June 27, 2012
June 27, 2012
By J.L. Wilson
Associated Oregon Industries
As AOI informed its members in March, a recent decision by the Oregon Court of Appeals will have huge liability ramifications for owners and members of limited liability companies (LLC’s) in Oregon. In this case – Antonio Cortez v. Nacco Materials Handling Group, Inc. – the Appeals Court ruled that the exclusive remedy provision of Oregon’s workers’ comp law, ORS 656.018, does not protect the members of an LLC from tort liability.
In other words, under the ruling, the owners and members of an Oregon-based LLC are considered personally liable for damages arising from workplace injuries.
The court’s holding undermines the long-standing basic tenant of Oregon’s workers’ compensation statute that an injured workers’ exclusive remedy against their employer is via the workers’ compensation system.
The issue stemming from the Cortez decision is that all employers across Oregon are protected from liability under Oregon’s workers’ comp exclusive remedy statute – except for LLC owners and members.
In this instance, it appears that the workers’ compensation statute has not kept pace with advances in corporate law. Oregon’s exclusive remedy statute dates back to the inception of the Oregon’s workers’ compensation law. Oregon’s Limited Liability Act took effect in 1994.
Clearly, workers’ comp law did not envision the rise and proliferation of limited liability companies as a preferred method of corporate organization.
The fact that the Oregon Appeals Court was able to parse the language of ORS 656.018 and not find specific exclusive remedy protection for owners and members of LLCs, even though the statute was designed to protect employers, is testament of this fact.
Proposed Legislative Solution
The court’s decision in Cortez has made clear that we need to be very specific in ORS 656.018 as to who is afforded exclusive remedy protections as an “employer.”
In this case, the court exposed the lack of expressed protection for owners and members of LLCs. But the court’s logic could easily apply to partnerships or other corporate entities not contemplated in the exclusive remedy statute.
AOI’s attempt to fix this loophole created by the court is to fashion a legislative fix that is narrowly focused by simply including “owners and members of limited liability companies” to the list of those protected under ORS 656.018.
However, AOI realizes that this may be an insufficient solution because the court’s logic could be construed to apply to other corporate entities not specifically listed in ORS 656.018.
Therefore, it is AOI’s ultimate goal to identify language that will cover the spectrum of modern corporate entities – “employers” – while keeping true to the spirit of the law.
Update on Legal Proceedings in Cortez
Nacco petitioned the Oregon Court of Appeals to reconsider its ruling, and was officially denied reconsideration on June 1.
Nacco will now petition the Oregon Supreme Court for review of the case.
AOI is currently assembling a coalition of business organizations to weigh in on the case with an amicus brief that would illustrate the gravity of the issue to the statewide business community. The hope is to persuade the Oregon Supreme Court to grant review of the decision.
The amicus brief strategy is a complement to AOI’s legislative strategy of fixing the issue in the 2013 Legislative Session.