If your household worker or contractor is injured, will you be liable?

Do The OSHA (Occupational Safety & Health Administration) Rules Apply to You? Does Your Homeowner’s Insurance Protect You?

THE PROBLEM: If your housecleaner, gardener, or handyman is injured while working at your residence are you liable? What about the tree trimmer or roofer that you hired for a one-time job? Do the same rules apply to the contractor you hired to do a month-long remodel? Are you required to comply with OSHA rules? Does your homeowner’s insurance provide coverage? Does your homeowner’s insurance provide worker’s compensation benefits? While the answers to these questions have been fairly predictable, a decision by the California Court of Appeals last year has brought some uncertainty to this area of the law. In early May, 2003, the California Supreme Court heard the further appeal of Fernandez v. Lawson. The decision of the Supreme Court was released on July 7, 2003, and restores stability to this area of the law.

Fernandez v. Lawson

In the case of Fernandez vs. Lawson, the plaintiff, Miguel Fernandez, was working for Anthony’s Tree Service when he was injured while trimming a 50-foot-tall palm tree at the Lawsons’ residence.

In California, trimming trees taller than fifteen feet (15′) requires a contractor’s license. When Lawson contracted with Anthony’s Tree Service to trim the tree for $450, the owner of Anthony’s, Mr. Lascano, gave Lawson a business card bearing a license number.

Lawson asked if Anthony’s had worker’s compensation insurance and in response Lascano retrieved an insurance form from his truck. Lawson noticed that the insurance had expired. Lascano told Lawson that he would bring the current form. The next day, before commencement of work, Lascano told Lawson that he had forgotten to bring the proof of insurance. Lawson relented and allowed the work to begin. Fernandez was injured and Anthony’s was not insured. The license number on the business card turned out to be an expired business license, irrelevant to the contracting work to be done.

Fernandez sued homeowner Lawson, contending that because Anthony’s was unlicensed Lawson was the employer and was required to have worker’s compensation insurance. Fernandez further contended that Lawson violated the Labor Code by hiring an unlicensed contractor, violated provisions of the California Occupational Safety & Health Act (Cal-OSHA), and violated the American National Standards Institute (“ANSI”) safety requirements for trimming trees. Fernandez submitted a claim to Lawson’s homeowner’s insurance, which denied the claim because Fernandez had worked less than 52 hours and thus was excepted from the Labor Code definition of an employee.

The trial court initially granted summary judgment in favor of Lawson, holding that OSHA did not apply to non-commercial tree trimming at a private residence. The Court of Appeal reversed the judgment, meaning that Fernandez’s claims are sent back to the trial court for a new trial.

The Court of Appeal held that under Labor Code § 2750.5 a person who hires an unlicensed contractor for work requiring a license is the statutory employer of not only the unlicensed contractor but also any workers of the unlicensed contractor. Further, as the statutory employer, Lawson was required to comply with OSHA regulations. The Court of Appeal held that trimming a 50′ palm tree was not necessarily household domestic service, which is exempted from the employer requirements, because tree trimming is not akin to the type of services for which an employer is exempt such as cooking, cleaning, child care, or gardening. The Court of Appeal ordered a new trial to determine, among other things, whether Anthony’s misled (defrauded) the homeowner to believe that it held a valid license, and whether Fernandez had knowledge of or participated in the fraud on Lawson, and if so whether either or both should be estopped from claiming employee status.

This case poignantly illustrates the potential for liability of a homeowner hiring a casual worker for household chores.

THE HISTORY: Until the aberrant decision in Fernandez v. Lawson, this area of the law was fairly settled. To understand it we briefly explore two statutes:

Labor Code § 2750.5

Labor Code § 2750.5 says that anyone performing work for which a contractor’s license is required, or working for someone who is required to be licensed, is presumed to be an employee of the hirer unless certain criteria for independent contractor status are met. The first criteria for being deemed a independent contractor instead of an employee is that the contractor must hold a valid contractor’s license. Thus a worker without a contractor’s license, or working for someone without a contractor’s license, cannot by law be an independent contractor, and must be presumed to be an employee. Thus Labor Code § 2750.5 creates a rebuttable presumption that an unlicensed contractor and his or her employees are employees of the homeowner, and the presumption cannot be rebutted if the contractor doesn’t have a valid license because he doesn’t meet the first criteria for being an independent contractor.

