Missouri: Commission Pierces Corporate Veil for LLC Owners

Want to pierce the corporate veil? Go ahead, according to the Labor and Industrial Relations Commission in a 2-0 decision which found uninsured Missouri business owners operating out of their home personally liable for more than $72,000 for a claimant who fell from a ladder in 2008 while installing duct work.

In Guinnip v. Bannister Electric, 2012 MO WCLR Lexis 149, issued July 27, 2012, the defendants operated several HVAC businesses out of their home and did not have worker’s compensation insurance. The claimant established control to show he was an employee and not an independent contractor because he performed several jobs, he was paid an hourly rate, and closely supervised and told what to do. The owners of the LLC dominated the business practices, commingled accounts to pay personal expenses, and did not acquire worker’s compensation insurance although having one employee performing construction made them subject to the Act. The LLC argued asserted that claimant was an independent contractor.

The LLC did not have an attorney at the 2011 hearing and had been granted a previous continuance to obtain one. The LLC owner Mr. Liles attempted to file an application for review on behalf of his wife as the co-owner and the appeal was rejected because he was not permitted to file an appeal on her behalf without engaging in the unauthorized practice of law. The LLC did not file any brief with the commission.

“The circumstances under which Missouri courts will pierce the corporate veil and hold the corporation's owner liable for the corporation's debt are narrow. Patrick v Koepke Const., Inc. v. Paletta, 118 S.W.3d 611. A court may pierce the corporate veil or disregard the separate corporate entity if the separateness is used a device to defraud a creditor. Sansone v. Moseley, 912 S.W.2d 666 (Mo. App. 1995).

A Missouri court will disregard the corporate entity and hold the corporate owners liable if the following can be shown: (1) control, not mere majority or complete stock control, but complete domination, not only of finances, but of policy and business practices in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) such control must have been used by the corporation to commit fraud or wrong, to perpetrate the violation of statutory or other positive legal duty, or dishonest and unjust act in contravention of claimant's rights; and (3) the control and breach of duty must proximately cause the injury or unjust loss complained of. Collett v. American National Stores, Inc. 708 S.W.2d 273 (Mo. App. 1986).” Cited in Lowe v. Kelly Cattle Co., 2012 MO WCLR Lexis 123, June 19, 2012. The Commission unanimously affirmed a claim rejecting an attempt to piece the corporate veil in Lowe. The Commission affirmed without comment a finding by a different administrative law judge: “There is no provision in the Missouri Workers' Compensation Law that permits an employee to pierce the corporate veil in order to hold an individual liable as an employer.”

Source: Martin Klug, Huck, Howe & Tobin. Read Martin Klug's Mo. Workers' Comp Alerts.

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