A Capehart Scatchard Blog

Partner in Limited Liability Corporation Was Not Covered in Fall from Ladder

By on June 16, 2014 in Key Defenses with 0 Comments

Rodney Farnath fell off a ladder at work and filed a motion for medical and temporary disability benefits against 34th Street Markets, LLC.  Farnath was a limited partner in the LLC.  Farm Family Casualty Insurance Company, the workers’ compensation carrier for the employer, declined coverage on the grounds that the policy issued to the LLC did not provide coverage for Farnath.

There was no dispute that Farnath did not seek coverage for himself under the policy but he argued that the New Jersey Workers’ Compensation Act requires liberal construction in favor of coverage.  He also argued that as a member of an LLC he must be considered an employee.

The Judge of Compensation, the Hon. Arthur J. Marchand, ruled in favor of Farm Family and the Appellate Division affirmed the dismissal of this case.  Both courts focused on the language of N.J.S.A. 34:15-36, which provides:

 A self-employed person, partners of a limited liability partnership, members of a limited liability company or partners of a partnership who actively perform services . . . shall be deemed an ‘employee’ of the business . . . for purposes of receipt of benefits and payments of premiums . . . if the business . . . elects . . . to obtain coverage for the person, the limited liability partners, the limited liability company members or the partners.

The court said that the statute allows a member of a limited liability company to obtain workers’ compensation coverage if he or she “elects” to do so.  “Here, Farnath did not elect to purchase the additional coverage.  Consequently, he is not an employee within contemplation of the Act.”   The court observed that the Legislature specifically amended this statute in 1999 to require that a limited partner is not covered unless the business elects to obtain coverage for that member of the limited liability company.

This provision is important for practitioners to know because it is quite different from the general definition of “employee,” which is broadly construed to mean anyone who performs services for an employer for financial consideration.  Limited partners are treated differently as the business must elect coverage for them.  The case can be found at Farnath v. 34th Street Market, LLC, A-1317-12T1 (App. Div. March 28, 2014).

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About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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