Labor Code § 3352

Labor Code § 3352 lists some exceptions to the definition of an employee, thus exempting the hirer from liability to provide worker’s compensation benefits if the worker or contractor fits one of the exceptions. Subsection (h) excludes “casual residential employees” from the requirements. A casual residential employee is anyone who worked or contracted to work less than fifty-two (52) hours in the ninety (90) days preceding the injury, or anyone who earned less than $100 from the hirer in the preceding ninety days.

A brief look at four cases will illustrate these two statutes, the interaction between them, and how the courts have reconciled them with one another in the past.

Furtado vs. Schriefer

In 1991 a case called Furtado vs. Schriefer, was brought by a house painter, Furtado, who was injured while painting Schriefer’s house. Furtado was not licensed, and so he contended that under Labor Code § 2750.5 he could not qualify as an independent contractor and was therefore necessarily Schriefer’s employee. Schriefer contended that the Lab.C. § 3352(h) exclusion from employee status applied to unlicensed contractors. The trial court held that Lab.C. § 2750.5 preempted Lab.C. § 3352(h), and therefore Furtado was Schriefer’s employee and not an independent contractor. The Court of Appeal stated that no previous court had considered the interaction between Lab.C. § 2750.5 and Lab.C. § 3352(h), but stated that the California Supreme Court had indirectly suggested that the § 3352(h) exclusion applied to the § 2750.5 presumption of employee status, and so sent the case back to the trial court for a determination on the issue of whether Furtado is excluded from status as an employee by § 3352(h). Since there was no further appeal it is unknown what the result of the further trial proceedings were. [Only appellate decisions are published, not trial court decisions].

Mischler v. WCAB, Gary Chagnon

In 1994 there was a decision of the Court of Appeal in a case called Mischler v. WCAB, Gary Chagnon. Chagnon had been working on a remodeling project at homeowner Mischler’s house for more than a month at the time of his injury. He had first worked under James Miller d.b.a. Miller Contracting, a licensed contractor. Homeowner Mischler grew impatient with Miller’s job progress, terminated him, and contracted with Robert Kissel d.b.a. Rob’s Carpentry, an unlicensed and uninsured contractor, to complete the job. Kissel retained Chagnon to continue working on the job and Chagnon was immediately injured. The Worker’s Compensation Judge found that Chagnon was an employee of both Kissel and Mischler (which leaves Mischler on the hook because Kissel was uninsured).

Mischler appealed on the basis that Chagnon had worked less than fifty-two (52) hours under the new contract with Kissel. The appeal was denied. Labor Code § 2750.5 provides that a worker performing work for which a license is required is presumably an employee. Chagnon met that criteria. Labor Code § 3352(h) excludes from “employees” those workers who have not worked fifty-two (52) hours in the last 90 days. Chagnon was injured on his first day under the new contract with Kissel, but the contract was for the same work that Chagnon had been doing under the contract with Miller for more than a month. Because it was a continuation of the same work, he was deemed to have worked more than 52 hours within the preceding 90 days. Therefore he was an employee, and not within the § 3352(h) exemption.

Sepanshirabad vs. WCAB, Bet’Poulos

Then in 1995 injured worker Sepanshirabad brought suit against homeowner Bet’Poulos for injuries Sepanshirabad received while trimming trees at Bet’Poulos’s residence. Sepanshirabad did not have a contractor’s license. So by the statutory presumption he was an employee of Bet’Poulos and was entitled to worker’s compensation benefits. However, he had neither worked, nor contracted to work, for fifty-two (52) hours at the time of his injury or within the 90 days before the injury.

Injured worker Sepanshirabad urged that under Lab.C. § 2750.5 he could not be found to be an independent contractor (and thus liable for his own insurance benefits) because he was unlicensed and thus necessarily an employee of Bet’Poulos. The Court found that Lab.C. § 3352(h) is the threshold that must be met before the rebuttable presumption of Lab.C. § 2750.5 comes into play. Therefore Sepanshirabad was excluded from the definition of employee and Bet’Poulos was not his employer and not responsible for his compensation insurance.

Duncan vs. WCAB, Sheehan

Then in 1998 the case of Duncan vs. WCAB, Sheehan was decided. Decedent Pastor Fariar fell out of a tree and died while working as a tree trimmer for William Sheehan, d.b.a. Reliance Tree Service, an unlicensed and illegally uninsured tree trimming business. The decedent’s widow sought worker’s compensation benefits, and included the insured homeowner and the Uninsured Employer’s Fund as defendants. The Worker’s Compensation Judge found the defendant homeowner and Sheehan were employers of decedent Fariar, but the homeowner was excluded from liability because the decedent’s employment was casual residential employment under Lab.C. § 3352(h).

