By: Jonathan A. Cass, Esq. and Joseph L. Sine, Esq. Cohen Seglias Pallas Greenhall & Furman PC
Workers’ compensation immunity not only protects employers from personal injury and wrongful death lawsuits brought by their employees, but it also prevents third parties from joining the employer to a lawsuit commenced by the employee. However, contractors should be aware that they usually are asked to waive the protection against third-party lawsuits stemming from their employee’s injuries in their contracts. Because personal injury and wrongful death lawsuits are one of the largest risks on a construction project, contractors should be aware of the contract language that results in waiver while negotiating their contracts.
The Pennsylvania Workers’ Compensation Act (the Act) governs how an employer compensates an employee for a work-related accident. Pursuant to the Act, every employer must compensate its employees for any personal injury or death sustained in the course of their employment without taking into account the employee’s negligence. For this reason, employers maintain workers’ compensation insurance to cover workers’ compensation claims. Critically, an employee’s exclusive remedy (with a few exceptions) against their employer for injuries or death suffered in the workplace is through the workers’ compensation system provided by the Act. Thus, an employee generally cannot sue his or her employer in court for negligence. This principle is generally referred to as “workers’ compensation immunity.”
Workers’ compensation immunity not only protects an employer from a lawsuit commenced by its employee, but it also protects an employer from being joined to a lawsuit filed by an employee. By way of hypothetical, imagine a subcontractor’s employee slips and falls at a construction site. After collecting his worker’s compensation benefits, the employee sues the general contractor for creating an unsafe work environment, which he claims caused severe and debilitating injuries. Under normal circumstances, a general contractor is not permitted to join the subcontractor to the lawsuit because it is immune under the Act.
However, the Act has an exception to this rule: if an employer expressly provides in a written contract that it shall be liable for damages, contributions, or indemnification of an employee’s claims against a third party, it may be joined and ultimately found responsible for the employee’s damages. While Pennsylvania courts have strictly construed this exception to prevent parties from relying on general waiver language, most sophisticated owners and contractors now include language in their standard contracts sufficient to waive workers’ compensation immunity.
For example, most construction contracts include an indemnification clause that explicitly references the waiver of the protections afforded by the Act, stating that the contractor “agrees to waive the immunity that the Workers’ Compensation Act provides to employers against indemnity claims by parties such as Owner.” Sometimes, the indemnification provision merely states that the employer agrees to indemnify the third party for “any claims made by the contractor’s employee for bodily injury, including death.” Under either of these scenarios, a contractor waives its workers’ compensation immunity and is now subject to being joined to the lawsuit via an indemnification claim.
Contractors and subcontractors should consider whether the indemnification provisions in their contracts waive workers’ compensation immunity and prepare for the consequences of either scenario. To ensure your interests are fully protected, please reach out to the attorneys at Cohen Seglias to review your contracts before execution.
Posted May 9, 2023