Rodriguez v. Leesburg Business Park ( 2014 )

Present: All the Justices
CECILIA RODRIGUEZ, ADMINISTRATOR
OF THE ESTATE OF UBALDO RODRIGUEZ
OPINION BY
v. Record No. 122029 CHIEF JUSTICE CYNTHIA D. KINSER
FEBRUARY 27, 2014
LEESBURG BUSINESS PARK, LLC, ET AL.
FROM THE CIRCUIT COURT OF LOUDOUN COUNTY
James H. Chamblin, Judge
The circuit court sustained a plea in bar and dismissed
this wrongful death action on the basis that the plaintiff's
exclusive remedy is under the Virginia Workers' Compensation Act
(the Act), Code §§ 65.2-100 through -1310. The primary issue is
whether an employee of a general contractor, hired by an owner
to construct warehouse buildings, was engaged in the "trade,
business or occupation" of the owner under Code § 65.2-302(A)
when the employee suffered fatal injuries in the course of
employment. We conclude that the employee's work at the time of
the accident was not part of the owner's trade, business, or
occupation and will therefore reverse the circuit court's
judgment.
FACTS AND PROCEEDINGS
Leesburg Business Park, LLC (LBP) contracted with E.E. Reed
Construction, LP (Reed) to construct warehouse buildings on a
parcel of undeveloped land owned by LBP and known as Leesburg
Business Park (Park). Ubaldo Rodriguez (Ubaldo) was an employee
of Reed. Ubaldo was fatally electrocuted when building
materials being moved by another Reed employee came into contact
with overhead electrical power lines. The Virginia Workers'
Compensation Commission entered an award of benefits to Ubaldo's
statutory beneficiaries under the Act.
Cecilia Rodriguez (Rodriguez) is the widow of Ubaldo and
the administrator of his estate. In her capacity as
administrator, Rodriguez filed a wrongful death action under
Code § 8.01-50, alleging that LBP caused Ubaldo's death by
negligently failing to keep its premises reasonably safe for
invitees such as Ubaldo. 1 LBP filed a plea in bar, arguing that
Ubaldo was the "statutory co-employee of LBP under [the Act],"
and therefore Rodriguez' claim was barred by Code § 65.2-307.
At an evidentiary hearing on the plea in bar, the circuit
court heard testimony from William H. Lauer, LBP's initial
manager and sole member. LBP, Lauer testified, is a "single
source" entity, with no employees, which was created to own and
develop a parcel of real estate and then lease or sell
warehouses constructed on the parcel. LBP's operating agreement
states that it was "formed for the purposes of acquiring,
holding, improving, managing, leasing and selling real property
in Virginia and elsewhere, and engaging in any other business
agreed to by the members of the LLC and permitted under the laws
1
Rodriguez named other entities as defendants in the
amended complaint, but they are not parties to this appeal.
2
of the Commonwealth of Virginia." Lauer described LBP's
operation as follows: "[A]s owner and developer, we create the
opportunity, we build it, we sell it, we lease it, and we manage
it." After purchasing the property through a separate entity
and determining that the property was "worthy of development,"
Lauer formed LBP and assigned the purchase contract to LBP.
LBP, through contracts with other entities, then determined the
feasibility of development and conducted various preliminary
steps to enable development of the land. Those steps included
architectural, engineering, legal, and financing work.
After considering a number of general contractors, LBP
contracted with Reed to construct warehouse buildings on the
property. Reed was "solely responsible for doing all of the
components to build the building" and was "fully in charge" of
construction. Under its contract with LBP, Reed was not
responsible for obtaining building permits, paying utility fees,
"[m]oving . . . the power lines," or providing "signage for the
project." These responsibilities, and the responsibility of
overseeing the construction process to ensure the work was done
properly and according to specifications, were contracted to a
consultant, or "owner's rep[resentative]." LBP had no role in
the actual construction of the buildings. As Lauer stated, it
did not "move earth[,] lay any rebar[,] pour any concrete [or]
3
install windows, plumbing [or] electrical." LBP made its money
from the sale and lease of the warehouses.
The circuit court found that "LBP was in the trade,
business or occupation of purchasing, developing, constructing,
selling and leasing warehouse buildings on" its parcel.
"[C]onstruction of the warehouses," the court stated, "was a
part of the trade, business or occupation of LBP." Accordingly,
the court concluded that Ubaldo "was a statutory co-employee of
LBP" and that Rodriguez' recovery was limited to the Act. On
August 10, 2010, the court entered an order sustaining the plea
in bar and dismissing the amended complaint with prejudice.
