On-the-job injuries are an all too common occurrence. According to recent statistics from OSHA, over 4.1 million people in the United States suffer a serious job related injury or illness each year, and more than 4,500 workers die on the job annually. When someone is injured or killed in the course of their employment, Georgia law, as does the law of most states, provides that the worker’s only remedy against his employer is workers’ compensation benefits. See O.C.G.A. § 34-9-11. In other words, the employee is precluded from suing his or her employer for damages; however, the employee is permitted to sue a third-party who may be responsible for the injuries.

While an employee is permitted to sue a third-party for damages, workers’ compensation immunity extends beyond the employee’s direct employer to include any “statutory employers" as well. Thus, a third-party that is deemed to be a statutory employer is entitled to the same immunity from a personal injury lawsuit as the employee’s immediate employer. The statutory employer doctrine is a part of Georgia’s workers’ compensation system, and it provides that, “[a] principal, intermediate, or subcontractor shall be liable for compensation to any employee injured while in the employ of any of his subcontractors engaged upon the subject matter of the contract to the same extent as the immediate employer." O.C.G.A. § 34-9-8(a). This doctrine applies “only in cases where the injury occurred on, in, or about the premises on which the principal contractor has undertaken to execute work or which are otherwise under his control or management." O.C.G.A. § 34-9-8(d). Even though a statutory employer may have ultimate liability for workers’ compensation benefits, an injured employee must still first submit his claim for compensation to his immediate employer. O.C.G.A. § 34-9-8(c).

The purpose of the statutory employer provision is to protect employees of financially irresponsible subcontractors who lack workers’ compensation coverage by allowing those employees to recover workers’ compensation from the principal or intermediate contractor. See Manning v. Ga. Power Co., 252 Ga. 404, 314 S.E.2d 432 (1984). Because the statutory employer has potential liability for the payment of workers’ compensation benefits, it is immune from a personal injury lawsuit. Vratsinas Const. Co. v. Chitwood, 314 Ga. App. 357, 723 S.E.2d 740 (2012). This immunity attaches even if the statutory employer does not actually pay any workers’ compensation benefits.

A party is a principal contractor under the statute only “in the isolated situation where [it] also serves as a contractor for yet another entity and hires another contractor to perform the work on the premises." See, e.g., Yoho v. Ringier of Am., Inc., 263 Ga. 338, 341, 434 S.E.2d 57, 59 (1993). As a result, the owner of property where work is being performed is not a principal contractor entitled to this immunity “if the contractual obligation of performance is owed to, rather than by, him." Id.

To be a “principal contractor," the contractual obligation that the owner owes to the other entity must be for the performance of substantial services. “[A] mere contract for the sale of goods does not make the seller a ‘contractor’ under OCGA § 34-9-8 unless the contract to sell is accompanied by an undertaking to render substantial services in connection with the goods sold." Guillam v. Ga. Power Co., 211 Ga. App. 690, 691, 440 S.E.2d 83, 84 (1994).

In Gray Building Systems v. Trine, 260 Ga. 252, 391 S.E.2d 764 (1990), the Georgia Supreme Court applied and interpreted the “substantial services" element of this defense. In Gray Building Systems, the appellee was a workers’ compensation claimant who was injured while unloading steel beams from his employer’s truck at the job site of the appellant. Id. at 252, 391 S.E.2d at 765. The appellee was unloading the steel beams to begin fabricating door and window lintels that the appellant had ordered from appellee’s employer. Id. The lintels had to be fabricated on the appellant’s job site according to specific measurements. Id. Despite these facts, the Supreme Court held that the appellant was not appellee’s statutory employer because there was no evidence of substantial services: “The record before us contains no evidence of a substantial service that was rendered in connection with the lintels sold by appellee's employer to appellant. The fact that appellee's employer fabricated the lintels on appellant's construction site does not, in and of itself, make appellee's employer a subcontractor of appellant." Id.

In Mobley v. Flowers, 211 Ga. App. 761, 440 S.E.2d 473 (1994), the Georgia Court of Appeals also analyzed whether the “substantial services" element was satisfied. In Mobley, the plaintiff worked for Scruggs Concrete, a company that sold bricks. Id., 440 S.E.2d at 475. While delivering bricks for his employer to the defendant, a general contractor who was building a house, the plaintiff sustained injuries at the construction site. Id., 440 S.E.2d at 474. Citing Gray Building Systems, the Court of Appeals noted that “[a] mere contract for the sale of goods does not make either the buyer or seller or both a ‘contractor’ as used in OCGA § 34-9-8." Id., 440 S.E.2d at 475. Instead, the contract for the sale of goods must be accompanied by an obligation to render “substantial services" in connection with the goods sold. Id. The Court of Appeals held that there was not a contract to render substantial services because “Scruggs Concrete merely performed the usual services of a seller of brick, and appellant merely delivered the bricks." Id.

When an on-the-job injury occurs, it is important to evaluate all sources of recovery. These sources of recovery include not only sources of workers’ compensation benefits, but also potential sources of recovery in a third-party personal injury lawsuit. Because the statutory employer defense is a potential hurdle to bringing a third-party lawsuit for a work related injury in Georgia, it is important to evaluate all the facts to determine whether the defense applies.