Up-the-line Immunity: A Gift to General Contractors

Up-the-line Immunity: A Gift to General Contractors

Jack Simpson, University of Mississippi School of Law, Class of 2022

A.     Workers’ Compensation is the Exclusive Remedy for on-the-job Injuries

All individuals and businesses that regularly employ five or more individuals are required to provide workers’ compensation benefits.^[1]Miss. Code Ann. § 71-3-5. The benefits are payable “for disability or death of an employee from injury or occupational disease arising out of and in the course of employment.”^[2]Miss. Code Ann. § 71-3-7. These benefits are payable “without regard to fault,” and thus, employees are not required to prove that their injuries were brought about by any wrongful conduct on behalf of their employer.^[3]Id. If employers provide workers’ compensation benefits to their employees, neither an injured employee nor anyone otherwise entitled to recover damages on account of the employee’s injury may maintain an action at law against the employer.^[4]Miss. Code Ann. § 71-3-9. As stated succinctly in Walls v. Franklin Corp., “[s]tatutory workers’ compensation benefits are the exclusive remedy for on-the-job injuries.”^[5]177 So. 3d 1156 (Miss. Ct. App. 2015). However, if an employer does not provide workers’ compensation benefits to its employees, an injured employee may proceed against the employer in tort.^[6]See Miss. Code Ann. § 71-3-9. Thus, an employer must pay workers’ compensation benefits to be immune from all other liability to the employee.^[7]Lamar v. Thomas Fowler Trucking, Inc., 956 So. 2d 911, 922 (Miss. Ct. App. 2006).

The workers’ compensation system is built on a compromise between employers and employees. Employees give up their right to sue their employers in exchange for a certain, modest recovery.^[8]Nash v. Damson Oil Corp., 480 So. 2d 1095, 1099 (Miss. 1985). Employers give up their right to deny wrongdoing in exchange for smaller judgments.^[9]Id. Both parties make sacrifices in exchange for some perceived benefit.

B.     General Contractors are Gifted “Up-the-line Immunity” in the Workers’ Compensation Context

“Up-the-line immunity” is a judicially created mechanism that relies upon an incorrect interpretation of §§ 71-3-7, 9.  General contractors must provide workers’ compensation benefits to their subcontractor’s employees if the subcontractor fails to do so.^[10]See Miss. Code Ann. § 71-3-7 (emphasis added). This obligation is conditional. If a subcontractor provides workers’ compensation benefits to its employees, the general contractor is not required to do anything.  However, Mississippi Courts have interpreted this conditional burden to grant unconditional immunity to general contractors.

So long as benefits are provided by either the subcontractor or the general contractor, workers’ compensation is an injured employee’s exclusive remedy.^[11]Bevis v. Linkous Const. Co., 856 So. 2d 535, 541 (Miss. Ct. App. 2003). As such, general contractors are granted immunity even if they do not provide benefits. Courts attempt to rationalize this conclusion by reasoning that general contractors must “stand in the place of the subcontractor if the subcontractor fails to obtain workers’ compensation coverage.”^[12]Richmond v. Benchmark Const. Corp., 692 So. 2d 60, 63 (Miss. 1997).

     1.       Contingent liability should not provide absolute immunity.

This judicially granted immunity is inconsistent with the plain language of § 71-3-9.  The plain language of § 71-3-9 only grants immunity to employers who provide workers’ compensation coverage.^[13]See Miss. Code Ann. § 71-3-9. The obligation to provide coverage is not enough to earn immunity – the employer must actually provide the coverage.^[14]See id.  (stating “if an employer fails to secure payment… an injured employee… may elect to… maintain an action at law for damages”). Therefore, a general contractor who does not provide any benefits to an injured employee cannot be immune from suit by the injured employee.

Moreover, general contractors’ responsibility to provide workers’ compensation benefits is contingent on their subcontractors’ neglect to do so.^[15]Miss. Code Ann. § 71-3-7.  Thus, if a subcontractor provides workers’ compensation coverage to its employees, the general contractor has no obligation to provide coverage. As the law currently stands, even if a general contractor neither provides a subcontractor’s employees with workers’ compensation benefits nor had any obligation to do so, “up-the-line immunity” would hold the general contractor harmless. Workers’ compensation is not intended to be gratuitous to either party.  However, the current “up-the-line” immunity granted to general contractors is a gift, contrary to the intent of the Legislature and the plain language of the Act.^[16]See Lamar v. Thomas Fowler Trucking, Inc., 956 So. 2d 878, 886 (Miss. 2007) (Diaz, P.J., dissenting).

