly's intent when it enacted this legislation. The owner who obtains the benefit of the work inevitably absorbs the costs of providing protection for the workers. In return, the employer receives immunity from other remedies which ordinarily might be sought by the employee.²⁹

A subcontractor has no workers' compensation liability to an employee of an owner, when that employee is not engaged in the work the subcontractor is performing.³⁰ Therefore, when an owner's employee is allegedly injured by the negligence of a subcontractor, the exclusive remedy provision will not bar the employee's common law tort action against the subcontractor.³¹ "The reason for the difference in result is forthright: the general contractor has a statutory liability to the subcontractor's employee, actual or potential, while the subcontractor has no comparable statutory liability to the general contractor's employee."³²

In Harrell v. Pineland Plantation, Ltd. and Glover v. United States, the defendants argued that a statutory employer may claim tort immunity under Section 42-1-540, and at the same time avoid an employer's obligation to secure the payment of compensation as required by Sections 42-5-10 and 42-5-20.³³

In both cases, the court rejected this argument and held that under the Act the basic duty of any employer, whether it be the direct employer or statutory employer, is the obligation to secure the payment of compensation as prescribed by Section 42-5-20. "Compliance with this obligation is the quid pro quo exacted from the employer in exchange for immunity. Thus, a statutory employer who fails to secure the payment of compensation as prescribed by § 42-5-20 may not claim immunity under the Act."³⁴

For further support, the court noted in both cases that under Section 42-1-415 and its subsequent amendments in 1997, a statutory employer no longer needs to secure the payment of compensation to avail itself of tort immunity under the Act, if the requirements of Section 42-1-415 are met. "As in Harrell, the passage of Section 42-1-415 and its 1997 amendment, a statutory employer, in order to claim tort immunity under the Act, was required to secure the payment of compensation as prescribed by Section 42-5-20."³⁵ Thus, the court held that "an owner, within the meaning of Section 42-1-400, must comply with Section 42-2-20 by either directly purchasing insurance to cover its potential workers' compensation liabilities or qualifying as a self-insurer before the owner may claim immunity under the Act's exclusive remedy provision."³⁶

B. Requirement of Personal Injury or Death by Accident

The South Carolina Workers' Compensation Act also prohibits an employee from suing his employer at common law for "personal injury or death by accident."³⁷ Personal injury is statutorily defined as "injury by accident arising out of and in the course of employment... ."³⁸ Thus, the three criteria for determining whether an injury is compensable thus barring a tort action are (1) an injury; (2) by accident; and (3) arising out of and in the course of employment.³⁹

No disability is required.⁴⁰ A good case illustrating these principals is Barber v. Whirlpool Corporation.⁴¹ In Barber, a former employee brought an action for intentional infliction of emotional distress and malicious prosecution against his employer.⁴² The gist of the action involved a meeting between the former employee and the plant's Human Resources Manager in which the manager accused the worker of stealing materials from the plant.⁴³ The meeting took place while the employee was on vacation and at a time when the plant was shut down.⁴⁴ The employer asserted the exclusive remedy provision as a defense.⁴⁵

The court noted that damages for emotional injuries, as well as intentional infliction of emotional distress, are within the scope of the Workers' Compensation Act.⁴⁶ "To be covered by the Act, however, the injury must...