Can’t have your cake & eat it too!

By Shuaib Ahmed, Founder of ASA Law Group // From Volume 53, No 3 of the newsletter of the Illinois State Bar Association’s Section on Workers’ Compensation Law

In Burge v. Exelon Generation Co., 2015 IL App (2d) 141090, Plaintiffs, Rick Burge and Nelda M. Burge, appealed an order of the Circuit Court granting Defendant’s Motion to Dismiss Plaintiff’s negligence complaint based upon the exclusive remedy provision under the Workers’ Compensation Act (820 ILCS 305/1 et seq. (West 2012)). Briefly, it was undisputed that Rick’s injuries arose out of and in the course of his employment with Exelon Nuclear Security, LLC (ENS), and that Rick filed and settled a workers’ compensation claim against ENS. ENS is a Delaware limited liability company organized pursuant to an agreement (the LLC Agreement) making defendant the sole member of ENS. ENS provided security services on defendant’s premises pursuant to a contract with defendant.

Section 1(a)(3) of the Workers’ Compensation Act states that an employer “is liable to pay compensation to his own immediate employees ***, and in addition thereto if he directly or indirectly engages any contractor whether principal or subcontractor to do any such work, he is liable to pay compensation to the employees of any such contractor or sub-contractor unless such contractor or sub-contractor has insured, in any company or association authorized under the laws of this State to insure the liability to pay compensation under this Act, or guaranteed his liability to pay such compensation.”

Section 5(a) of the Act states, in pertinent part:

“No common law or statutory right to recover damages from the employer, his insurer, his broker, any service organization retained by the employer, his insurer or his broker to provide safety service, advice or recommendations for the employer or the agents or employees of any of them for injury or death sustained by any employee while engaged in the line of his duty as such employee,

other than the compensation herein provided, is available to any employee who is covered by the provisions of this Act, to any one wholly or partially dependent upon him, the legal representatives of his estate, or anyone otherwise entitled to recover damages for such injury.”

820 ILCS 305/5(a) (West 2012).

It was undisputed that defendant contracted with ENS to provide security services on defendant’s premises. The defendant argued that it was the employer (ENS) who paid workers’ compensation benefits for the plaintiff, Rick Burge, and that, pursuant to section 5(a) of the Act, plaintiffs could not maintain a common law action against defendant. In support of its motion, defendant submitted the affidavit of Christine M. Wendt, the workers’ compensation manager of the benefits department for Exelon Business Services Company. Wendt represented that she oversaw the Exelon system of workers ‘compensation benefits. Further, that defendant used a thirdparty administrator/payor for workers’ compensation benefits and paid all monies for the [ENS account] made to or on the behalf of Rick Burge. Finally, that defendant “paid the worker’s compensation benefits of any/all employees of [ENS], including [Rick], as it was obligated to do under [section 1(a)(3) of the Act].” In response, plaintiffs relied, in part, on Laffoon v. Bell & Zoller Coal Co., 65 Ill. 2d 437, 447 (1976), where the supreme court held that section 5(a) “confer[s] immunity upon employers only from common law or statutory actions for damages by their immediate employees.” Given that defendant was not Rick’s employer and that, to enjoy immunity under section 5(a) from liability in a common law negligence lawsuit, defendant must establish at least that it was legally responsible for payment of workers’ compensation benefits to Rick. Defendant claimed it had reimbursed ENS for workers compensation payments to ENS employees. Accordingly, given the reimbursement payments, coupled with its authority to manage ENS’ affairs, it was conferred with the same immunity as ENS.

The Appellate analyzed two issues: (1) whether the defendant was ENS’s agent; and (2) whether defendant’s role, if any, in paying Rick’s workers’ compensation settlement confers immunity, pursuant to section 5(a), from a common-law action for damages. As to the former, the Appellate Court found in the negative. While defendant relied on the powers conferred upon it by the LLC Agreement, the Appellate Court focused on the principle’s right to control the agent’s conduct and the agent’s power to act on the principle’s behalf. After analyzing the LLC Agreement, the Appellate Court did not find anything which confers ENS the right to control the defendant. If anything, the Appellate Court found the opposite to be true. For instance, the LLC Agreement conferred defendant exclusive authority over the business and affairs of ENS and full power and authority to authorize, approve or undertake any action on behalf of ENS and to bind ENS, without the necessity of a meeting or other consultation.

As to whether defendant’s role in paying Rick’s workers ‘compensation settlement confers immunity pursuant to section 5(a) from a common-law action for damages, the Appellate Court analyzed two Supreme Court cases, Forsythe v. Clark USA, Inc., 224 Ill. 2d 274 (2007), and Ioerger. In Forsythe, plaintiffs brought wrongful death actions against the defendant.

The Decedents, who were employees of a wholly owned subsidiary of the defendant, died in a fire at a refinery. The defendant argued that it was merely a holding company and owed no duty to the employees of its subsidiary. The Supreme Court concluded that the defendant could potentially be held liable under a theory of active participant liability. The court held that “[w]here there is evidence sufficient to prove that a parent company mandated an overall business and budgetary strategy and carried that strategy out by its own specific direction or authorization, surpassing the control exercised as a normal incident of ownership in disregard for the interests of the subsidiary, that parent company could face liability.” Id. at 290. Further, that it was the subsidiary, not defendant, who paid workers’ compensation benefits to the decedents’ families. It was the subsidiary, not defendant, who actually employed the decedents. As such it is the subsidiary, not the defendant that should enjoy the exclusive remedy provision of the Act. In contrast, in Ioerger, the court held that a joint venture was entitled to section 5(a) immunity from liability for injuries to employees of one of the two corporations engaged in the joint venture. After first concluding that the joint venture was entitled to immunity based on its agency relationship with the corporation that employed the injured workers, the Ioerger court held that the joint venture should also enjoy immunity because it was obligated under the joint-venture agreement to pay workers’ compensation for the employees of both corporations.

Applying these principles to the instant case, the Appellate Court held that immunity under section 5(a) of the Act cannot be predicated on defendant’s payment of workers’ compensation unless defendant was under some legal obligation to pay (such as the contractual obligation imposed by the joint-venture agreement in Ioerger). While the defendant reimbursed ENS for workers compensation payment to ENS employees, the LLC Agreement is silent about the legal obligation for defendant to provide workers’ compensation insurance for ENS’ employees. Accordingly, the Appellate Court held, that defendant has failed to establish a basis for claiming immunity under section (5)(a) of the Act, and it was error to dismiss plaintiffs’ complaint.

‍