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Case Highlights Legal Difference Between Agents And Independent Contractors

In a recent decision, the Tennessee Court of Appeals reversed a trial court’s grant of summary judgment to a defendant drug testing company in a negligence case. The case is worth a blog post because, not only is it interesting, but also, it discusses three issues of law that arise frequently enough in Tennessee that they are worth reviewing: (1) negligence law; (2) exculpatory clauses; and (3) the difference between an agent and an independent contractor.

Admiral Webster, the Plaintiff, was an employee of Koyo Corporation. Koyo, the employer, had a workplace substance abuse policy. Webster, the employee, had signed an acknowledgment of the substance abuse policy wherein he agreed:

“to hold Koyo and its agents harmless from any liability arising in whole or in part from any act of negligence by any of them in connection with collection of specimens, testing, and use of the results…”

Webster was notified one day that he had been selected for random drug testing. Webster reported to the nursing station, and gave a hair sample as instructed. The employer’s drug testing was done by a biotechnology company with an independent laboratory. The company’s name was Psychemedics Corporation (“Defendant” or “Psychemedics”).

Webster also signed a release on behalf of Psychemedics wherein he agreed:

“I hereby release Psychemedics Corporation its officers, employees, agents and representatives from any and all liability arising from the reporting of my results to the authorized recipient….”

Days after Webster gave the hair sample, he was notified that it had tested positive for cocaine, and he was terminated from employment. Webster, within days after being terminated, submitted a hair sample to another lab. That lab tested Webster’s hair sample for cocaine, and its results were negative.

Webster’s lawsuit against Psychemedics, the drug testing company, was the subject of the court of appeal’s decision, and is the subject of this blog. Webster sued Psychemedics for negligence. The trial court granted Psychemedics a summary judgment on the grounds that Webster had waived any negligence claim he had against Psychemedics by signing the release he signed with his employer, Koyo, and by signing the release he signed with Psychemedics.

The first question the court of appeals dealt with in the case was whether the employee, Webster, could bring a negligence claim against Psychemedics. To sustain a claim for negligence under Tennessee law, Webster had to show that Psychemedics owed him a duty of care, an essential element of a negligence claim in Tennessee (the other necessary elements are: breach of the duty; an injury or loss; causation in fact; and proximate, or legal cause).

The appeals court noted that the courts of other states had reached different conclusions as to whether an independent drug testing company owed a duty of care to an employee of an employer with whom it was under contract. The court concluded, and held, that Psychemedics did owe a duty of care to Webster, the employee of Koyo.

The appeals court then turned to a review of the trial court’s decision that the exculpatory clauses relieved Psychemedics from any liability for negligence. The appeals court held that the release Webster signed for Psychemedics could not be used by Psychemedics because it only released liability arising from negligent reporting. Since Webster’s claims arose from negligent testing, the appeals court reasoned, that exculpatory clause was ineffective.

Next, the Tennessee Court of Appeals turned to the release Webster, the employee, had signed on behalf of his employer that released his employer and “its agents” from liability for negligence (not just negligent reporting). Whether Psychemedics could avail itself of that release turned on whether it was an “agent” of the employer.

The appeals court enunciated the long-settled test in Tennessee for determining whether someone is an agent or an independent contractor: What was the extent of control exercised over the alleged agent or independent contractor? The court stated: “The right of control is the primary or essential test of an agency relationship without which no agency exists.” The court of appeals concluded that the relationship of Psychemedics to Koyo, the employer, was “clearly” that of an independent contractor.