When Choice of Law Made a Difference

Choice of law clauses are not usually the subject of intense negotiation, in part as there is substantial consistency among the laws of the various states. But not always, as parties on a New Jersey project learned. A difference in the New Jersey and Pennsylvania workers’ compensation laws meant that the liability of the general contractor to an injured worker claim would depend on which state’s law governed.

A New Jersey contractor performing a public project in New Jersey hired a Pennsylvania roofing sub. A subcontract clause called for New Jersey law to govern. An employee of the sub was injured, and sued the GC in Pennsylvania. The GC then sought dismissal of the claim, arguing that the Pennsylvania workers’ comp statute provides immunity to the GC as a “secondary employer” who has liability for payment of workers’ comp benefits if the direct employer fails to do so. Despite the subcontract clause calling for application of New Jersey law, the GC apparently hoped the Pennsylvania judge would willingly apply Pennsylvania law. The judge didn’t take the bait.

Applying a choice of law analysis, the court reasoned that Pennsylvania had an interest in ensuring that one of its citizens would be properly compensated for an injury. And that interest could be discharged by applying New Jersey law, as called for in the subcontract. And since New Jersey law does not provide the GC in this setting with immunity from the sub’s employee’s claim, the GC’s motion to have the claim dismissed was denied.

A nuance in the workers’ compensation laws from one state to another may not dictate negotiations over a choice of law clause. But this case serves as a reminder that at least a few risks may be allocated differently, under particular circumstances, from one state to another. Think about that the next time you consider whether to argue over the choice of law clause when negotiating a contract. The case is Acker v. Ray Angelini, Inc., 2016 U.S. Dist. LEXIS 108956 (Aug. 16, 2016), available here (LEXIS subscription required).