George E. Blanchard, Plaintiff-appellant, Cross-appellee, v. Engine and Gas Compressor Services, Inc. and Gulf Oilcorporation, Defendants-appellees, v. Commercial Union Insurance Company, Intervenor-appellee,cross-appellant, 613 F.2d 65 (5th Cir. 1980)

As it once was,¹  the issue which will not go away is whether the District Court erred by entering a directed verdict in favor of Gulf Oil Corporation, ruling that it was the "statutory employer" of Blanchard under LSA-R.S. 23:1061 (West 1964) and that his sole remedy against Gulf was under the Louisiana Workmen's Compensation Act. We reverse the holding of the District Court and remand for further proceedings consistent with this opinion.

Twice Told Tales

George E. Blanchard was employed as a mechanical supervisor by Engine and Gas Compression Service, Inc. (Engine and Gas). This company supplied mechanical services to Gulf Oil Corporation (Gulf) to maintain and repair compressors at its Ingersoll Rand Station in the Mississippi River Delta, about thirty minutes from Venice, Louisiana.

Blanchard and Pollard Lee, another employee of Engine and Gas, were assigned to the Ingersoll Rand Station. While performing some extensive repairs on a compressor there, Blanchard became covered with oil. In this condition, he tried to replace a 150 pound compressor bearing cap. The cap fell on him, and Blanchard slipped and injured his back, suffering permanent partial disability.

Blanchard sued his employer and Gulf for damages under the Jones Act and in diversity under Louisiana tort law. The District Court granted the defendants' motion for summary judgment on the Jones Act claim which we affirmed. The diversity action proceeded to trial where the District Court entered a directed verdict against Blanchard on the grounds that he was a statutory employee of Gulf under the Louisiana Workmen's Compensation Act, and his right of recovery was therefore limited to workmen's compensation. Blanchard appealed and we certified this issue to the Louisiana Supreme Court.

An Unanswered Query

But our hopes for a surer, if not easier, answer were dashed by the Supreme Court's cryptic, enigmatic response, relying as it properly could on the Rule's²  discretion to decline to answer:

In Re: George E. Blanchard, applying for Certification from the Fifth Circuit Court of Appeal, No. 75-4216.

Decline. The jurisprudence of this Court does not warrant an additional pronouncement at this time. See Reeves v. Louisiana & Arkansas Ry., 282 So. 2d 503 (La.1973); Lushute v. Diesi, 354 So. 2d 179 (La.1978); La.Sup.Ct. Rules XII, Sec. 1.

We continue to feel that Louisiana jurisprudence demonstrates two different standards for determining when a principal is considered the statutory employer of his contractor's employee, and we express here our feelings of hesitation at the prospect of divining Louisiana law without the guidance which the Louisiana Supreme Court is in the best position to give. We pay special attention to the cases cited for us by our brethren on the Louisiana Supreme Court, Reeves v. Louisiana & Arkansas Railway, 282 So. 2d 503 (La.1973) and Lushute v. Diesi, 354 So. 2d 179 (La.1978).

The Louisiana Statutory Employer

Louisiana Workmen's Compensation Law, LSA-R.S. 23:1061, provides that the principal for whom a contractor is performing work which is part of the principal's "trade, business or occupation,"³  shall be liable for workmen's compensation benefits to the contractor's employees.

Although in practice at least as we see it in the flood of diversity and maritime or quasi-maritime cases the purpose of the section is urged, looked upon or held to be immunity to traditional third party tort liability,⁴  the true purpose of this provision, as long ago described (and since many times echoed) in Horrell v. Gulf & Valley Cotton Oil Company, Inc., 15 La.App. 603, 610, 131 So. 709, 714 (1930) is:

to protect employees of minor contractors against the irresponsibility of their immediate employers by making the principal employer, who has general control of the business in hand, liable as if he had directly employed all who work upon any part of the business which he has undertaken to carry on.

Coincident with this responsibility placed on the statutory employer, the Louisiana Workman's Compensation Act, LSA-R.S. 23:1032⁵  (West Supp.1979), limits a contractor's employee's recovery to the compensation benefits. The result is that a statutory employer cannot be sued in tort. Of course, the "exclusive remedy" defense will not bar a tort action against the principal if it is not a statutory employer, that is, if the work performed by the contractor was not part of the defendant's "trade, business or occupation."

