To understand this case, you need a brief background on workers’ compensation law.
Workers’ Compensation is the great compromise between capital and labor (take note, Governor Walker). In the late 19th century, workers who were injured on the job had only one course of action—to sue the owner for creating a workspace or job that was negligently unsafe. The problems with this system were multiple. First of all, negligence can be difficult to prove. You must establish that the owner owed the employee a duty of care, that the employer breached that duty of care, that the breach proximately caused injuries, and that the employee suffered actual damages. You can see where the problems might arise. What if the owner kept a safe workspace and the work was inherently dangerous under the best conditions? What if another employee’s negligence caused the accident? What if the accident was a cumulative injury caused by the employment over a number of years? There were also practical considerations. Negligence cases cost money, and injured workers often do not have the resources to mount such a case. On the employer’s side, these cases were a nightmare that took large amounts of resources to defend and occasionally resulted in huge verdicts against the company.
So the two sides came together, and they created workers’ compensation. Under workers’ compensation laws, all employers must purchase insurance to cover their workers. If a worker becomes injured during the course of her employment, she is entitled to workers’ compensation, which includes medical damages, lost wages, and compensation for any partial or total impairment the employee suffers as a result of the injury. The trade-off is employees do not have to prove negligence—only that the injury occurred as a part of work—and employers cannot be sued for any additional damages in court. It is a good system because employees know they will be covered if they get injured in the course of employment, and companies can limit the cost of doing business to a predictable annual insurance payment.
This is exactly what Steven Arnold did in 2003, when he learned that his job as a funeral director had exposed him to carcinogenic formaldehyde, leaving him with cancer. Mr. Arnold died in 2006 shortly after settling his workers’ compensation claim, and his family, acting as his estate, most likely received the payments. This settlement, however, was not enough for the family after the loss of their father/husband, and so they looked to pursue anyone else responsible. This led to the present case concerning the funeral home’s landlord, C–P Burlington Properties, LLC.
Apparently, the cause of the formaldehyde poisoning arose from a classic unsafe work condition. Mr. Arnold dressed up corpses in the basement of the funeral home where formaldehyde and other embalming chemicals were stored and used. To keep these fumes at a minimum, the space had a ventilation system, which according to the record, rarely worked and was often broken. Without proper ventilation, the toxic fumes lingered in the room where Mr. Arnold breathed them in as a matter of course during his work day.
Because the duty of a landlord to provide a safe and habitable space is different than an employer’s similar duty, Mr. Arnold’s estate sued the landlord. Under
law, this is permissible. The twist here is that the employer is also the landlord, albeit under a different corporate form. Vermont
The trial ruled that this corporate shell game did not matter; the employer was in essence the landlord. The estate had a workers’ compensation settlement with the employer. Therefore, an action against the landlord was not allowed.
On appeal, the SCOV majority disagrees. Their reasoning boils down to the following: if you want the benefits of incorporation, then you are going to have to stick with the form even when it hurts. For the majority, the important fact is that despite the reality that both the company and the real estate are owned and controlled by the same person, they are two different corporations. This different identity, therefore, gives rise to separate liability. The law treats corporations as separate persons for the purposes of taxes, liability, and free speech. The majority is not going to alter this simply because it would benefit this particular corporation.
The dissent in this opinion sides with the trial court in holding and reasoning. For the dissent, the identity and interests are the same, and the workers’ compensation law is broad enough to allow coverage of an individual, even if she owns the business and the real estate in separate corporations. The dissent sees this as an abrogation of the workers’ compensation compromise by allowing an employee who has sought and received full compensation to come back and seek more damages from the employer on a technical point.
Case is reversed, and the merits, like Plaintiff’s work, are preserved for another round of litigation.