The Arizona Court of Appeals recently held that in determining statutory employers, an administrative law judge (ALJ) is required to evaluate the liability of each contractor and subcontractor and not stop the analysis once one subcontractor is determined liable.
In Meno’s Construction, Taylor Morrison contracted with Younger Brothers Group (Younger) to complete framing for new home construction. The contract stated Younger specifically stated that “no such subcontracting shall relieve Younger Brothers from its obligations.” Younger then subcontracted the framing work to another contractor, Genaro’s Framing Construction (Genaro’s). Younger would provide general guidelines and framing material but Genaro’s was responsible for supplying labor and tools, carrying workers’ compensation insurance, and controlling day-to-day operations. Genaro’s did not employ framers and subcontracted the work to a third framing contractor, Meno’s Construction (Meno’s). Meno’s hired a sole proprietor, Estopellan, to complete framing for Lot 31. Estopellan then hired Robert Navarro (Navarro) to help with the job. Estopellan would direct workers to Navarro for him to instruct and supervise. The workers received safety training and t-shirts from Genaro’s. Estopellan also worked as a foreman for Younger but handled other side jobs, like this contract with Meno’s.
The claimant went to the construction site looking for work and began working with Estopellan and Navarro. Navarro instructed the claimant when and where to work and paid him weekly via cash or personal check. Estopellan would visit jobsites in a Younger truck to deliver tools and materials and supervise the work. Estopellan provided a budget and instructions to Navarro. The claimant was working on Lot 31 when he fell from a ladder and injured his hip and wrist.
The claimant reported his injury to the internal carotid artery (ICA) and this resulted in a consolidated claim against five potential employers – Navarro, Estopellan, Meno’s, Genaro’s, and Younger. All employers denied liability and a hearing took place to determine the liable parties. The ALJ held that the claimant was hired by Estopellan and Meno’s was the statutory employer. Thus, Estopellan and Meno’s were both responsible for payment of the claimant’s claim. The ALJ did not make any findings regarding the status or liability of Genaro’s and Younger.
On appeal, the parties argued that Estopellan and Meno’s should not be jointly responsible. The Court disagreed and held that all employers are jointly responsible for the claim. The Court relied on a prior Supreme Court case that held where two or more persons are employers of the same employee engaged for the common benefit of both, their liability is joint and common. Both employers are primarily liable. The liability of one employer is not secondary to the other.
The parties also argued that the ALJ erred by not considering the joint liability of Younger and Genaro’s in addition to Estopellan and Meno’s. The Court agreed and held that an ALJ must evaluate the liability of each contractor and subcontractor named in the action. The ALJ must consider whether all the parties are statutory employers based on the nature of the work procured and the level of supervision or control retained over the work. A determination that a claimant is an employee of a subcontractor does not preclude a subsequent determination that the same claimant is an employee of the original contractor.
Meno’s Construction, LLC v. Indus. Comm’n of Ariz., 246 Ariz. 521 (May 9, 2019).
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