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    Limited Duty to Independent Contractors' Employees

    Employers that hire independent contractors generally are not liable for injuries to the contractor's employees, unless the injury was caused by the hiring party's affirmative act of negligence or occurred while the employee was engaged in an extrahazardous activity. Tatera v. FMC Corp. makes clear that plaintiffs face high barriers to satisfying either of these prerequisites to recovery.

    Mark R. Hinkston

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 84, No. 5, May 2011

     

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    No one business can do it all. Thus, the use of independent contractors is often a commercial necessity, especially on construction projects and in specialized manufacturing industries. Such settings frequently pose inherent physical dangers to workers, some resulting from activities conducted on the employers’ premises and others from use of products or equipment supplied by employers. Employees of independent contractors who receive work-related injuries can resort to worker’s compensation recovery. Employees who suffer extreme or catastrophic injuries might also seek recovery in tort against the principal employer, the individual or entity that hired the independent contractor for whom the employee works.

    One such case involved Walter Tatera, whose family shop had been hired by FMC Corporation’s predecessor to build parts for use in industrial-brake systems. After Mr. Tatera developed mesothelioma, Mrs. Tatera sued FMC, alleging that it failed to protect her husband from the dangers of asbestos. Tatera v. FMC Corp.1 afforded the Wisconsin Supreme Court the opportunity to revisit the general rule of principal-employer nonliability, which it had last considered 22 years earlier in Wagner v. Continental Casualty Co.2 The court held that Mrs. Tatera had no claim in tort against FMC because exceptions to the Wagner nonliability rule did not apply: supplying parts for machining is not an affirmative negligent act, and although machining disks containing asbestos is inherently dangerous, it is not an extrahazardous activity. This article examines the scope of principal-employer liability for independent-contractor employees’ injuries, with a focus on Tatera and its practical ramifications.

    Background: General Rule of Nonliability

    An independent contractor is a person or company that contracts to do something for another but is not subject to the other’s control in performing the work.3 Although the entity hiring an independent contractor can have a variety of labels, such as “owner” or “general contractor,”4 for this article the tag “principal employer” is used.

    Generally, a principal employer is not liable for physical harm sustained by a person if the harm is caused by an independent contractor’s negligence.5 There are various exceptions to this rule, depending on the context. A common context is one in which a third party unrelated to the contracting parties, such as a frequenter to a construction jobsite or commercial premises, is injured by an independent contractor. In such cases, liability for the third party’s injuries will be imposed on the principal contractor only in situations involving inherent danger (such as construction or demolition), a violation of the safe-place statute if an owner or general contractor has reserved a right of supervision and control, or if in a contract the principal contractor agrees to prevent against injury to another party or its property.6

    Even though worker’s compensation recovery is generally an employee’s exclusive remedy,7 an employee may also pursue a claim against third parties.8 When the third party an injured employee pursues is a principal employer, the general nonliability rule applies. In Wisconsin, this rule in the independent-contractor employee versus principal employer context is known as the Wagner rule, named after the Wisconsin Supreme Court’s 1988 decision in Wagner v. Continental Casualty Co.9

    Affirmative Act Exception. Because of the potential for worker’s compensation recovery and in recognition of the lack of control and lack of oversight inherent in the independent contractor relationship, a principal employer’s duty is narrower in the context of injury to an independent contractor’s employee than it is in cases of injury to nonemployees.10 But as with the unrelated-third-party (nonemployee) context, there are exceptions.