Thus, we turn to Louisiana jurisprudence to determine what standard to use in deciding whether the work done by Blanchard was part of the "trade, business or occupation" of Gulf. In our previous opinion in this case, 575 F.2d at 1143-45, we discussed various Louisiana cases and found them somewhat inconsistent. However, the Louisiana Supreme Court has indicated to us that Reeves, supra, states the controlling rule of law.⁶ 

Reeves involved the installation of a coking unit by Foster Wheeler Corporation on the premises of Humble Oil and Refining Company. The plaintiff, an employee of Foster Wheeler, was injured on the job and asserted a tort action against Humble. The Court ruled in favor of the plaintiff, holding that he was not Humble's statutory employee. The Court did not mention the "essential to business" test articulated in Thibodaux v. Sun Oil Company, La.App., 40 So. 2d 761 (1949), Aff'd, 218 La. 453, 49 So. 2d 852 (1950). Under this test, the statutory employer-employee relationship exists between a principal and the employee of its subcontractor whenever the work done by the employee is essential to the principal's business. However, in Reeves, the Court did find that

it was not Humble's business practice to engage in new construction of this type and magnitude, nor does the record support a conclusion that this type work was customarily done by Humble or other employers similarly situated. The record does not support a conclusion that Humble is a statutory employer.

Reeves, supra, 282 So. 2d at 508.

In Freeman v. Chevron Oil Co., 517 F.2d 201 (5th Cir. 1975), Judge Ainsworth for this Circuit followed Reeves in holding that the installation of a septic tank on a fixed drilling platform was not a part of the business of the defendant Chevron. Judge Ainsworth criticized the "essential to business" test as too superficial to be used as the sole criterion in identifying statutory employment:

The testimony of the Chevron witness, Baudouin, that the work being performed is "absolutely necessary" to his company's business, is not decisive because we infer that Chevron does not contract for work by independent contractors such as Herb's unless it is helpful and necessary to the operation of its business enterprise. See Cole v. Chevron Chemical Co., 5 Cir., 1970, 427 F.2d 390, 394. If every employee of such an independent contractor thereby becomes a statutory employee of Chevron, the concept of statutory employee would be expanded beyond practical limits and lead to ridiculous consequences. We decline to reach such an unsound result.

Id. at 206.

Instead, Judge Ainsworth looked at all the facts of the case, including whether Chevron had the facilities to install its own septic tanks (Id. at 208), to determine whether installation of the sewerage system was part of the usual and customary practice of Chevron. Although the Court had to recognize that in this day and time an adequate sewerage system was absolutely necessary, the "essential to business" test so long extolled had to be given a reasonable and practical application:

While the installation of the sewerage system was important to pollution control on its drilling platform in the Gulf of Mexico, it was not so closely related thereto as to become an integral part thereof and therefore was not essential to the employer's business as that term is understood in the context of being basic, fundamental, indispensable or imperative.

Id. at 209.

Professor Larson has also criticized the "essential to business" test and after analyzing scores of cases has expressed what he believed to be the true test:

From these cases it will be readily seen that the test is not one of whether the subcontractor's activity is useful, necessary, or even absolutely indispensable to the statutory employer's business, since, after all, this could be said of practically any repair, construction or transportation service. The test (except in cases where the work is obviously a subcontracted fraction of a main contract) is whether this indispensable activity is, in that business, normally carried on through employees rather than independent contractors.

A. Larson, The Law of Workmen's Compensation § 49.12, at 9-23 to 9-24 (1973).

In Ball v. Kaiser Aluminum and Chemical Corporation, La.App., 112 So. 2d 741, 745 (1959), the Louisiana Court of Appeals remarked:

The jurisprudence as it has developed since the Horrell case reveals that there possibly exists what counsel has referred to as a "twilight zone" (which was also recognized by Judge Janvier, who authored the opinion in the Horrell case) where it is sometimes difficult to distinguish between an independent contractor and an employer on the basis of application of the trade, business, or occupation rule.

In these cases the court must decide whether the work performed is that which is customarily performed by the employer or whether it is specialized work usually given to independent contractors as a practice or custom in the trade or business.

More recently, we find this language concerning the "customary" practice of those engaged in that particular operational activity echoed throughout Louisiana and federal cases interpreting § 1061. See, e. g., Massey v. Rowan Drilling Co., 368 F.2d 92, 93-94 (5th Cir. 1966); Frey v. Brown, 254 So. 2d 491, 493 (La.App.1971); Meche v. Farmers Drier and Storage Company, 193 So. 2d 807, 809 (La.App.1967).

Despite our already expressed hesitation to rule on a state law issue which has not been categorically resolved in state court, we are, by the Supreme Court's expressed unwillingness to answer the certified question, now forced to do so. Therefore, after due consideration of Larson and Louisiana and federal cases, including Reeves and Freeman, we hold that in Louisiana, the "essential to business" test is no longer, if it ever was, the controlling factor in the identification of a statutory employer. The proper standard, as we see it, is whether the activity done by the injured employee or his actual immediate employer is part of the usual or customary practice of the principal or others in the same operational business.⁷ 

More specifically, we should first consider whether the particular principal involved in the case customarily does the type of work performed by the contractor and whether the contractor's work is an integral part of the work customarily performed by the principal. If either of these situations exist, then there is a statutory employment relationship, and the inquiry ends there. If, however, the principal does not normally engage in this type of activity, or if it is not normally a part of his practices, then it is necessary to determine if others engaged in businesses similar to that of the principal customarily do this type of work or if it is an integral part of their businesses. If either of these inquiries yields an affirmative answer, then the general custom of the trade will control to make the relationship between the principal in question and his contractors' employees that of statutory employer and employee.