We awarded Rodriguez an appeal. In an unpublished order,
we held there was no evidence that Ubaldo and LBP were statutory
co-employees. Rodriguez v. Leesburg Business Park, LLC, Record
No. 102127, slip op. at 4 (Jan. 6, 2012) (per curiam)
(unpublished). We noted that the term "statutory co-employee"
is "not synonymous with the term 'statutory employee' as
contemplated under Code § 65.2-302(A) in the context of the
relationship between an alleged statutory employee and statutory
employer." Id. We reversed the judgment of the circuit court
and remanded the case for further proceedings. Id.
On remand, LBP moved to reconsider its plea in bar based on
the evidence presented at the original hearing. LBP argued that
the evidence established it was Ubaldo's statutory employer and
4
that Rodriguez' action against LBP was barred by the exclusivity
provision under Code § 65.2-307(A). Rodriguez objected that the
circuit court could not reconsider its ruling on the plea in bar
because more than 21 days had elapsed since the court entered
its order sustaining the plea and awarding final judgment.
Thus, according to Rodriguez, Rule 1:1 divested the court of
jurisdiction to modify its order. She also argued that the
evidence did not establish that LBP was Ubaldo's statutory
employer.
At a hearing, the circuit court first rejected Rodriguez'
argument concerning Rule 1:1 and its jurisdiction to reconsider
the plea in bar. The court then again found that LBP "was in
the trade, business or occupation of purchasing, developing,
constructing, selling and leasing warehouse buildings on" its
parcel, and "the construction of the warehouses was a part of
the trade, business or occupation of LBP." The court concluded
that "LBP was the statutory employer of Ubaldo and that
[Rodriguez'] recovery is limited to Workers' Compensation
benefits only." It entered an order sustaining the plea in bar
and dismissing the amended complaint with prejudice.
We awarded Rodriguez this appeal.
ANALYSIS
The primary issue on appeal is whether at the time of his
fatal accident, Ubaldo was engaged in work that was part of
5
LBP's trade, business, or occupation, thus making LBP Ubaldo's
statutory employer under Code § 65.2-302(A). Determining
whether work is part of the trade, business, or occupation of an
owner is a mixed question of law and fact. Carmody v. F.W.
Woolworth Co., 234 Va. 198, 201, 361 S.E.2d 128, 130 (1987).
The Court views the facts and any reasonable inferences raised
by the evidence in the light most favorable to the prevailing
party below, LBP, and determines whether the circuit court
correctly applied the law to those facts. Id. Here, because
the essential facts are undisputed, we are presented only with a
question of law regarding the circuit court's application of the
law to those facts and therefore apply a de novo standard of
review. See Hilton v. Martin, 275 Va. 176, 180, 654 S.E.2d 572,
574 (2008).
Answering the question before us "is not a simple,
straightforward exercise," Henderson v. Central Tel. Co., 233
Va. 377, 382, 355 S.E.2d 596, 599 (1987); it "depends upon the
facts and circumstances of the particular case [and] 'does not
readily yield to categorical or absolute standards.'" Johnson
v. Jefferson Nat'l Bank, 244 Va. 482, 485, 422 S.E.2d 778, 780
(1992) (quoting Bassett Furniture Indus., Inc. v. McReynolds,
216 Va. 897, 902, 224 S.E.2d 323, 326 (1976)).
The Act's exclusivity provision, Code § 65.2-307(A),
mandates that the rights and remedies provided in the Act
6
"exclude all other rights and remedies" of a covered employee or
his beneficiaries for injuries sustained in the course of
employment. An employee cannot maintain a common law tort
action against his employer or a fellow employee for such
injuries. Hudson v. Jarrett, 269 Va. 24, 29, 606 S.E.2d 827,
829 (2005). Likewise, an employee is barred from bringing such
an action against a party who is not the employee's common law
employer if that employer is nevertheless a "statutory employer"
under Code § 65.2-302(A). Id. at 29-30, 606 S.E.2d at
829; cf. Clean Sweep Prof'l Parking Lot Maint., Inc. v. Talley,
267 Va. 210, 213, 591 S.E.2d 79, 81 (2004) ("The only exception
to [the] exclusivity provision is provided in Code § 65.2-309(A)
permitting an action to be maintained against an 'other party.'
To be an 'other party,' a defendant must have been a stranger to
the trade, occupation, or business in which the employee was
engaged when he was injured.") (internal quotation marks
omitted).
With the relevant parties from this case interpolated in
brackets, Code § 65.2-302(A) states:
When any person (referred to in this section
as "owner") [LBP] undertakes to perform or
execute any work which is a part of his
trade, business or occupation and contracts
with any other person (referred to in this
section as "subcontractor") [Reed] for the
execution or performance by or under such
subcontractor of the whole or any part of
the work undertaken by such owner, the owner
7
[LBP] shall be liable to pay to any worker
employed in the work any compensation under
this title which he would have been liable
to pay if the worker had been immediately
employed by him. 2
The provisions of Code § 65.2-101, however, provide
that "nothing in [the Act] shall be construed to make the
employees of any independent contractor the employees of
the person or corporation employing or contracting with
such independent contractor." Thus, in accordance with
Code § 65.2-101, "the mere fact a business owner engages an
independent contractor does not make that independent
contractor's employees statutory employees of the
owner." Henderson, 233 Va. at 381, 225 S.E.2d at 598.
