In New Jersey, members of a limited liability company who actively perform services on behalf of the company are deemed to be employees of the company for purposes of receipt of benefits and payment of workers' compensation insurance, but only if the company elects to purchase such coverage when the policy is purchased or renewed. This election may only be made at purchase or at renewal and may not be withdrawn during the policy term. Further, if there are multiple partners in the company, they all must either opt in or opt out. While many owners of LLCs do not elect to purchase workers compensation coverage for themselves, where a small to mid-size construction or manufacturing company is involved, they should consider doing so since the owners are often also in the field or on the manufacturing floor.
In a recent unpublished decision from the Appellate Division, an owner of a millwork company was struck by a steel rod, causing leg, knee and back injuries. However, despite the incident occurring in conjunction with the manufacturing of millwork, workers compensation benefits were denied due to the fact that the owners did not elect to include themselves on the workers compensation policy. Although they claimed to have asked for such coverage, and blamed their broker for filing out the form incorrectly, the Appellate Division still found that was insufficient to create liability for the insurance company where the application clearly indicated no coverage for the owners. (Kearton v. E.W. Millwork LLC)
In a recent unpublished decision from the Appellate Division, the court held that a homeowner did not acquire a portion of his neighbor's property by adverse possession. In New Jersey, if someone who doesn't own a particular area of real property possesses that property for over thirty years, the non-owner can take ownership of said property by filing an adverse possession action in Superior Court. However, in order to do so, such possession must be (1) continuous and uninterrupted, (2) actual and exclusive, (3) open and notorious, and (4) adverse and hostile. The court in this matter found that the possession, which consisted of an incorrectly-placed fence on an irregular shaped lot was not so "open and notorious" to give rise to an adverse possession claim. Noting that, "[t]here is nothing about the small fenced-in area that would suggest an actual encroachment ... the encroachment was at the far rear of defendants' lengthy (400 foot) property and obscured on defendants' side by a swath of trees," the court determined that the property should remain with its original owner. (Chen v. Gesualdo)
Earlier this week, a general contractor’s responsibility for the safety of the entire jobsite was reaffirmed by the Appellate Division in a case involving a subcontractor’s injured employee. Relying on, Alloway v. Bradlees, Inc., the Court noted that:
A general contractor has an even more comprehensive duty than the property owner to ensure the safety of the employees of any subcontractors working at a construction site. This duty is based on the public policy considerations embodied in the Federal Occupational Safety and Health Act and New Jersey's Construction Safety Act: It was obviously the legislative intention to ensure the protection of all of the workers on a construction project, irrespective of the identity or status of their various and several employers, by requiring, either by agreement or by operation of law, the designation of a single repository for the safety of them all. That "single repository" is the general contractor.
Here, although the trial court had dismissed the general contractor from the case on the basis that OSHA itself didn’t issue any violations, the Appellate Division overturned the decision, noting that OSHA compliance was only one factor and that general negligence principles govern the determination of whether a legal duty should be imposed on a contractor for injuries sustained by another contractor's employee. (Arias v. Cardinal Estates LLC, et. al.)
Attorney Fee Awards under Prompt Payment Act are not Dependent Upon the Amount Recovered by the Contractor where the Fees are Otherwise Reasonable
In a published decision from September of 2021, the Appellate Division reversed a trial court’s award of $12,250.40 in attorney fees, opening the door for the Plaintiff to possibly recover the full $104,670.51 in attorney fees and costs that were incurred. The Plaintiff subcontractor had filed a Prompt Payment Act claim for $30,500, which the Defendant fought for two years all the way to trial. In accordance with prosecuting its case through to a trial, the Plaintiff incurred over $100,000 in attorney fees and costs. However, the trial judge reduced this figure to $16,375.73, finding that a fee award of over $100,000 would be unreasonable where the amount recovered was only $30,500.
The Appellate Division reversed this finding, and remanded to the trial court to revisit the attorney fee award. In doing so, the appellate court emphasized that to drastically reduce the amount of attorney fees to be recovered would work against the public policy behind the Prompt Payment Act in the first place stating:
The statute's salutary goals of ensuring that contractors and subcontractors are fully and promptly paid for their work are thwarted when such plaintiffs fully prevail on a suit to vindicate their rights under the Act but net little or nothing owing to the costs of the litigation. … Without the court's unstinting enforcement of the statutory fee-shifting provision, contractors and subcontractors with relatively small claims would win only a Pyrrhic victory against defendants who failed to discharge their statutory obligations to pay promptly what they owe. Instead of deterring owners and contractors from delaying payment or stiffing their subs as the Legislature intended, it would be the stiffed contractors and subcontractors who would be deterred from suing to vindicate their statutory rights.
(JHC Industrial Services LLC v. Centurion Companies Inc.)
Peter J. Vazquez, Jr.