Grant of Immunity to Subcontractors on Self-Insured Project is Constitutional

Consider this scenario: you are a subcontractor working on a large construction project and the general contractor is self-insured for purposes of dealing with claims that result from jobsite injuries. Another subcontractor’s employee gets injured on the job and sues you for negligence. Are you immune from the negligence suit as an enrolled subcontractor on the self-insured project? The Supreme Court of Ohio held in 2016 that the short answer is “yes.” The Supreme Court decided the issue again on constitutional grounds just this past year in December 2018. In short, as an enrolled subcontractor working on a self-insured job, you will generally be immune from tort liability for workplace injuries.

In 2016, a federal court certified a question of state law regarding a workplace injury sustained on the construction of the Horseshoe Casino in Cincinnati.  The Ohio Supreme Court decided that subcontractors working on a self-insured construction project are afforded the same immunity the general contractor enjoys for injuries sustained by other workers for different subcontractors on the same self-insured construction project.[1]

Ohio Revised Code § 4123.35(O) permits a self-insuring employer under Ohio’s Workers’ Compensation System the privilege of self-insuring construction projects that are scheduled for completion within six years with estimated costs of over $100 million (for private employers) or over $25 million (for certain public employers, such as state colleges). R.C. § 4123.35 further provides that a self-insuring employer is entitled to protections provided under Ohio’s workers’ compensation laws with respect to the “employees of the contractors and subcontractors,” as if those employees were employees of the self-insuring employer. The self-insuring employer may administer workers’ compensation claims not only for its own employees, but also for the employees of subcontractors enrolled in the plan. In return, the self-insuring employer gains protection against claims by its own employees as well as the claims of employees of enrolled subcontractors.

The Stolz I Court held that the workers’ compensation statutes “create a legal fiction that a self-insuring employer for a self-insured construction project is the single employer, for workers’ compensation purposes, of all employees working for enrolled subcontractors on that project.”[2]  The 2016 decision was good news for subcontractors enrolled in plans on self-insured construction projects in Ohio, since it affirmed their immunity under Ohio workers’ compensation law for injuries sustained by employees of other subcontractors on a self-insured job.

In December 2018, the federal court certified a second question – whether the self-insured construction project immunity violated certain provisions of the Ohio Constitution.  Again, the Ohio Supreme Court upheld the grant of immunity to the general contractor and the enrolled subcontractors on the project.[3]

In Stolz II, the Supreme Court held that the grant of immunity discussed in Stolz I does not violate the Equal Protection and Due Process Clauses of the Ohio Constitution. Under the Court’s rational basis review, it determined that there were several legitimate governmental interests that justified the grant of immunity under R.C. § 4123.35(O), including the traditional rationale of minimizing litigation, putting general contractors and subcontractors on equal footing in terms of worker injury liability, encouraging subcontractors to engage in large-scale construction projects they might otherwise shy away from, and the provision of quicker, and more certain, means of recourse for injured employees.

The Supreme Court’s Stolz I and Stolz II decisions together provide significant relief for subcontractors working on self-insured projects. They can now rest assured that they are immune, in most circumstances,[4] for negligence claims that arise from workplace injury, even if the plaintiff is not the subcontractor’s direct employee. Moreover, upper-tier project constituents such as owners and construction managers may also benefit from subcontractors’ decreased potential for liability and exposure, which may play an important role in reducing overall project costs.