Statutory Employment And Peripheral Employees Reforming § 42-1-400, May2021 SCBJ, SC Lawyer, May 2021, #34

AuthorBy Thomas Gagne, Esq.
PositionVol. 32 Issue 6 Pg. 34

Statutory Employment And Peripheral Employees Reforming § 42-1-400

No. Vol. 32 Issue 6 Pg. 34

South Carolina BAR Journal

May, 2021

By Thomas Gagne, Esq.

For the last two years, Jacob “Jake” Oak had worked as a contract security guard for Apex Automotive in Bedford, South Carolina[1]. He did well and was well liked. Management especially appreciated Jacob’s “squared away” attitude. Rumor had it that Apex was about to offer him a full-time position, which was fine as far as Jacob was concerned. Working directly for Apex not only meant better pay and job security, it meant fnally having decent medical insurance.

Unfortunately, Jake’s bright future came tumbling down one evening when, as he was making his usual rounds, he stumbled into a hole recently excavated by the company’s maintenance team, part of a project of laying high speed internet cable.

Jake’s fall left him seriously injured. His ACL and MCL ligaments in his right knee were completely severed. If Jake wanted to walk again he would need a total knee replacement, but, even with the replacement, it was doubtful he would be able to return to work as a security guard. But if Jake did not want to spend the rest of his life in a wheelchair, he would have to risk the surgery.

The operation was a success. Unfortunately, post-operative sepsis set in which led to the amputation of Jake’s right leg above the knee. An active person all his life who enjoyed cycling and softball, Jake’s physical limitations triggered a severe case of depression. Anti-depressants proved ineffective, but the carrier refused to refer him to a counselor. Jake realized he needed an attorney.

The attorney fled a workers’ compensation claim against Jacob’s direct employer, National Security Services, and a premises liability suit against Apex Automotive, his indirect employer, based upon its failure to properly cure or warn of a dangerous condition.

Six months later National’s carrier settled the workers’ compensation case. Jake was awarded permanent and totality disability benefits plus future medicals. Apex, on the other hand, moved to dismiss the negligence action, contending that Jake was a “statutory employee,” therefore immunizing it from suit under the Exclusivity Rule. The court agreed with Apex and dismissed the suit with prejudice, despite the fact that Apex’s primary business was the manufacture of airplanes, not security, and that Apex had always subcontracted its security force at the Bedford facility. Except for legal costs, Apex and its carrier walked away scot-free.

The facts in the fctional, but by no means fanciful, Oak v. Apex described above are not uncommon, and the result is arguably correct under current law, but is it equitable? Or. is it time to reform South Carolina’s statutory employee law in cases like Jake’s?

A brief primer on South Carolina’s Workers’ Compensation law and contract employees

Employees injured within the scope of their employment have long enjoyed the right to be compensated by their employer and its workers’ compensation insurance carrier. A seven-member commission, headquartered in Columbia, administers the workers’ compensation system in South Carolina. They individually adjudicate cases, meet en banc to hear appeals, make rules, and generally manage the agency.

Any injury arising out of and in the course of one’s employment is compensable. Injured employees need not prove negligence in order to recover damages. Damages are generally less than what a claimant could receive via a tort suit for a variety of reasons—pain and suffering is not a cognizable damage, the range of damages are more or less predetermined by the worker’s salary, the severity of the injury(ies), and the body part(s) involved, etc. Other features of the process include streamlined adjudication, relaxed evidentiary rules, and an Exclusivity Rule which prohibits injured employees from seeking damages by any means other than by a workers’ compensation claim.

Now, when one employer (call her the “direct employer”—usually an employment agency) “leases” an employee to a second employer (the “indirect employer”), the resultant “indirect hire” may or may not be deemed an employee of the indirect employer for purposes of workers’ compensation benefits, depending on the application of the statutory employment statute S.C. Code Ann. § 42-1-400.

The determination that an indirect hire is a statutory employee of the indirect employer can be a double-edged sword. If the direct employer does not carry workers’ compensation insurance, the indirect employer assumes the burden of compensation—good news for the indirect hire. However, if the direct employer carries workers’ compensation insurance...

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