Interstate 94 in North Dakota, near Gladstone, demonstrating why ND is the least visited of the 50 states. Photo from Wikipedia.

According to the official tourism website for North Dakota, the Peace Garden State “leads the nation in production of spring wheat, durum wheat, dry edible peas, dry edible beans, honey, flaxseed and canola.” North Dakota is also the #1 producer of honey in the U.S., a fact you can learn more about by clicking on this official North Dakota State Bee Map, on which you can locate the most active apriaries, which is a place where bees are kept and which is a word that I did not know was a word, so you see, we have all learned something today.

In addition to giving us more dry edible beans than any one of us could safely consume, North Dakota also gives us a recent case that reminds us of an important principle: If your company contracts to perform a service and subcontracts the service, your company is probably still liable under contract law to ensure that the service is properly performed.

In Bakke v. Magi-Touch Carpet, the Supreme Court of North Dakota examined a case where Magi-Touch subcontracted the installation of a shower door, which later “imploded,” according to the narrative in the opinion. I envision something less dramatic than the implosion of the Georgia Dome (cool video), but nonetheless if it were my shower door, I’d be unhappy with that sort of installation job.

The subcontractor apparently stunk it up (too many dry edible beans?), and the homeowner sued Magi-Touch for negligence, fraud, breach of contract, and bunch of other stuff that its creative attorney could come up with. The Court ruled that this was a basic breach of contract case, not a tort case and not a negligence case. Magi-Touch had an obligation to ensure the proper installation of the door, since that what it had contracted to do. Retaining a subcontractor did not relieve Magi-Touch of its contractual obligation to install the door, and Magi-Touch could be held liable under a breach of contract theory for failing to complete the installation in a workmanlike manner.

On the bright side for Magi-Touch, it could not be held liable for negligence or other tort claims. Any damages were limited to the type of damages available for a breach of contract — namely, what it could take to repair and properly install the door.

While this may seem like an obscure shower door case from a state you’ll never visit, the principles of law discussed in the case apply fairly universally. The N.D. Supreme Court decided this case based on common law principles, which generally apply no matter where in the U.S. you are located.

The important thing to remember is that subcontracting a service that your company has contractually agreed to perform does not relieve your company of the contractual obligation to perform the service. Subcontract at your own risk, and take steps to ensure the work is properly performed before paying the subcontractor.

Be sure your contracts are clear as to whose obligations are whose — both in your contracts with customers and in your contracts with subcontractors.

And if you ever find yourself planning a trip to North Dakota, aim for September in Grand Forks and prepare to witness greatness. According to the N.D. Tourism site, “The world’s largest french fry feed is held every year in Grand Forks, during Potato Bowl USA. A new record was set on September 10, 2015, when 5,220 pounds of french fries were served.” Sounds healthy but delicious.

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Philadelphia on Feb. 26 or Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.