    The Wisconsin Supreme Court has carved out two narrow exceptions to the general rule of nonliability. First, in 1976, in Barth v. Downey Co.,11 the court recognized that a principal employer may be liable for its affirmative acts of negligence that cause injury to the independent contractor’s employee.12 There must be an “act of commission” or “active misconduct” that creates a new risk of harm to the plaintiff.13 An act of omission or a failure to take protective measures will not suffice because the principal employer’s inaction has not worsened the plaintiff’s situation.14

    In Barth, an employee of an independent contractor that was hired to remove heating and ventilation ducts from an arena sued the general contractor after he fell from one of the ducts and was injured. He alleged that his injuries resulted from the general contractor exerting pressure on the independent contractor to “proceed at a faster rate.”15 In granting a new trial, the supreme court implied that this action could be a sufficient “affirmative act” to warrant an exception to the nonliability rule.16

    Wisconsin courts have held that negligence claims premised on negligent hiring,17 failure to furnish safe equipment or supervisory control,18 failure to act on safety violations and incorporate safety precautions,19 failure to warn or protect against dangerous job-site conditions,20 and failure to conduct appropriate safety training21 are not sufficient because the behavior does not constitute active or affirmative negligence. An example of an affirmative act sufficient to support a negligence claim is directing an employee to operate certain equipment in a particular manner.22

    Mark R. HinkstonMark R. Hinkston, Creighton 1988 cum laude, practices with Dye, Foley, Krohn & Shannon S.C., Racine. He can be reached at com mrh dfks-law dfks-law mrh com.

    Extrahazardous-activity Exception. A second exception was recognized by the Wisconsin Supreme Court in 1988 in Wagner, in which the court reversed a judgment in favor of a subcontractor’s employee against a general contractor after the employee fell off a roof during a demolition project and was injured. The court acknowledged that a principal employer may be held vicariously liable for an independent contractor’s negligence if the contractor’s employee was injured while performing an extrahazardous activity,23 also known as an “abnormally dangerous” activity: “one in which the risk of harm remains unreasonably high no matter how carefully it is undertaken.”24 The court held that to impose liability on a principal employer, it is not enough that the activity is “inherently dangerous,” because in such a case steps can be taken to minimize risk of injury.25 The court concluded that building demolition was not an extrahazardous or abnormally dangerous activity sufficient to merit imposition of liability. Working with high voltage,26 doing electrical work in conjunction with construction of a nuclear power plant,27 and sandblasting28 are other activities that have not qualified as extrahazardous. Activities that do qualify include “transporting nuclear waste [and] working with toxic gases.”29

    The Wagner court identified several reasons for requiring the higher extrahazardous standard, as opposed to inherently dangerous, to impose liability. First, the principal employer should not face greater liability for injuries to employees of an independent contractor than it faces for injuries to its own employees (which are covered under worker’s compensation, not tort liability). Second, because injured employees can also resort to worker’s compensation recovery, allowing a suit against a principal employer as well results in a windfall. Third, employees should bear part of the risk of injury because they possess some knowledge regarding the work and are in a better position than the principal employer to provide protection. Finally, the principal employer has already assumed financial responsibility and indirectly compensated the employee for the injuries “because the contract price between the principal employer and the independent contractor includes a payment for worker’s compensation coverage.”30

    Tatera v. FMC Corp.: Testing the Wagner Rule’s Limits

    In Tatera v. FMC Corp., the Wisconsin Supreme Court had the opportunity to again consider the Wagner rule and its exceptions in revisiting “the scope of a principal employer’s duty to an independent contractor’s employee.”31 Mr. Tatera worked for almost 30 years at a machine shop owned by his father. His work included grinding and shaping brake components (friction disks) containing asbestos for Stearns Electric Co., an industrial brake manufacturer purchased by FMC in 1967. In 2004, after Mr. Tatera contracted mesothelioma, a cancer linked to asbestos exposure, Mrs. Tatera sued FMC and others, alleging strict product liability and negligence. Mr. Tatera died shortly thereafter.

    Mrs. Tatera alleged that FMC should be held strictly liable because it manufactured or supplied a product (brake disks containing asbestos) that was unreasonably dangerous because of the company’s failure to warn or provide safety instructions for use of the product. As for negligence, she alleged that FMC had a duty to exercise reasonable care for the safety of Mr. Tatera and others who were exposed to the asbestos-containing products and knew or should have known that such exposure could cause disease or death.

