Stephens v. Witco Corporation

• Court: Court of Appeals for the Fifth Circuit
• Decided: December 16, 1999
• Docket: 98-30955
• Status: Published

Opinion

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 98-30955

LARRY J. STEPHENS and CHARLENE STEPHENS,

Plaintiffs-Appellants,

VERSUS

WITCO CORPORATION,

Defendant-Appellee.

Appeal from the United States District Court for the Eastern District of Louisiana December 16, 1999 Before EMILIO M. GARZA and PARKER, Circuit Judges, and COBB, District Judge.*

ROBERT M. PARKER, Circuit Judge:

Plaintiffs Larry Stephens (“Stephens”) and his wife Charlene

Stephens appeal the summary judgment rendered in favor of defendant

Witco Corporation (“Witco”). We reverse and remand to the district

court.

I. FACTS AND PROCEDURAL HISTORY

On April 1, 1996, Stephens was seriously injured in an

explosion and fire while he was supervising a crew engaged in

replacing a steel bar joist in an epoxy tank at a Louisiana

* District Judge of the Eastern District of Texas, sitting by designation.

1 chemical plant owned and operated by Witco. Stephens was employed

by Mundy Contract Maintenance (“Mundy”) at the time of the accident

and was assigned to work at the Witco plant as Mundy’s Project

Foreman pursuant to a contract for “construction, maintenance, and

plant services” between Witco and Mundy.

Stephens filed suit in Louisiana state court seeking damages.

Witco removed the case to federal court on the basis of the diverse

citizenship of the parties. Mundy intervened to recover worker’s

compensation benefits it paid to Stephens as a result of the

accident.

Witco moved for summary judgment, arguing that it was

Stephens’s “statutory employer” under La.R.S. §§ 23:1032 and 1061

and thus immune from tort liability, or, in the alternative, that

Stephens was its “borrowed employee,” also entitling it to immunity

under Louisiana’s workers’ compensation law. The district court

granted summary judgment for Witco, finding that Witco was

Stephens’s “statutory employer” but did not reach the “borrowed

employee” issue. The district court denied a Federal Rule of Civil

Procedure 59(e) motion for reconsideration and this appeal

followed.

II. DISCUSSION

a. Standard of review

We review a grant of summary judgment de novo, applying the

same criteria used by the district court in the first instance.

See Kemp v. G.D. Searle & Co., 103 F.3d 405, 407 (5th Cir. 1997).

Summary judgment is warranted when “the pleadings, depositions,

2 interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact.” Firesheets v. A.G. Bldg. Specialists, Inc., 134

F.3d 729 (5th Cir. 1998)(citing Celotex Corp. v. Catrett, 477 U.S.

317, 322 (1986)).

Because the basis for federal jurisdiction in this case is

diversity of citizenship, Louisiana substantive law applies. See

Kemp, 103 F.3d at 407. We review the district court’s

interpretation of state statutes de novo, resolving questions of

Louisiana law “the way the Louisiana Supreme Court would interpret

the statute based upon prior precedent, legislation, and relevant

commentary.” Occidental Chemical Corp. v. Elliott Turbomachinery

Co., Inc., 84 F.3d 172, 175 (5th Cir. 1996).

b. Statutory Employer Doctrine

A principal who hires a contractor to perform work that is

part of its trade, business, or occupation is a statutory employer

of the contractor’s employees. See LA. REV. STAT. ANN. § 23:1061

(1990). A statutory employer is liable to pay worker’s

compensation benefits, but is immune from tort liability. See LA.

REV. STAT. ANN. § 23:1032 (West 1989).

Stephens contends that there are genuine issues of material

fact in dispute regarding the existence of a statutory employer

relationship between him and Witco. The central question is

whether the contract work performed by Mundy was part of Witco’s

“trade, business or occupation.” Neither party disputes the

district court’s use of the factors set out by the Louisiana

3 Supreme Court in Kirkland v. Riverwood Intern. USA, Inc., 681 So.2d

329 (La. 1996), for interpreting the applicable version of § 1061.1

We agree that Kirkland controls the question before us.

Kirkland established a totality of the circumstances test,

requiring a fact-intensive consideration of all pertinent factors.

See Kirkland, 681 So.2d at 336.

