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Volb v. G.E. Capital Corp.

Decided: January 24, 1995.

LINDA VOLB, ADMINISTRATRIX OF THE ESTATE OF CHARLES VOLB, DECEASED, AND LINDA VOLB, INDIVIDUALLY AND AS GUARDIAN AD LITEM FOR MATTHEW VOLB, CHARLES VOLB, AND ERIKA VOLB, MINORS, PLAINTIFFS-APPELLANTS,
v.
G.E. CAPITAL CORPORATION, J.H. REID CONSTRUCTION COMPANY, J.H. REID INDIVIDUALLY AND T/A J.H. REID CONSTRUCTION COMPANY, ABC COMPANY (A FICTITIOUS CORPORATION) AND JOHN DOES (FICTITIOUS PERSONS), INDIVIDUALLY AND T/A ABC COMPANY (A FICTITOUS CORPORATION), DEFENDANTS, AND RONALD LEE AND T.D.E. SERVICES, INC., DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division.

The opinion of the Court was delivered by Stein, J. Chief Justice Wilentz and Justice Handler join in this opinion. Justice Pollock has filed a separate Dissenting opinion, in which Justice Garibaldi joins. Justices O'Hern and Coleman did not participate.

Stein

The opinion of the court was delivered by

STEIN, J.

The critical issue in this appeal concerns the immunity from tort liability of a general employer, T.D.E., for the alleged negligence of its employee, Ronald Lee, which occurred while the employee functioned as a special employee of J. H. Reid General Contractors, Inc. (J. H. Reid). The decedent, Charles Volb, was an employee of J. H. Reid at the time of the accident, and his widow, as administratrix, sought and recovered a workers' compensation award against J. H. Reid. The administratrix also instituted this tort action. The Law Division granted motions for summary judgment in favor of Lee and T.D.E., apparently on the assumption that both Lee, as Volb's co-worker, and T.D.E., as Lee's employer, were immunized from tort liability under the Workers' Compensation Act, N.J.S.A. 34:15-1 to -128. The Appellate Division affirmed in an unreported opinion. We reverse the summary judgment in favor of T.D.E., and hold that T.D.E. is not entitled to Workers' Compensation Act immunity from tort liability. We are unable definitively to ascertain whether or to what extent the Law Division's grant of summary judgment in favor of T.D.E. also may have been predicated on principles of respondeat superior liability. Accordingly, we remand the matter to the Law Division for consideration of that issue.

I

On July 17, 1989, defendant Ronald Lee backed a dump truck over Charles Volb, causing Volb's death. The accident occurred at a construction site of J.H. Reid. Volb was employed by J.H. Reid; however, Lee was employed by T.D.E., an affiliate of J.H. Reid.

The same four principals own both J.H. Reid and T.D.E. They also own another affiliate of J.H. Reid called J.H. Reid General Construction Co., Inc., which is not involved in this case. The record informs us only generally that T.D.E. and J.H. Reid General Construction were organized because of J.H. Reid's labor-union relationships. Testimony elicited at depositions revealed that T.D.E's function was to employ workers from certain unions to perform construction work for J. H. Reid. Similarly, the function of J.H. Reid General Construction was to employ workers from other unions to perform construction work for J. H. Reid. We infer, however, from the generalized description of the two affiliates and their purpose that J.H. Reid was engaged in a form of the practice common to the construction industry known as "double breasting." ("Double breasting refers to the creation of two distinct operating entities, one governed by a collective bargaining agreement and one totally unencumbered by such an agreement. The single most universal characteristic of any double-breasted operation is common ownership of both the unionized and nonunionized companies by a central business entity." Joseph H. Bucci and Brian P. Kirwin, Double Breasting in the Construction Industry, 10 Constr. Lawyer 1 (Jan. 1990)). Because J.H. Reid's affiliates each hired workers from different unions, the inference is permissible that differences in J.H. Reid's relationships with various unions -- building-trade and non-building-trade unions, for example -- dictated the use of separate corporate entities to avoid conflicts that otherwise might arise.

