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Contractor Does Not Pay Workers' Compensation To Sub-Contractor's Employee
(May 2010) By Lydia S. Hu, Esq.
For more information, contact Paul Farquharson.
Schlosser Co., et al. v. Uninsured Employers' Fund, et al.,
No. 112 (Md. May 12, 2010) available at
http://mdcourts.gov/opinions/coa/2010/112a09.pdf
The Court of Appeals of Maryland held that a principal
contractor, W.M. Schlosser Company ("Schlosser"), was not liable to pay workers'
compensation benefits to an employee of a subcontractor, Rose Industrial
Services ("Rose"), for an accidental injury that occurred while working solely
outside of the state in the District of Columbia. Rose had workers' compensation
insurance coverage in the District of Columbia but not in Maryland, where the
employee, Jehue Johnson, resided.
Mr. Johnson filed for workers' compensation benefits in
Maryland where the subcontractor did not carry workers' compensation coverage,
but where Schlosser was covered. The issue was who would pay the benefits —
Schlosser or the Uninsured Employers' Fund.
Two issues were addressed in resolution of this matter:
first, whether Johnson is a "covered employee;" and second, whether Schlosser is
a statutory employer.
The Maryland Workers' Compensation Act is codified at MD.
CODE ANN., LAB. & EMP. § 9-101 et seq. Section 9-202 defines a "covered
employee" as one who is in the service of an employer under an express or
implied contract of apprenticeship or hire. The broad definition is limited by
the site of employment. Section 9-203 provides that an individual is not a
"covered employee" if employed wholly outside of the state.
The second issue is whether Schlosser is a "statutory
employer" such that Schlosser may be liable for Mr. Johnson's workers'
compensation benefits. Section 9-508 provides that under certain conditions a
principal contractor, such as Schlosser, is liable to pay a covered employee any
compensation that the principal contractor would have had to pay had the covered
employee been employed directly by the principal contractor.
The issue here is whether Johnson is a covered employee of
Schlosser. The Court found that Johnson could not have been Schlosser's covered
employee because he was employed entirely outside of the state in the District
of Columbia and therefore did not satisfy the statutory definition of Section
9-203 providing that covered employees are not ones that are wholly employed
outside of the state. It is not disputed that Johnson and Rose engaged in an
employee-employer relationship and that as to Rose, Johnson would have been
considered a covered employee. However, the important question is whether
Johnson was a covered employee as to Schlosser. The determining factor here is
that had Johnson worked directly for Schlosser his work would have been wholly
outside of the state and therefore not a covered employee as to Schlosser.
Accordingly, the Court of Appeals held that the Uninsured
Employers' fund is liable to pay Johnson's workers' compensation benefits
because Rose was an uninsured employer in the State of Maryland.
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