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