Contracting to Your Advantage: Understanding the Importance of Louisiana’s Statutory Employer Status in a Workers’ Compensation Lawsuit

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Foley & Lardner LLPWorkers’ compensation laws differ from state to state, and employers whose employees regularly move across state lines should understand how and when these laws apply. Understanding the interplay between state workers’ compensation rules could limit financial losses from personal-injury litigation. A recent Louisiana case, Ford v. Phillips 66 Co., No. 19-920 (La. 3 Cir. 12/16/2020), illustrates this principle.

In that case, the plaintiff worked for a contractor that transported liquid hydrocarbons for refineries and chemical plants in Texas and Louisiana under a master services agreement (MSA). The plaintiff injured his shoulder opening a valve on a job in Louisiana. He filed a workers’ compensation claim in Texas and sued the refinery for personal injuries in Louisiana, alleging the refinery acted negligently by failing to maintain the valve because it should have been far less difficult to open.

At issue in the Louisiana trial court was whether the plaintiff’s injury was one covered by Louisiana workers’ compensation law as provided in the MSA. If it was covered, then he could not sue the refinery for personal injuries. If it was not covered, then he could sue. Under Louisiana law, if a principal, such as the refinery, had an agreement with an agent, here the contractor, the principal qualified as the statutory employer of the agent’s employees. For claimants seeking to recover for injuries sustained on the job with a statutory employer, their recovery was limited to that provided by Louisiana’s workers’ compensation. If a service contract specifically created a statutory-employer relationship, a rebuttable presumption arose that such relationship indeed existed.

The refinery argued the MSA created an express statutory-employer relationship between the refinery and the contract company’s employees, including the plaintiff. According to the refinery, it was the plaintiff’s statutory employer. The refinery noted the MSA had express language showing the parties’ intended the services provided under the MSA to be essential, which disposed of the plaintiff’s ability to rebut the presumption. For those reasons, the refinery alleged it had immunity against the plaintiff’s tort claims under Louisiana workers’ compensation law.

The plaintiff contended the MSA’s statutory-employer provision applied only to claims for workers’ compensation in Louisiana (the operative phrase read: “This Exhibit is limited to and shall apply only in and to the extent of instances involving coverage of the Louisiana Workers’ Compensation Law.”). According to the plaintiff, that phrase could not be applied to him as he filed for workers’ compensation in Texas. The plaintiff further asserted that only Texas workers’ compensation law should apply because he lived in Texas, had already received Texas workers’ compensation benefits, worked as the contractor’s employee in Texas, was not a party to the MSA, and did not know about the MSA. In the plaintiff’s eyes, he had nothing to do with Louisiana workers’ compensation and had no statutory-employer relationship with the refinery. On those bases, he asserted his tort claims were properly before the court in Louisiana.

The trial court denied the refinery’s motion for summary judgment, finding fact questions existed about the parties’ intent in the MSA’s statutory-employer provision, and by extension, whether Louisiana workers’ compensation rules should apply to bar the plaintiff’s claims.

On appeal, the court reversed the trial court and entered judgment in the refinery’s favor. It found that though the plaintiff filed for workers’ compensation benefits in Texas, he remained eligible for workers’ compensation in Louisiana, and jurisdiction was proper in Louisiana. The appeals court then applied Louisiana’s choice-of-law rule related to financial loss and distribution, a two-prong analysis. The first prong required the parties to be domiciled in different states, and the second prong required the injury and the actionable conduct to have occurred in the same state.

Here, the plaintiff was a Texas resident, and the refinery had a principal place of business in Texas; as both were Texas domiciliaries, they did not meet the first prong. However, the appeals court found the refinery qualified as a juridical person under choice-of-law rules because it had incurred an obligation in Louisiana while conducting its business there. Under such circumstances, the refinery was a Louisiana domiciliary. And as both the plaintiff’s injury and the refinery’s alleged negligence occurred in Louisiana, the second prong was also met. Consequently, the court construed the MSA as creating a statutory-employer relationship between the plaintiff and the refinery, which the plaintiff failed to rebut. As a result, the plaintiff could only recover under Louisiana’s workers’ compensation law and could not maintain his personal-injury suit against the refinery.

This case highlights why businesses must consider whether and to what extent their operations may subject them to different states’ laws, particularly in Louisiana. Including a choice-of-law provision in contracts is a straightforward step to ensure some certainty when facing litigation. But a more in-depth understanding of the relevant states’ laws may reveal benefits or liabilities in one state but not another, especially in Louisiana.

Further, employers should closely examine their contract terms and address any language that could expose the employer to claims otherwise barred by the contract. Ultimately, the terms included in agreements with employees, vendors, contractors, and those employed by contractors should place employers in the most advantageous position should disputes arise. 

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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