Code § 65.2-302(A), however, makes clear that an owner such
as LBP can contract out all its work yet remain liable
under the Act. Id.
The two statutes read together mean that an owner
cannot escape liability under the Act by merely contracting
away work that is part of the owner's trade, business, or
occupation. Id. at 381, 225 S.E.2d at 598-99. "'[I]f the
work performed by an employee of the contractor or
subcontractor is part of the owner's trade, business, or
occupation,'" the owner is the statutory employer of the
2
Code § 65.2-302(B) and (C) apply the same standard to
situations in which a contractor contracts with a subcontractor,
or a subcontractor contracts with another subcontractor.
8
employee and "'is liable for compensation as though the
worker were his own employee.'" Cinnamon v. IBM Corp., 238
Va. 471, 478, 384 S.E.2d 618, 621 (1989) (quoting Smith v.
Horn, 232 Va. 302, 305-06, 351 S.E.2d 14, 16 (1986)).
However, if the work is not part of the trade, business, or
occupation of the owner, and the owner hires an independent
contractor to perform the work, the contractor is liable to
the employee under the Act, not the owner. Sykes v. Stone
& Webster Eng'g Corp., 186 Va. 116, 122, 41 S.E.2d 469, 472
(1947).
As the Court has stated numerous times,
[t]he purpose of [Code § 65.2-302] is to
bring within the operation of the Act all
persons engaged in work that is a part of
the trade, business, or occupation of the
party who undertakes as owner or who
contracts as contractor to perform the work,
and to make liable to every employee engaged
in the work every such owner contractor, or
subcontractor above such employee.
Pfeifer v. Krauss Constr. Co., 262 Va. 262, 266, 546 S.E.2d 717,
719 (2001) (internal quotation marks and footnote omitted).
Under these principles, it is thus necessary to determine
whether construction was part of LBP's trade, business, or
occupation. We begin that analysis by identifying "the nature
of the particular owner." Nichols v. VVKR, Inc., 241 Va. 516,
521, 403 S.E.2d 698, 701 (1991). Unlike a governmental entity
or public utility, see Henderson, 233 Va. at 383, 355 S.E.2d at
9
599, a private entity, such as LBP, "has broad discretion to
choose its business activities." Nichols, 241 Va. at 521, 403
S.E.2d at 701. For this reason, the Court has generally applied
the "normal work test" as enunciated in Shell Oil Co. v.
Leftwich, 212 Va. 715, 187 S.E.2d 162 (1972):
[T]he test is not one of whether the
subcontractor's activity is useful,
necessary, or even absolutely indispensable
to the statutory employer's business, since,
after all, this could be said of practically
any repair, construction or transportation
service. The test . . . is whether this
indispensable activity is, in that
business, normally carried on through
employees rather than independent
contractors. 3
3
The test does not apply when the "the work is obviously a
subcontracted fraction of a main contract." Shell Oil, 212 Va.
at 722, 187 S.E.2d at 167 (internal quotation marks omitted).
In the context of the construction business,
[this test] relates to a general contractor,
the party obligated by the main contract
with the owner to complete the whole
project. If the work out of which the
accident arose was . . . obviously a
subcontracted fraction of [that] contract
and . . . not a part of the trade, business
or occupation of the owner, the general
contractor who engaged the subcontractor to
perform that fraction is the statutory
employer of the injured worker, whether
directly employed by the primary
subcontractor or by a secondary
subcontractor.
Cinnamon, 238 Va. at 476, 384 S.E.2d at 620 (internal quotation
marks omitted).
10
Id. at 722, 187 S.E.2d at 167 (internal quotation marks
omitted). This test, however, is "only a corollary guide,
sometimes useful but not indispensable, in applying the literal
language of the statutes to the facts in a particular
case." Cinnamon, 238 Va. at 478, 384 S.E.2d at 621.
For example, in Nichols, the Greater Roanoke Transit
Company (GRTC) owned a "construction/rehabilitation project
designed to provide public mass transportation facilities,
downtown parking facilities, retail and office space facilities,
and revitalization and urban development" of a commercial
shopping district. 241 Va. at 518, 403 S.E.2d at 699-700.
Addressing a defendant's argument that the normal work test did
not apply because GRTC had no employees, the Court stated:
[T]his argument "misses the mark." . . . .