    FMC moved for summary judgment, contending that it was not liable because it had no strict product liability and could not be negligent as a matter of law because it owed no duty to Mr. Tatera since he was an independent contractor’s employee. In response, Mrs. Tatera contended that her strict-liability claim rested on Restatement (Second) of Torts section 402A, which imposes special liability on a seller of defective products that are unreasonably dangerous to the user or consumer. She based her negligence claim on Restatement (Second) of Torts section 388 (Chattel Known to be Dangerous for Intended Use),32 which provides that a supplier of a chattel known to be dangerous for an intended use has a duty to exercise reasonable care to inform those for whose use the article is supplied of the facts that make the chattel likely to be dangerous. She asserted that the two exceptions to the Wagner rule applied because FMC committed an affirmative act of negligence by manufacturing or supplying “unsafe asbestos-containing products” and “because working with asbestos-containing products is an abnormally dangerous activity.”

    Circuit Court and Court of Appeals. The circuit court granted summary judgment for FMC on the strict liability and negligence claims. The court of appeals affirmed dismissal of the strict liability claim, holding that the context – involving “a product provided to the employee of a subcontractor for further processing before reaching the ultimate consumer” – did not support such liability.33

    The court of appeals reversed and remanded the negligence claim. It held that FMC was a supplier under Restatement (Second) of Torts section 388 and that Mrs. Tatera presented sufficient evidence at the summary judgment stage to show that ultimately “a reasonable jury could conclude that FMC knew or should have known of the potential of harm from asbestos to those who would use that product.”34 The court also held that the two exceptions to the nonliability rule applied. First, the supplying of the brake linings to the shop’s employees for grinding was an affirmative act. Second, what it called the “ultrahazardous material exception” applied in view of the summary judgment record containing evidence as to the dangers of asbestos.35

    Supreme Court: Reaffirming Policy. Mrs. Tatera did not challenge the court of appeals’ dismissal of the strict liability claim. Thus, the supreme court only addressed the court of appeals’ decision on the negligence claim. In a 4–3 decision written by Justice Ziegler, the supreme court reversed the court of appeals and held that the Wagner rule barred the negligence claim. The court noted that it was reaffirming the policy consideration it had first adopted more than two decades earlier in Wagner: that a principal employer should be generally protected from tort liability to an independent contractor’s employee because “it has already assumed financial responsibility for injuries to the independent contractor’s employees” by paying a contract price that presumably includes payment for worker’s compensation coverage. The court also noted that “imposing liability on a principal employer for injuries sustained by an independent contractor’s employee runs counter to the notion that the principal employer has relinquished control to the independent contractor” and therefore the independent contractor is in a better position than the principal employer to guard against injuries to the independent contractor’s employees.36

    The supreme court first disposed of an argument that Mrs. Tatera had made for the first time on supreme court review: that because the relationship between FMC and the machine shop was really a bailor-bailee relationship and not that of principal employer-independent contractor, the Wagner rule and its exceptions did not even apply. The court rejected this, holding that the shop was “properly characterized as an independent contractor” because it retained control with respect to the machining, which was conducted at its shop, and it was free to machine the parts in the manner it chose.37 Thus, the Wagner rule of nonliability would control unless the court determined that one of the two exceptions applied.

    Failures Are Not Affirmative Acts. Regarding the first exception, the court concluded that the alleged conduct was not an “affirmative act of negligence.” Mrs. Tatera had claimed that FMC was negligent by failing to 1) warn Mr. Tatera of asbestos’s health hazards, 2) warn of the danger of the asbestos after products and equipment were installed, 3) investigate or test for asbestos’s health effects before sale, and 4) instruct Mr. Tatera and other employees as to precautionary measures. The court said that because these allegations were grounded on “omissions,” they were not affirmative acts. At most, these failures constituted “passive misconduct,” akin to failing to discover and act on safety violations.38

