Does The “Alter Ego” Doctrine Apply To Workers’ Compensation?

In 2021 Cal. Wrk. Comp. P.D. LEXIS 302, Mastagni Holstedt, A.P.C. with Associate Attorney, Jonathan D. Char argued that the Workers’ Compensation Appeals Board frustrated the applicant’s recovery by issuing an award only against a corporation (dissolved) and not against the owner. Upon petition for reconsideration, the Workers’ Compensation Appeals Board found the alter ego doctrine is consistent with their mission so application of the alter ego doctrine may be warranted in a Labor Code section 132a claim.

At the trial level, the court found that the Workers’ Compensation Appeals Board did not have jurisdiction to “pierce the corporate veil” thus impose joint and several liabilities on an individual shareholder in a Labor Code section 132a proceeding and therefore issued the section 132a award only against a corporation (dissolved). In contrary belief, the applicant contended the Workers’ Compensation Appeals Board had authority to issue the award against the owner under the doctrine of “alter ego” because there was no difference between the owner and the corporation (dissolved).

The court explained imposition of individual owner liability lies with the civil courts and although exceptions did exist, those exceptions did not apply since the employer had workers’ compensation insurance. The trial judge went on to say the Legislature enacted the Corporations Code to allow the formation of corporations with the primary purpose to allow individuals to separate their individual lives and the corporate identity and it would defeat the purpose of the Corporations Code.

Upon reconsideration, the Workers’ Compensation Appeals Board explained courts now give more weight to whether the corporation is in fact controlled by the individual sought to be held liable. In discussion, the court explained unity of interest does not have to be complete ownership and conditions under which the corporation may be regarded as the alter ego of the stockholders vary according to the circumstances in each case. Consequently, the Workers’ Compensation Appeals Board found the alter ego doctrine is consistent with their mission so its application may be warranted in a Labor Code section 132a claim.

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