BREAKING GROUND

Trends In New York Construction Law

16
AUG
2018

Second Department Chimes In On the Workers’ Compensation Law Exclusivity Defense

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The Appellate Division, Second Department recently issued two diametrically opposed decisions involving the exclusivity defense of Workers’ Compensation Law §§ 11 and 29(6). On July 18, 2018, the Second Department decided Sanchez v. 3180 Riverdale Realty, LLC wherein the defendant sought to dismiss the case on the grounds that it was an “alter ego” of plaintiff’s employer and thus entitled to the protection of the Workers Compensation Law afforded to employers from lawsuits. The lower court had granted defendant’s summary judgment motion, but the Appellate Division reversed, holding that although the two entities may be related and shared officers, defendant failed to make a prima facie showing that it either operated as a single integrated entity with plaintiff’s employer or that one controlled the day-to-day operations of the other. While the appellate decision is limited in detail, factors such as whether the entities were formed for different purposes, had separate bank accounts, filed separate tax returns, and had different workers’ compensation policies are typically probed in this context.

In contrast to the Sanchez decision, the Second Department granted summary judgment on Workers’ Compensation exclusivity grounds in Flanagan v. Kajima USA, Inc. In Flanagan (decided the same day as Sanchez) defendant argued that plaintiff was its “special employee” and thus entitled to the Workers’ Compensation bar. The Court reaffirmed that a worker can have both a general employer and special employer for purposes of the Workers’ Compensation Law. The key to establishing status as a special employer is demonstrating that the special employer takes on a worker for a limited duration and has the right to direct the work and exercise control over the worker. While the Court noted that no one factor is dispositive in determining a special employment relationship and that the analysis is usually wrought with questions of fact for a jury to decide, the Second Department nonetheless affirmed the lower court’s granting of summary judgment, suggesting either that plaintiff’s opposition papers raised little resistance to the argument and/or that plaintiff’s employer independently substantiated defendant’s account. Other factors that typically come up in special employee cases include whether the purported special employer had the right to fire the employee and who paid the worker.

The Sanchez and Flanagan decisions can be reviewed here:
http://www.nycourts.gov/reporter/3dseries/2018/2018_05347.htm
http://www.nycourts.gov/reporter/3dseries/2018/2018_05284.htm

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Paul Howansky

Paul Howansky is a partner at Harrington, Ocko & Monk, LLP where he specializes in handling insurance coverage disputes, construction litigation and subrogation claims. He also manages the firm's appellate practice. Mr. Howansky earned his J.D. from Hofstra University School of Law, where he served as Articles Editor for the Hofstra Law Review. If you have any questions regarding construction law issues, please contact Paul at (914) 686-4800 or via e-mail phowansky@homlegal.com.