Illinois Supreme Court Refuses to Extend Employer Immunity to Parent Corporations

Published by Philip G. Brinckerhoff on

The Illinois Supreme Court issued its decision in the case of Munoz v. Bulley & Andrews, LLC, 2022 IL 127067 on January 21, 2022 finding that a parent corporation is not immunized from a civil suit even though the parent corporation paid the workers’ compensation benefits of the employee of a wholly owned subsidiary corporation.

Under the Illinois Workers’ Compensation Act, an employer who pays benefits to its injured employee is immunized from a direct action civil suit by that same injured employee. The exclusive remedy protection is found at both 820 ILCS 305/5(a) and at 305/11. In this case, the direct employer was Bulley & Andrews Concrete (“Bulley Concrete”), a wholly owned subsidiary of Bulley & Andrews LLC (“Bulley LLC”). The Court stated that each corporation was separate. They each had their own federal tax identification, filed their own separate taxes, and had separate presidents. Each company had their own workers. Bulley Concrete employed 100 laborers, caulkers and concrete finishers, and Bulley LLC employed 500 carpenters and laborers. Bulley LLC was the general contractor on the site. While Bulley LLC entered written subcontracts with other trade companies, it entered no written subcontract for the concrete work that Bulley Concrete performed on the project.

The Plaintiff Donovan Munoz worked for Bulley Concrete. He completed their time sheet and was paid under their payroll. Bulley Concrete had its policy of insurance with Arch Insurance, and that same policy of insurance was issued to Bulley LLC and other subsidiary corporations. Plaintiff collected workers’ compensation benefits from Arch. In addition, Mr. Munoz filed a civil lawsuit against Bulley LLC and others. As to Bulley LLC, Plaintiff alleged that as a general contractor, Bulley LLC had overall control of the work on site, and breached those duties by allowing Bulley Concrete to use unsafe equipment on the site.

Bulley LLC filed a Motion to Dismiss Munoz complaint arguing Bulley LLC as the parent corporation and the party responsible for Munoz’ workers’ compensation benefits, it was entitled to protection from a direct civil suit by the Exclusive Remedy Provisions of the Workers’ Compensation Act, 820 ILCS 305/5(a), 305/11. The Court recognized that there two prior Illinois Supreme Court decisions impacting its analysis. The first is Laffoon v. Bell & Zoller Coal Company, 65 Ill.2d 437 (1976), and the second is Ioerger v. Halverson Construction Co., 232 Ill.2d 196 (2008).

In Laffoon, the Illinois Supreme Court had to determine whether the exclusive remedy protection extended to a company that paid workers compensation benefits to an employee of an uninsured subcontractor. Under a separate provision of the Workers’ Compensation Act, employers who hire uninsured contractors become primarily responsible for those benefits. 820 ILCS 305/1(a)(3). The Court denied the general contractor exclusive remedy protection since that protection was reserved solely to the direct employer only. The Court rejected the argument that since the general contractor paid the workers’ compensation benefits, it should be conferred that immunity.

In Ioerger, the court had to deal with protection given to two partners to a joint venture when an employee of one entity, while performing work for the joint venture, was hurt. The joint venture was responsible to reimburse the labor costs including workers’ compensation insurance. Joint ventures are governed by partnership principles. Since the joint venture was not a separate legal entity, each partner of the joint venture was immunized. In addition, the parties to the joint venture had an agreement whereby the joint venture had to reimburse the labor partner for labor costs and workers’ compensation premium payments. The Court ruled that Ioerger did not overrule Laffoon, and the effect of the payment of premium is limited to the fact situation of Ioerger. The Court noted that the terms of the Workers’ Compensation Act provide immunity to direct employers and “agents of the employer.” Since the partners of the joint venture are agents under partnership law, the Court could extend immunity to the joint venture as “agents of the employer.” In Munoz and Laffoon cases, the entities involved were not “agents” or otherwise protected under the terms of the Workers’ Compensation Act. Therefore, the parent corporation Bulley LLC like the general contractor in Laffoon is not specifically covered under the immunity protections of the Workers’ Compensation Act.

It appears that the Supreme Court wants that the specific statutory terms define immunity and not the payment of premium or the payment of workers’ compensation benefits. In addition, the court is placing emphasis on the parties’ decision to create separate corporate entities. While such separation can have positive effects in other areas, the Court will not allow that separate corporate status to be disregarded to insulate the separate corporation from civil liability.

While the Court’s decision makes it hard to extricate a parent corporation at the outset, counsel for the parent in the civil case need to show that parent corporation’s mere ownership of the subsidiary should not make the parent liable for the negligent acts of the subsidiary. Plaintiffs need to be compelled to show that the parent had its own independent acts of negligence in causing Plaintiff’s injury.