Court adds huge new liabilties for LLCs

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ALERT: Appeals Court Ruling Adds Massive New Liabilities for Owners and Members of LLC’s
Article by: J.L. Wilson
Associated Oregon Industries
In the waning days of the hectic February Legislative Session, a little-noticed decision by the Oregon Court of Appeals will have huge liability ramifications for owners and members of limited liability companies (LLC’s) in Oregon.

AOI will work to remedy this ruling legislatively in the 2013 Legislative Session.

In this case – Antonio Cortez v. Nacco Materials Handling Group, Inc. – the Appeals Court ruled that the exclusive remedy provision of Oregon’s workers’ compensation 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. Shielding employers and individuals from tort liability arising from workers’ compensation claims was a central tenet of the landmark 1990 and 1995 workers’ compensation reforms in Oregon.

The Appeals Court has now significantly compromised those reforms.

The worker, in this case, was employed by an LLC and was injured in a fork lift accident. The worker filed a workers’ compensation claim against the LLC and received benefits. The worker then sued various parties, including the sole member and owner of the LLC. The trial court dismissed the action, citing the workers’ compensation exclusive remedy provision.

The Court of Appeals reversed, however; noting that the exclusive remedy provision refers to an “employer” and also its “officers and directors,” but not to an “LLC member or owner.” Accordingly, the court held that even though the exclusive remedy provision protects an LLC as an “employer,” it does not protect a “member” of an LLC.

AOI will seek remedy in the 2013 Oregon Legislative Session to protect owners and members of LLC’s from personal liabilities they were not intended to incur under Oregon’s workers’ compensation reforms. This issue will be at the forefront of the AOI Legislative Agenda in 2013.