People v. D. H. Productions, Inc., 41 N.Y.2d 906 (1977)

Corporate officers, specifically the president, secretary, and treasurer, are strictly liable for a corporation’s failure to secure worker’s compensation insurance, reflecting a legislative intent to ensure payment to injured employees.

Summary

This case addresses the criminal liability of corporate officers for failing to secure worker’s compensation insurance for their employees. The Court of Appeals affirmed the lower court’s decision, holding that the statute imposes strict liability on the president, secretary, and treasurer of a corporation for such failures. This decision is based on the legislative intent to ensure that injured employees receive compensation and the historical context of the statute’s amendment, which specifically targeted responsible corporate officers while excluding directors from such strict liability.

Facts

D.H. Productions, Inc. failed to secure worker’s compensation insurance as required by New York law. As a result, the corporation and its president were charged with a misdemeanor under Section 52 of the Worker’s Compensation Law.

Procedural History

The lower court convicted the corporation’s president. The Appellate Term affirmed the conviction. The case then came before the New York Court of Appeals.

Issue(s)

Whether Section 52 of the Workers’ Compensation Law imposes strict liability on corporate officers (president, secretary, and treasurer) for the corporation’s failure to secure worker’s compensation insurance.

Holding

Yes, because the legislative intent and the purpose of the law indicate a desire to ensure that injured employees receive compensation, and the legislative history shows a deliberate choice to hold specific officers responsible for the corporation’s compliance.

Court’s Reasoning

The Court reasoned that Section 52 of the Workers’ Compensation Law clearly penalizes the “failure to secure the payment of compensation,” indicating a legislative intent to impose strict liability. This interpretation is supported by the statute’s purpose of assuring payment to injured employees. The Court examined the legislative history of the 1926 amendment to Section 52, which added the provision imposing liability on corporate officers. An initial draft included “executive officers and directors,” but the Committee on Criminal Courts Law and Procedure of the Association of the Bar of the City of New York objected, arguing that directors often lack direct involvement in the corporation’s day-to-day business and may be unaware of the failure to secure compensation. The legislature heeded these concerns and excluded directors from the final draft. The Court inferred that the legislature intended to apply strict liability to the named corporate officers, who are “likely to have responsibility for the day-to-day operation and management of the corporate enterprise,” but not to directors. The court referenced Matter of Aioss v. Sardo, 223 App. Div. 201, 203, aff’d 249 N.Y. 270 to support the purpose of the law in assisting and assuring payment to an injured employee.