Linda Volb filed a workers' compensation claim as administratrix of her deceased husband's estate. The compensation court entered an award against J.H. Reid. However, Mrs. Volb also filed this tort claim against Lee and T.D.E.*fn1 Lee moved for summary judgment following the completion of discovery. In an oral opinion the trial court granted Lee's motion, basing its decision on J.H. Reid's control of Lee's activities on the day in question. The trial court later entered summary judgment in favor of T.D.E., without opinion. The Appellate Division in an unreported opinion affirmed both trial court judgments substantially for the reasons stated to support the grant of summary judgment in favor of Lee. We granted plaintiff's petition for certification, 134 N.J. 478 (1993).

II

To the extent that the lower courts sustained the grant of summary judgment to T.D.E. on the basis of an employer's statutory immunity under the Workers' Compensation Act, that determination cannot be sustained. Although the lower courts' treatment of the immunity question was abbreviated, the opinions below imply that T.D.E.'s immunity was based on the premise that Lee, as the special employee of J.H. Reid, was statutorily immune from tort liability and that that immunity necessarily encompassed his employer, T.D.E. An alternative theory of tort immunity not addressed by the lower courts might be based on a contention that the statutory immunity of J.H. Reid, Volb's employer, should be expanded to include J.H. Reid's subsidiary and affiliate companies. Neither theory of immunity, however, finds support in the case law.

A

We first address whether T.D.E. is entitled to tort immunity based on Lee's status as a special employee of J.H. Reid. New Jersey has developed its special-employee doctrine by adopting the three-prong test recommended by Professor Larson for establishing a special-employment relationship:

Whether the common law [tort] action is precluded [by the borrowed-employee doctrine] is * * * dependent upon a determination that the borrower of an employee is, in fact, a special employer. Professor Larson * * * lays down a three-pronged test in order to establish employment within the terms of the [Workers' Compensation] Act:

"When a general employer lends an employee to a special employer, the special employer becomes liable for workmen's compensation only if:

(a) The employee has made a contract of hire, express or implied, with the special employer;

(b) The work being done is essentially that of the special employer; and

(c) The special employer has the right to control the details of the work.

When all three of the above conditions are satisfied in relation to both employers, both employers are liable for workmen's compensation."

There is no uniform agreement as to a predominant factor. The sheer weight of authority is undoubtedly on the side of "control." * * * The federal authorities * * * are uniform that the "ultimate test is: Whose is the work being done? * * * In determining whose work is being done, the question of the power to control the work is of great importance * * *."

[Blessing v. T. Shriver & Co., 94 N.J. Super. 426, 430-31, 228 A.2d 711 (App. Div. 1967) (citations and footnote omitted) (last two omissions in original) (quoting 1A Arthur Larson, Workmen's Compensation § 48.00, at 710 (1966), and Jones v. George F. Getty Oil Co., 92 F.2d 255, 263 (10th Cir. 1937), cert. denied sub nom. Associated Indemnity Corp. v. George F. Getty Oil Co., 303 U.S. 644, 58 S. Ct. 644, 82 L. Ed. 1106 (1938)).]

Because the most important factor in determining a special employee's status is whether the borrowing employer had the right to control the special employee's work, the trial court plainly was correct in concluding that Lee was a special employee of J.H. Reid. It based that finding on the fact that a regular employee of J.H. Reid directly supervised the job site on which Lee ran over Volb. Indeed, that supervisor was the person who told Lee to back the dump truck down the detour road on which Volb was checking grades. Because J.H. Reid, as the borrowing employer, controlled Lee's work, Lee was a special employee of J.H. Reid.

