Tenth Circuit Overturns Jury Verdict For Injured Floorhand Finding Defendant Was Statutory Employer Under Colorado Law and Immune From Negligence Liability

Early in the morning of December 13, 2005, a floorhand was seriously injured while working on a drilling rig.  At 12:01 am on the same day, an acquisition agreement became effective by which the floorhand’s employer sold the casing drilling services portion of its business and transferred employees of that division to the acquiring entity.  The floorhand sued his now former employer asserting a Colorado state-law negligence claim.  Prior to trial, the defendant sought summary judgment on the ground it was immune from common-law negligence liability because it was the plaintiff’s statutory employer under Colorado’s Workers’ Compensation Act.  The district court denied that motion and the case proceeded to trial.  After the parties rested their cases, but before the case was submitted to the jury, the court granted judgment as a matter of law to plaintiff on the question of immunity, concluding “the only reasonable interpretation of the evidence in this case is that [defendant] is not a statutory employer” under Colorado law.  The court then submitted plaintiff’s negligence claim to the jury, which found in plaintiff’s favor and awarded substantial damages.

On Tuesday, the Tenth Circuit remanded the case to the district court with instructions to vacate the jury’s verdict and instead enter judgment for the defendant.  In so doing, the court found that the district court erroneously concluded that the relationship between the former employer and the acquiring entity after the acquisition agreement was not one of general contractor and subcontractor.  To the contrary, the Tenth Circuit determined that the former employer remained an active participant in the casing drilling services business after the closing of the agreement and contracted out work to the acquiring entity that was “an important, routine, and regular part” of its business.  Accordingly, under Colorado’s “regular business test,” defendant was a statutory employer for workers’ compensation coverage and immunity purposes.