A Court’s Silence Broken: Esposito Writes on Restatement § 414

Way back in 1965, the Illinois Supreme Court announced that Restatement §414 is part of the Illinois common law.  It’s taken 51 years for the Court to explain what that means.  Carney v. Union Pac. R.R., 2016 IL 118984, marks the Court’s first attempt to clarify the liability of owners and general contractors for jobsite accidents.  As a bonus, it explained who is not protected by a Restatement §411 claim for negligence in the selection of a contractor.

Restatement §414

Like most states, Illinois follows the general rule that one who hires an independent contractor is not liable for injuries caused by its conduct.  The rule flows from the hiring entity’s lack of control over the means and methods – the operative details – of an independent contractor’s work.

But what if the hiring entity was negligent?  Restatement §414 provides an exception.  It imposes liability where the hiring entity retains control over any part of the work yet does not act with reasonable care.  During the Supreme Court’s half-century silence, appellate court decisions have created confusion about §414.  It’s why Carney is so important.

In Carney, scrap contractor Happ’s, Inc. bought three abandoned Union Pacific railroad bridges and agreed to remove them.  Happ’s hired subcontractor Carney Group to assist in the removal.  In the process, the son of Carney’s owner was seriously injured.  He sued UP.  The trial court granted UP’s motion for summary judgment; the appellate court reversed.

The Supreme Court reinstated summary judgment.  Contrary to appellate court decisions, it held that §414’s reach is limited to cases involving the direct negligence of a hiring entity.  A vicarious liability claim must be governed by agency law, not §414.  That’s a big change in Illinois law.

Just as importantly, the Court explained what is needed to establish retained control.  The “best indicator” of whether retained control exists is the written agreement between a defendant and contractor.  ¶41.  Absent proof through the agreement, retained control may be proven by evidence that a defendant acted inconsistently with it.  Id.

The agreement disclaimed an employment relationship between UP and Happ’s, the latter being only an “independent contractor.”  ¶45.  Happ’s was required to provide all labor, tools, equipment, materials, supplies, and supervision.  Under the agreement, UP could require a workmanlike job, stop the work or make changes, or terminate Happ’s for unsatisfactory work.  But those were mere “general rights” not evidencing retained control under §414.  ¶46.

UP’s rights touching on job safety did not establish retained control.  UP could require the removal of unsafe workers or equipment and require specific protective gear.  “A general right to enforce safety, however, does not amount to retained control under section 414.” ¶47.  And the contract placed control over job safety with Happ’s.

The Court found no evidence that UP sought to retain control over the work.  It also ruled that UP’s post-accident suggestions on how to avoid a recurrence did not establish a duty under §414 as a matter of law.  “To hold otherwise would penalize a defendant’s safety efforts by creating, in effect, strict liability for personal injury to any job site employee.”  ¶61.

In the end, the Court found no evidence that “defendant retained at least some control over the manner in which Happ’s performed the bridge removal work.”  ¶62 (emphasis supplied).  This is the most significant statement of all.  Many appellate decisions have mistakenly focused on retained control over safety.  Instead, retained control must exist over operative details.

Having kept quiet for so long, the Court spoke in a big way.

Restatement §411

Plaintiff also claimed that UP was negligent in selecting Happ’s to dismantle the bridges.  The claim implicated Restatement §411, which the Court had adopted decades earlier.  Section 411 subjects a hiring entity to liability to injured third persons where it failed to exercise reasonable care in selecting a contractor.

The Court found a genuine issue of fact as to whether UP exercised sufficient care in retaining Happ’s.  But the dispositive issue was whether plaintiff – an employee of the subcontractor – was a protected “third person” under §411.  The Court concluded that he was not.

The Court found no evidence in the text of or illustrations to §411 indicating that it was intended to cover jobsite employees.  An Illinois appellate court decision and decisions nationwide reinforced the Court’s conclusion.

The Court found good reason for the rule.  Unlike the public, a jobsite worker is in a better position to protect himself.  Unlike the public, he receives worker’s compensation benefits from his employer.  And as discussed, nothing in §411 would appear to support the inclusion of jobsite employees.  ¶88.

Interestingly, the Court did not adopt two of the rationale from other decisions.  First, because a contractor usually factors the cost of worker’s compensation into its bid, holding the hiring entity liable effectively makes it pay twice.  Second, it would be inequitable for the hiring entity to pay full damages when the employer only pays worker’s compensation.  The Court probably foresaw unwanted implications with other cases from these rationales.

That said, the Court still barred open-ended liability under §411.