California homeowner associations (HOAs) and HOA management companies will want to pay attention to a recent ruling coming out of the state's Second Appellate District. The case, Heimen et al. v Worker's Compensation Appeals Board, involved the claim of a worker injured on association property for worker's compensation benefits.

The petitioner, Robert Heiman, did business as Pegasus Properties, a property management business. Pegasus had entered into a management agreement with Montana Villas Homeowners Association. At an association meeting, Montana Villas HOA agreed with Pegasus' recommendation that rain gutters be installed on part of the condominium building.

Pegasus hired Mark Hruby, doing business as Rube's Rain Gutter Service, to install the gutters. Hruby in turn hired Freddy Aguilera to perform some of the work. According to the court record, "On November 5, 1977, the first day of the job, a rain gutter contacted a high voltage electrical wire and Aguilera was severely shocked and fell and was seriously injured. Hruby completed the job and was paid by check."

Hruby was not a licensed contractor and did not carry worker's compensation insurance.

Aguilera filed a claim naming Hruby, Pegasus, the HOA, and the individual condominium owners. An administrative law judge determined that "Hruby was the employer of Aguilera and was liable for workers' compensation including 90 percent disability." Subsequently, a Workers' Compensation Appeal Board concluded that "Hruby was hired by Pegasus, 'a professional property management business' and 'an agent for the homeowners' association, and 'therefore under Labor Code section 2750.5 became the employer of applicant, Freddy Aguilera." The Board awarded workers' compensation to be paid by Pegasus.

So Pegasus appealed.

The appellate court's decision contains a finely reasoned and incredibly dense discussion of various sections of the labor code as well as applicable sections of the civil code. Nothing would be gained by trying to condense or explain that discussion here. The bottom line, though, is this: "Among the legal consequences of hiring an unlicensed contractor who is injured or whose employee is injured performing the work is that different employment relationships may arise with respect to 'employer' liability for workers' compensation or tort damages."

Ultimately, the appellate court held that both Hruby and Pegasus were dual employers of Aguilera and that, under the labor code, they were jointly and severally liable for workers' compensation. Moreover, the court found that Pegasus was acting as an agent for the HOA. Therefore, they explained, "liability for an agent's authorized acts may be imputed from the agent to the principal pursuant to Civil Code section 2330." That is, the HOA had liability as well.

There are many lessons to be taken away from Heimen et al. v Worker's Compensation Appeals Board, but one is very clear. Don't hire unlicensed contractors who do not -- cannot -- carry workers' compensation insurance. Just because someone says, "This is an independent contractor relationship" doesn't make it so. If a person doesn't have the status to do such a thing, e.g. have a license, he can't will it to be so. Pegasus couldn't have hired Rube's Rain Gutter Service as an independent contractor, because Rube's didn't have a contractor's license. Without one, you can't be an independent contractor.

There are lessons here for individual homeowners as well, although the laws do make some distinctions. Nonetheless, the general principle applies: No license, no hire.