The key issue here is whether construction
and rehabilitation of a transportation and
retail facility was part of GRTC's business
purpose of providing mass transportation
services. This purpose is established in
its articles of incorporation.
Id. at 522, 403 S.E.2d at 702 (quoting Carmody, 234 Va. at 205,
361 S.E.2d at 132); see Evans v. Hook, 239 Va. 127, 132, 387
S.E.2d 777, 779 (1990) (stating that "a defendant's business
structure and number of employees have never been considerations
in deciding whether [it] is entitled to the [A]ct's immunity").
The Court stated that although GRTC clearly required a facility
"from which their business is conducted," the actual
11
construction or adaptation of the facility "is not itself the
trade, business, or occupation of the owner." Nichols, 241 Va.
at 522, 403 S.E.2d at 702.
We have considered construction or repair of
such a facility not to be the trade,
occupation, or business of an owner for
purposes of determining whether a statutory
employee or employer relationship
exists unless those activities are normally
carried out directly by the owner or are
part of [its] normal activities.
Id. at 522, 403 S.E.2d at 702 (emphasis added).
In determining whether Ubaldo's construction work was part
of LBP's trade, business, or occupation, we therefore do not
simply examine whether LBP engaged in construction. Nor is the
fact that LBP had no employees determinative. Rather, we must
determine whether Ubaldo's construction work at the time of his
fatal accident was part of LBP's business. See Carmody, 234 Va.
at 205, 361 S.E.2d at 132; see also Floyd v. Mitchell, 203 Va.
269, 274, 123 S.E.2d 369, 372 (1962) ("The test is not whether
the owner, by engaging an independent contractor to perform some
part of his business, thereby engages in the business of the
independent contractor. It is whether the independent
contractor is performing work that is part of the trade,
business or occupation of the owner.").
According to Lauer, LBP was created for a single purpose:
to develop the Park so that LBP could ultimately lease or sell
12
the finished warehouses. It necessarily engaged in many
preliminary steps or activities to accomplish its business
purpose of selling or leasing the warehouses. The development
of the property, including the construction of the warehouses,
was obviously essential, just as a plant is to a
manufacturer. See Cinnamon, 238 Va. at 478, 384 S.E.2d at 621("'Every manufacturer must have a plant, but this fact alone
does not make the work of constructing a plant a part of the
trade or business of every manufacturer who engages a contractor
to construct a plant.'") (quoting Raines v. Gould, Inc., 343
S.E.2d 655, 659 (S.C. Ct. App. 1986)). While many activities
may be important or even "indispensable" to the success of a
business, those activities do not necessarily constitute the
trade, business, or occupation of the owner. Cinnamon, 238 Va.
at 475; 304 S.E.2d at 620; see Shell Oil, 212 Va. at 722-23, 187
S.E.2d at 167-68 (holding that retail sale of gasoline was
indispensable activity to Shell Oil Company but nevertheless not
part of its trade, business, or occupation). As a private
entity, LBP had the "broad discretion to choose its business
activities." Nichols, 241 Va. at 521, 403 S.E.2d at 701.
The circuit court dismissed this wrongful death action on
LBP's plea in bar. A plea in bar presents a distinct issue
that, if proven, bars a plaintiff's right of recovery. Hilton,
275 Va. at 179, 654 S.E.2d at 574. LBP, as the moving party,
13
had the burden of proving that Ubaldo's construction work at the
time of the accident was part of LBP's trade, business, or
occupation. See id. at 179-80, 654 S.E.2d at 574. We conclude,
as a matter of law, that LBP did not carry that burden.
Establishing that LBP contracted with Reed to construct the
warehouses and sought to ensure that the work was "done
properly" is not sufficient to establish that construction is
part of LBP's trade, business or occupation. Henderson, 233 Va.
at 381, 225 S.E.2d at 598 ("[T]he mere fact a business owner
engages an independent contractor does not make that independent
contractor's employees statutory employees of the
owner."); Cinnamon, 238 Va. at 479, 384 S.E.2d at 622(overseeing construction by employees does not compel the
conclusion that construction is the trade, business or
occupation of the owner). LBP may have demonstrated that the
construction of warehouses was indispensable to the success of
its business, but it did not prove that Ubaldo's construction
work was part of LBP's trade, business, or
occupation. See Cinnamon, 238 Va. at 475, 384 S.E.2d at 620.
In arguing that Ubaldo's construction work was part of its
trade, business, or occupation, LBP relies principally
on Pfeifer. There, as here, a company with no employees,
Linkhorn Bay Associates, L.L.C., contracted all work on a
project to subcontractors. 262 Va. at 265, 546 S.E.2d at 718.
