Defense Digest, Vol. 27, No. 5, December 2021

New Jersey Workers’ Compensation and Property Leases. Two Greats Tastes That Don’t Taste Great Together

By
Robert J. Fitzgerald

Key Points:

  • The premises rule limits recovery to injuries which occur on the physical limits of the employer’s premises.
  • The pivotal questions under the the premises rule are (1) where was the situs of the accident and (2) did the employer have control of the property on which the accident occurred?
  • Compensability of an accident depends on the right of control of the employer, it is not necessary to establish that the employer actually exercised that right.

In the recent case of Walker v. Saker Shop Rite, 2021 WL 4058011 (N.J. Super. App. Div. Sept., 7, 2021), the New Jersey Appellate Division revisits compensability for “parking lot” cases under the New Jersey workers’ compensation statute.

On December 11, 2018, the petitioner, a 70-year-old employee of a supermarket, stepped into a pothole as she walked to her car in the parking lot after completing her shift. The Workers’ Compensation Judge found that the accident did not occur in an area under the employer’s control nor in an area designated for employee parking. Therefore, the claim petition was denied.

On appeal, the court went into a detailed analysis of the factual and documentary evidence. It noted that the petitioner had been working for the employer for 31 years. She drove to work and parked in the parking lot abutting a side entrance to the store. The shopping center where this accident occurred contains eight to ten stores, with the supermarket occupying the last leased space on the south end. The side parking lot contained a cabana that the employer put there for the convenience of its employees to smoke cigarettes or drink their coffee. The store used the sidewalk to hold shopping carts. The petitioner testified she had parked in this same area since the store was opened 25 years ago.

At trial, the petitioner acknowledged that the employer previously told its employees to park out by the street. However, she testified that she used the side parking lot due to safety concerns. She recounted that years before the accident, she had engaged in a conversation with an assistant manager, where she explained why she parked in the lot and the assistant manager didn’t say to move. In addition, other employees also parked in the side lot rather than the designated area near the street.

Pursuant to the lease, the store pays a common area maintenance (CAM) fee to the landlord, based on its pro-rata share of the entire shopping center, for maintenance of the parking lot. The lease indicated that the “landlord shall keep and maintain or permit the operator of the premises to keep and maintain the common area in good condition and repair.” In February 2018, the supermarket and the landlord amended the lease, allowing the store to complete reconfiguration work for a sidewalk and parking lot project.

At trial, the store’s human resources manager testified that new employees were directed to park in the “designated employee parking area.” On cross examination, she acknowledged regularly observing store employees parking in non-designated parking areas and asking them to move their cars to the designated area. She also testified that certain employees had the responsibility of retrieving shopping carts from the parking lot and were asked to keep an eye out for any hazards in the parking lot and report such hazards to management.

Based on its detailed analysis of the factual and documentary evidence, the Appellate Division reversed the denial and found the case to be compensable. Specifically, it found substantial evidence that the employer used and exercised control over the parking lot area abutting its supermarket, including the area where the petitioner fell. The Appellate Division also determined that there was no evidence that the employer’s directive to park in the designated employee parking area was for the safety of its employees. Moreover, the court focused on the lease agreement, noting:

We find largely irrelevant that the landlord was responsible for maintaining the parking areas of the shopping center, as Saker’s lease clearly granted Saker, its ‘customers, invitees, licensees . . . and employees’ the right to use the parking areas. While the landlord maintained the parking areas, the lease required Saker to pay ‘additional rent,’ reflecting a proportionate share of CAM charges, which included the cost of maintaining parking areas.

Because the employer Saker used and exercised controlled control over the parking lot here, we conclude petitioner’s injury is compensable under the premises rule. In addition, the February 2018 lease amendment clearly expressed the intention to permit Saker to exercise control of the parking lot and do all things necessary to reconfigure and repave the lot. Saker, in fact, completed the work, albeit after the accident. Nevertheless, the execution of the lease amendment ten months before petitioner’s accident, reflects Saker’s authority to exercise control of the parking lot.

While this case does not necessarily break new ground when addressing compensability for parking lot cases, it does show how a property lease agreement can unknowingly create a substantial workers’ compensation liability. Here, the property lease agreement and its amendments referenced by the court were focused on improving the property location. The lease spelled out the financial responsibilities between the landlord and tenant. Obviously, the petitioner had no interest or even knowledge of the negotiations and agreements as she was not in any way a party to them.

It is doubtful that in crafting the lease and its amendments the parties to the lease ever thought about how their document language would be later scrutinized under the New Jersey workers’ compensation statute. The use of terms in the lease such as a “common area maintenance fee” opened the door to the creation of workers’ compensation liability where none may have existed before. Therefore, employers should be cautioned that, when it comes to real estate and lease issues, they should consider how those documents can effect other areas, such workers’ compensation liability.

*Bob is a shareholder in our Mount Laurel, New Jersey, office. He can be reached at 856.414.6009 or rjfitzgerald@mdwcg.com.

 

Defense Digest, Vol. 27, No. 5, December 2021 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2021 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.