Workers’ Compensation – Workers’ Compensation Act – Exclusivity Provision

Because Cortech Solutions Inc. and Defendants are separate entities, neither the exclusivity provision of the Workers’ Compensation Act nor the parties’ release agreement bars Plaintiff’s negligence claim against Defendants.

We reversed the trial court’s order granting Defendants’ motion to dismiss.

Plaintiff argued the trial court erred by granting Defendants’ motion to dismiss because the exclusivity provision of the Workers’ Compensation Act does not bar Plaintiff’s claim and the parties’ release agreement does not release Defendants from liability.

Plaintiff began his employment with Cortech in 2011. Defendant Lloyd T. Smith was the President of Cortech and Defendant Jennifer G. Smith was the Secretary and Treasurer. The Workplace was not owned by Cortech; Defendants in their individual capacities owned the commercial property in which the Workplace was located. Defendants were the landlords of the Workplace. Several months after he started working at the Workplace, Plaintiff began experiencing various flu-like symptoms, including dizziness and cognitive difficulty. In 2018, Plaintiff noticed what he believed was mold emerging from the baseboards of the Property. In 2019, an Environmental Relative Moldiness Index test. found that Plaintiff’s workspace was “beyond the highest level of classification, level ‘Q4′, for the presence of mold.”

Plaintiff immediately reported the test results to Defendants. Because Defendants took no action, Plaintiff filed a complaint with the Occupational Safety and Health Administration. In response to this complaint, Defendants arranged for an inspection and mold testing of the Workplace. The results of that testing indicated that mold was present throughout approximately 80% of the Workplace. Plaintiff filed a Form 18, “Notice of Accident to Employer,” with the Commission for his injuries resulting from “ongoing exposure to water damage and mold.” One month later, Cortech terminated Plaintiff from his employment.

Plaintiff and Cortech entered into a compromise settlement agreement wherein Cortech agreed to pay Plaintiff $25,000 for any injuries giving rise to his claim; the Commission approved the agreement. Plaintiff also signed a general release agreement, wherein Plaintiff agreed to “to resolve all current and future disputes concerning Plaintiff’s employment with Cortech Solutions, Inc. along with all of its affiliates and subsidiaries” in exchange for additional consideration.

Plaintiff filed a complaint against Defendants for negligence, gross negligence, and punitive damages. Plaintiff alleged he suffered various health issues as a result of toxic mold exposure while working at the Workplace. Defendants moved to dismiss Plaintiff’s claims. The trial court granted Defendant’s motion under Rule 12(b)(1).

On appeal, Plaintiff argued the court erred by granting Defendants’ motion to dismiss for lack of subject matter jurisdiction because the exclusivity provision of the Workers’ Compensation Act does not bar Plaintiff’s claim and the release agreement does not release Defendants from further liability. Plaintiff contended the exclusivity provision of the Act does not bar his claim because Defendants, in their individual capacities as owners of the Property and landlords of the Workplace, are separate from Cortech, Plaintiff’s employer. We agreed. Defendants were not acting as Cortech when they engaged in the duties associated with their ownership of the Property. Defendants owned and operated the Property— where Cortech leased office space—in their individual capacities; they worked for and operated Cortech as a separate business. The allegations in Plaintiff’s complaint reveal that Defendants are separate from Cortech and thus do not show an absolute bar to recovery due to the exclusivity provisions of the Act.

Plaintiff next argued the release agreement does not release Defendants from liability because, when acting as owners of the Property and landlords of the Workplace, Defendants were not acting in their official capacities within the scope of their employment with Cortech. Plaintiff’s allegations alleged Defendants owned the Property in their individual capacities. Defendants argued they “are Plaintiff’s employer, and at the least, in their capacity as individuals owning the [Property], they are affiliates of Cortech.” Defendants cited no authority in support of this statement, and we could not find any authority to support a conclusion that an individual can be an “affiliate” of a corporation. Additionally, the plain language of the agreement releases the officers and employees of Cortech only to the extent they were “acting in their official capacities in the course and scope of their employment for Cortech and none other.”

In the context of Plaintiff’s negligence claim against them, Defendants were not acting within their official duties as Cortech’s officers but were instead acting in their capacities as owners of the Property and landlords of the Workplace. The release agreement does not mention Defendants by name nor does it reference Cortech’s landlord in the list of individuals covered by the release. Based upon the plain language and express terms of the release agreement, Plaintiff is not precluded from asserting a negligence claim against Defendants in their capacities as owners of the Property and landlords of the Workplace.

Reversed.

Nelson v. Smith (Lawyers’ Weekly No. 011-119-25, 13 pp.) (Allegra Collins, J.) Appealed from New Hanover County Superior Court (Quintin McGee, J.) Perry, Brandt & McLemore, by Holden K. McLemore, and Terrazas PLLC, by Kevin J. Terrazas, pro hac vice, for Plaintiff-Appellant; Hedrick Gardner Kincheloe & Garofalo LLP, by M. Duane Jones and G. Anderson Stein, for Defendants-Appellees. North Carolina Court of Appeals