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Illinois Supreme Court Workers' Compensation Act is Exclusive Remedy Only Against "Immediate Employers"

ABSTRACT: The Supreme Court recently reaffirmed that only "immediate employers" of injured employees are immune from suit under the Workers' Compensation Act's exclusive remedy provisions, despiteany contractual duties to carry workers' compensation insurance.

The Illinois Supreme Court recently held that the Workers’ Compensation Act’s exclusive remedy provision does not extend immunity to a general contractor who paid workers’ compensation insurance premiums for its subcontractor (a wholly-owned subsidiary) and the subcontractor’s employees. Only an employee’s “immediate employer” is entitled to immunity under the Act’s exclusive remedy provision. The Court held that the general contractor was not the “immediate employer” of the subcontractor’s employees within the meaning of the Act, and was therefore not entitled to immunity from suit.

Factual Background

This case involved a fairly familiar arrangement for construction projects. The project owner, RAR2-222 South Riverside, LLC (“222 South Riverside”), contracted with Bulley & Andrews, LLC (“B&A”), to act as general contractor on the project. The contract between 222 South Riverside and Bulley & Andrews required B&A to maintain several lines of insurance coverage, including coverage for, among other things: workers’ compensation claims; claims for bodily injury or death of the contractor’s employees; and claims for bodily injury to any person other than the contractor’s employees.

B&A used its wholly-owned subsidiary called Bulley Concrete, LLC to perform concrete work on the project, but the two companies did not enter into a subcontract or other joint venture agreement. B&A and Bulley Concrete operated as totally separate corporate entities, and Bulley Concrete employed its own laborers, including caulkers and concrete finishers.

Munoz was a concrete laborer employed and paid (including all tax withholding) by Bulley Concrete. During the project Bulley Concrete used blankets to cover wet concrete to prevent the concrete from freezing as it cured. While Munoz was removing a blanket, he injured his back and incurred more than $75,000 in medical bills. Munoz filed a claim for workers’ compensation against Bulley Concrete, who was an insured under B&A’s workers’ compensation policy. Due to a large deductible, B&A paid Munoz’s claim.

In 2019, Munoz filed a personal injury law suit against B&A and others, alleging that as the general contractor, B&A had a non-delegable duty to maintain the safety of the worksite. The Circuit Court granted B&A’s motion to dismiss, finding that it was immune from suit under the Act’s exclusive remedy provisions. The Court of Appeals affirmed.

Supreme Court Decision

The Supreme Court described the Workers’ Compensation Act as a quid pro quo between employers and employees, wherein employers give up common law defenses to liability, and in exchange, employees give up their right to bring common law suits. The role of the Courts is to give effect to the legislative intent in that bargain. Generally, where the Act covers a workplace injury, compensation under the Act is the employee’s sole and exclusive remedy.

Turning to the Act’s exclusivity provisions, the Court of Appeals found that there was no doubt that Munoz was an “employee” under the Act. However, the essential question was whether B&A was Munoz’s “employer,” and thus immune from suit. Under the Act’s exclusivity provision, Section 5(a): “No common law or statutory right to recover damages from the employer … for injury or death sustained by any employee while engaged in the line of his duty as such employee, other than the compensation herein provided, is available ….” Section 1(a)(2) of the Act defines an “employer” as “Every person, firm, public or private corporation … who has any person in service or under any contract for hire, express or implied … for which compensation under this Act may be claimed” (emphasis added). 

Under Section 1(a)(2), B&A would seem at first to be an employer. However, Section 1(a)(3) states that any employer is one who is “liable to pay compensation to his own immediate employees.” The Supreme Court relied on its prior holding from a 1976 case, which held: “[W]e must interpret section 5(a) as conferring immunity upon employers only from common law or statutory actions by their immediate employees.Laffoon v. Bell & Zoller Coal Co., 65 Ill. 2d 437, 447 (1976). In a situation involving a parent and a subsidiary, the question is whether the companies operated as separate entities, in which case only the immediate employer is entitled to immunity.

The Supreme Court evaluated the relationship between B&A and Bulley Concrete and found them to be completely separate entities. The companies were separate LLCs, with separate leadership, different tax ID numbers, and employed different workers. Because Bulley Concrete paid Munoz, Bulley concrete was his “immediate employer,” and B&A was not. Even though B&A was liable for paying workers’ compensation under its contract with 222 South Riverside, it not liable to pay Munoz’s bills as his “immediate employer,” was not an “employer” under the Act from whom “compensation under this Act may be claimed” under Section 5(a), and was thus not entitled to immunity. The Supreme Court also rejected B&A’s argument that it and Bulley Concrete were a joint venture (and thus entitled to immunity under a separate exception) because the companies did not have a contract to operate as a joint venture.

The Act permits employees of a subcontractor to pursue claims against a third-party general contractor. In the end, B&A was simply a general contractor on the project and Bulley Concrete a subcontractor. The Court reversed the trial court and the Court of Appeals and remanded for further proceedings.