Community Associations and Workers Compensation

An important and interesting issue that is currently trending in community association legal circles is whether North Carolina law requires community associations to maintain worker’s compensation insurance.

The issue surfaced following a column published in the Charlotte Observer in which another law firm concluded that North Carolina’s Workers’ Compensation Act, read closely, appears to require community associations – such as homeowners associations (HOAs), condominiums and townhomes – to maintain workers’ compensation insurance. This conclusion turns on the Act’s definition of “employee”, which states: “Every executive officer elected or appointed and empowered in accordance with the charter and bylaws of a corporation shall be considered as an employee of such corporation….” Because most community associations are formed as non-profit corporations, this language could be fairly read as covering community associations with executive boards with three or more members, which is essentially all of them.

Understandably, the article prompted property managers and associations to contact their attorneys, including our firm, to determine whether they need workers’ compensation insurance. It also prompted an informed blog post from another North Carolina attorney who served as the President of College of Community Association Lawyers in 2014.

The blog post, while acknowledging the problem posed to HOAs and condominiums by the Act’s current definition of “employee”, notes that the “general consensus” among workers’ compensation attorneys and insurance agents is that the Charlotte Observer article “made an issue explode that likely didn’t need exploding” because 2015 could see proposed legislation to address the concern of nonprofit corporations being vulnerable to “employee misclassification”, and because the Industrial Commission, which administers the Workers’ Compensation Act, has never been known to police this issue among non-profit corporations and appears unlikely to start now.

Based on this consensus, the blog reasons that the better question is “should” community associations maintain workers’ compensation insurance, which is a question that every board should consider but which ultimately must be determined on a case-by-case basis. Importantly, though, the blog suggests that those associations that decide to purchase workers’ compensation may find it difficult to find a ready-made, cost-effective coverage.

If you would like to discuss whether workers’ compensation is right or necessary for your association, please do not hesitate to contact us.

North Carolina’s New-Look Business Court Ready for 2015

North Carolina’s Business Court starts 2015 with a fresh look after a busy 2014 that saw the departure of two of the Court’s special judges and a significant amendment to its Rules. In addition to last year’s changes, the Business Court expects to redefine itself further with a quicker docket and the reasonable prospect of expanding from three to five judges. Here are the highlights of both what has passed and what may transpire over the coming year.

First, the three-judge Business Court welcomed two new jurists following the retirement of Judge Calvin Murphy in Charlotte and Chief Judge John Jolly in Raleigh. In their stead, Governor Pat McCrory appointed Louis A. Bledsoe III in June 2014 to preside in the Charlotte Business Court, and Greg McGuire in October 2014 to preside in the Raleigh Business Court. A related development was the designation of Judge James L. Gale, who presides in Greensboro, as the Business Court’s new Chief Judge.

The second major Business Court development in 2014 was the North Carolina General Assembly’s passage of Senate Bill 853 which aims to “modernize” the Business Court by, among other ways, “making technical, clarifying, and administrative changes to the procedures for complex business cases….”

More particularly, Senate Bill 853 ushered in three notable changes to the Business Court Rules: (1) direct appeals from the Business Court to the North Carolina Supreme Court; (2) dividing matters that qualify as a “mandatory complex business case” between those that “may” be designated as mandatory complex business cases – such as those involving corporate law, securities law, antitrust law, intellectual property, trade secrets, and certain qualifying breach of contract disputes – and those that “shall” be designated as a mandatory complex business case. The cases that must be designate as a complex business case include certain tax disputes and any of the above-listed elective actions in which the amount in controversy exceeds $5,000,000; and (3) the Business Court’s hefty filing fee, which is currently $1,100.00, may now be recovered as a cost by prevailing litigants.

With two new judges and a revamped set of rules, the overloaded Business Court is primed for a strong 2015. In a December 2014 article from North Carolina Lawyers Weekly, Chief Judge Gale is quoted as having acknowledged “the historical perception that it took the court a long time to rule on motions,” but assured that “the situation is being reversed rather steadily.” He was further quoted as saying “I’m hopeful that a year from now that the… perception it takes the court a long time to rule on motions will no longer be the perception.”

The Business Court’s goal of quicker turnaround times could be bolstered further with the possible addition of two new judges, which would result in a five-judge bench. Whether this two-judge expansion comes to pass, though, depends on a yet-to-be-approved budget provision. At one point there was speculation that the two hoped-for judges would preside in Wilmington and Asheville, thus growing the Business Court’s geographic footprint from the coast to the mountains. However, given the increased costs associated with opening and staffing new courts, it seems more likely that any additional Business Court judges would simply join the existing courts in Charlotte, Greensboro, or Raleigh.

Regardless of whether it grow from three to five, North Carolina’s new-look Business Court has good reason to be bullish about the New Year.