N.Y. Court Rules ‘No Pay, No Protection’ from Suits Under Workers’ Comp Law for Scofflaw Employers

New York State’s highest court has ruled that employers that fail to purchase workers compensation coverage cannot hide behind the workers’ compensation protection against being sued by employees.

In reversing a lower court ruling, the New York Court of Appeals said that extending the protections of the workers’ comp law to employers who do not buy coverage makes no sense and could undermine the law’s intent of encouraging businesses to buy coverage.

“Employers that do not secure workers’ compensation for their employees are not holding up their end of the bargain between business and labor” that undergirds the workers compensation law, the court stated. “The Legislature can not have intended to extend the statute’s heavily negotiated protections from third party liability to scofflaws, which would be unfair to law-abiding employers and might discourage compliance…,” the decision noted.

Workers’ comp law restricts an employer’s liability to third parties for contribution or indemnity in workplace injury cases.

Plaintiff Boles was injured while installing vinyl siding. The scaffold he was using collapsed, causing him to fall eight feet to the ground where he sustained serious injuries.

General contractor Dormer Giant had been hired by the homeowners and subcontracted the work to Personal Touch Home Improvements, the company Boles was working for at the time of the accident.

Boles, and his wife, sued Dormer Giant, which in turn brought a third-party action against the subcontractor, Personal Touch, seeking indemnification and contribution. Personal Touch argued that Dormer Giant’s claims against it was barred under the workers’ comp law. But Dormer Giant argued that Boles was a self-employed, independent contractor, not an employee of Personal Touch and that the workers’ comp restriction did not apply because Personal Touch had never secured workers’ comp coverage for Boles.

A lower court had sided with Personal Touch over Dormer Giant.

The case, decided Feb. 22, 2005, is Douglas Boles, et al. v. Dormer Giant Inc., d/b/a Dormers Are Us