    Mrs. Tatera also based her negligence claim on an allegation that FMC supplied the asbestos-containing parts for machining. The court held that this did not suffice. Although the act of supplying the parts was affirmative, the crux of Mrs. Tatera’s claim was the alleged failure to warn of the dangerousness of the chattel supplied, and the failure to warn was not an affirmative act. In concluding that Mrs. Tatera alleged no affirmative act, the court rejected what it called Mrs. Tatera’s attempt to create an exception to the Wagner rule “by imposing traditional negligence liability under § 388 onto a principal employer that supplies a chattel to an independent contractor to be machined.”39 The court also noted that permitting such liability “would completely undermine our three decades of precedent that requires an affirmative act of negligence” and because “[l]iability for supplying a dangerous chattel is necessarily premised in failing to warn of the chattel’s dangerousness, an omission,” the “affirmative act exception would be eviscerated if a principal employer’s liability is met through an omission.”40

    Not Extrahazardous: Preventive Steps Possible. The court then considered Mrs. Tatera’s contention that the extrahazardous-activity exception applied. Because the difference between “an extrahazardous activity and an inherently dangerous activity is not always obvious,” the court considered prior cases.41 It observed that, as in the high-voltage-electricity and sandblasting contexts, the risk of injury when machining an asbestos-containing disk “can be minimized by wearing protective equipment and taking proper precautions,” such as wearing a respirator. It concluded that if Mr. Tatera had used a “proper respirator as opposed to a simple surgical mask” when doing his work, “his risk of inhaling asbestos dust and developing mesothelioma would have been minimized.” Therefore, it held that because steps could have been taken to minimize Mr. Tatera’s injury, machining an asbestos-containing friction disk is not an activity “in which the risk of harm remains unreasonably high no matter how carefully it is undertaken,” and it does not qualify as an extrahazardous activity.42

    The Dissent. In a dissent joined by Justice Abrahamson and Justice Bradley, Justice Crooks charged that the majority used “twisted” logic to come to a decision that “is not defensible.”43 Justice Crooks believed that Mrs. Tatera presented a prima facie negligence claim under Restatement (Second) of Torts section 388 because she presented proof of, among other things, FMC’s knowledge of the asbestos, its failure to use warnings, and the connection between asbestos exposure and malignant mesothelioma.44 Justice Crooks accused the majority of ignoring this proof and committing “a grievous and fundamental error by failing to abide by the standards and principles underlying summary judgment,” thereby robbing Mrs. Tatera of a jury trial.45

    Justice Crooks also challenged the majority’s holding that the affirmative-act exception did not apply. He disagreed with the majority’s conclusion that any allegation of failure is an omission that thus cannot be “an affirmative act of negligence”; he argued that it is “impossible” for there to be an “affirmative act of negligence” without some “failure to act occurring somewhere in the chain of causation.”46 “Supplying the asbestos-containing disks is an affirmative act, failing to warn of the disks’ dangerous content is the act of negligence, and the harm alleged is death by a disease known to be caused by exposure to asbestos. If this act is not an affirmative one, I fail to see what act could possibly fit within the affirmative act exception.”47

    Tatera’s Aftermath

    The 4–3 decisions in both Wagner and Tatera clearly indicate that determining whether a principal employer has committed an affirmative act or whether an activity is extrahazardous is not always an easy task and is subject to debate.48 Because in virtually all the applicable cases, including Tatera, the appellate courts have held that the subject acts were not “affirmative” and the context not extrahazardous and that liability was thereby precluded, analysis turns on how similar or different the subject activity is to those in the prior “no liability” scenarios presented to the courts. As observed by Justice Crooks, in its “few opportunities” to “explain what sort of behavior might constitute an affirmative act of negligence,” the supreme court has only basically explained “what an affirmative action is not,” rather than “what an affirmative action is.”49 Although lawyers and lower courts may yearn for bright-line guidance as to what specific scenarios will fit into the Wagner exceptions, because of the unique circumstances of each case, a precise, uniform rule is elusive.

