New Jersey Supreme Court Reverses Key Ruling by Appellate Court that Vested Original Jurisdiction on Employee Status With the Division of Workers’ Compensation

In 2014 an important appellate court decision was decided on whether all cases involving the interpretation of employee status must be referred to the Division of Workers’ Compensation.  On June 11, 2015, the New Jersey Supreme Court reversed the Appellate Division in Estate of Myroslava Kotsovska v. Saul Liebman (A-89-13) (073861).

The facts were tragic.  Saul Liebman was living alone after the recent death of his wife in September 2008.  He was 89 years of age.  His daughter attempted to find someone who could help her father in his home and take care of his meals and daily activities.  Myroslava Kotsovska, a 59-year-old Ukranian woman, was referred to Liebman. She met with Liebman through her son-in-law, who interpreted for her, and she agreed to do laundry, cooking, light housekeeping, and assisting with general tasks in exchange for $100 per day in cash.  She had no social security number and no checking account.  There were no discussions about whether she would be considered an employee or an independent contractor.  There were no formal agreements drafted and the only discussion of medical benefits was that the son-in-law would take care of any necessary medical bills.

On December 8, 2008, Liebman and Kotsovska ran some errands and stopped at the Millburn Diner for lunch.  Kotsovska exited the car and stood on the sidewalk while Liebman pulled into the parking space on front of her.  Liebman accidentally pressed the accelerator, causing the car to lurch over the parking block and onto the sidewalk where Kotsovska was standing.  The force of the car pinned Kotsovska against a low wall, severing her leg.  She died from the injuries within an hour.

The estate of Kotsovka filed a wrongful death action against Liebman in Superior Court.  The estate never filed a workers compensation claim.  Liebman argued that the civil suit must be referred to the Division of Workers’ Compensation because the Division had exclusive jurisdiction over the issue of employee status.  The homeowner’s carrier stipulated that the accident arose from the decedent’s employment.

The trial judge ruled for the estate and awarded it $300,000 for the decedent’s pain and suffering and $225,000 for her wrongful death.  The Appellate Division reversed, stating that the matter should have been transferred to the Division of Workers’ Compensation on the issue of whether Kotsovska was an employee or an independent contractor.  The New Jersey Supreme Court then reversed on June 11, 2015 in favor of the estate.

In ruling that the Superior Court has jurisdiction over employee status, the Supreme Court first distinguished several cases that seemed to suggest that this issue should be resolved in the Division of Workers’ Compensation.  The Court said that what makes this case different from prior cases is that the estate of Kotsovska never filed a workers’ compensation claim. The only claim that was filed was a wrongful death action. “Moreover, petitioner did not file a petition for workers’ compensation with the Division.  Thus, as the trial court noted, there was no claim pending before the Division over which it could assert jurisdiction.  Under these circumstances, we conclude that the Superior Court had jurisdiction to decide the question of decedent’s employment status.”

In ruling in favor of the estate, the Supreme Court did not reject the concept that the Division of Workers’ Compensation has primary jurisdiction on issues of compensability and related employment matters.  However, it said there is a four-part test that must be considered to determine if the Division has primary jurisdiction:

1) whether the matter at issue is within the conventional experience of judges; 2) whether the matter is peculiarly within the agency’s discretion, or requires agency expertise; 3) whether inconsistent rulings might pose a danger of disrupting the statutory scheme; and 4) whether prior application has been made to the agency.

On the second part of this test, the Supreme Court surprisingly said, “. . . the Compensation Court is in no better position to make the threshold determination of a worker’s employment status than the Superior Court.”  It also again noted that there was no risk of a conflicting decision between the Superior Court and Division of Workers’ Compensation in this case because the estate of Kotsovka only filed in Superior Court.  It upheld the decision of the trial judge that Kotsovska was not an employee but an independent contractor in spite of the apparent control over Kotsovska’s activities that Liebman had and the economic dependency that Kotsovska had on Liebman.  In the portion of the decision dealing with jury charges, the Court said, “A worker’s economic dependence upon the employer is a factor to be considered when a worker performs a function that constitutes a part of the employer’s business.”  It said in this case that Kotsovska’s employment was not in furtherance of Liebman’s business.

One is left to wonder what the result would have been had the estate of Kotsovska filed both a workers’ compensation claim and wrongful death action simultaneously.  Many lawyers do this to protect the statute of limitations from running in both actions.  If the Superior Court were to find employee status, the timely filing in workers’ compensation court would protect the rights of the employee.  There is certainly language in this decision suggesting that if the claimant files both a workers’ compensation claim asserting employee status and a civil claim for wrongful death, the Division should have primary jurisdiction to decide the employment status issue.  On the other hand, the Supreme Court also said that the Judge of Compensation is in no better position to decide on a worker’s employment status.

What practitioners are likely to do in situations like this where it is unclear whether the worker is an independent contractor or an employee is to file in superior court and defer any filing in workers’ compensation until just before the statute of limitations should run. The most important comment from this Supreme Court decision is that the Superior Court is equally competent in making employment status determinations.

The stakes are higher in civil law suits and that will favor filings in superior court over workers’ compensation, and the emphasis on social legislation which pervades workers’ compensation decisions may not play such a large role outside workers’ compensation court.  In this writer’s view, the decision in Kotsovka will likely lead to a divergence in legal analysis on independent contractor status emerging from workers’ compensation and the superior court.  In the workers’ compensation arena, a finding of independent contractor status is very rare because using both the “control” test and the “relative nature of the work test” favors employee status.  For instance, babysitters who come to a home fairly regularly are found to be employees, and Kotsovka would likely have been found to be an employee in compensation court, contrary to the analysis used in the Superior Court decision.  In the last analysis, the rule now is that when it comes to the initial employee status interpretation, the Division does not have primary jurisdiction if the plaintiff only files suit in Superior Court.