Supreme Court clarifies workers' comp claims re: subcontractors

" The law -- intended to discourage companies from subcontracting regular work to avoid the cost of workers' comp insurance -- provides that a company is responsible for subcontracted employees when it farms out "regular or recurrent" work to another business. It exempts companies from lawsuits filed by employees covered by their workers' comp insurance. "

Court clarifies workers' comp law

State ruling involves subcontracted jobs

By Bill Wolfe
[email protected]
The Courier-Journal

When James David Rehm of Louisville died in 2002 of cancer caused by asbestos, it appeared that his lawsuit against various work sites where he may have been exposed to the harmful substance might never get a full hearing.

The claims against the 16 companies were considered to be prohibited under the Kentucky Workers' Compensation Act -- though none had ever directly employed Rehm.

But a unanimous Kentucky Supreme Court ruling last week opened the door for the Rehm family to continue legal action against seven of the companies and, perhaps more significantly, aimed to clarify for workers and businesses which cases fall under the workers' comp exemption and which can be considered in court.

The law -- intended to discourage companies from subcontracting regular work to avoid the cost of workers' comp insurance -- provides that a company is responsible for subcontracted employees when it farms out "regular or recurrent" work to another business. It exempts companies from lawsuits filed by employees covered by their workers' comp insurance.

But with the standard open to many interpretations, the court has offered a clarification: "Stated simply, (the law) refers to work that is customary, usual, normal or performed repeatedly and that the business or a similar business would perform or be expected to perform with employees."

"For years, there have been a lot of different opinions by various circuit judges and from courts of appeal on when the exemption applied," said Kenneth L. Sales, a partner with the Sales, Tillman, Wallbaum, Catlett & Satterley law firm, which represented the Rehm family.

In the Rehm case, "the original judge was struggling to apply the law, and it was a very difficult law to interpret."

The businesses named in the lawsuit all argued that they were covered by the workers' comp obligations, so they should be protected from the litigation.

"A lot of judges have been dismissing these cases not really understanding the limitations on the right, and the Supreme Court has completely defined it now," said Sales, who called the ruling "a victory for those victims," and said it's a better definition for judges about how to apply a difficult law.

Businesses, too, have been looking for clarification of the law, said Rebecca Schupbach, an attorney with Wyatt, Tarrant & Combs, which represented several of the companies involved. The question for businesses, she said, is when are they subject to being sued?

The law protects a business from worker-injury lawsuits if it has workers' comp insurance in place, and if the case involves work from a reputable contractor that is or could be done by the company's own employees, Schupbach said.

The case drew friend-of-the-court filings from the Kentucky Chamber of Commerce, Associated Industries of Kentucky, Greater Louisville Inc., the Coalition for Litigation Justice and the Pacific Legal Foundation.

"The Supreme Court basically upheld the major arguments that we had made in that case, and that was primarily to protect the current workers' comp system and to prevent a litigation crisis for employers," said Dave Adkisson, president and chief executive officer of the Kentucky chamber.

"Generally the business community feels good when definitions are clear, understandable and predictable," he said.

The case combined the Rehm family's appeal with a similar case involving three plaintiffs who claimed that they contracted asbestosis while working for contractors on projects at General Electric Co.'s Appliance Park in Louisville.

In clarifying the boundaries of the workers' comp protection, the court ruled that the family could sue American Standard, Ford, GE, Goodrich, International Harvester, Lorillard and Reynolds Metals.

Reporter Bill Wolfe can be reached at (502) 582-4248.