Labor Company on the Hook for Own Defense After Worker Sues for Wage Violations

In an underlying complaint, one contracted worker filed suit against his employer after his wages were withheld.
By: | September 13, 2020

In an underlying complaint, Jose Enrique Castillo Chaidez filed suit against his employer, MJC Labor Solutions, and Carl Hemphill, who oversaw Castillo’s duties at the company.

Advertisement


Castillo alleged that Hemphill and his corporate entities “forced him to undertake activities well beyond the scope of his agreed upon job responsibilities.” Castillo was hired to drive trucks for MJC Labor, but Hemphill had Castillo doing office and yard work for Hemphill’s office space. Castillo also alleged Hemphill tried to send Castillo on to construction sites, which Castillo was not authorized to do.

Additionally, Castillo alleged Hemphill and Co. withheld money to which he was entitled, lodged him in overcrowded and unsanitary housing and threatened him with arrest and permanent expulsion from the temporary-worker visa program he was in.

The allegations fell into four main categories: violations of federal and state anti-human trafficking laws; violations of federal and state wage laws; violations of Pennsylvania common law; and a violation of Pennsylvania consumer protection law.

Hemphill and MJC Labor looked to their insurer for defense.

The company held a miscellaneous professional liability policy through Landmark Insurance Company at the time of Castillo’s suit.

The policy covered claims “arising out of a negligent act, error or omission … in the performance of providing a permanent and/or temporary employee placement services.”

Following its review of the claims, however, Landmark declined to defend Hemphill or MJC Labor in the underlying action.

Landmark pointed to the fact that Castillo’s complaint did not allege negligence, errors or omissions in the provision of placement services, as the professional liability policy requires, and instead were allegations of human trafficking and wage violations. Hemphill and MJC Labor were being accused of wrongful conduct, which fell outside coverage.

Hemphill and MJC Labor filed suit.

Advertisement


The plaintiffs’ believed Landmark was obliged to defend them, as well as reimburse them for attorneys’ fees and costs under the policy.

Court officials reviewed the policy language in tandem with the allegations put forth in Castillo’s suit. Upon review of the activities that led to Castillo filing said suit, the court ruled in favor of Landmark. The insurer’s motion to dismiss was granted.

Scorecard: Carl Hemphill and MJC Labor will have to defend themselves in the underlying action. Landmark Insurance is off the hook.

Takeaway: It is imperative to remain in compliance with the Fair Labor Standards Act, as well as abide by state and federal wage laws in order to create a work environment that is fair and just for all employees. Any deviation, and employers may face legal consequences. &

Autumn Heisler is the content strategist at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Matrix: Presented by Liberty Mutual Insurance

9 Trends that Are Driving Rate Increases

The market was optimistically cautious entering 2020, but thanks to COVID-19, growing liability challenges and other risk factors, we’re seeing more hardening.
By: | September 1, 2020




The R&I Editorial Team can be reached at [email protected]