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Legal Memorandum: Arbitration of Claims for Work-related Injuries

Issue: May a contractor be a third-party beneficiary of an arbitration clause in an employment contract, so as to require arbitration of claims arising out of injuries to employees of a subcontractor?

Area of Law: Alternative Dispute Resolution, Employee Law
Keywords: Employment contract; Arbitration clause; Subcontractor
Jurisdiction: Virgin Islands
Cited Cases: 654 A.2d 1375; 429 A.2d 388; 311 F.3d 237
Cited Statutes: 24 V.I.C. § 284; 24 V.I.C. § 284(b); Section 309 of the Restatement (Second) of Contracts;
Date: 03/01/2007

Pursuant to 24 V.I.C. § 284, rights under the Workers’ Compensation Act constitute the only remedy injured employees would have against their employers.  Consequently, any attempt by contract to provide either party with additional rights, such as, for example, the right of a worker to arbitrate a claim against an employer for work-related injuries, is voidable.

Section 284 of the Workers’ Compensation Act provides in relevant part:

For purposes of this section, a contractor shall be deemed the employer of a subcontractor’s employees only if the subcontractor fails to comply with the provisions of this chapter with respect to being an insured employer.  The “statutory employer and borrowed servant” doctrine are not recognized in this jurisdiction, and an injured employee may sue any person responsible for his injuries other than the employer named in a certificate of insurance.

24 V.I.C. § 284(b) (emphasis added). 

The Virgin Islands Legislature has “clarified that an employee of an independent contractor is not immune from suit simply because the contractor is protected by the exclusivity provision of the [workers’ compensation statute].”  Gass v. V.I. Tel. Corp., 311 F.3d 237, 245 (3d Cir. 2002).  In Gass, the Third Circuit Court of Appeals observed that section 284 was required to correct judicial interpretation of the workers’ compensation statute to allow not only the employer but also the employer’s employer immunity from suit.  Id. at 245.  Amerada Hess was named in the legislative history, cited by the Gass court, […]

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