Among those factors to be considered in determining whether a statutory employment relationship exists are the following:

(1) The nature of the business of the alleged principal; (2) Whether the work was specialized; (3) Whether the contract work was routine, customary, ordinary or usual; (4) Whether the alleged principal customarily used his own employees to perform the work, or whether he contracted out all or most of such work; (5) Whether the alleged principal had the equipment and personnel capable of performing the contract work; (6) Whether those in similar businesses normally contract out this type of work or whether they have their own employees perform the work; (7) Whether the direct employer of the claimant was an independent business enterprise who insured his own workers and included that cost in the contract; and (8) Whether the principal was engaged in the contract work at the time of the incident.

Kirkland, 681 So.2d at 336-37.

The district court stated that it “is undisputed that Witco

was in the business of chemical manufacturing and that part of its

business includes maintaining its facilities.” We agree.

The specific task being performed by the individual employee

1 In 1997, Louisiana amended § 1061 by Acts 1997, No. 315, §§ 1 and 2, legislatively overruling Kirkland. See Felan v. F & F Trucking, Inc., 708 So.2d 430, 437 n.1 (La.App.3 Cir. 1998). However, the changes do not affect this case because the amendment expressly provided that the changes applied prospectively only. See id.

4 at the time of the accident is not controlling. See Lewis v. Exxon

Corp., 441 So.2d 192, 198 (La. 1983). Rather, the entire scope of

the contract work must be considered. See id.

Witco argues that the district court was correct in

characterizing Mundy’s work under the contract as maintenance of

the chemical plant. Once that characterization is accepted as

undisputed, it follows that factors 2-6 and 8 weigh in favor of

Witco. That is, maintenance work is not specialized, it is

routine, Witco uses its own employees and equipment for

maintenance, chemical plants normally have their own maintenance

crews, and Witco had employees engaged in maintenance work at the

time of Stephens’s accident. However, the record does not support

such a simplistic approach. Witco contracted with Mundy for

“construction, maintenance and service work.” Stephens submitted

evidence that Mundy’s contract required it to replace structural

steel joists, which work was extraordinary, nonroutine,

nonrecurring work that is not customarily done by Witco maintenance

crews nor by the hypothetical ordinary chemical plant maintenance

crew, nor were Witco’s employees engaged in joist replacement or

construction at the time of Stephens’s accident. We conclude that,

based on this evidence, there is at least a fact question

concerning whether factors 2-6 and 8 weigh in his favor.

Additionally, Kirkland asks whether Mundy insured its own

workers and included that cost in the contract. See Kirkland, 681

So.2d at 337. The parties do not dispute that Mundy is an

independent business entity that insured Stephens and included the

5 cost in the contract. The district court found that the

arrangement favored statutory employer status. However, we read

Kirkland to require that such an arrangement be weighed in favor of

Stephens’s position that he is not Witco’s statutory employee. See

id.

Based on the foregoing, we find that there remain genuine

issues of material fact concerning whether or not Witco is

Stephens’s statutory employer.

c. Borrowed Employee Doctrine

Witco argued in the alternative that it was entitled to

summary judgment because Stephens was its borrowed employee. The

district court did not reach this issue, but Witco urges us to

affirm the grant of summary judgment on this basis.

Under the borrowed employee doctrine, an employee of one

company may become the servant of another if he is transferred by

the former to the employ of the latter. In Louisiana, there is a

presumption that a general employer such as Mundy retains control

of his employees. See Marzula v. White, 488 So.2d 1092, 1095 (La.

App. 2 Cir. 1986). Although there is no fixed test, case law has

relied on the following factors in determining whether the borrowed

servant doctrine applies: (1) right of control; (2) selection; (3)

payment of wages; (4) power of dismissal; (5) relinquishment of

control by general employer; (6) which employer’s work was being

performed at the time in question; (7) agreement between the

borrowing and lending employer; (8) furnishing of tools and place

of performance of work in question; (9) length of employment; (10)

6 acquiescence by the employee in the new work arrangement. See,

e.g., Green v. Popeye’s Inc., 619 So.2d 69 (La. App. 3 Cir. 1993).2

Although the borrowed servant issue has been treated as a question

of law, we decline to affirm summary judgment on this alternative

basis because questions of fact remain concerning those factors

that must be resolved before the factors can be weighed. For

instance, Witco contends, based on circumstantial evidence, that it

was “fully understood between Witco and Mundy that the Mundy

workers were mere payroll employees of Mundy who were loaned to

Witco.” Stephens offers in reply the language of the Witco/Mundy

contract providing that “all persons employed by [Mundy] to perform

such work shall be and remain employees of [Mundy] subject to the

supervision of [Mundy’s] supervisory personnel.” Contrariwise, in

discussing the payment of wages and power of dismissal factors,

Witco invokes the language from the contract which Stephens

contests. Because it is necessary for a trier of fact to resolve

these desputes before the factors can be weighed, we cannot affirm

the district court’s summary judgment on this alternative basis.

