Author: Chris Bergin, Esq.
Editor: Brian Cafritz, Esq.
In today’s specialized society, hiring independent contractors is a necessity. As demonstrated in the recent September 2015 Virginia circuit court decision, Cherry v. Palace on Plume St., how one executes the master-servant relationship is a key issue that directly impacts one’s liability.
The widely accepted general rule is that employers are vicariously liable for the torts of their employees, but not for the torts of their independent contractors. In today’s environment where road rage, random violence, and binge drinking are commonplace, business owners have a greater burden to provide a safe haven for its patrons. Using independent contractors to perform security service allows the premises owner the benefit of security services, but greatly limits his risk of liability for any torts the independent contractor might commit while performing those services—assault, battery, false imprisonment, and negligence, to name a few.
Hiring an independent contractor, however, is not a panacea. A business can still be held vicariously liable for the torts of its independent contractors when certain factors exist. Those factors include scenarios where the independent contractor was hired to conduct work that was: (1) unlawful, (2) a nuisance, (3) inherently dangerous, or (4) likely to produce injury “in the natural course of events,” unless special precautions were taken. Fortunately, the Supreme Court of Virginia has held that security guard work generally does not fall into any of these categories. See Broaddus v. Standard Drug Co., 211 Va. 645, 179 S.E.2d 497 (1971). Yet another boon for the restaurant and retail owner.
However, the court may find that the contractor’s negligence is imputed to the business owner if the contractor is not actually independent. This can occur when the business has “the right to control not merely results but the progress and details of [the independent contractor’s] work.” This relationship is founded, “on the power which the superior has a right to exercise on the acts of his subordinates.”
Recently, the Circuit Court for the City of Norfolk, Virginia examined what makes a “master-servant” relationship in Cherry v. Palace on Plume St., In Cherry, the Plaintiff alleged that she had visited The Palace on Plume Street (a self-proclaimed, “reinvented combination of a restaurant, nightlife lounge, and event space”) when one of The Palace’s security guards committed an assault and battery on her. Plaintiff filed suit against The Palace, Elite Security Consultants (an independent contractor hired by the Palace to perform security services), and John Doe (an Elite Security employee that Plaintiff claimed assaulted her). Specifically, Plaintiff alleged: (1) Elite, Doe’s employer, had the right to control the progress and details of Doe’s work, (2) The Palace had contracted with Elite for security services on its premises, and (3) that Doe performed work on The Palace’s premises.
The Palace immediately filed a demurrer arguing that Plaintiff had not stated a cause of action for vicarious liability, because Elite had been hired as an independent contractor. Plaintiff responded by arguing that the court could draw a reasonable inference from her pleadings that The Palace had the right to control Doe because he worked within The Palace’s premises, and therefore, a master-servant relationship existed between Doe and The Palace. The circuit court disagreed. It could not infer that The Palace exercised any level of control over Doe simply from the fact that Doe worked on the premises. The circuit court granted The Palace’s demurrer but also granted the Plaintiff leave to amend her complaint.
Plaintiff amended her complaint and this time alleged that, “[The] Palace had the right to control the progress and details of Doe’s work.” The court noted that this “naked assertion” was clearly insufficient to prove anything by a preponderance of the evidence. Nevertheless, if the allegation was true, it would be sufficient to establish a “master-servant relationship” between the Palace and Doe. As such, Plaintiff’s amended complaint pleaded a viable cause of action.
Restaurants and retailers should take away two lessons from Cherry. First, Virginia courts are reluctant to infer a master-servant relationship. Thus, any complaint which does not specifically allege that the business owner had a right to control the details of the independent contractor’s work may be vulnerable to demurrer. Second, restaurants and retailers should take steps to ensure that its independent security contractors are actually independent. Allow your security contractor to control how their employees conduct their work.
For restaurants and retailers which have locations throughout the Mid-Atlantic, it is vital to understand that the rules in Virginia differ slightly from those of Maryland, North Carolina, West Virginia, and the District of Columbia.
For example, Maryland and D.C. courts use a five factor test to determine whether a master-servant relationship exists. Whitehead v. Safeway Steel Prods., Inc., 304 Md. 67, 77-78, 497 A.2d 803, 808 (1985); Anthony v. Okie Dokie, Inc., 975 A.2d 901, 907 (D.C. 2009). Both these factor tests seek to identify whether the superior had the power to pay wages, or hire and fire the independent contractor’s employees. Yet, the most important factor the DC and Maryland courts consider is whether the superior had the ability to direct the independent contractor’s employee in the “performance of the work and in the manner in which the work is to be done.”
North Carolina uses a more antiquated and elaborate eight factor test. Hayes v Elon College, 224 N.C. 11, 19, 29 S.E.2d 137, 142 (1944)). This test seeks to elicit whether the subordinate is “engaged in an independent business calling or occupation”—something outside of the superior’s ordinary business. At its core, however, this test simply attempts to determine whether the superior has a right to control the conduct of the independent contractor’s employees.
West Virginia uses a simplified four factor test. Cunningham v. Herbert J. Thomas Mem. Hosp. Ass’n, 230 W. Va. 242, 250 737 S.E.2d 270, 277 (2012). Under this test, a court nominally inquires whether the superior could exercise the power to select, compensate and dismiss the servant. Nevertheless, these factors are “not essential to the existence of the relationship.” The only “determinative” inquiry is whether the superior had the right to control the conduct of the independent contractor’s employees.
In essence, all of the various analysis used throughout the Fourth Circuit to identify a master-servant relationship attempt to determine one simple thing: whether a business owner has the power to control the details of the independent contractor’s work. In other words, does the business owner have the same power over an independent contractor’s employees that he exercises over his own employees? The difficulty for restaurant and retail owners who operate outlets throughout the Fourth Circuit is that each jurisdiction focuses its inquiry on a slightly different set of facts. Ideally, business owners should be aware of these differences before potentially litigious situations arise. A well-informed business owner can structure his relationships with independent contractors in a way that proactively limits liability in each specific jurisdiction. As always, an ounce of prevention is worth a pound of cure.
If you have questions navigating the legal differences between the various Fourth Circuit jurisdictions, KPM LAW’s Retail and Restaurant attorneys have experience, and we are here to help. We understand the differences between these jurisdictions and are available to discuss any questions you may have and help protect your business and your brand.