October 11, 2012
NANCY S. MONK, GENERAL ADMINISTRATRIX AND ADMINISTRATRIX AD PROSEQUENDUM OF THE ESTATE OF DR. SCOTT MONK, DECEASED, AND NANCY S. MONK, INDIVIDUALLY, PLAINTIFF-APPELLANT,
JOSEPH J. O'CONNELL, D.O.; ED CYBOLSKY, R.N.; MARK MACKAVANAGH, R.N.; VIRTUA/WEST JERSEY HOSPITAL, DEFENDANTS, AND EMERGENCY PHYSICIAN ASSOCIATES, P.A., DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-6279-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 18, 2012
Before Judges Axelrad and Ostrer.
Dr. Scott Monk sought emergency medical care at Virtua/West Jersey Hospital (Virtua) on September 1, 2006. He was attended by Dr. Joseph O'Connell who was working at Virtua under a contract between Virtua and Emergency Physician Associates, Inc. (EPA). Dr. Monk died later that day as a result of a massive dose of narcotic pain killers that suppressed his respiratory system. Dr. Monk's widow, Nancy Monk, as administrator of Dr. Monk's estate, and individually, sued EPA asserting it was vicariously liable for Dr. O'Connell's alleged negligence.*fn1
The trial court granted EPA's motion for summary judgment, and denied plaintiff's cross-motion for partial summary judgment. The court concluded Dr. O'Connell was an independent contractor and not EPA's employee, and consequently, EPA was not vicariously liable for his actions. We reverse.
Dr. Monk went to Virtua's emergency room on September 1, 2006 complaining of pain from renal colic. Dr. O'Connell was the only physician on duty in the emergency room. Over the course of less than two hours, Dr. Monk received three twomilligram doses of Dilaudid, a potent narcotic pain medication. According to plaintiff's expert, this was roughly six to nine times the recommended maximum dose. Just over an hour after he received the last Dilaudid dose, Dr. Monk was discovered with no pulse and later died.
EPA is in the business of recruiting emergency room physicians and placing them at New Jersey hospitals. In 2001, EPA entered into a contract with Dr. O'Connell for him to perform professional emergency physician services at Virtua. EPA also entered into a contract with Virtua to place doctors like Dr. O'Connell in Virtua's emergency department. The parties do not dispute that these contracts define the respective relationships of the parties.
We review first the contract between EPA and Dr. O'Connell. The contract provided that Dr. O'Connell would provide medical care "in a manner which [he] shall exclusively determine but within the guidelines of good medical practices." EPA agreed it "shall neither have nor exercise any control or direction over the methods by which [O'Connell] agrees to perform his said work" so long as he acts in accordance with currently approved practices. He was to comply with "all general rules and regulations established by the Hospital."
EPA was empowered to terminate the agreement immediately for cause, or without cause upon thirty days' written notice. Although "cause" is not expressly defined, we presume it included Dr. O'Connell's failure to perform medical services in a competent manner. EPA could terminate the contract if Dr. O'Connell competed with EPA or interfered with any EPA contractual relationship, if EPA's contract with the hospital became null and void, if EPA were dissolved, or if O'Connell were disabled for more than thirty days. Dr. O'Connell retained the right to terminate the agreement at the end of an existing one-year term or on ninety days' notice.
The contract specified a price EPA would pay Dr. O'Connell for each clinical hour worked, to be paid at least once per month. Dr. O'Connell said he also received bonuses, above his hourly salary, based on the number of patients seen and the intensity of care, as determined by EPA. The contract required Dr. O'Connell to maintain prescribed levels of malpractice insurance, but Dr. O'Connell testified that EPA paid the premium.
The contract restrained Dr. O'Connell from competition. Although Dr. O'Connell was not prohibited from practicing medicine outside the contract, he was prohibited from treating anyone in the Virtua Emergency Department as a private patient. Dr. O'Connell was required to remit to EPA anything of value he received as a result of his services as an emergency physician at Virtua. During his contract, and for two years thereafter, Dr. O'Connell could not perform emergency department services at any hospital that had contracted with EPA in the preceding year.
The contract was denominated an "Independent Contractor's Agreement" and stated it did not create an employee relationship. EPA would not withhold taxes and Dr. O'Connell agreed he would have no claim for sick leave, vacation pay, retirement benefits, worker's compensation, or disability and unemployment insurance benefits.
