Many companies with manufacturing or processing facilities outsource their day-to-day maintenance and repair work to independent contractors. These contractors typically employ dozens, if not hundreds, of workers in various industrial crafts who report to work each day at the company’s facility. In this type of integrated, on-site workforce, it’s important for company lawyers to educate management and workers about the legal implications of day-to-day interactions between employees and independent contractors.
One critical issue that emerges concerns the extent to which a company can direct the work practices of the independent contractors’ employees without creating unwanted legal duties for the company and, potentially, unanticipated liability. The company and its employees need to tell the contract workers what to do for those contractors to do the work. But at what point do a company’s directions trigger legal duties? Here’s some basic background an in-house or outside counsel for a company can use when educating company managers and other employees, plus some basic work practices a company can employ without creating unwanted liabilities.
The concept of control provides the basis for unwanted liability. Despite a company’s best efforts to limit its potential exposure, unexpected liabilities can arise through unintentional exercise of control over the details of an independent contractor’s work. As the Texas Supreme Court noted in 1985′s Redinger v. Living Inc.,asserting control can create a legal duty on the part of the company to ensure that the contractor performs his work in a safe manner.
The foundation for the concept of liability through control can be traced to Texas’ adoption of the Restatement (Second) of Torts, which provides:
One who entrusts work to an independent contractor, but who retains the control of any party of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care.
While the Restatement’s comments have failed to identify specific acts of a company that result in an exercise of control, Texas courts and the Texas Legislature have done so.
As the Supreme Court noted in Redinger, Texas courts historically have held that a company did not create a legal duty to ensure that the independent contractor safely performed his work when the company’s directions did not involve how the worker performed the details of his work. More recent cases have clarified that duties will arise only if the company’s direction invaded the contractor’s work practices and prevented him from freely doing the work his own way.
The Legislature strengthened this principle of nonliability when, in 1996, it enacted Chapter 95 of the Texas Civil Practice & Remedies Code. The intent behind Chapter 95 was to limit statutorily property owners’ liability to independent contractors working on their property when the property owners hired those contractors to construct, repair, renovate or modify an improvement. In the context of the on-site maintenance contractor, Chapter 95 is particularly applicable, as these workers “construct, repair, renovate or modify” company improvements (i.e., piping, vessels, tanks, boilers, etc) on a daily basis.
Decisions relying on the common law and Chapter 95 have identified a number of acts that court have found not to invade the details of the contractor’s work practices and, as a result, not to create legal duties. A detailed examination of all potential acts is beyond the scope of this article. But a broad sampling of Texas decisions demonstrate that a company will not establish control and thus will not create legal duties when it does the following:
• supplies specifications and material for projects, Union Carbide Corp., et al. v. Smith, et al., decided by Houston’s 14th Court of Appeals in 2009;
• requires a contractor to follow state or federal law or general company safety guidelines when the guidelines do not increase the probability and severity of injury, Hoechst Celanese Corp. v. Mendez, decided by the state Supreme Court in 1998;
• merely places a safety employee on the worksite, Koch Refining Co., et al. v. Chapa, et al., decided by the Texas Supreme Court in 1999;
• forbids an independent contractor from beginning or continuing its work in an unsafe manner, Ellwood Texas Forge Corp., et al. v. Jones, et al., decided by the 14th Court in 2007;
• exercises or retains a general right to recommend a safe manner for the independent contractor’s employees to perform their work, Dow Chemical Co., et al. v. Bright, decided by the Supreme Court in 2002;
• implements and requires an independent contractor to follow a safe work permit system when such system does not increase the probability and severity of injury, as explained by Dow;
• retains the timing and sequencing of the work to be done by the independent contractors, as further explained by Dow;
• retains a general right of control over the facilities where the injury occurred, Dyall v. Simpson Pasadena Paper Co., decided by the 14th Court in 2004; or
• designs and installs the very improvement on which the independent contractor was working when his injuries occurred, Conoco Inc. v. Brown, et al., decided by San Antonio’s 4th Court of Appeals in 2003.
These decisions can provide a starting point when a lawyer is advising a company that is deciding to hire on-site contractors for a first time or modify a current relationship. Attorneys should work closely with executives and managers to articulate standard operating procedures to address the inherent difficulties created by this close relationship and to effectively educate and train the work force to avoid unanticipated liabilities that may follow.
Norman W. Peters is a partner in Kasowitz, Benson, Torres & Friedman in Houston. His practice focuses on toxic tort, commercial litigation and products liability defense, with particular experience in defending premises liability claims in toxic tort actions.