Oregon’s Employer Liability Law: It Is Time for a Change

Originally published as an Op-Ed by the Oregon Daily Journal of Commerce on February 16, 2023.

Introduced as a ballot measure, Oregon’s Employer Liability Law (ELL) was described in a voter’s pamphlet from 1910 as “a law requiring protection for persons engaged in hazardous employments, defining and extending the liability of employers, and providing that contributory negligence shall not be a defense.” Proponents of the ELL argued that it would require “that a safe place in which to work be provided and that ropes, chains, beams, machinery, etc., be properly tested before the workman is asked to risk his life with them.” Three years later, the Legislature enacted Oregon’s worker’s compensation law, which created a compensation fund for injured workers and immunity for contributing employers.

Oregon’s current ELL imposes liability on owners, contractors, subcontractors, and others who are in charge of, or have responsibility for, work that involves risk or danger. Oregon’s current worker’s compensation law gives injured workers the right to file a claim, seek medical care, and access benefits for time off. In many jurisdictions, like in Oregon, recovery from worker’s compensation insurance is the injured worker’s exclusive remedy, and the injured worker’s direct employer is immune from civil claims (including ELL claims). However, in certain situations, the ELL permits the injured construction worker to collect on their worker’s compensation claim and sue the project owner and other contractors involved in the construction project.

Contrary to ELL’s original aim, the current statutory scheme arguably prioritizes risk shifting over worker safety. Because liability for ELL claims arises under three types of situations, project participants other than the direct employer (“indirect employers”) are incentivized to avoid liability through their actions and by shifting risk to others by contract.

Liability may be imposed on those indirect employers in the following situations.

“Common enterprise” liability

An indirect employer may be liable under the ELL when the injured worker’s employer and the indirect employer are working together on a common enterprise. The situation arises when the indirect employer is in charge of or has control over a risk-creating activity or equipment. For example, a general contractor owns a forklift and regularly allows its subcontractors to use it to unload deliveries of materials. If the general contractor fails to properly maintain its forklift and a subcontractor’s employee is seriously injured when the hydraulic system fails, the general contractor may be liable to the injured worker.

“Actual control” liability

An indirect employer also may have liability under the ELL when it actually controls the manner or method in which the risk-producing activity was performed. Closely related to the concept of “means and methods,” an indirect employer may incur ELL liability by giving detailed instructions to the direct employer as to how construction work must be performed. If the direct employer’s worker is injured because of those detailed instructions, the injured worker may sue the indirect employer under the ELL.

For example, a general contractor directs a subcontractor to construct an elevated temporary work platform without fall protection. If the subcontractor follows that direction and the subcontractor’s employee is injured in a fall, the general contractor may be liable to the injured worker because the general contractor exercised actual control over the manner or method in which the risk-producing activity was performed.

“Retained right to control” liability

The third situation in which an indirect employer may have ELL liability is when it has the legal authority to exercise a right to control the risk-producing activity. For example, if a subcontract between a general contractor and subcontractor gives the general contractor’s superintendent the right to inspect construction work in progress and require the subcontractor to take additional safety measures, the general contractor may have retained a right to control sufficient to trigger ELL liability. Oregon courts have held that, unless a subcontract unequivocally states that the subcontractor alone is responsible for the safety of its direct employees, the general contractor’s right to inspect construction work and require additional safety measures may result in ELL liability.

Why incentives matter

A common theme running through all these situations is the indirect employer’s involvement in and control of construction project safety. To avoid potential ELL claims by subcontractor employees, indirect employers (such as project owners and general contractors) will likely:

• avoid having their employees work with their subcontractor’s employees on aspects of the work;
• avoid allowing workers from different employers share safety equipment (such as fall protection devices), construction equipment, scaffolding, and temporary works;
• develop contracts that make subcontractors solely responsible for their workers’ safety; and
• limit safety inspections to issues that relate to their own employees and avoid performing safety inspections related to aspects of the work being performed by subcontractors.

In short, Oregon’s ELL arguably discourages cooperation and collaboration among separate contractors as it relates to project safety. The ELL also arguably incentivizes contractors to require subcontractors to be solely responsible for their direct employees’ safety and avoid inspecting those subcontractors’ work or requiring them to address safety issues.

Recall that Oregon’s worker’s compensation system provides the exclusive remedy for an injured employee and gives its direct employer immunity from civil liability. This immunity protects direct employers from ELL claims. If a direct employer is a subcontractor, the general contractor cannot sue the subcontractor, even if the subcontractor’s negligence was a substantial factor in causing the employee’s injury. Indeed, in Oregon, the ELL prohibits a jury from considering the direct employer’s fault or negligence. This means that the party in the best position to prevent the injury – the direct employer – is not held directly responsible for the injuries that are suffered by its employee.

The result is that Oregon law shifts considerable risk to indirect employers on Oregon construction projects. Oregon is unique in this regard, as other states either provide immunity for all employers or allow for an equitable allocation of liability based on fault. Whenever parties are required to shoulder additional risk, they generally seek to cover that risk by increasing their margins and passing additional costs along to the consumer.

Oregon should reform (or repeal) the ELL. In its place, the Legislature should enact legislation that encourages cooperation among project participants and fairly allocates liability when injuries occur. In so doing, the Legislature can incentivize project safety while lowering the cost of construction in Oregon.