We turn next to EPA's professional service agreement with Virtua. Under the agreement, EPA staffed Virtua's emergency room. Virtua agreed that, with limited exceptions, EPA would be the exclusive source of emergency room physicians as well as emergency department professional supervisory and teaching services. EPA assumed responsibility for provision of professional services "through EPA Provided Physicians." The clause entitled "Services Provided by EPA" stated:
A. EPA, through EPA Provided Physicians, shall assume the responsibility for the professional services rendered in the Departments and shall render such services in a professional, competent, effective and efficient manner consistent with accepted standards of the medical profession and the local medical community.
B. EPA, through EPA Provided Physicians, shall render professional physician services which are usually and customarily rendered in the Departments, including without limitation: (1) the prompt evaluation and treatment of acute medical needs of every patient who presents to the Department for medical care, except those patients requesting treatment by their personal physicians who do not need immediate medical treatment and (2) consultations with members of the Medical Staff of the Hospital as to the care and diagnosis of any patient. . . .
EPA was to provide Virtua a monthly schedule subject to Virtua's approval. EPA agreed its physicians would meet minimum qualifications and obtain Medical Staff membership at Virtua. EPA was not required to provide any equipment or supplies to EPA physicians at Virtua.
EPA also assumed a role in evaluating its physicians. It agreed to maintain a system of performance review for the physicians that met Virtua's standards. EPA also agreed to participate in Virtua's Performance Improvement Program, patient satisfaction initiatives and other hospital initiatives and to implement patient satisfaction goals. EPA undertook the responsibility to maintain the quality of service provided by the physicians it placed. The EPA-Virtua agreement stated, "EPA shall require EPA Provided Physicians to perform their work and functions at all times in strict conformance with the currently approved medical methods and practices and in a competent and professional manner."
The contract provided that "EPA Personnel" would serve as the Chief Medical Director of Emergency Medical Services (Chief), and as Divisional Medical Directors of Emergency Services (Divisional Directors). They were responsible for managing the daily medical operations of the emergency department. They were responsible for scheduling emergency physician staffing, improving the medical performance of the department, coordinating continuing education, reviewing physicians' time sheets, providing performance evaluations, "initiat[ing] appropriate feedback program to emergency physicians and medical staff committees," and arranging for educational interventions for EPA Provided Physicians. Ibid. Dr. O'Connell testified, "If there is an issue with patient care, from my understanding, the . . . director of the department that you're in will discuss the issue with you on a one-to-one basis." The Chief reported to the hospital's Vice President of Medical Affairs and the Executive Vice President of Health Services. The Chief was given full authority to act on EPA's behalf.
Although the record does not include the agreements between EPA and the Chief and Divisional Directors, it appears that these physicians maintained an explicit agency relationship, which is not found in the terms of the EPA agreement with Dr. O'Connell as an "EPA Provided Physician." The EPA-Virtua contract stated, for example, that Dr. Fredric Ludwin, the identified Chief, "shall have full authority to act on EPA's behalf as may be required."*fn2
Under the contract, EPA must maintain or supervise maintenance of medical records of the professional services rendered by EPA physicians. EPA also agreed to comply or supervise compliance with all applicable reporting statutes and regulations relating to the services provided by EPA physicians. In addition, EPA also agreed to cooperate with Virtua in carrying out administrative rules, policies and regulations pertaining to the Emergency Department. EPA also agreed to participate in Virtua training programs and perform teaching duties.
EPA and Virtua agreed to ensure their respective personnel were covered by malpractice insurance in accordance with the Medical Staff Bylaws. All non-medical staff in the emergency department were classified as Virtua employees.
As for financial relationships with patients, EPA was responsible for billing patients for the professional component of services received. Although Dr. O'Connell testified that EPA sent patients bills in the name of the treating physician, EPA set the fees, and apparently collected the fees, remitting a salary to the treating physician like Dr. O'Connell.*fn3
Virtua agreed that it would not exercise control over the professional medical judgment of EPA physicians, and all EPA physicians were to be viewed as independent contractors by the hospital. EPA agreed to indemnify and hold harmless the hospital from and against "any liabilities and costs, including attorneys [sic] fees, which may arise out of or are related to any costs associated with the EPA Provided Physicians or its employees."
Plaintiff filed her complaint alleging medical negligence in December 2007. EPA moved for summary judgment in November 2009 and plaintiff cross-moved for partial summary judgment on the issue of EPA's vicarious liability. The court granted EPA's motion and denied plaintiff's motion. The court also denied plaintiff's subsequent motion for reconsideration.
Applying Lowe v. Zarghami, 158 N.J. 606 (1999), the court determined that Dr. O'Connell was an independent contractor and not an employee of EPA. As a result, EPA was not vicariously liable for Dr. O'Connell's actions. The court reached that decision after applying both the "control test" and the "relative nature of the work test."
