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Borrowed Servant Doctrine Used to Avoid Vicarious Liability

Case:    Santacruz v. Hertz Equip.
              U.S. District Court, Southern District of Texas
              2015 U.S. Dist. LEXIS 66007 (S.D. Tex. Apr. 27, 2015)

This maritime case resulted from a barge fire. Hutco is a staffing agency that provides laborers to various companies. One of Hutco's employees, Luis Andino, was assigned to work at the shipyard of Texas Barge & Boat (TBB), which repairs barges and other vessels. About two weeks into Andino's time at TBB, a barge in the shipyard caught fire. The morning of the fire, a TBB supervisor had assigned Andino to fire watch. That task involved monitoring and extinguishing any fires that broke out in his area of the barge. However, Andino left his post without warning to get a drink of water, and the fire broke out during his absence. Two of the Plaintiffs could not escape the barge and tragically died. The other Plaintiffs claim to have suffered severe emotional distress as a result of the incident.

Hutco argued it was vicariously liable for any negligence of Andino. Hutco contended, in a summary judgment motion, that the borrowed servant doctrine applied, which provides that a business like TBB, that is not a negligent worker's nominal or payroll employer, may nonetheless become his "borrowed" employer for purposes of vicarious liability. The magistrate judge denied Hutco’s motion, and in appealing to the district judge, Hutco maintained the magistrate incorrectly applied the borrowed servant doctrine as it has been used in the different context of the Longshore and Harbor Workers' Compensation Act (LHWCA). Hutco argued, here, the question was whether Hutco should be held responsible for the torts of a worker who injured someone else, whereas the LHWCA question is whether an injured worker is a company's borrowed employee which results in immunity from tort liability under that statute's worker's compensation scheme.

The court then considered the difference in how the borrowed servant doctrine is applied in these two contexts. The court first noted, in either situation, a court assesses the following nine factors described in Ruiz v. Shell Oil Co., 413 F.2d 310, 312-13 (5th Cir. 1969): (1) who has control over the employee and the work he is performing, beyond mere suggestion of details or cooperation; (2) whose work is being performed by the employee; (3) whether an agreement, understanding, or meeting of the minds exists between the nominal and the borrowing employer; (4) whether the employee acquiesced in the new work situation; (5) whether the original employer terminated his relationship with the employee; (6) who furnished the employee's tools and place of performance; (7) whether the employee's new employment was over a considerable length of time; (8) whether the nominal or the borrowing employer had the right to discharge the employee; and (9) whether the nominal or the borrowing employer had the obligation to pay the employee.

The court then determined the difference is that the “control” factor is the most significant in the vicarious liability context, but is de-emphasized for the LHWCA. The court reasoned this is appropriate because vicarious liability is an issue of agency—a company is liable to others for the conduct of its agents—and agency turns largely on control. Moreover, because of the vicarious liability context, that control inquiry is also focused in large part on the time when liability arises. In contrast, whether an injured worker is a borrowed employee for purposes of a workers' compensation regime like the LHWCA turns on the general employment relationship over a more sustained period of time.

After reviewing all of the factors, including the control factor, the court determined Hutco was correct that Andino worked as a borrowed servant of TBB and that it cannot be vicariously liable for Andino's negligence.

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