14
An employee of one subcontractor sued another subcontractor,
Krauss Construction Company of Virginia, Inc. (Krauss) for
personal injuries sustained while Krauss employees were
installing natural gas lines. Id. As a statutory co-employee
case, the determinative issue was whether Krauss' "installation
of the gas line was a part of the trade, business, or occupation
of Linkhorn Bay, making Krauss [the plaintiff's] statutory co-
employee." Id. at 267, 546 S.E.2d at 719. The Court held that
it was: "Linkhorn Bay had been formed solely to build and
develop these condominiums [and] had no other function[;] the
installation of the gas lines was part of Linkhorn Bay's
construction project covered by the terms of [the parties']
contract." Id. at 268, 546 S.E.2d at 720.
Contrary to LBP's argument, Pfeifer does not control here.
Determining whether work is part of the trade, business, or
occupation of an owner "depends upon the facts and circumstances
of the particular case." Johnson, 244 Va. at 485, 422 S.E.2d at
780. Linkhorn Bay had been formed "solely to build and develop
. . . condominiums." Pfeifer, 262 Va. at 268, 546 S.E.2d at 720(emphasis added). Its trade, business, or occupation was not
disputed, and installing the natural gas lines and connecting
them to the condominium units were obviously part of its
business purpose to build the condominiums.
15
CONCLUSION
For these reasons, we conclude that LBP was not Ubaldo's
statutory employer under Code § 65.2-302(A) at the time of his
fatal accident. As a matter of law, the circuit court erred by
granting LBP's plea in bar. We will reverse the circuit court's
judgment and remand the case for further proceedings consistent
with this opinion. 4
Reversed and remanded.
4
In light of our holding, we need not address Rodriguez'
other assignments of error except for her argument that, under
Rule 1:1, the circuit court lacked jurisdiction over the case to
reconsider the plea in bar after this Court's first remand.
Rodriguez' argument is without merit.
Upon Rodriguez' timely appeal from the circuit court's 2010
judgment sustaining the plea in bar, this Court obtained
jurisdiction over the case. Ghameshlouy v. Commonwealth, 279
Va. 379, 390, 689 S.E.2d 698, 703 (2010). By reversing the
circuit court's order and remanding the case, we vacated the
circuit court's August 2010 order. See Nassif v. Board of
Supervisors, 231 Va. 472, 480, 345 S.E.2d 520, 525 (1986) ("When
this Court rules that the judgment of a trial court is erroneous
. . . it is no longer viable. Unless we say otherwise, the
slate is wiped clean, with the result that on remand the parties
begin anew."). Although the circuit court made the same
findings of fact on remand and concluded that LBP was Ubaldo's
statutory employer, it did not simply modify its prior order.
Instead, it entered a new order. That action, therefore, did
not implicate Rule 1:1.
16
JUSTICE McCLANAHAN, with whom JUSTICE POWELL joins, concurring
in part and dissenting in part.
Today the majority terminates the ability of injured workers
to seek workers' compensation from developers like LBP, contrary
to the remedial purposes of the Virginia Workers' Compensation
Act (the Act). At the same time, the majority exposes such
developers to common law tort liability that is completely at
odds with applicable statutory and case law. The majority
offers no discernible rationale for effecting these results. We
are provided only the majority's conclusory assertion – contrary
to the facts and law - that LBP failed to prove that Ubaldo, as
Reed's employee, was performing work that was part of LBP's
trade, business or occupation at the time of his work-related
accident.
On the undisputed facts in this case, the circuit court
correctly concluded that LBP was Ubaldo's statutory employer
based on its finding that Reed's construction of the warehouses
at Leesburg Business Park (the Park) was a part of LBP's trade,
business or occupation. I would therefore affirm the judgment
of the circuit court sustaining LBP's plea in bar pursuant to
the Act's exclusive remedy provision. 1
1
In light of this conclusion, as explained in Part II
below, I would also address, but would reject, Rodriguez'
Accordingly, I dissent from the majority's conclusion that
LBP was not Ubaldo's statutory employer and its reversal of the
circuit court's judgment. However, I concur in the majority's
rejection of Rodriguez' jurisdictional argument based on Rule
1:1. 2
I. LBP'S STATUTORY EMPLOYER STATUS
A. Controlling Statutes and Remedial Purpose
By the terms of the Act's exclusive remedy provision, Code
§ 65.2-307(A), 3 the rights and remedies provided in the Act are
exclusive of all other rights and remedies that a covered
employee and his beneficiaries might otherwise possess as a
result of the employee's job-related accident. Under this
statute, an injured employee and his beneficiaries are precluded
from maintaining a common law action against the employee's
immediate employer for an injury sustained in the course of
alternative argument that, even if LBP was Ubaldo's statutory
employer, LBP waived its defense of immunity under the Act
because LBP did not purchase workers' compensation insurance or
qualify as a self-insurer.