The court found that under the contract, EPA did not have control over Dr. O'Connell in the work he performed for patients on a daily basis. The court noted that Virtua, not EPA, provided the facility and all the equipment that Dr. O'Connell used at the hospital. However, the court found EPA "can terminate the doctor . . . if the doctor is not performing[.]"
In applying the nature of the work test, the court held that this case did not present the public policy concerns at play in Lowe, supra. The judge concluded that EPA's business goals were not, in any way, enhanced if Dr. O'Connell were considered an employee. The judge, therefore, found that Dr. O'Connell was not an employee of EPA, but an independent contractor.
Plaintiff presents the following points for our consideration:
I. THE TRIAL COURT COMMITTED HARMFUL ERROR WHEN IT RULED THAT EMERGENCY PHYSICIAN ASSOCIATES, INC. WAS NOT LIABLE FOR THE NEGLIGENT CONDUCT OF JOSEPH O'CONNELL, D.O., REGARDLESS OF WHETHER HE IS CONSIDERED TO BE AN INDEPENDENT CONTRACTOR OR EMPLOYEE.
A. EPA is liable for the negligence of Dr. O'Connell even if he is considered to be an independent contractor.
B. EPA is liable for the negligence of Dr. O'Connell even if he is considered to be an employee.
II. THE TRIAL COURT COMMITTED HARMFUL ERROR WHEN IT DENIED PLAINTIFF'S CROSS MOTION FOR PARTIAL SUMMARY JUDGMENT SINCE THE LAW IS UNEQUIVOCAL THAT DEFENDANT EPA IS LIABLE FOR THE NEGLIGENT CONDUCT OF JOSEPH J. O'CONNELL, D.O., REGARDLESS OF WHETHER HE IS CONSIDERED TO BE AN INDEPENDENT CONTRACTOR OR EMPLOYEE.
III. THE TRIAL COURT COMMITTED HARMFUL ERROR WHEN IT DENIED PLAINTIFF'S MOTION FOR RECONSIDERATION AS IT HAD PREVIOUSLY MADE ERRONEOUS FINDINGS OF FACT AND MISAPPLIED APPLICABLE LAW.
We review the trial court's grant of summary judgment de novo. Lapidoth v. Telcordia Tech., Inc., 420 N.J. Super. 411, 417 (App. Div. 2011). We apply the same standard as the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167, (App. Div.), certif. denied, 154 N.J. 608 (1998). Pursuant to Rule 4:46, we "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Issues of law are also subject to our de novo review. Regarding "the review of legal conclusions reached on summary judgment . . . '[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.'" Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 382-83 (2010) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
A master is vicariously liable for the negligence of its servants acting within the scope of their employment. Restatement (Second) of Agency § 219 (1957). However, "[a]s a general rule, and absent certain exceptions, one who engages an independent contractor is not liable for the negligence of that contractor in the performance of the contract." Baboghlian v. Swift Elec. Supply Co., 197 N.J. 509, 518 (2009). Exceptions to the rule include where the hiring party "(1) . . . retains control of the manner and means of doing the work under the contract; (2) . . . engages an incompetent contractor; and (3) where the activity constitutes a nuisance per se." Ibid. (citing Majestic Realty Assocs. Inc. v. Toti Contracting Co., 30 N.J. 425, 431 (1959)). "It has long been recognized that control by the master over the servant is the essence of the master-servant relationship on which the doctrine of respondeat superior is based." N.J. Property-Liability Ins. Guaranty Assoc. v. State, 195 N.J. Super. 4, 8 (App. Div. 1984).
In Lowe, supra, 158 N.J. at 615-17, our Court reviewed the two tests for analyzing whether a person is an independent contractor, or an employee, to determine potential liability for negligence: the control test and the relative nature of the work test. The Court observed that the control test was based on the master-servant relationship where the "employer controls both the nature of the work performed and the manner in which the work is completed." Id. at 615-16. "[T]he control test assesses four factors in determining a worker's status: (1) the degree of control exercised by the employer over the means of completing the work; (2) the source of the worker's compensation; (3) the source of the worker's equipment and resources; and (4) the employer's termination rights." Id. at 616. The Court noted that greater control increased the likelihood the worker would be considered an employee. Ibid.
A court shall apply the relative nature of the work test if an employer-employee relationship is not found under the control test. This is often true in cases involving professional services, where it is natural for the professional to control the manner in which services are performed.