CONCLUSION

Due to remaining genuine issues of material fact, we reverse

the summary judgment in favor of Witco and remand this case for

further proceedings.

2 The Louisiana Legislature recently codified the borrowed employee doctrine by enacting LA.REV.STAT. 23:1031(c). See La. Acts 315. However, this enactment expressly provides for prospective application from the effective date of June 17, 1997. Id. § 3. Because this case arose before Act 315's effective date, the factors articulated in Green govern our analysis of the borrowed employee doctrine.

7 REVERSED and REMANDED.

8 EMILIO M. GARZA, Circuit Judge, dissenting:

The majority asserts that the district court erred in holding that Larry Stephens (“Stephens”)

was a “statutory employee” of Witco Corporation (“Witco”) as a matter of law. I disagree.

Our inquiry into whether Witco was Stephens’s “statutory employer,” as the majority notes,

is governed by Kirkland v Riverwood Int’l USA Inc., 681 So.2d 329 (La. 1996), which provides an

eight-factor, totality-of-the-circumstances test. These factors, as the majority notes, are:

(1) The nature of the business of the alleged [statutory employer]. (2) Whether the work was specialized or non-specialized. (3) Whether the contract work was routine, customary, ordinary, or usual. (4) Whether the alleged [statutory employer] customarily used his own employees to perform the work, or whether he contracted out all or most of such work. (5) Whether the alleged [statutory employer] had the equipment and personnel capable of performing the contract work. (6) Whether those in similar businesses normally contract out this type of work or whether they have their own employees perform the work. (7) Whether the direct employer of the claimant was an independent business enterprise who insured his own workers and included that cost in the contract. (8) Whether the principal was engaged in the contract work at the time of the incident.

Id. at 337. “No single factor is determinative.” Id.

In viewing the nature of Stephens’s “work” at the Witco plant for purposes of our Kirkland

inquiry, we look not to the work Stephens was performing at the time of his injury, but rather to the

work called for by the contract between Witco and Mundy Contract Maintenance (“Mundy”),

Stephens’s actual employer. In this inquiry, “[t]he specific task to which [Stephens was] put should

not be determinative of his coverage under the act. Instead, the entire scope of the work contract

must be considered.” Lewis v. Exxon Corp., 441 So.2d 192, 197 (La. 1983) (on rehearing) (emphasis

added).

The contract between Witco and Mundy provided, inter alia:

ARTICLE 1. SCOPE OF WORK [Mundy] agrees to furnish labor and supervision, needed for the performance of construction, maintenance, and plant services . . .

The district court characterized the scope of the contract work as “ongoing repair work and

preventative maintenance.” Stephens v. Witco Corp., 1998 WL 274248, at *1, *2 (E.D. La. May 21, 9 1998). Applying the Kirkland factors, the district court held that the contract work: was part of the

nature of Witco’s business (factor 1), was not specialized (factor 2), was routine (factor 3), was the

same as work for which Witco and any hypothetical chemical plant had the necessary employees and

equipment necessary (factors 4-6), and that Stephens was performing contract work at the time of

the accident (factor 8). Stephens, 1998 WL 272248, at *2-3.

The majority asserts that “the record does not support” the district court’s “simplistic”

approach. Basically, the majority claims that because the contract between Witco and Mundy

required Mundy employees to, among many other tasks, replace structural steel bar joints, a type of

work which the majority asserts was “extraordinary, non-routine, [and] non-recurring work,” factors

2-6 and 8 weigh against statutory employee status.

However, in focusing its attention on one particular task that the contract between Witco and

Mundy called for, the majority uses far too powerful a lens. We are bound by a rationale directing

us to look at the entire scope of the contract:

[A] broader view o f the work as a whole is considerably more reasonable than the narrow view. The “work” contemplated by the statute can hardly be the individual tasks performed by each worker. Plaintiff, it is true, was injured while installing a particular device; his employer, however, was engaged in the conversion of a plant from one manufacturing process to another. The “work” at i ssue here is the employer’s work))the construction project. If Exxon was in the business of plant construction or conversion, it then would be protected by the statute.

Lewis, 441 So.2d at 199. In Lewis, the plaintiff was injured while performing a non-specialized,

routine function as part of his employer’s contract work, which involved completely reconstructing

an Exxon chemical plant. While merely considering the plaintiff’s work would have placed him within

the definition of a “statutory employee”, the Louisiana Supreme Court held that since the contractor’s

function, completely rebuilding the plant, was specialized and non-routine, Exxon was not the

plaintiff’s statutory employee. Id. The same analysis applies to the reverse factual scenario here.

