Realtor Rehabbing Home Can Become an Employer in PA Workers’ Comp

We have discussed the concept of “Statutory Employer” on this blog in the past. This is something that happens when the direct employer of an injured worker lacks insurance. Most often this is seen in the construction world, where a subcontractor failed to carry insurance, so the general contractor (who more often has workers’ compensation insurance) is seen as the statutory employer, to obtain insurance coverage for the work injury. Though the use of the concept is probably lesser now, given the existence of the Uninsured Employers’ Guaranty Fund (UEGF), this is still an area of law we see somewhat regularly.

An interesting twist in such a case was seen in the recent decision from the Commonwealth Court of Pennsylvania in Mark Zwick v. Workers’ Compensation Appeal Board (Popchocoj). Here, the issue was more whether the “statutory employer” was an employer at all.

The injured worker was a general laborer, who suffered amputations of his right pinky finger and right thumb, and a laceration of his right hand, when an electric saw kicked back suddenly at a house renovation site. It was a man named Adarlan Rodrigues who hired the injured worker, set his pay and hours and directed his activities at the job site. Unfortunately, Mr. Rodrigues did not have workers’ compensation insurance.

A Claim Petition was filed against the UEGF. During the litigation, the UEGF filed a Joinder against Mark Zwick, alleging that Mr. Zwick was a statutory employer, and should be responsible for the payment of the benefits (notably, in contrast to most statutory employer cases, Mr. Zwick also lacked workers’ compensation insurance).

Mr. Rodrigues testified that he was self-employed but was working for Mr. Zwick at the time of the accident. It was Mr. Rodrigues who hired the injured worker. Mr. Zwick would tell Mr. Rodrigues what to do, and Mr. Rodrigues, in turn, would direct the injured worker. The injured worker was paid by Mr. Rodrigues, who was paid by Mr. Zwick.

Mr. Zwick testified that he was a licensed realtor, and investor, and did rehabilitation work on residential properties. He hired Mr. Rodrigues to do renovation work at this particular property. Mr. Zwick did not own the Property, and was just fixing it up for resale. Other contractors, in addition to Mr. Rodrigues, were hired by Mr. Zwick to work on the property. Mr. Zwick told Mr. Rodrigues what work needed to be done, but he did not tell him how to do it. The work would be inspected by Mr. Zwick, before payment to Mr. Rodrigues was made.

Based on all of the evidence, the Workers’ Compensation Judge (WCJ) granted the Claim Petition, finding that Mr. Rodrigues was the employer, and that the UEGF was secondarily liable. The WCJ specifically found that Mr. Zwick was not a statutory employer because “the work performed was not a regular part of Zwick’s business.”

On appeal, the Workers’ Compensation Appeal Board (WCAB) affirmed the award of benefits but reversed the finding that Mr. Zwick was not a statutory employer. Specifically, the WCAB determined that Mr. Zwick was a “contractor” under Section 302(a) of the Pennsylvania Workers’ Compensation Act. As a result, the WCAB found that Mr. Rodrigues was still primarily liable for workers’ compensation benefits, but that Mr. Zwick was secondarily liable as a statutory employer. The UEGF was only responsible if both Mr. Rodrigues and Mr. Zwick both defaulted on payments (and, realistically, without insurance, this would be a pretty safe bet – makes one question whether this entire appellate litigation yielded a benefit to anyone).

The Commonwealth Court of Pennsylvania affirmed the decision of the WCAB. Section 302 creates a statutory employer relationship if the requirements of either Section 302(a) or 302(b) are met. Section 302(a) states, “to have work performed of a kind which is a regular or recurrent part of the business, occupation, profession or trade of such person shall be deemed a contractor.” Contrary to older interpretations of this Section, 302(a) is not limited to cutting or removing natural resources from lands. And, contrary to 302(b), the “statutory employer” need not occupy or control the land at issue.

Mr. Zwick argued that he was a licensed realtor, so renovating properties was not a regular part of his business. Unfortunately for him, as the evidentiary record showed, that was simply not true. As the Court observed, Mr. Zwick had admitted in his testimony that construction rehabilitation work was a part of his business, that he had hired Mr. Rodrigues to prepare this property for resale, and that Mr. Rodrigues had previously done construction work for him at another property. This, found the Court, showed that the rehabilitation of properties was indeed a regular part of Mr. Zwick’s business.

The decision in this case is certainly a logical and reasonable one. Mr. Zwick, despite his efforts to portray himself as one, was hardly an “accidental” employer in this matter. This was not a one-time event. Really, the issue could have been avoided if Mr. Zwick had simply insisted on a Certificate of Insurance from any contractor he hired. This case serves as a lesson for business owners, especially those in real estate, that they may be operating a business other than their primary intended one. It is always wise to obtain a legal opinion when setting up a business operation or process, so that proper insurance can be obtained. It is also critical to make sure that the insurance of other parties involved be confirmed.