[T]here are various situations in which the control test does not emerge as the dispositive factor. For example, where it is not in the nature of the work for the manner of its performance to be within the hiring party's direct control, the factor of control can obviously not be the critical one in the resolution of the case, but takes its place as only one of the various potential indicia of the relationship which must be balanced and weighed in determining what, under the totality of the circumstances, the character of that relationship really is. [Marcus v. E. Agric. Ass'n, Inc., 58 N.J. Super. 584, 597 (App. Div. 1959) (Conford, J., dissenting) (deeming plaintiff an employee for workers' compensation purposes), rev'g on dissent, 32 N.J. 460 (1960).]
The Lowe Court concluded "it is appropriate generally to apply the relative nature of the work test in situations involving work performed by professional employees." Lowe, supra, 158 N.J. at 617. Although the test is "primarily" used in workers' compensation cases, it may be used in other contexts. Id. at 617. The Court reasoned, "if the working relationship involves professional services where an employer cannot exercise control over the methods used to provide those services, the relative nature of the work test may provide a more accurate assessment of the working relationship." Id. at 618 (citation omitted). In the case of a physician, it is inconsistent with the nature of the work performed for the employer to dictate the details of how he or she practices medicine. Lowe, supra, 158 N.J. at 619.
The relative nature of the work test requires a court to examine the "'extent of the economic dependence of the worker upon the business he serves and the relationship of the nature of his work to the operation of that business.'" Id. at 616 (quoting Marcus, supra, 58 N.J. Super. at 603). In applying the test, the court should consider whether the employer's goals are served by concluding that the worker is an employee. Id. at 622.
Applying the four-factor control test, we conclude the undisputed facts created an employment relationship. Turning to the degree of control over the means of completing work, EPA retained broad authority, but for the ability to dictate the physician's exercise of his professional judgment in particular cases. However, we have held "the requirement of control is sufficiently met where its extent is commensurate with that degree of supervision which is necessary and appropriate, considering the type of work to be done and the capabilities of the particular person doing it." Marcus, supra, 58 N.J. Super. at 597. We discern such commensurate level of control here.
EPA, "through EPA Provided Physicians," agreed to render services in a "professional, competent, effective and efficient manner" and agreed to provide "the prompt evaluation and treatment of acute medical needs of every patient who presents to the Department[.]" EPA promised Virtua that the physicians it placed would provide quality care. EPA not only provided the emergency physicians to Virtua, but also provided the Chief and Divisional Directors, who were authorized to act on EPA's behalf. Thus, EPA physicians, as opposed to Virtua physicians or managers, were Dr. O'Connell's supervisors, authorized to provide feedback, training, and "educational interventions . . . to achieve goals." These EPA physician-managers affected the manner in which Dr. O'Connell performed his tasks. On balance, this factor favors a finding of an employer-employee relationship.
Dr. O'Connell's compensation came from EPA. EPA, not Virtua, billed his patients. Although they billed in his name, the payments apparently were remitted to EPA, which then paid Dr. O'Connell a fixed hourly compensation, subject to bonuses, based on his patient volume and the intensity of his services. Dr. O'Connell was prohibited from treating his own patients at Virtua. He did not develop a separate contractual relationship with Virtua or the patients he treated at Virtua.
We recognize that the person hiring an independent contractor, as did EPA here, will generally not withhold income taxes, or pay unemployment taxes. On the other hand, "neither the making nor the failure to make such deductions is dispositive" in determining the existence of an employer-employee relationship. Dee v. Excel Wood Prods. Co., 86 N.J. Super. 453, 457 (App. Div. 1965). Nor is it dispositive that EPA denominated Dr. O'Connell as an independent contractor. "We have held that the real status of a person as an employee or independent contractor cannot be altered by any false label put on that status." Id. at 458 (citation omitted).
While EPA did not provide Dr. O'Connell's equipment and physical resources, that fact carries little weight because Dr. O'Connell did not provide his equipment and resources either. Rather, the third-party hospital provided the equipment and resources. Cf. Tofani v. Lo Biondo Bros. Motor Express, Inc., 83 N.J. Super. 480, 486 (App. Div. 1964) ("When the employer furnishes valuable equipment, the relationship is almost invariably that of employment. When the employee furnishes such equipment, this circumstance may, if coupled with other factors, indicate independent contractorship, but in itself is not necessarily fatal to a showing of employment based on other grounds."). Moreover, although EPA did not provide physical equipment, it agreed that its personnel serving as Chief and Divisional Directors would "[a]rrange education interventions for EPA Provided Physicians". In other words, EPA assumed responsibility for providing educational resources to physicians like Dr. O'Connell.