Lee's status as a special employee of J.H. Reid compels the Conclusion that Volb's estate cannot sue Lee. By definition, a special employee is an employee of the borrowing employer. As a result, the fellow-employee immunity provided by the Workers' Compensation Act bars a suit by a regular employee of the borrowing employer against the special employee. N.J.S.A. 34:15-8 provides in pertinent part that

if an injury or death is compensable under [the Workers' Compensation Act], a person shall not be liable to anyone at common law or otherwise on account of such injury or death for any act or omission occurring while such person was in the same employ as the person injured or killed, except for intentional wrong.

In short, co-workers cannot sue one another for negligence in the workplace. Thus, the Workers' Compensation Act prohibits the Volb estate's suit against Lee because Volb was a regular employee of J.H. Reid and Lee was a special employee of J.H. Reid.

The determination that Lee is immune from suit by Volb's estate, however, does not establish that Lee's employer, T.D.E., also is entitled to statutory immunity from tort liability. In sustaining the grant of summary judgment in favor of Lee and T.D.E., the lower courts both relied on Antheunisse v. Tiffany & Co., 229 N.J. Super. 399, 551 A.2d 1006 (App. Div. 1988), certif. denied, 115 N.J. 59 (1989), and Santos v. Standard Havens, Inc., 225 N.J. Super. 16, 541 A.2d 708 (App. Div. 1988). Those cases involved plaintiffs who had been loaned by their general employers to perform services for the respective defendants, and set forth the principles that establish a special employment relationship. In each case the court determined that the plaintiff, who had received workers compensation benefits from his general employer, had functioned as a special employee of the defendant, thereby entitling the defendants to Workers' Compensation Act immunity. 229 N.J. Super. at 405; 225 N.J. Super. at 22. Those decisions would be controlling if the issue before us concerned the immunity of J.H. Reid to a tort claim asserted by Lee, its special employee, but they do not resolve T.D.E.'s immunity concerning the tort claim asserted by Volb's administratrix against it, inasmuch as Volb had no employment relationship with T.D.E.

The Workers' Compensation Act does not bar either directly or indirectly the Volb estate's suit against T.D.E. T.D.E. cannot assert as a defense that Volb's exclusive remedy is workers' compensation, because Volb was neither a regular T.D.E. employee nor a special T.D.E. employee. As a result, the employer immunity of N.J.S.A. 34:15-8 does not prohibit directly the Volb estate's suit against T.D.E.

The Act also does not indirectly bar plaintiff's suit by deriving immunity for T.D.E. from Lee's fellow-employee immunity. That the statute immunizes Lee from liability for torts committed against special co-workers such as Volb does not mean that the statute similarly immunizes Lee's employer from such liability. The Appellate Division has described the legislative purpose of the fellow-employee tort immunity provided under the Workers' Compensation Act:

The continued subsistence of a cause of action in tort against a fellow-employee has come under considerable public criticism in recent years. It has frequently resulted in burdening the employer indirectly with common-law damages superimposed upon his workmen's compensation liability by reason of either a legal, moral or practical obligation to indemnify the sued director, officer or supervisory employee, or with the expense of carrying insurance to cover the personal liability of such supervisory personnel. Recognizing that such consequences conflict with the general scheme of the Workmen's Compensation Act, the Legislature * * * amended the act (R. S. 34:15-8) expressly to preclude a right of recovery on account of a compensable injury or death at common law or otherwise against a fellow-employee except in cases of intentional wrong.

[Miller v. Muscarelle, 67 N.J. Super. 305, 321, 170 A.2d 437, certif. denied, 36 N.J. 140 (1961) (citations omitted).]

That legislative policy does not extend Lee's fellow-employee immunity to T.D.E. T.D.E. has not paid workers' compensation benefits to Volb's estate, because T.D.E. did not employ Volb. Thus, imposing vicarious liability on T.D.E. for the negligent act Lee committed while acting within the scope of his employment by T.D.E. is not unfair, because any resulting tort judgment will be the only sum paid by T.D.E. to Volb's family. Such liability also will not undermine T.D.E.'s right to choose workers' ...


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