In applying this test, it is proper to consider all facts which would or would not suggest a statutory employment relationship. Whether the work is essential to the business of the principal or others engaged in similar businesses, may be one such fact.

Another fact to consider is whether the principal, or others engaged in like operational activities, normally subcontract out the work or whether they have employees who can, and customarily do, do the work. If the only fact which suggests the activity is not part of the principal's trade or business is that the principal has no employees of his own to do the work, this fact alone will not preclude the application of § 1061, provided all other evidence indicates the activity is an integral part of the principal's business. This was the holding of a recent Louisiana Supreme Court case, Barnes v. Sun Oil Company, 362 So. 2d 761 (La.1978). Barnes involved the repair of Sun Oil Company pipelines by a contractor whose employee was injured on the job. Although Sun Oil maintained no employees to do this kind of work, the Louisiana Supreme Court held that "this fact alone (did) not prevent the labor from being part of (Sun Oil's) regular business." 362 So. 2d at 764. Just as § 1061 prevents a principal from avoiding statutory employer status and workmen's compensation liability by contracting out all his business, this provision also implies that the mere fact that a principal contracts out all of his work does not necessarily mean he is Not a statutory employer for purposes of avoiding tort liability.⁸ Applying The Proper Standard To Our Facts

In reviewing the District Court's directed verdict in defendant's favor we must apply the "usual and customary practice" test to the specific facts of the case, keeping in mind the standard of Boeing Company v. Shipman, en banc, 411 F.2d 365, 374-75 (5th Cir. 1969), for review of directed verdicts in federal diversity cases:

On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence not just that evidence which supports the non-mover's case but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury. The motions for directed verdict and judgment n. o. v. should not be decided by which side has the better of the case, nor should they be granted only when there is a complete absence of probative facts to support a jury verdict. There must be a conflict in substantial evidence to create a jury question. However, it is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses.

Blanchard was an employee of Engine and Gas, a company which provided mechanical services to Gulf's compressor station. A compressor station runs twenty-four hours a day, gathering natural gas from wells and building up the pressure in order to transport the gas.

Gulf employed its own mechanics to do overhauls and routine maintenance of the compressor engines. Gulf also hired additional men, through companies such as Engine and Gas, when things got busy or when there was an emergency situation, called a "flare." There was a flare at the time of the accident in question, and Gulf's most specialized mechanics were not available. The Engine & Gas mechanics, including Blanchard, performed both routine maintenance and more specialized tasks. Blanchard was paid by Engine and Gas but the time was approved by Gulf. Gulf supplied Blanchard with tools and repair manuals. Blanchard testified that Gulf supervisors had the power to remove him.

There is conflicting testimony as to the extent of Blanchard's expertise. There seems to be no dispute that he was capable of doing the most specialized types of repairs. He once testified he did not know if Gulf had its own employees who could do work as specialized. But he also stated that Gulf had no employee as expert in specialized repairs as Blanchard. Pollard Lee, a fellow Engine and Gas employee and a co-worker at Gulf, agreed with the latter statement by Blanchard. Another Engine and Gas employee who worked at Gulf, Herbert Ellis, stated that Gulf had mechanics just as specialized as Blanchard, and Engine and Gas employees were used only as extra hands when things got particularly busy and there were not enough Gulf employees to do the job. Of course, Gulf agrees with Ellis' testimony.

Even if Gulf had no employees as expert as Blanchard, the recent Louisiana Supreme Court decision in Barnes v. Sun Oil Company, supra, would indicate that "this fact alone does not prevent the labor from being part of (the principal's) regular business." 362 So. 2d at 764.

But on the now critical problem of the principal's normal trade or practice (or that of the particular industry) the evidence does not really address the issue. And in no sense is it sufficient to meet Boeing standards for an instructed verdict.⁹ 

While many facts in the record, considered in conjunction with Barnes, would weigh in favor of affirming, we are mindful that the District Court must have felt as much uncertainty as to the applicable standard for ascertaining statutory employment status as we felt when we certified the issue to the Louisiana Supreme Court. It is very likely the District Court applied the "essential to business" test, and certainly the record reveals no consideration of the usual and customary practices of Gulf and other oil companies, the test which we spell out today.

The cause must therefore be remanded for a determination of this issue on the facts. The remand does not necessarily envisage a full dress trial. Based upon facts, not what a party says the facts are or what such facts say, the case may or may not survive a motion for summary judgment, a motion for directed verdict or a motion for judgment notwithstanding the verdict after a verdict is rendered.

REVERSED and REMANDED.