54 F.4th 187
4th Cir.2022Background
- In December 2016 a pump exploded at Eastman Chemical’s former South Carolina plant, killing Alton Zeigler and severely injuring Jacob Jackson and Kevin Vann, all employees of DAK Americas (an independent contractor).
- Eastman sold the plant to DAK in 2011, retained four production lines, and contracted with DAK to operate and maintain those lines; Eastman kept only a small managerial staff on-site.
- Plaintiffs sued Eastman and Mundy (a maintenance subcontractor) in federal court for negligence; Eastman moved to dismiss under Rule 12(b)(1), arguing the plaintiffs were its "statutory employees" under the South Carolina Workers’ Compensation Act, so workers’ compensation was their exclusive remedy.
- The district court applied the traditional three-part test and dismissed, finding maintenance work was part of Eastman’s trade or business; the Fourth Circuit held the appeals in abeyance pending the South Carolina Supreme Court’s decision in Keene.
- The South Carolina Supreme Court in Keene held that when an employer makes a legitimate business decision to outsource work, the contractors hired to perform that work are not statutory employees; applying Keene, the Fourth Circuit reversed dismissal and remanded.
- The Fourth Circuit declined to resolve Mundy’s borrowed-servant defense (a merits issue), leaving that for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs were "statutory employees" of Eastman (so workers’ comp exclusive) | Plaintiffs: they were independent contractors; the statutory-employee exception preserves a tort remedy | Eastman: maintenance was part of its trade/business; under statutory-employee doctrine plaintiffs are treated as employees | Court: applying Keene, Eastman legitimately outsourced maintenance in 2011, so plaintiffs were not statutory employees; tort suits may proceed |
| Effect of employer's prior use of its own employees to perform the same work | Plaintiffs: Eastman’s prior performance does not override a later legitimate outsourcing decision | Eastman: the third traditional test (identical activity previously done by owner’s employees) makes plaintiffs statutory employees | Court: Keene allows considering prior practice in narrow contexts, but where outsourcing was a final, legitimate business decision, prior use does not make contractors statutory employees |
| Whether Keene applies retroactively to this 2016 accident | Plaintiffs: Keene restates and refocuses existing law and should apply retroactively | Eastman: Keene should be applied prospectively only because it changes immunity scope | Court: Under South Carolina law, Keene clarified (not created) the rule and is presumptively retroactive; it applies here |
| Whether Mundy is independently immune via borrowed-servant doctrine | Plaintiffs: no — claims against Mundy are viable if not statutory co-employee | Mundy: its workers acted as Eastman’s borrowed servants, so liability flows to Eastman | Court: declined to decide on appeal; borrowed-servant is a merits, non-jurisdictional defense and remains for further factual development |
Key Cases Cited
- Keene v. CNA Holdings, LLC, 870 S.E.2d 156 (S.C. 2021) (holding legitimate outsourcing means contractors are not statutory employees)
- Olmstead v. Shakespeare, 581 S.E.2d 483 (S.C. 2003) (narrowed early broad readings of the statutory-employee doctrine)
- Abbott v. The Ltd., Inc., 526 S.E.2d 513 (S.C. 2000) (warning that essentiality alone does not make work part of owner’s business)
- Collins v. Charlotte, 772 S.E.2d 510 (S.C. Ct. App. 2015) (articulating the traditional three-part test for statutory-employee status)
- Harrell v. Pineland Plantation, Ltd., 523 S.E.2d 766 (S.C. 1999) (describing workers’ compensation as a quid pro quo replacing tort remedies)