Alabama Supreme Court Holds That Parent Company of Employer is Not a Group Employer Under Alabama Workers’ Compensation Act
by Gabrielle “Gaby” E. Reeves, Of Counsel Attorney
January 16, 2020
In Ex parte Ultratec Special Effects, Inc.in re Estate of Amiee Cochran, No. 1180180, 2019 WL 5853264 (Ala. Nov. 8, 2019); Ex parte Ultratec Special Effects, Inc. in re Estate of Virginia Sanderson, No. 1180183, 2019 WL 5853264 (Ala. Nov. 8, 2019), (hereinafter, “Ex parte Ultratec”), the Alabama Supreme Court issued a lengthy opinion declining to extend the exclusivity provisions of the Alabama Workers’ Compensation Act, (“the Act”), to Ultratec Special Effects, Inc. (“Ultratec”), a Canadian corporation and the owner of 100% of the stock of Ultratec Special Effects (HSV), Inc. (“Ultratec HSV”), an Alabama Corporation.
The estates of two Ultratec HSV employees who died in an explosion during the course of their employment at the Ultratec HSV plant filed separate wrongful death suits against Ultratec in the Circuit Court of Madison County, Alabama. Ultratec moved for summary judgment, maintaining that it was entitled to immunity under the Act because, inter alia, Ultratec and Ultratec HSV were a single employer group under the Act. The estates countered that Ultratec and Ultratec HSV were separate companies and not joint employers. The trial court denied both motions, and Ultratec petitioned the Alabama Supreme Court for mandamus – asking it to direct the trial court to vacate its order. The Court denied the petitions without opinion, but subsequently granted Ultratec’s applications for rehearing as to the sole issue of whether Ultratec was entitled to immunity under the Act and consolidated the petitions and issued one opinion. Ex parte Ultratec, 2019 WL 5853264, at *1-*2.
On rehearing, Ultratec argued that it was entitled to immunity under the Act because Ultratec and Ultratec HSV operated as a single employer group as defined in Ala. Code § 25-5-1(4)(1975). That section defines an “employer” as “[e]very person who employs another to perform a service for hire and pays wages directly to the person” and provides that the term “employer” “shall include a service company for a self-insurer … or group thereof ….” Ultratec’s argument was that it qualified as an “employer” because it was a member of the same conglomerate as Ultratec HSV. The Alabama Supreme Court rejected this argument, concluding that the phrase “group thereof” modified only the term “service company,” a term previously determined to apply only to entities that assisted a self-insured in the administration of its workers’ compensation program. Ex parte Ultratec, 2019 WL 5853264, at *4-*6 (quoting Richardson v. PSB Armor, Inc., 682 So.2d 438, 440-41 (Ala. 1996)). The Court stated that, because Ultratec had neither asserted that it assisted Ultratec HSV in administering its worker’s compensation plan, nor had it presented any evidence to that effect, Ultratec did not fall within the statutory definition of an employer. See id., at *6.
Ultratec also argued that it was immune from suit because the decedents were jointly employed by Ultratec and Ultratec HSV. Ex parte Ultratec, 2019 WL 5853264, at * 7. In support of its argument, Ultratec presented the affidavit of its president, Adrian Segren. Segren testified that, as president of Ultratec, he reserved the right to control all aspects of the employees’ work at Ultratec HSV as individual employees, as well as the right to make and change work rules, personnel policies, operating procedures and production schedules. Id. The Court rejected this argument, holding that Ultratec had failed to establish a clear legal right to mandamus relief because it had “offered no evidence indicating, much less argued, that the employees contracted, expressly or impliedly, for employment with Ultratec or that the work they performed at Ultratec HSV was essentially the work of Ultratec. Ex parte Ultratec, 2019 WL 5853264, at *7 (citing G.UB.MK Constructors v. Garner, 44 So.3d 479, 485 (Ala. 2010) (quoting Pinson v. Alabama Power Co., 557 So.2d 1236, 1237-38 (Ala. 1990) (quoting Marlow v. Mid-South Tool Co., 535 So.2d 120, 123 (Ala. 1988) (quoting 1C A. Larson, The Law of Workmen’s Compensation, § 48 (1980)).
Ultratec next argued that it was immune from tort liability under the Act because Ultratec HSV operated as a division of Ultratec, as it was a wholly-owned subsidiary of Ultratec. Ultratec relied on the Court’s decision in Meeks v. Budco Group, Inc., 631 So.2d 915 (Ala. 1993), as support for its position. Ex parte Ultratec, 2019 WL 5853264, at *7. The Court disagreed, stating that Ultratec’s case was “distinguishable from Meeks in one very important aspect. In Meeks, the two corporations merged; here, there has been no merger between Ultratec and Ultratec HSV ….” Id., at *8. The Court further stated that Ultratec and Ultratec HSV were legally separate entities, as they were each incorporated in different countries and filed separate tax returns. Id. Of particular importance to the Court was the fact that Ultratec recognized itself as a legal separate entity to OSHA when it successfully petitioned OSHA to have its name removed as respondent employer in OSHA proceedings against both companies after the explosion. Id., at *8 -*9.
Finally, Ultratec asserted that “strong public policy favors that immunity under … the Act be extended to parent corporations for workplace injuries or deaths of employees of a parent corporation’s subsidiaries.” Id., at *9. The Court denied the petition as to these grounds, stating that “[a]n extension of immunity to parent corporation is better left to the Alabama Legislature.” Id. (quoting March v. Green, 782 So.2d 223, 231 (Ala. 2000)).
Justice Bolin wrote the majority opinion. Chief Justice Parker concurred and Justices Mendheim and Stewart concurred in the result without opinion. Justices Wise and Mitchell recused themselves. Justices Shaw, Bryan, and Sellers dissented from the majority opinion, stating that the statutory definition of employer was ambiguous and that Ultratec had shown by substantial evidence that the business operations of the two companies were “sufficiently ‘integrated’ … so that Ultratec HSV employees should be considered employees of Ultratec for workers’ compensation purposes.” Ex parte Ultratec, at *11 -*12 (Cf. Domino’s Pizza, Inc. v. Casey, 611 So.2d 377 (Ala. Civ. App. 1992) (Sellers, J., dissenting from denial of petition for mandamus)).
The Court’s decision does not determine what qualifies a parent company as an “employer” such that it is entitled to the same exclusivity protections as its wholly-owned subsidiary under the Act. Rather, it means that the Court found that Ultratec failed to meet the summary judgment standard and, thus, the question of its immunity from the estates’ claims was for the jury. The majority appears to have been particularly impressed by the fact that Ultratec represented itself as not being an employer to avoid penalties under OSHA, yet sought protection under the Act on the premise that it was an employer as defined by Alabama law.
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