Generally, employers are required under the California Labor Code to carry workers’ compensation insurance to pay for any work-related injuries to their employees. Employers who do not carry such insurance may be liable to the employee for his or her injuries, as well as for penalties and other sanctions for failing to carry workers’ compensation insurance. There is an exception under the Labor Code (the "Owner Exemption") for workers who are hired by the owner or occupant of a residential dwelling to perform work that is "incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, or occupation of the owner or occupant." Under such circumstances, the owner is not liable to a worker for his or her injuries if the worker worked less than 52 hours or earned less than $100 from the owner in the 90 days preceding the injury.
In Heiman v. Workers’ Compensation Appeals Board, the California Court of Appeal addressed who may be deemed a joint employer of an employee, and thus, also be liable for an injured employee’s injuries, when the employer of an employee does not carry workers’ compensation insurance, as well as who may receive the benefit of the Owner Exemption.
In Hieman, a condominium association ("Association") hired Robert P. Heiman, a property manager, ("Property Manager") as an independent contractor for the Association. The agreement between the Property Manager and the Association stated that the Property Manager shall be responsible for all labor laws, but that any employees hired to perform work for the Association will be deemed employees of the Association. The Property Manager hired an unlicensed contractor ("Contractor"), who held no workers’ compensation insurance, to perform a 2-day project for the Association. An employee of the unlicensed contractor ("Injured Employee") was injured on the first day of the project.
The Court of Appeal held that the Property Manager and the Contractor are joint employers who are jointly and severally liable for workers’ compensation for the Injured Employee’s injuries. It also held that the Association, as the principal of the Property Manager, is liable for workers’ compensation for the employee, but that the owners of the condominiums (i.e., the members of the Association), were not liable.
Under the Labor Code, one who hires a worker to perform a job for which a license is required will be deemed the employer of the worker if that worker does not hold the license required for the work. This means that the hiror of an unlicensed contractor can be held liable to that unlicensed contractor and each of the contractor’s employees as if the hiror were the employer of the contractor and his/her employees. Thus, because the Property Manager had hired the Contractor to perform work for the Association that required a license, and the contractor did not hold that license, the Property Manager was deemed a joint employer with the Contractor of the Injured Employee, making the Property Manager jointly and severally liable for the injuries to the Contractor’s employee.
The Property Manager had argued that he was not liable to the employee because, as the agent of the Association and the condo owners, he was entitled to the benefit of the Owner Exemption. However, the court concluded that, although California law expressly provides that an agent may accrue the liabilities of the principal, California law does not expressly entitle an agent to the defenses of his/her principal. Moreover, the Court reasoned, as the property manager of the condominium complex, the Property Manager was in the best position to ensure that the contractor held the appropriate license to perform the work and to ensure that the contractor carried the appropriate insurance for its employees. Therefore, the Property Manager could be held liable to the Injured Employee.
The Court next concluded that the Association was liable to the Injured Employee for his injuries as the principal of the Property Manager. California law provides that principals may be held liable for the authorized acts of its agents, and the Association did not dispute its agency relationship with the Property Manager.
The Association, nonetheless, argued that it should not be held liable to the Injured Employee because it was entitled to the benefit of the Owner Exemption. To qualify for this exemption, one must show that the work was "personal" in nature and not in the "course of the trade, business, profession, or occupation" of the owner. The Association, as a legal entity separate and apart from the condominium owners, was engaged in the business of providing maintenance and repairs. Thus, the work performed by the Contractor was not "personal," but, in fact, in the nature of the business of the Association. Accordingly, the Association could be held liable to the Injured Employee as the principal of the Property Manager.
Finally, the Court held that the owners of the condominiums qualified for the Owner Exemption and, thus, were not liable to the Injured Employee. The owners of the condominiums, unlike the Association and the Property Manager were not engaged in the business of providing maintenance and repairs, and the Injured Employee had not worked sufficient hours to qualify for status as an employee of the individual condominium owners.
This decision underscores the importance of ensuring that any independent contractors hired to perform work carry the appropriate licenses for the job, as well as workers’ compensation insurance to protect his/her/its workers. If you have questions about these issues or any other employment-related matter, please contact one of our Labor and Employment attorneys.