Wisconsin Worker’s Compensation Policy Favors Immunity From Suit

By
July 14, 2014

When the Worker’s Compensation Act was adopted in Wisconsin the quid pro quo were no-fault benefits to the employee and protection to the employer against lawsuits. Wisconsin courts have consistently upheld the employers’ end of the bargain. The Wisconsin Court of Appeals did so again in Hurt v. Cole, 2014 WL 3056165 decided on July 8, 2014.

The result might seem counterintuitive in light of the facts of the case. Hurt’s Recycling, LLC is a building demolition contractor; Dean Hurt is the only member of his limited liability company. Upon being hired to demolish a building in Fredonia, Hurt’s Recycling, LLC hired four workers to assist in the demolition, and in doing so the workers signed “independent contractor” agreements. Two of these “independent contractors,” Josh Cole and Joel Hegna, were working on overhead ductwork, which fell and injured Dean Hurt.

Hurt did not have worker’s compensation coverage because he had not elected to be considered as an employee of his own company. Section 102.075 of the Wisconsin Statutes allows sole proprietors, partners, and members of limited liability companies to elect worker’s compensation coverage for themselves. Hurt filed suit against Cole and Hegna seeking civil damages for his injury. Cole and Hegna argued that they were immune from suit under the exclusive remedy provision of worker’s compensation. Both the Barron County Circuit Court and the Wisconsin Court of Appeals agreed with Cole and Hegna.

Dean Hurt was an “employee” of Hurt Recycling, LLC
The first issue was whether Dean Hurt was considered to be an employee of Hurt’s Recycling, LLC for purposes of the exclusive remedy provision. His argument was credible: Having not elected to be considered as an employee of Hurt’s Recycling, LLC for purposes of benefits under worker’s compensation, Hurt argued that he could not be considered an employee for purposes of immunity from suit. Cole and Hegna argued that under section 102.07(4)(a) Hurt’s limited liability company is a distinct legal entity and that at the time of his injury Hurt was performing the type of work that one might expect to have been performed by an employee, i.e. deconstruction work.

While acknowledging the logical consistency of Hurt’s argument, the court of appeals pointed out two superseding factors, public policy and absurd results. First, Wisconsin has adopted a strong policy in favor of protecting employers from civil suits, including suits brought by one co-employee against another co-employee.

Second, in light of this strong policy, absurd results would follow if one’s immunity from civil suit were to be determined by the decision of an individual whether to elect coverage under the Worker’s Compensation Act. Following Hurt’s logic to its conclusion, since he had not elected coverage, Cole and Hegna were not immune from civil suit; yet if Hurt had elected coverage, then Cole and Hegna would have been immunized from suit. The court of appeals found that the potential for such unpredictable variability in outcome would lead to absurd results.

Cole and Hegna were also “employees” of Hurt Recycling, LLC
The court of appeals easily dispensed with this issue. The signed “independent contractor” agreement did not conform to all nine of the criteria specified for independent contractor status in section 102.07(8)(b)1-9. The court of appeals relied on established case law for the proposition that, for purposes of worker’s compensation, the strict and relatively certain set of criteria in the statute supersedes the older, more general common law test of independent contractor status. Where a purported independent contractor agreement fails even one of the nine criteria, the default is employee status.

Hurt Recycling, LLC is an “employer” for purposes of worker’s compensation
The statutory threshold for “employer” status under worker’s compensation is low: payment of $500 in wages or employment of three employees during the quarter immediately preceding the injury. The threshold takes effect on the 10th day of the immediately succeeding quarter. The court of appeals determined that the evidentiary record contained ample evidence that the threshold had been crossed. Accordingly, the conditions for compensability were met: Hurt Recycling, LLC was an “employer”, Hurt, Cole and Hegna were “employees”, albeit for differing reasons, and Hurt was injured during the course of his employment. That being the case, Cole and Hegna were immune from civil suit by their “co-employee.”

Comment
The real issue here was whether Dean Hurt, the sole member of his limited liability company and who had not elected to be covered under worker’s compensation for his own injury, would be treated as an “employee” of his company. What tipped the balance in favor of Cole and Hegna was Wisconsin’s strong policy immunizing employers from civil suits arising out of on-the-job injuries, a fundamental part of the bargain in the enactment of the Worker’s Compensation Act.

The outcome may seem off kilter on the facts of this particular case. Dean Hurt cannot receive compensation for his injury under worker’s compensation and he cannot maintain his lawsuit for damages. He could have elected to be covered, but then he would have incurred a premium to do so.

More generally, however, employers should cheer the court of appeals’ decision. For employers increasing worker’s compensation insurance premiums are an ever-present concern. The benefit of protection against civil suits is a less appreciated aspect of worker’s compensation. It is too early to know whether the case will be petitioned for review to the Wisconsin Supreme Court.

Back to all News & Insights

This document provides information of a general nature regarding legislative or other legal developments, and is based on the state of the law at the time of the original publication of this article. None of the information contained herein is intended as legal advice or opinion relative to specific matters, facts, situations, or issues, and additional facts and information or future developments may affect the subjects addressed. You should not act upon the information in this document without discussing your specific situation with legal counsel.

© 2024 Ruder Ware, L.L.S.C. Accurate reproduction with acknowledgment granted. All rights reserved.