2
The majority discusses and disposes of Rodriguez'
jurisdictional argument in footnote 4 of its opinion.
3
Code § 65.2-307(A) states:
The rights and remedies herein granted to an employee when
his employer and he have accepted the provisions of this title
respectively to pay and accept compensation on account of injury
or death by accident shall exclude all other rights and remedies
of such employee, his personal representative, parents,
dependents or next of kin, at common law or otherwise, on
account of such injury, loss of service or death.
18
employment when the employee and the employer have accepted the
Act's provisions. See Hudson v. Jarrett, 269 Va. 24, 29, 606
S.E.2d 827, 829 (2005); Pfeifer v. Krauss Const. Co., 262 Va.
262, 266, 546 S.E.2d 717, 719 (2001). An exception, however, to
the Act's exclusive remedy provision is set forth in Code §
65.2-309(A), which permits the employee to bring a common law
action against a third-party tortfeasor, provided the tortfeasor
is an "other party" within the meaning of the Act. Crocker v.
Riverside Brick & Supply Co., 273 Va. 235, 238-39, 639 S.E.2d
214, 216 (2007); Anderson v. Dillow, 262 Va. 797, 799-800, 553
S.E.2d 526, 527 (2001).
An owner such as LBP, which is not the injured employee's
immediate employer, is nonetheless "under the canopy of the
[A]ct and entitled to the immediate employer['s] statutory
immunity from common-law actions" if the owner qualifies as the
injured employee's statutory employer, thereby negating "other
party" status. Evans v. Hook, 239 Va. 127, 131, 387 S.E.2d 777,
779 (1990). The test for determining whether an owner becomes a
statutory employer is set forth in Code § 65.2-302(A) as
follows:
When any person (referred to in this section as
"owner") undertakes to perform or execute any work which is
a part of his trade, business or occupation and contracts
with any other person (referred to in this section as
"subcontractor") for the execution or performance by or
under such subcontractor of the whole or any part of the
work undertaken by such owner, the owner shall be liable to
19
pay to any worker employed in the work any compensation
under this title which he would have been liable to pay if
the worker had been immediately employed by him.
The project owner is thus deemed to be the statutory employer of
the independent contractor's employees if those employees are
engaged in work that is a part of the owner's trade, business,
or occupation. 4 If so, the owner is rendered liable to those
employees for workers' compensation benefits.
The purposes of Code § 65.2-302(A) are to afford protection
to "'the employees of [independent contractors] who are not
financially responsible,'" Bassett Furniture Industries, Inc. v.
McReynolds, 216 Va. 897, 902, 224 S.E.2d 323, 326 (1976)
(quoting Sears, Roebuck & Co. v. Wallace, 172 F.2d 802, 810 (4th
Cir. 1949)), and to "prevent an owner from escaping liability
under the Act by the simple expedient of subcontracting away
work which is part of its trade, business, or
occupation." Henderson v. Central Tel. Co. of Va., 233 Va. 377,
381, 355 S.E.2d 596, 598-99 (1987).
These purposes are reflective of the "highly remedial"
nature of the Act, id. at 382, 355 S.E.2d at 599; Board of
Supervisors of Amherst County v. Boaz, 176 Va. 126, 134, 10
S.E.2d 498, 501 (1940), which is to be construed to effect its
fundamental purpose of providing workers with statutory
4
The employees, in turn, become the "statutory employees"
of the owner. Crocker, 273 Va. at 238-39, 639 S.E.2d at 216.
20
compensation for accidental injuries resulting from the hazards
of their employment. Henderson, 233 Va. at 382, 355 S.E.2d at
599; Feitig v. Chalkley, 185 Va. 96, 98, 38 S.E.2d 73, 75
(1946). Accordingly, in this case, even though Rodriguez does
not seek workers' compensation benefits from LBP, "our
consideration of this appeal is nevertheless governed by the
principles that apply in a case where coverage is
sought." Henderson, 233 Va. at 382, 355 S.E.2d at 599.
B. LBP's Trade, Business or Occupation
The undisputed facts, material to the analysis of whether
Reed's construction of the Park warehouses was part of LBP's
trade, business, or occupation under the terms of Code § 65.2-
302(A), are as follows. LBP, a Virginia limited liability
company, was organized by Lauer, its owner and sole member, for
the purpose of "acquiring, holding, improving, managing, leasing
and selling real estate," as set forth in its operating
agreement. 5 LBP was specifically organized to effect that
purpose through the Park property project. Upon its acquisition
of the Park property, LBP was, in fact, responsible for the
property being commercially developed, and for the sale and
lease of the warehouse units that were constructed on the
5
In this context, Black's Law Dictionary defines the word
"improve" to mean: "To develop (land) . . . ." Black's Law
Dictionary 826 (9th ed. 2009).