     2.       General contractors should earn immunity as subcontractors do.

In Lamar v. Thomas Fowler Trucking, Inc., the Mississippi Court of Appeals recognized the inequity in granting immunity to employers who do not provide workers’ compensation coverage.^[17]See 956 So. 2d 911, 921 (Miss. Ct. App. 2006). The Court refused to adopt “down-the-line immunity” and neglected to give subcontractors “a free ride merely because of their status as a subcontractor.”^[18]Id. at 921-22. Subcontractors must secure coverage for their employees or lose “the benefits of exclusivity.”^[19]Id. at 922.

The message behind the Court’s opinion is straightforward: subcontractors must pay their way to immunity, but general contractors get to ride for free. Yet, there is no difference in a subcontractor who does not provide coverage and a general contractor who does not provide coverage. The immunity provided by the exclusive remedy provision is only applicable when an employer provides coverage.^[20]See Miss. Code Ann. § 71-3-9. General contractors should earn their immunity just as subcontractors are required to do.  If not, injured individuals are robbed of their rights to recovery in exchange for nothing.

     3.       Up-the-line immunity does not protect against perverse incentives.

In Doubleday v. Boyd Const. Co., the Supreme Court of Mississippi considered policy implications in justifying its decision to extend “up-the-line immunity” to general contractors.  The Court believed it would be “paradoxical” to subject general contractors to the risk of personal injury judgments if their subcontractors secured compensation insurance, but if the subcontractors did not secure compensation insurance, then the general contractors’ liability would be limited by the Act.^[21]See Doubleday v. Boyd Const. Co., 418 So. 2d 823, 826 (Miss. 1982).  In other words, the Court thought there was a perverse incentive for general contractors to hire subcontractors who would not provide compensation coverage, so the general contractors could limit their liability.^[22]See id. The Court believed such an incentive would work against the statute’s purpose of incentivizing general contractors to require subcontractors to carry insurance.^[23]See id. at 826. This rationale is flawed for two reasons.

First, by voluntarily assuming responsibility for the injuries of subcontractor employees, general contractors are forfeiting their rights to deny responsibility. Workers’ compensation is a no-fault system. Therefore, by agreeing to provide workers’ compensation coverage, the general contractor has exposed itself to more liability. While the potential damages may be less, the likelihood of a compensable injury is assuredly higher in a no-fault system than a fault-based system. Workers’ compensation liability is not inherently better than tort liability, as the Court seemed to suggest.^[24]See id. at 825-26.

Second, the Court has improperly framed the issue. This is not an issue of unnecessary liability. The issue is one of unnecessary immunity. The Court should presuppose that no party is immune from suit and only grant immunity if a party offers workers’ compensation coverage. This approach is consistent with § 71-3-7 and puts subcontractors and general contractors on equal footing.

The primary purpose of the § 71-3-7 is “for the protection of the employees of independent contractor or subcontractors.”^[25]Doubleday, 418 So. 2d at 825. Rather than protecting the employees of independent or subcontractors, up-the-line immunity only limits the avenues of recovery for those very employees.

 

MEET THE AUTHOR

 

Jack Simpson is from Booneville, Mississippi, and is a member of the University of Mississippi School of Law Class of 2022. Jack began his college career at the University of Southern Mississippi, where he was a member of the football team. He later transferred to Mississippi State University where he graduated with a bachelor’s degree in Finance in 2019. In his first year at the University of Mississippi School of Law, Jack was selected as a Business Law Fellow. Currently, Jack serves as the Chair of the Moot Court Board at the University of Mississippi School of Law. Additionally, Jack serves as the Associate Business Manager for Volume 91 of the Mississippi Law Journal. After graduation, Jack will sit for the Mississippi Bar and join Langston & Lott as an associate in the Booneville office.