    The Tatera dissenters believed that the majority’s decision still left unanswered the question of whether and to what extent Restatement section 388, which imposes on the supplier of a dangerous chattel a duty to inform users of the danger, comes into play in the analysis of a principal employer’s liability in tort to an independent contractor’s employee.50 Although the majority dispensed with any significant discussion of section 388, its decision clearly implies that the section cannot be resorted to if the negligence claim is premised on a failure to inform in anything less than an extrahazardous context. However, even in cases in which a plaintiff injured during extrahazardous activity resorts to section 388, one still wonders whether and to what extent that section could form the basis for a negligence claim in such a context, given that the concept behind the “extrahazardous” activity exception is that some activities are still unreasonably dangerous even with warning, and a principal’s duty under that exception is “nondelegable.” On a related question, under what circumstances could a principal employer in the ostensibly nondelegable-duty extrahazardous context rely on the “sophisticated user” doctrine inherent in section 388, which imposes “no duty to warn if the user knows or should know of the potential danger, especially when the user is a professional who should be aware of the characteristics of the product”?51

    In Tatera, the supreme court faced competing policies: the desire to immunize principal employers in view of the worker’s compensation system and relinquishment of control versus the desire to ensure proper warnings are given when dangerous chattels are supplied to independent contractors. The majority stressed that “the proper inquiry is not whether Walter was working with or exposed to an extrahazardous material” but “whether, when performing the contracted work, the injured employee was engaged in an extrahazardous activity.”52 Thus, the court’s focus was on “the activity of machining asbestos-containing friction disks”53 and not on the chattel, the friction disks themselves. Perhaps the focus on “activity” as opposed to “instrument” (chattel) tacitly sounds the death knell for injured employees’ attempts to rely on Restatement section 388 when deciding whether to pursue the principal employer.

    Conclusion

    Unfortunately, workplace injury cases often involve devastating injuries caused by sometimes horrific conditions. Asbestos has wreaked havoc on the lives of many people. The Tatera decision should not be viewed as an impassive or heartless response to the Tatera family’s plight. The supreme court resorted to other difficult decisions spanning more than 30 years in deciding whether exceptions to the Wagner rule were present. Its specific limited holding that the subject plaintiff cannot recover against the principal employer for asbestos exposure from brake disks likely will not have widespread effect on workers, especially because increased awareness of workplace carcinogens and significant safety advances may lessen the likelihood that asbestos will be the subject matter in suits brought by future plaintiffs. In the meantime, what remains evident is that there likely will continue to be limited circumstances in which employees of independent contractors can sue a principal employer to recover for their workplace injuries. As to exactly what extrahazardous scenarios will be presented, only time will tell.

    Endnotes

    12010 WI 90, 328 Wis. 2d 320, 786 N.W.2d 810.

    2143 Wis. 2d 379, 421 N.W.2d 835 (1988).

    3Kerl v. Dennis Rasmussen Inc., 2004 WI 86, ¶ 24, 273 Wis. 2d 106, 682 N.W.2d 328. See also Wis. JI - Civil 4060 (Independent Contractor: Definition).

    4See Estate of Thompson v. Jump River Elec. Coop., 225 Wis. 2d 588, 590 n. 1, 593 N.W.2d 901 (Ct. App. 1999).

    5Lofy v. Joint Sch. Dist. No. 2, 42 Wis. 2d 253, 263, 166 N.W.2d 809 (1969). See also Restatement (Second) of Torts § 409 (General Principle) (stating that “the employer of an independent contractor is not liable for physical harm caused to another by an act or omission of the contractor or his servants”).

    6Lofy, 42 Wis. 2d at 263. See also Wis. JI – Civil 1022.6 (Liability of One Employing Independent Contractor).

    7Wis. Stat. § 102.03(2).

    8Wis. Stat. § 102.29(1).

    9Wagner v. Continental Cas. Co., 143 Wis. 2d 379, 421 N.W.2d 835 (1988).

    10See Danks v. Stock Building Supply Inc., 2007 WI App 8, ¶ 17 n.3, 298 Wis. 2d 348, 727 N.W.2d 846.

