New Jersey’s Independent Contractor Rule

Originally posted 2014-12-19 09:00:48. Republished by Blog Post Promoter

bsusserFor this week’s Guest Post Friday here at Musings, we welcome back Bennet Susser. Bennet is a founding member and shareholder of the New Jersey law firm, Jardim, Meisner & Susser, P.C. He has over 25 years’ experience in representing clients in all types of complex (and not so complex) litigation, including those involving construction actions. His Construction Law Practice Group has deep experience in the representation of property owners, developers, homeowners, design professionals, materials manufacturers, contractors and subcontractors in connection with construction of high-rise and other residential developments, condominium conversions of older rental properties, commercial property, mixed-use projects, and governmental buildings. Issues handled include: construction defects and deficiencies related to residential and commercial construction, including roofing defects, water intrusion, and structural life safety; construction delays; liens; hurricane recovery and rebuilding; insurance coverage disputes, including negotiation and resolution of insurance claims related to rebuilding; mold and mildew claims; and construction contracts and related documents, including loan documentation.

Construction litigation often seeks to foist the culpable conduct of contractors and subcontractors upon an owner or developer of commercial or residential real property. Sometimes, such conduct is warranted, especially when the owner/developer has a significant role in the manner in which the construction project work is to be conducted. However, there are times when the general contractor is the party calling the shots. Why should an owner/developer be charged with the conduct of other independent contractors over whom no control was exercised? Under certain circumstances, such party may be insulated from liability based on the “independent contractor rule.” Put another way, general contractors’ and subcontractors’ status as independent contractors do not impute liability to an owner/developer for their alleged wrongful conduct under the principles of respondeat superior and vicarious liability.

A Principal Is Generally Not Culpable For The Wrongful Conduct Of Its Independent Contractors.

It is well settled law in New Jersey that one who hires independent contractors is not liable for the wrongful conduct of those contractors in the performance of their duties and services. Bahrle v. Exxon Corp., 145 N.J. 144, 156 (1996); Baldasarre v. Butler, 132 N.J. 278, 291 (1993). The public policy reason for this rule is that unlike an employee, an independent contractor controls the manner in which the work is to be done, and therefore should be the one charged with the damages that result from its acts. Id.; Mavrikidis v. Petullo, 153 N.J. 117, 132 (1998); Wilson v. Kelleher Motor Freight Lines, Inc., 12 N.J. 261, 264 (1953). Respondeat superior does not apply to the actions of independent contractors because they are non-employee agents. See, e.g., JMB Enterprises v. Atlantic Employers Insurance Co., 228 N.J. Super. 610, 617-18 (App. Div. 1988). The key question is whether the relationship to the owner/developer is characterized by their “self-determination in both an economic and professional sense” and, accordingly, not a master and servant relationship, even though they are principal and agent. Mavrikidis, 153 N.J. at 134.

To avoid the imposition of the wrongful conduct of a general contractor and/or subcontractors, an owner/developer must be able to show, from the fact record, that the contractor parties’ actions were conducted in their capacities as independent contractors.

Exceptions to the Rule of Non-Liability of a Principal for the Alleged Wrongful Conduct of Its Independent Contractors.

There are three exceptions to the rule that a principal/contractee is not liable for the wrongful conduct of its independent contractors: (1) when the principal retains control over the manner and means of doing the work the contractor provided; (2) when the principal has engaged an incompetent contractor; or (3) where the services provided by the contractor are a nuisance per se (i.e., “inherently dangerous”). Majestic Realty Associates, Inc. v. Toti Contracting Co.; 30 N.J. 425 (1959); Mavrikidis, 153 N.J. at 133.

The first exception bespeaks of control, but this is limited to how the work is to be conducted by the contractors/subcontractors. One engaging an independent contractor may properly exercise the general control necessary to create the terms of a contract and monitor compliance, but such conduct does not, in and of itself, equate with control over the means and manner of job performance. See Muhammed v. New Jersey Transit, 176 N.J. 185, 197 (2003); Mavrikidis, 153 N.J. at 135; Majestic, 30 N.J. at 431; AT&T v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1435 (3d Cir. 1994), cert. denied, 514 U.S. 1103 (1995); Marion v. Public Serv. Ele. & Gas Co., 72 N.J. Super. 146, 154-55 (App. Div. 1962). Consequently, in order to impose liability on an owner/developer, it must be shown that such party exercised active participation in the manner of the work. Muhammed v. New Jersey Transit, 176 N.J. at 197.

For the second exception, it must be shown that the owner/contractor was negligent in its decision to retain the general contractor/subcontractors. Knowledge of incompetence may be difficult to prove. See Mavrikidis, 153 N.J. 117. However, retaining a general contractor or approving subcontractors not licensed or registered by the State, or who have publicly-disclosed fines/penalties, may be sufficient to impose such knowledge. Otherwise, “no presumption as to the negligence of an employer in hiring an independent contractor arises from the fact that, after being hired, the contractor is negligent in the performance of his duties and injures the person or property of another.” Id. at 136.

The third exception is nuisance per se a/k/a “inherently dangerous.” Mavrikidis, 153 N.J. at 143. Sections 413, 416, and 427 of the RESTATEMENT (SECOND) OF TORTS (1965) defines “inherently dangerous” work as work that involves “a peculiar risk of harm” because it involves activities that require “special skill and care” for which there is a “grave risk of danger” if negligently done. Majestic, 30 N.J. at 435.

“Inherently dangerous” is more than danger merely arising from the casual or collateral negligence of contractors who engage in construction activities under particular circumstances, or danger that occurs solely from the means and methods of its performance, or arising merely from negligence in the operative details of the work. Rodrigues v. Elizabethtown Gas Co., 104 N.J. Super. 436, 444 (App. Div. 1969). Work is inherently dangerous if the “danger inheres in the activity itself at all times” so that the contractor must take “special precautions” to avoid injury. Majestic, 30 N.J. at 435.

An “inherently dangerous activity” is always dangerous, no matter how carefully the work is performed, and is incidental to and characteristic of the work itself. Rodrigues, 104 N.J. Super. at 445. A prime example of an inherently dangerous activity is a demolition of a structure.

Accordingly, the independent contractor rule, under the right fact scenario, may insulate an owner/developer from the conduct (or more aptly, misconduct) of its general contractor and/or subcontractors. Given the nature of proofs, such defense likely will be best effective at a summary judgment phase of litigation, after a fact record is established.

For the full analysis and a longer take on this rule, check out this link.

As always, Bennet and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.

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