21
property. LBP received its income from the sale and lease of
those warehouse units.
With no employees or equipment, LBP implemented its
organizational objectives through Lauer, independent contractors
and consultants. LBP acquired the Park property as totally
undeveloped, raw land. In developing the property, LBP
obtained, among other things: numerous studies regarding the
financial viability of developing the Park property, the
practicality of construction, and the risk of development;
appraisals; bids from contractors; various government permits,
bonds and approvals; and construction financing.
LBP made the decision to improve the Park property by the
construction of the Park warehouses, obtained the necessary
approvals for their construction, and procured an architect to
design them. After interviewing various contractors to
construct the warehouses, LBP selected Reed. LBP and Reed then
entered into a contract making Reed solely responsible for
constructing the warehouses to the agreed specifications. LBP
hired an owner's representative to oversee the construction
process, "serving as [Lauer's] eyes and ears as to what's going
on with the project," as Lauer explained. Lauer had weekly
meetings with this representative regarding the progress of the
construction. The architect that designed the warehouses also
inspected, on LBP's behalf, Reed's work over the course of the
22
warehouses' construction. Lauer made the ultimate decision on
any construction issues.
The majority, without acknowledging it, evidently accepts
Rodriguez' central argument that because LBP did not, and could
not, construct the Park warehouses itself, Reed's construction
of the warehouses was not a part of LBP's trade, business, or
occupation; rather, LBP was merely "investing in real estate,"
placing LBP outside the purview of the definition of statutory
employer in Code § 65.2-302(A) for that part of the Park's
development.
This argument is unavailing as it conflicts with the
express terms of Code § 65.2-302(A), which imposes workers'
compensation liability on an owner, as a statutory employer,
when the owner undertakes through an independent contractor
"the whole or any part of the work" that is "a part of [the
owner's] trade, business or occupation." (Emphasis added). The
statute thus "contemplates that an owner such as [LBP] can
subcontract all its work yet remain liable under the
Act." Henderson, 233 Va. at 381, 355 S.E.2d at 598. Hence,
under our case law, "a defendant's business structure and number
of employees have never been considerations in deciding whether
[it] is entitled to the [A]ct's immunity" from a common law suit
as a statutory employer. Evans, 239 Va. at 132, 387 S.E.2d at
779.
23
As this Court has previously explained, "an owner may
perform or execute work that is part of [its] trade, business,
or occupation through contractors or subcontractors, directly
employing no workers for the purpose." Smith v. Horn, 232 Va.
302, 305, 351 S.E.2d 14, 16 (1986) (emphasis added)
(citing Anderson v. Thorington Const. Co., 201 Va. 266, 272-73,
110 S.E.2d 396, 400-01 (1959)). But "if the work performed by
an employee of the contractor or subcontractor is [such a] part
. . . the worker is deemed the statutory employee of the owner,
and the owner is liable for compensation as though the worker
were [its] own employee." Id. at 305-06, 351 S.E.2d at 16.
LBP utilized a business model for its development of the
Park property that required no direct employees for the
construction of its Park warehouses. However, LBP should be
unable to thereby "escap[e]" statutory employer
status. Henderson, 233 Va. at 381, 355 S.E.2d at 598. "[T]he
whole [warehouse construction] work undertaken by [LBP]" was
performed by Reed, LBP's independent contractor, in a manner
contemplated by Code § 65.2-302(A). The undertaking was in
furtherance of the express purposes for which LBP was
established, and comprised the main component of the Park
property's intended development and use. From the beginning,
LBP's plan was to acquire the Park property in its unimproved
state, improve the property through the construction of the Park
24
warehouses, and then sell or lease the warehouse units. The
construction of the Park warehouses was thus necessarily an
integral part of LBP's "trade, business or occupation" under the
terms of Code § 65.2-302(A).
It is therefore inconsequential that LBP did not "make money off
of the construction [of the warehouses] itself," as Lauer
acknowledged, with Reed being paid to construct them. Even if
LBP had performed the construction with employees of its own, it
would not have made "money off of the construction itself," as
the project's owner (i.e., LBP would not have received payments
for its own construction work). In either case, LBP's income
would have been generated at the point of sale and/or lease of
the warehouse units, just like any other owner-developer of a
similar project (with or without its own construction crew). By
the very nature of commercial real estate development, the
developer generates income upon completion of the project from
the sale or lease of the developed property or some portion of
it. Nonetheless, we have never deemed the point at which income
is generated from a commercial undertaking to be dispositive in
determining an entity's trade, business or occupation under Code
§ 65.2-302(A), and I see no good reason for doing so here.
