In a notable shift with significant potential future liability for public entities, the Oregon Supreme Court found that an injured worker whose injury is covered by his private employer’s workers’ compensation insurance may still sustain a claim against a public entity and its employees.
Case Background
Shirley “Joe” Crandall was a bulldozer operator and employee of a company that contracted with the Oregon Department of Forestry (ODF) to provide support during firefighting. Two employees of ODF directed Crandall to drive a bulldozer down an access road. Hampered by poor visibility because of smoke and darkness and forced to swerve to avoid a work crew, the bulldozer slipped off the road, flipping as it descended the slope, and left Crandall with serious injuries. Crandall sought and received workers’ compensation from his employer and then brought an action against the State of Oregon and against the two ODF employees individually. The trial court dismissed the case on two grounds under the Oregon Tort Claims Act (OTCA)—substitution of the State for the individual defendants as the sole proper defendant, ORS 30.265(3), and workers’ compensation immunity, under ORS 30.265(6)(a).
Oregon Supreme Court Decision and Analysis
In a 5-2 decision, the Oregon Supreme Court reversed the dismissal of the case based on the second ground. Centered in the Remedies Clause of the Oregon Constitution and drawing on the Court’s established analysis in earlier OTCA cases, the Court concluded that the legislature-created public entity (and individual) immunity (in ORS 30.265(6)(a)) from claims by injured workers who receive workers’ compensation from their own employer was a “substantial departure” from the common law remedy available before the enactment of the OTCA. Further, the immunity granted in ORS 30.265(6)(a) potentially deprived an injured worker from recovering the full measure of their economic damages and any of their noneconomic damages. Finally, the legislature’s reasoning behind the OTCA did not have the sufficient “heft” to counterbalance the substantive rights secured to the employee by the Remedies Clause. Because of these factors, the Court concluded that the workers’ compensation immunity in ORS 30.265(6)(a) violated the Remedies Clause—“at least when those persons are privately employed”—and sent the case back to the trial court where it will continue.
Key Implications for Public Entities
This ruling now places public entities in the same shoes as private businesses, which do not enjoy the immunity of the OTCA and are potentially liable to injured employees of third parties for negligence claims even if the injured employee received workers’ compensation benefits.
While the contours of this ruling will likely take more definite shape as courts further interpret the case, there are some considerations for public entities in the short term:
- This is a potentially expansive ruling with significant impact for public entities, particularly ones that contract with private businesses to supply workers for tasks involving risk and potential for injury, e.g., construction, forest management, private law enforcement and security, and health services.
- For public entities that contract with outside agencies for particular tasks, there may be value in considering whether it is viable to directly employ individuals so the Workers’ Compensation System could cover any employee injuries and avoid the uncertainty of potential litigation. Of course, there may be separate reasons to continue contracting, recognizing that the costs may outweigh a potential benefit of avoiding future claims.
- The Court did not limit its holding to individuals engaged in dangerous work. As a result, the source of potential claims could include injuries arising out of a variety of tasks for which public entities contract with outside agencies. For example, a city’s housing division that contracts with a private plumbing company to install bathrooms in a public housing project could be liable for an injured plumber taking directions from a project foreperson who is a city employee.
- The general provisions of the OTCA remain:
- The damages cap of the Tort Claims Act remains intact. The Court has established that the current limits satisfy the constitutional guaranties of the Remedies Clause.
- Timely notice of a claim is required; with some exceptions, notice must be sent within 180 days.
- The substitution requirement in ORS 30.265(3) remains intact.
- There are substantive legal limiting factors that will restrict potential claims:
- If a claim is brought under the Employers Liability Law, the potential defendant, when not the direct employee of the plaintiff, must (1) engage in a common enterprise; (2) retain right to control the manner or method in which risk-producing activity is performed; or (3) actually control the manner or method in which risk-producing activity is performed.
- Oregon’s negligence law may limit the potential liability of a contracting party. In the absence of a special relationship between the third-party employee and the public entity, the traditional concepts of foreseeability should serve to limit a public entity’s liability. Still, like this case, the Oregon Supreme Court has recently shown an expansion of its interpretation of Oregon negligence. In a December 2025 case, the Court refused to dismiss a negligence case brought by the estate of a bicyclist against a prescribing doctor and a dispensing pharmacy related to an impaired driver striking and killing the bicyclist. See Stone v. Witt, 374 Or 524 (2025).
- Practical Steps that public entities can take:
- When contracting with an outside agency, fully vet the outside agency and require training on key safety aspects to attempt to mitigate or avoid injury.
- When drafting contracts, seek indemnity and contribution provisions to cover instances when an employee of the contractor is injured.
- Evaluate risks and potential insurance arrangements to reduce overall risks for legal defense costs and potential settlements and verdicts.
- Reassure inquiring public employees of the statutory obligation to defend and indemnify them consistent with the requirements of ORS 30.265.
The legal issues impacting this topic are and will continue to be ever-changing (Employment Law in Motion!), and since publication of this blog post, new or additional information not referenced in this blog post may be available.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
