Pennsylvania’s Statutory Employer Doctrine and the Yoder Decision
Pennsylvania’s Statutory Employer Doctrine, a cornerstone of the Pennsylvania Workers’ Compensation Act (“WCA”), is once again at the center of a fierce legal and political battle—this time following the Supreme Court of Pennsylvania’s October 23, 2025, decision in Yoder v. McCarthy Construction, Inc.. The Statutory Employer Doctrine says that general contractors qualifying as statutory employers are entitled to tort immunity from suits by the employees of sub-contractors, even when the general contractor does not pay workers’ compensation benefits directly to the sub-contractor’s employee. The Supreme Court’s recent ruling affirmed a 2023 Superior Court opinion that had doubled down on broad immunity for general contractors under Sections 203 and 302(b) of the Pennsylvania Workers’ Compensation Act, 77 P.S. §§ 52 and 462. In doing so, the Court reopened one of Pennsylvania’s most enduring legal and political struggles—pitting home builders, contractors, and business groups against trial lawyers, victims’ advocates, and consumer coalitions.
Industry Divisions Over Statutory Immunity
On one side stand the National Association of Home Builders (NAHB) and the Pennsylvania Builders Association (PBA), who argue that immunity for general contractors is essential to controlling costs and ensuring a viable construction industry in the Commonwealth. On the other side are trial lawyers, consumer-advocates, and victims’ rights groups who contend that the doctrine unfairly shields large contractors from accountability and limits the ability of injured workers and their insurers to seek full recovery via subrogation or tort claims.
The Yoder v. McCarthy Construction Decision
On October 23, 2025, the Pennsylvania Supreme Court decided the case of Yoder v. McCarthy Construction, 2025 WL 2981889 (Pa. 2025). In Yoder, the plaintiff, Jason Yoder, was injured when he fell through a roof opening while working for a subcontractor on a project where the general contractor, McCarthy Construction, had been hired by the owner, the Norwood Public Library. Yoder, an employee of the subcontractor, sued the general contractor for negligence. The general contractor invoked the statutory employer defense, claiming immunity from tort liability under Section 302(b) (77 P.S. § 462) and Section 203 (77 P.S. § 52) of the WCA. The Superior Court held that McCarthy met all five elements of the familiar McDonald test (McDonald v. Levinson Steel Co., 153 A. 424 (Pa. 1930)): (1) contract with the owner; (2) premises under control; (3) subcontract; (4) part of regular business entrusted; and (5) employee of the subcontractor. Accordingly, McCarthy was held to be Yoder’s statutory employer and thus immune from the tort claim.
Reaffirmation of Statutory Employer Immunity
The Yoder decision reinforces long-standing precedent under the WCA that a general contractor remains entitled to “historic immunity as a ‘statutory employer’ from suit for common law negligence … even though the subcontractor which directly employed the injured worker carried workers’ compensation insurance which paid benefits for the worker’s injuries.” It confirmed, despite tremendous opposition, that general contractors may obtain immunity from personal injury suits by employees of their subcontractors if the statutory employer relationship is shown—even if the contractor did not actually pay workers’ compensation benefits to the injured worker. Fonner v. Shandon, Inc., 724 A.2d 903 (Pa. 1999). In exchange for secondary liability for the payment of workers’ compensation benefits to the employees of subcontractors, statutory employers are given immunity in tort for work-related injury claims brought by the employees of sub-contractors.
Political and Legislative Tensions
From the industry side, the builders’ lobby warns that any rollback of immunity will drive up construction costs, result in higher premiums, and discourage investment. The NAHB rang the alarm bell with their blog headline, which said, “‘Statutory Employer’ Immunity in Jeopardy in Pennsylvania” (Dec. 4, 2024). On the plaintiff’s side of the coin, opponents call the doctrine an “irrational relic” that deprives injured workers and their insurers of full recovery and shifts costs onto compensation carriers and ultimately employers. The tug-of-war is real: each legislative session in Pennsylvania sees proposed bills aimed at narrowing or abolishing subrogation rights. But the Supreme Court in Yoder wisely left this policy decision for the legislature.
Implications for Subrogation Practitioners
For subrogation practitioners, Yoder is of critical importance. The Statutory Employer Doctrine directly impacts the viability of third-party tort claims by injured employees and thus the ability of workers’ compensation carriers to subrogate against third parties (or general contractors) who would otherwise be liable. Where immunity blocks tort liability, the carrier’s only remedy remains under the compensation statute—in effect eliminating a lucrative third-party recovery avenue. With Yoder reaffirming the viability of immunity, carriers and self-insured employers must be vigilant and engage subrogation counsel to maximize their subrogation recovery.
Practical Takeaways and Future Outlook
Practically speaking, it is far less risky to assume that until the Supreme Court rules otherwise, statutory immunity remains a formidable subrogation barrier in Pennsylvania. It means that when evaluating subrogation potential in Pennsylvania construction settings, practitioners should perform a thorough early inquiry into whether the general contractor qualifies as a statutory employer under the five-factor McDonald test, whether the contractor reserved its right to assert immunity (the Yoder court reaffirmed the non-waivability of the defense), and whether the injured worker was in fact an employee of the subcontractor.
From a drafting and legislative strategy standpoint, it is wise to monitor upcoming bills in the Pennsylvania General Assembly. The builders’ associations are mounting a defensive campaign, while the plaintiffs’ bar is aggressively promoting change. Whether the doctrine is narrowed—e.g., requiring actual payment of benefits before immunity attaches—or redefined is uncertain, but the risk of change is now elevated. The Yoder case may be the catalyst. The Supreme Court’s decision on allowance of appeal will be closely watched.
*Mark recently joined MWL as Senior Counsel and has been admitted to practice in Pennsylvania since 1987 and New Jersey since 1989. If you have any questions about subrogation in those jurisdictions, please contact him at mopalisky@mwl-law.com.
