Tenn. Top Court Finds ‘Predominant Purpose’ of Vendor-Vendee Relationship Opens Tort Door

Case File

In a case of first impression, the Tennessee Supreme Court found that the UCC supplied an appropriate framework to help determine whether the state's exclusive remedy rules applied to a vendor-vendee relationship. Simply Research subscribers have access to the full text of the decision.

Case

Coblentz v. Tractor Supply Co., No. M2023-00249-SC-R11-CF (Tenn. 12/22/25)

What Happened?

While working for his employer, a worker visited a Tennessee retail store to work on a display in the store. The display included barn doors on tracks, one or more of which fell from the display and struck the worker in the head. The worker sustained significant injuries, and the employer paid the worker workers' compensation benefits for his injuries.

About a year later, the worker and his wife sued the store, alleging that it negligently created an unreasonably dangerous and unsafe condition by failing to either properly install or maintain its display rack as well as properly stock its merchandise.

The trial court granted the store's motion for summary judgment, and the Court of Appeals affirmed, holding that the store was principal contractor/statutory employer and the worker was a subcontractor/statutory employee within the meaning of Tennessee workers' compensation law.

The worker appealed to the Tennessee Supreme Court, arguing that his relationship with the store was a vendor-vendee relationship and not a principal-subcontractor relationship.

Rule of Law

Tennessee statutes provide that a principal contractor, intermediate contractor, or subcontractor shall be liable for compensation to an employee injured while in the employ of the subcontractors of the principal contractor, intermediate contractor, or subcontractor and engaged upon the subject matter of the contract to the same extent as the immediate employer.

Under Tennessee caselaw, individuals or entities may become liable for workers' compensation as "statutory employers." Under exclusive remedy provisions of state law, statutory employers are protected from tort claims by injured employees of their subcontractors even where the immediate employer has paid for the injured employee's workers' compensation claim.

What the Tennessee Supreme Court Said

In a case of first impression and facing the question of whether vendor-to-retailer relationships were considered principal-subcontractor relationships under state workers' compensation law, the Tennessee Supreme Court held that the relationship between the employer and the store was one of vender-vendee, not principal-subcontractor, and was outside the ambit of Tennessee workers' compensation law. Thus, the store was not the worker's statutory employer and was not shielded from the worker's injury claims by the exclusive remedy provisions of state law.

To determine whether a vendor-vendee arrangement that includes services beyond the sale and ancillary delivery of merchandise is governed by state workers' compensation law, the Tennessee Supreme Court adopted a version of the "predominant purpose" test. The court held that the predominant purpose of the arrangement was for the product vendor to sell merchandise to the retail store and that any additional services rendered were incidental to the vendor's sale of merchandise to the retail store.

In support of its decision, the court looked to define "subcontract" and "subcontractor," ultimately interpreting the terms to refer to work such as labor or services and not to the sale and ancillary delivery of merchandise.

"In construing the term 'subcontractor' ... , we find that dictionary definitions around the time the statute was enacted refer to labor or services and not to the sale and ancillary delivery of merchandise," the court wrote. "Interpreting 'subcontractor' to have this meaning furthers the recognized purpose of [workers' compensation law] to prevent employers from contracting out their normal work to avoid workers' compensation liability."

The court found that the contract between the parties was a "Vendor Agreement" under which the purpose was for the sale of goods with no reference to services.

Additionally, the nature of the employer's business was, by the store's admission, "a vendor that sells products at ... stores."

Also, the record indicated that the reason the parties entered into a contractor was because the store sought to procure merchandise from the employer for resale to the store's customers.

"Considering the totality of the circumstances, the record indicates that [the store] entered into the 'Vendor Agreement' to acquire [the employer's] merchandise for resale, not to get any other services," the court wrote.

Thus, the predominant purpose of the contract was for the employer to sell merchandise to the store and services rendered were incidental to the sale of merchandise.

Verdict: The Tennessee Supreme Court reversed the Court of Appeals' judgment and remanded the case.

Takeaway

Under Tennessee workers' compensation law, the term "subcontractor" refers to a person or entity that performs labor or services for another, and Tennessee worker's compensation law does not apply to a pure vendor-vendee relationship.

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