Finally, EPA retained the right to terminate Dr. O'Connell for cause without notice, or upon thirty days' notice without cause. Upon such termination, Dr. O'Connell would be required to cease providing emergency medical services at Virtua, based on EPA's role as the exclusive provider of such services at the hospital. This factor also supports a finding of an employer-employee relationship. In sum, applying the control test, we conclude Dr. O'Connell was EPA's employee, and EPA is vicariously liable for his actions.
We reach the same result applying the relative nature of the work test. As we have discussed, although EPA did not control Dr. O'Connell's exercise of his professional medical judgment, it indirectly exercised control by supervising and assessing his work, and retaining the power to intervene with training, if appropriate, or to terminate him.
Turning to the nature of the parties' interests in the relationship, there was significant "economic dependence of the worker upon the business he serve[d][.]" Lowe, supra, 158 N.J. at 616. Dr. O'Connell worked at Virtua only through EPA. He was prohibited from contracting separately with Virtua, or Virtua's patients. EPA assumed the responsibility of billing Dr. O'Connell's patients. Similarly, in Lowe, the Court found economic dependence where a physician's sole source of income was from the alleged employer, UMDNJ, and UMDNJ billed the physician's patients. 158 N.J. at 622. See also Auletta v. Bergen Ctr. for Child Dev., 338 N.J. Super. 464, 473 (App. Div.) (in workers' compensation case, psychologist who received only about thirty percent of his income from defendant had demonstrated sufficient economic dependence under the relative nature of work test), certif. denied, 169 N.J. 611 (2001); Conley v. Oliver and Co., 317 N.J. Super. 250, 256-57 (App. Div. 1998) (in worker's compensation case, petitioner had substantial economic dependence on respondent where for four-and-a-half months, he worked exclusively for respondent as claims adjuster).
The nature of Dr. O'Connell's work was also integral to the operation of EPA's business. See Lowe, supra, 158 N.J. at 616 (stating that under the relative nature of the work test, the court considers the relationship of the nature of the work to the business's operation). In Lowe, supra, the work of a physician placed in a teaching hospital affiliated with UMDNJ was deemed integral to UMDNJ's educational mission. 158 N.J. at 622-23. Also, in Auletta, supra, 338 N.J. Super. at 473, we held that a child psychologist's work, though limited to two days per week, was integral to the business of a school that provided psychological and educational services to special education students.
EPA did not merely find physicians, including Dr. O'Connell, and place them in a separate contractual relationship with a third party. EPA retained a continuing contractual and business relationship with Dr. O'Connell and its other EPA Provided Physicians. Simply put, EPA was responsible for staffing and running Virtua's emergency department, which included providing the managing physicians, and the Chief and Divisional Directors. EPA relied upon Dr. O'Connell and the other "EPA Provided Physicians" to fulfill its continuing obligation to Virtua to "render professional physician services which are usually and customarily rendered in the Departments[.]" EPA retained a continuing interest that Dr. O'Connell and other physicians it provided performed their services competently and capably, in order to preserve its relationship with Virtua.
Moreover, EPA retained a direct economic interest in Dr. O'Connell's billable work. Although EPA billed patients in physicians' names, EPA apparently retained the remaining balance of a patient's or insurer's payment after paying Dr. O'Connell his fixed hourly salary, plus bonuses.
We recognize that EPA's goals are not apparently served by concluding that Dr. O'Connell is its employee. Cf. Lowe, supra, 158 N.J. at 622 ("Any evaluation of a working relationship, therefore, must consider whether the goals of the business are served by concluding that the particular worker is an employee."). However, we do not deem the absence of that factor to be dispositive. The Lowe Court deemed that factor significant in a case where both the physician and UMDNJ shared an interest in establishing a employer-employee relationship, which provided a shield against liability under the Tort Claims Act. By contrast, in this case, establishment of the relationship would lower the shield against liability. EPA obviously sought that shield by denominating its relationship with Dr. O'Connell an independent contractorship and fashioning its contract the way it did. In that context, we therefore attach relatively little weight to this factor, in our effort to discern the actual nature of the parties' relationship, as opposed to EPA's self-interested classification of it as an independent contractorship. See Marcus, supra, 58 N.J. Super. at 602 (noting that since tests for determining an employer-employee relationship "are subject to manipulation by a prospective employer, reliance thereon must be guarded").
Given our conclusion that Dr. O'Connell is an employee under both the control test and the relative nature of work test, we need not reach plaintiff's argument that under Marek v. Professional Health Services, Inc., 179 N.J. Super. 433, 440-41 (App. Div. 1981), EPA had a non-delegable duty to plaintiff to provide competent and adequate medical care.
Reversed and remanded.