While Stephens may have been involved in a specialized, non-routine function when injured, the

contract between Mundy and Witco called almost exclusively for mere “ongoing repair work and

preventative maintenance.” Stephens, 1998 WL 274248 at *2. It is well-settled under Louisiana law

10 that employees of a contractor hired to perform these functions are the statutory employees of the

principal company. See Hester v. Pioneer Chlor Alkali Co., Inc., 955 F. Supp. 656, 659-60 (M.D.

La. 1996) (citing cases).

The majority’s conclusion is based on its overemphasis of a single portion of the record. The

only evidence in the record indicating that the struct ural steel bar joint replacement Stephens was

involved in may have been “non-routine or non-recurring” was a statement by plant manager James

Goletz that of the 500 steel bar joints in the Witco plant, only around twenty had been replaced since

1968. However, the remainder of Mr. Goletz’s testimony makes clear that Mundy’s contract was

almost exclusively of a “routine” nature when one takes the focus off bar joists in particular and

places it on the many other tasks Mundy employees perform at Witco. As Goletz stated i n his

deposition:

Like all [chemical] plants, they require maintenance. You are replacing steel. After 30 years, there is a lot of steel that has to be replaced. If we limit it to a bar joist as being one part icular piece of steel . . . maybe it’s 20, but steel, there are probably hundreds of pieces that have been replaced.

Any task, no matter how fundamental, can be considered “non-recurring” or “non-routine” when

analyzed down to its most minor detail. I believe that Kirkland and Lewis require a broader scope

of inquiry into the nature of the contract work. Accordingly, I believe the district court correctly

characterized the scope of work under the Mundy-Witco contract and that its determinations on

factors 2-6 and 8 were correct.

The majority also asserts that the district court erred in its analysis on Kirkland factor 7,

claiming that under its reading of Kirkland, the fact that Mundy insured Stephens and included the

cost in its contract with Witco weighed against statutory employee status. The district court held that

since “Witco was required to reimburse Mundy for premiums it paid for worker’s compensation

insurance,” that factor favored statutory employee status. Stephens, 1998 WL 274248 at *3. I agree

with the district court.3 The purpose of the Kirkland test is to decide whether Stephens will be

3 In coming to the contrary conclusion, the majority provides no analysis behind its reading of Kirkland factor 7. 11 relegated to workers’ compensation for injuries suffered at the Witco plant. Since Witco for all

practical purposes pays Stephens’ workers’ compensation premiums, Stephens should be covered by

workers’ compensation as if he were a Witco employee. Cf. Gaspard v. Orleans Parish School

Board, 688 So.2d 1298, 1303 (La. Ct . App. 1997) (holding that a plumber was not a statutory

employee of a school district in part because the plumber’s employer “was an independent business

enterprise with its own worker’s compensation insurer”).

Our job, as defined by the Louisiana Supreme Court, is to decide whether Mundy employees

who work at Witco pursuant to the “construction, maintenance, and plant services” contract are

Witco’s statutory employees for workers’ compensation purposes. The majority, in narrowly

focusing on the particular job Stephens was performing at the time of the accident, performs the

incorrect inquiry. I recognize that, under Kirkland, “[a] totality of the circumstances inquiry is

frequently difficult to accomplish on motion for summary judgment.” Kirkland, 681 So.2d at 337.4

However, in the case at bar, the single piece of evidence relied on by the majority is insufficient to

create a genuine issue of material fact on the scope of Mundy’s contract work. Therefore, the district

court correctly concluded that Mundy employees who work at Witco pursuant to the “construction,

maintenance, and plant services” contract and for whom Witco, for all pract ical purposes, pays

workers’ compensation insurance, are Witco’s “statutory employees” as a matter of law.

Accordingly, I dissent.

4 “While [after Kirkland] it may be difficult to satisfy one’s burden on summary judgment, it is not impossible.” Hester, 955 F. Supp. at 658-59; see also Jones v. Vela’s Garage & Rental, Inc., 717 So.2d 246, 248-49 (La. Ct. App. 1998) (granting summary judgment under the Kirkland factors); Jackson v. Latini Machine Co., 960 F. Supp. 1043, 1049 (E.D. La. 1997) (“Sathers has proven the presence of seven of the eight factors pointing to an existence of a statutory employment relationship. The absence of one of the factors is adequat ely compensated by the presence of the seven other factors. Thus, Sathers has carried its [summary judgment] burden.”). 12