Finally, the majority's stated reasons for rejecting LBP's
reliance on Pfeifer plainly support the counter-position.
Applying Code § 65.2-302 in Pfeifer, we held that an independent
25
contractor's installation of gas lines undertaken for a
condominium development project was a part of the trade,
business, or occupation of the owner-developer, Linkhorn Bay
Associates, L.L.C. (Linkhorn Bay). Much like LBP, Linkhorn Bay
was a limited liability company that was organized for the
purpose of developing condominiums, had no employees and
"subcontracted all the work to various subcontractors." Id. at
265, 546 S.E.2d at 718. In attempting to distinguish Pfeifer,
the majority points to the fact that Linkhorn Bay had been
formed solely to build and develop condominiums. The majority
then concludes that "installing the natural gas lines and
connecting them to the condominium units were obviously part of
its business purpose to build the condominiums." This
observation seems to simply ignore the fact that LBP's
development of the Park property by the construction of
warehouse units was undisputedly in furtherance of LBP's
organizational and business purpose, as set forth in LBP's
operating agreement. It would thus be completely illogical to
contemplate that somehow installation of natural gas lines to
those warehouse units would be a part of LBP's business purpose
to build those units, but the actual construction of the units
would not be a part of that purpose.
Accordingly, I would hold the circuit court correctly
concluded that LBP was Ubaldo's statutory employer because
26
Ubaldo, as Reed's employee, was performing work that was a part
of LBP's trade, business, or occupation at the time of his work-
related accident. Given the undisputed facts before it, the
circuit court's conclusion was dictated by both the express
terms of Code § 65.2-302(A) and the statute's remedial purpose. 6
II. LBP AS UNINSURED STATUTORY EMPLOYER
Rodriguez argues that even if Ubaldo was LBP's statutory
employer, pursuant to Code § 65.2-805 of the Act, LBP waived
its defense of immunity in this action because LBP failed to
purchase workers' compensation insurance covering Reed's
employees, or to qualify as a self-insurer.
6
I take issue with the majority's indication that,
initially, LBP argued and the circuit court held that "Ubaldo
and LBP were statutory co-employees," citing this Court's
unpublished order in Rodriguez' first appeal, Rodriguez v.
Leesburg Business Park, LLC, Record No. 102127, slip op. at 4
(Jan. 6, 2012) (per curiam). At no time did the circuit court
or LBP refer to LBP and Ubaldo as "statutory co-employees."
(Emphasis added.) This phrase was of Rodriguez' making, and
then attributed to LBP and the circuit court by the current
majority of this Court in its unpublished order remanding this
case for reconsideration, as well as in its instant opinion.
The circuit court actually found in its initial ruling that
"[Ubaldo] was a statutory co-employee of LBP." (Emphasis
added.) This finding no doubt derived from LBP's use of this
phrase in the context of framing the issue as a question of
"whether [Ubaldo] was a statutory employee of LBP, as well as an
employee of EE Reed." LBP otherwise referred to Ubaldo as
"LBP's statutory co-employee." LBP also referred to itself as
Ubaldo's "co-employer" and his "statutory employer." Thus,
while LBP's phraseology may have been novel for workers'
compensation law, it did not reflect a misapprehension that LBP
and Ubaldo were somehow "statutory co-employees."
27
On the facts of this case, LBP's uninsured status is
immaterial. Under the Act, both Reed, as Ulbaldo's immediate
employer, and LBP, as Ulbaldo's statutory employer, would have
been liable to Ulbaldo and his statutory beneficiaries for his
work-related accident. Upon Ulbaldo's death, the beneficiaries
would have been entitled to benefits under the Act from either
Reed or LBP, but not from both. David White Crane Service v.
Howell, 282 Va. 323, 329, 714 S.E.2d 572, 576 (2011). The
beneficiaries pursued their rights and remedies under the Act
and obtained a full recovery of workers' compensation benefits
from Reed. Therefore, as the beneficiaries have received the
"one full recovery" they were entitled to under the Act, id.(citation and internal quotation marks omitted), they would be
barred from pursuing "other rights and remedies" against LBP
under the Act's exclusive remedy provision. Code § 65.2-307(A).
I would thus hold the trial court correctly rejected Rodriguez'
argument that, because LBP was uninsured, it waived its immunity
to suit in this common law action.
For these reasons, I would affirm the judgment of the
circuit court in sustaining LBP's plea in bar pursuant to the
Act's exclusive remedy provision. I therefore dissent to the
majority's conclusion that LBP was not Ubaldo's statutory
employer and its reversal of the trial court's judgment. I
concur, however, in the majority's rejection of Rodriguez'
28
jurisdictional argument based on Rule 1:1, as the majority
addresses in footnote 4 of its opinion.
29