The Uninsured Employer’s Fund filed a writ urging the Court of Appeal to overturn the Worker’s Compensation Judge. The writ was denied, and so the Lab.C. § 3352(h) exemption from the definition of employee overrode the Lab.C. § 2750.5 presumption of employee status. This remained essentially the settled state of the law until the 2002 decision in Fernandez v. Lawson, the first case discussed above.

The Fernandez vs. Lawson Decision Is Not in Accord with Prior Law

In Fernandez v. Lawson the Court of Appeal held that because under Lab.C. § 2750.5 a person who hires an unlicensed contractor to do work requiring a license is a statutory employer, he must comply with OSHA regulations. Previous decisions had held that OSHA regulations do not apply to a homeowner who hires casual domestic help on a one-time basis. This Court held that tree trimming is not casual domestic help. It reasoned that because a license is required to trim trees taller than fifteen feet (15′), tree trimming is not similar to other casual domestic help such as cooking, cleaning, child care, or gardening.

The Court of Appeal also disagreed with previous decisions that had held homeowners should not be required to comply with OSHA regulations. It stated that the burden of regulatory compliance could be alleviated by simply hiring licensed contractors. It said a contractor’s license status is not difficult to ascertain, since the State Contractors’ Licensing Board has both a toll free 800 phone number and a website.

The California Supreme Court Reversed the Court of Appeal, Holding That OSHA Does Not Apply

The California Supreme Court considered whether Lawson was required to comply with OSHA regulations. First it noted that OSHA’s definition of “Employment” expressly excludes “household domestic service.” However, that phrase is not further defined. The Supreme Court reasoned that tree trimming is commonly performed by persons hired by homeowners to maintain residential premises. It expressed that “household domestic service” implies duties personal to the homeowner, as opposed to commercial or business activities of the homeowner. Lawson had no commercial purpose for having his palm tree trimmed. Because a homeowner would not expect to be subject to OSHA regulations, it would be unfair to impose them. So, it held that although OSHA regulations might apply to tree trimming for other than a private homeowner, they are not applicable to homeowners such as Lawson.

THE IMPLICATIONS: When you hire a worker at your house for a one-time job of casual domestic work lasting less than fifty two (52) hours they are excluded from the Labor Code definition of employee. However, if they are unlicenced and performing work for which a license is required, the status becomes less clear, although several cases suggest that the Labor Code § 3352(h) exception prevails over the Labor Code § 2750.5 presumption.

As to longer term workers, such as a cook, housekeeper, child care worker, or gardener, the Labor Code definition of “Employee” includes any person employed by the owner or occupant of a residential dwelling whose duties are incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession, or occupation of the owner or occupant, unless that person is excluded under the “52 hours in 90 days” exclusion of Lab.C. § 3352(h).

Insurance Code § 11590 provides that every homeowner’s comprehensive personal liability insurance policy issued or renewed in California after 1977 is required to have, or will be imputed to have, coverage for worker’s compensation benefits for “Employees” as defined in the Labor Code, if they are not covered by other compensation insurance.

However, when you hire someone for a longer term project, such as a home remodel, pool construction, or any job not “incidental to the ownership, maintenance, or use of the dwelling” you must ensure that such persons are properly licensed and insured. If they are not, you could become their employer and be responsible for the equivalent of worker’s compensation benefits in the event anyone is injured.

OUR SUGGESTION: You absolutely must check on the license status of any contractor you hire before they commence work, and insist on proof of current and valid worker’s compensation insurance. Keep a photocopy of the insurance certificate and a printout of the contractor’s license status. The license status of a contractor can be checked on the website of the State Contractor’s Licensing Board, at www.cslb.ca.gov.

Brewer Offord & Pedersen LLP does not handle workers’ compensation matters. We recommend the Law Ofc. of Roger M. Sublett in San Jose for applicants, and Law Ofc. of Marshall Candee in San Jose for employers, each of whom contributed research resources for the preparation of this article.

This article written and © Peter N. Brewer, Esq.

Brewer Offord & Pedersen LLP (www.BrewerFirm.com) serves the legal needs of homeowners, real estate and mortgage brokers, agents, brokerages, title companies, developers, investors, other real estate professionals and their clients. Mr. Brewer and his firm also represent clients in debt collection, breach of contract matters, and other litigation and transactional work. The firm’s client range from homeowners, brokers and lenders based in Santa Clara County, San Mateo County, San Francisco County, as well as throughout other counties in California.