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 This election may only be made at purchase or at renewal and may not be withdrawn during the policy term.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In a recent unpublished decision from the Appellate Division, an owner of a millwork company was struck by a steel rod, causing leg, knee and back injuries.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)
Peter J. Vazquez, Jr.