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Can an Employee of a Wholly-Owned Subsidiary Sue the Parent Company Based Upon Negligence?

Yedigaryan, et al, v. Penske Truck Leasing Corporation, et al.
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    FISHKILL, NY, February 17, 2012 /24-7PressRelease/ -- When workers' compensation laws were passed throughout the nation, the intent was to create a system where workers injured on the job would be guaranteed to receive part of their lost wages and have their medical bills paid, regardless of who was to blame for their injury. What employers received in return for this system was the protection of a law that blocked injured employees from suing their employers (and co-employees) for their injuries (See the exclusivity provision of the N.Y. Worker's Comp. Law Sec. 29[6]).

The benefits of the workers' compensation laws and protection from being sued afforded employers and co-employees applies to all workers except employees of interstate railroads and the maritime industry who are exempt from workers' compensation laws. In addition, victims of intentional torts are not barred by the exclusivity provisions of the New York Workers' Compensation Law.

What happens when the parent company of an employer negligently causes injury to an employee of a wholly-owned subsidiary company? Are there any circumstances that would permit an injured employee to maintain a personal injury lawsuit against the employer's parent company? The short answer is yes, but the court cases that have decided whether the injured employee can maintain a lawsuit against the parent company provide conflicting results depending upon the facts of each case.

A good example of the complexities raised by this issue is found in a federal district court case (Yedigaryan, et al, v. Penske Truck Leasing Corporation, et al, identified by civil index number 1:09-cv-1009) pending in the Northern District of New York. In the Yedigaryan case, I am representing two truck driver employees of Penske Logistics, LCC. Both drivers sustained serious injuries in two separate truck accidents when the front right steer wheel assemblies fell off their Penske Freightliner trucks while in operation due to what appears (the case is still in the pre-trial discovery stage) to have been a case of poor maintenance. I brought the lawsuit against the parent company, Penske Truck Leasing Co., LP which owned the trucks and leased them to its wholly-owned subsidiary, Penske Logistics, LCC.

After extensive pre-trial discovery on the issue, Penske filed a motion to dismiss the claims by both drivers based upon the exclusivity provisions of the New York Workers' Compensation Law. In essence, Penske argued that the wholly-owned subsidiary employer, Penske Logistics, LCC was the "alter ego" of the parent company and that the parent company was entitled to assert the affirmative defense afforded under the worker's compensation law to the subsidiary employer. If successful in its motion to dismiss, the two injured employees would not be able to maintain their personal injury lawsuits against the parent company.

After considering the undisputed facts that supported the motion and argued against the motion, the court denied Penske's motion, finding that the line separating the parent and subsidiary companies was "blurred" and that there were triable issues of fact that required jury determination. The Court's summary of the facts is instructive and highlights many of the factors that are considered by courts when a motion to dismiss based upon the exclusivity provisions of a workers' compensation law is filed.

"Here, the line separating Penske LP and Penske Logistics is blurred. For instance, Penske Logistics cannot hire or fire an employee without communication with Penske LP; Penske LP maintains a single policy manual with rules for both its employees and those of Penske Logistics; Penske LP and Penske Logistics share a tax identification number and filed joint tax returns during the relevant time period; Penske LP directly paid plaintiffs for their labor; and Penske LP was responsible for the payment of workers' compensation benefits to plaintiffs.

"On the other hand, Penske Logistics and Penske LP are independent of each other in several meaningful ways: Penske Logistics accepted job applications from, hired, and trained plaintiffs; Penske Logistics maintained internal financial records apart from those of Penske LP, including its accounting for internal cost and profit centers separately and keeping separate budgets; and Penske Logistics has its own human resources department and is responsible for assessing discipline of its employees.

"The foregoing, taken together, demonstrates the existence of a genuine issue of material fact as to whether Penske LP and Penske Logistics are, in reality, a single entity despite the legal form of each. Accordingly, Penske Corp.'s motion for summary judgment must be denied."

The Yedigaryan case is a perfect example of how a parent company can be exposed to liability for injuries sustained by the employees of a wholly-owned subsidiary if the parent company and its subsidiary fail to operate their businesses in a manner that clearly demonstrates the companies are one and the same under the law.

The Maurer Law Firm in Fishkill, NY serves clients throughout the New York Hudson Valley. Attorney Ira Maurer has over 30 years of experience in representing victims of car accident injuries, railroad injuries and construction accidents. For more information visit or call 845-440-1172.

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