July 28, 2014 Leave a comment
Companies typically assume they will not be held liable for tort claims arising from the work performed by independent contractors they hire. However, as tort law continues to change this is less and less true.
The general rule of non-liability of an employer for torts committed by independent contractors has been eroded to the point that some legal experts now argue that “the rule is now primarily important as a preamble to the catalog of exceptions.” 41 Am. Jur. 2d Independent Contractors § 27
The Restatement of Torts has gone so far as to say that the many exceptions have eroded the “general rule” to the point that the rule can now be said to be “general” only in the sense that it is applied where no good reason is found for departing from it. (REST 2d TORTS § 409). In other words, just because you hire an independent contractor does not mean you should assume you will not be held liable for the work they perform.
The reality is that corporations face many liability issues when dealing with independent contractors and suppliers. Inserting boilerplate waiver-of-liability language and indemnification clauses in an independent contractor’s contract is no guarantee that the hiring party will not be held liable for contribution in tort actions filed by third parties against the independent contractor, or in actions filed by an injured third party directly against the company who hired the independent contractor.
The general rule regarding independent contractors states that a person who hires an independent contractor cannot be held vicariously liable for the wrongdoing of the independent contractor. (NYPRAC-TORTS § 9:17). Because the work they perform is independent from your supervision or direction, and the contractor is not your employee, the general rule is that you cannot be held liable for their actions. However, there are exceptions to this rule.
Under the legal doctrine respondeat superior, an employer is liable for the tortious acts committed by employees and agents ‘that are committed within the scope of their employment.’ (Black’s Law Dictionary, 8 Ed., 2004).
An employee is acting within the scope of her employment for purposes of respondeat superior liability if her tortious act that gave rise to a claim was “reasonably foreseeable” by the employer / hiring party. Bussard v. Minimed, 129 Cal. Rptr. 2d 675 (Ct. App. 2003). The question then becomes, is this person who committed this tort an employee of the company that hired them, or merely an independent contractor.
The primary basis for determining whether someone is an employee or independent contractor for purposes of attaching vicarious liability to the employer is whether the employer has the right to control the manner in which the employee performs their job. Id. So, even if a company hires what it thinks is an independent contractor, the reality is that if the hiring party can control and direct the work being done by the contractor to a certain level, then that person no longer is an independent contractor and instead will be treated as an employee of the hiring company.
Even if company X hires contractor Y to perform a job and disclaims liability in the employment contract, the court may disregard the label ‘independent contractor,’ and could assign liability to the hiring party under Respondeat superior if the hiring party has the right to control the manner in which the contractor performs their job.
Assuming the contracting party does not retain the right to control the manner in which the independent contractor performs their job, there are still three broad exceptions to the non-liability rule which may still lead a court to decide that the contractor is actually an employee of the hiring party, and thus the company is liable for the claims arising from the contractor’s work.
If a hiring party falls within one of these three broad exceptions, they will in some circumstances be liable for the torts of their independent contractor, even if they did not control the manner in which the contractor performed their job. (REST 2d TORTS § 409).
 The employer / hiring party is negligent in selecting, instructing, or supervising the contractor, hiring party may be liable for torts committed by the contractor. Id.
In a Wyoming case involving this first exception, an oil company hired an independent contractor to repair a well. An employee of the independent contractor was injured while working on the well, and brought a negligence action against the oil well owner. The trial court and appellate court both agreed that the oil company was liable for the injuries sustained by the employee of the independent contractor.
The appellate court found that “by directing… the manner of the independent contractor’s performance, defendant (oil company) abandoned the protection of the “independent contractor” rule… and owed plaintiff a duty of reasonable care.” Natural Gas Processing Co. v. Hull, 886 P.2d 1181. Despite having a contractual relationship with the contractor limiting liability, because the oil company directed the manner in which the contractor performed it’s work, the oil company fell outside of the safe harbor of tort immunity, and the court decided the contractor was actually the employee of the hiring company.
Similarly, in a Utah case involving an employee of an independent contractor hired to build a an LDS church building, the court had to determine whether the LDS Church had fallen within the first exception to independent contractor tort liability, by directing the explicit manner in which the contractor performed their work. During construction of a church building, a wall fell on a worker employed by the independent contractor, killing him. His estate filed suit, naming the hiring-party church as defendant. In examining the hiring party’s liability, the court examined the doctrine of retained-control, which states that if the hiring party retains an active participation in an injury-causing activity’s method or operative detail, the hiring party would be liable for torts committed by the independent contractor. Thompson v. Jess, 979 P.2d 322.
 Employer has a non-delegable duty, arising out of some obligation to the public. (REST 2d TORTS § 409).
Courts may also decide a contractor is actually an employee if the work being performed by the contractor is a type of work which the hiring party has a duty to the community to be ultimately responsible for the safe completion of. In a Texas case, an independent contractor repairman was injured when fixing a cement truck tire. The appellate court affirmed the trial court’s finding that the company who owned the truck was liable to the repairman, despite his independent contractor status. The appellate court held that “under the circumstances of this case, defendant owed plaintiff a duty of care, even though plaintiff was an independent contractor, since defendant was in the better position to identify, minimize, and administer the risks involved.” Alamo Lumber Co. v. Pena, 972 S.W.2d 800, 805. The court held that under the second exception, public policy dictates that there are certain non-delegable duties of safety and care that a party cannot simply externalize to other injured parties via indemnity clauses. To allow so would open the floodgates of negligent behavior by allowing companies to hide behind indemnity clauses and pass on the costs of injury to others.
 Inherently Dangerous Activity
And finally, if the work being done by the contractor is inherently dangerous, for public policy reasons a company in some cases cannot simply absolve itself of liability for that work by passing it onto a contractor. In a Michigan case, an independent contractor was hired by landowners to fell timber on the landowner’s property. An employee of the independent contractor was injured when a felled tree crushed his leg. The employee named the property owners in the negligence suit, claiming tree logging was an inherently dangerous activity, and as such, was an exception to the no liability rule for independent contractor employees. The trial court granted summary judgment against plaintiff, but the appellate court reversed, holding that logging could be an inherently dangerous activity. DeShambo v. Nielsen, 471 Mich. 27, 684 N.W.2d 332 Mich., 2004.
The Michigan Supreme Court decided that for purposes of this exception, work is inherently dangerous “If the thing to be done is in itself unlawful, or if it is per se a nuisance, or if it cannot be done without doing damage…” Rogers v. Parker, 159 Mich. 278, 123 N.W. 1109 (1909).
Generally speaking, then, if the work cannot be done without doing some kind of damage or committing some kind of nuisance, such as controlled detonations, leveling buildings in a crowded city, etc., then the work is inherently dangerous, and the person who hires an independent contractor to perform the work is as much liable for damages caused by the work to third persons as is the independent contractor. Rogers, 159 Mich. 278.
These kinds of exceptions to the rule of non-liability for companies that hire independent contractors are real, and are happening more and more often. It is more important than ever that companies know with certainty that the contractors they hire are safe, licensed, insured and financially stable. The time to verify whether you are working with reliable, insured contractors is before contracting with them, not after a claim arises.