    1171 Wis. 2d 775, 239 N.W.2d 92 (1976).

    12Id. at 782-83. See also Wis JI- Civil 1022.2 (Negligence of General Contractor: Increasing Risk of Injury to Employee of Subcontractor) (“A general contractor who sublets all or a part of a contract to a subcontractor has a duty not to commit an affirmative act which would increase the risk of injury to an employee of the subcontractor. An affirmative act is an act of commission – that is, something that one does – as opposed to an act of omission, which is something one fails to do”).

    13Estate of Thompson, 225 Wis. 2d at 601.

    14Wagner, 143 Wis. 2d at 390.

    1571 Wis. 2d at 782.

    16Id. at 784.

    17Wagner, 143 Wis. 2d at 390 (stating that defendants’ failure “to check the credentials of the independent contractor or make other inquiries” is not “active misconduct constituting an affirmative act”).

    18Snider v. Northern States Power Co., 81 Wis. 2d 224, 239, 260 N.W.2d 260 (1977).

    19Estate of Thompson, 225 Wis. 2d at 602.

    20Rohde v. Acuity, No. 2008AP997-FT, 2008 WL 4402665 (Wis. Ct. App. Sept. 30, 2008) (unpublished) (failure “to properly guard or barricade the drop-off” not an affirmative act).

    21Danks, 2007 WI App 8, ¶ 35, 298 Wis. 2d 348.

    22Barth, 71 Wis. 2d at 783 n.24.

    23143 Wis. 2d at 401.

    24Id. at 392.

    25Id. at 401-02.

    26Estate of Thompson, 225 Wis. 2d at 596.

    27Snider, 81 Wis. 2d at 235-36.

    28Anderson v. Marathon Petroleum Co., 801 F.2d 936, 940 (7th Cir. 1986).

    29Wagner, 143 Wis. 2d at 392-93.

    30Id. at 397-99.

    312010 WI 90, ¶ 15, 328 Wis. 2d 320, 786 N.W.2d 810.

    32Restatement (Second) of Torts § 388 (“Chattel Known to be Dangerous for Intended Use”): “One who supplies directly or through a third person a chattel for another to use is subject to liability to those whom the supplier should expect to use the chattel with the consent of the other or to be endangered by its probable use, for the physical harm caused by the use of the chattel in the manner for which and by a person for whose use it is supplied, if the supplier (a) knows or has reason to know that the chattel is or is likely to be dangerous for the use for which it is supplied, and (b) has no reason to believe that those for whose use the chattel is supplied will realize its dangerous condition, and (c) fails to exercise reasonable care to inform them of its dangerous condition or of the facts which make it likely to be dangerous.”

    33Tatera v. FMC Corp., 2009 WI App 80, ¶ 7, 319 Wis. 2d 688, 768 N.W.2d 198.

    34Id. ¶¶ 37, 44.

    35Id. ¶¶ 51, 52.

    362010 WI 90, ¶¶ 16, 17, 328 Wis. 2d 320, 786 N.W.2d 810.

    37Id. ¶ 20.

    38Id. ¶ 29.

    39Id. ¶ 30.

    40Id. ¶ 31.

    41Id. ¶ 33.

    42Id. ¶ 36.

    43Id. ¶¶ 39, 64.

    44Id. ¶ 57.

    45Id. ¶ 70.

    46Id. ¶ 64.

    47Id. ¶ 65.

    48Estate of Thompson, 225 Wis. 2d at 601-02; Tatera, 2010 WI 90, ¶ 33, 328 Wis. 2d 320.

    49Tatera, 2010 WI 90, ¶ 61, 328 Wis. 2d 320.

    50Id. ¶ 53.

    51Haase v. Badger Mining Corp., 2003 WI App 192, ¶ 19, 266 Wis. 2d 970, 669 N.W.2d 737 (quoting Bergfeld v. Unimin Corp., 319 F.3d 350, 353 (8th Cir. 2003)).

    52 Tatera, 2010 WI 90, ¶ 36 n.21, 328 Wis. 2d 320.

    53Id.




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