.

Defense Digest

New Jersey Supreme Court Holds That in a Civil Action, the Jury, Not the Judge, Decides the Issue of Whether There Is a Special Employee Relationship

Defense Digest, Vol. 29, No. 3, September 2023

September 1, 2023

by Robert J. Fitzgerald

Key Points:

  • A negligent employee is not liable in a civil action for damages for causing an injury to a co-worker under the workers’ compensation bar.
  • In a civil action, the tests to determine whether there is a “borrowed employee/special employee” relationship include the traditional “control test” and the “business furtherance test.”
  • The question of the whether there is a “borrowed employee/special employee” status is likely to be determined by a jury.

In the recent case of Pantano v. NY Shipping Assoc., 294 A.3d 1148 (N.J. 2023), the New Jersey Supreme Court addressed the legal test to be considered in determining whether an individual is a “borrowed employee” and, thus, protected from liability in a third-party civil action. More specifically, in this case, the court addressed whether an employer’s vicarious liability under the borrowed employee doctrine is a question of law to be decided by the court or, conversely, a question of fact reserved for the jury. The court held that the application of the multi-factor test—which can involve matters of disputed fact and witness credibility—is presumptively for a jury to determine. Moreover, a court should not resolve the borrowed employee issue unless the evidence concerning the factors is so one-sided that it warrants judgment in a moving party’s favor as a matter of law.

On November 19, 2013, the plaintiff, Philip Pantano, a mechanic employed by Container Services of New Jersey, was injured at work while attempting to move a heavy piece of equipment he had knocked on its side. Lawrence Giamella, who was also working on the site that day, tried to help Pantano move the equipment back into position with a forklift. As Giamella operated the forklift, a chain slipped, causing the equipment to crush Patano’s left foot, which was ultimately amputated. Pantano collected workers’ compensation benefits from Container Services. He and his wife also brought a personal injury action against multiple defendants, including Marine Transport, Inc. The main dispute concerned which entity or entities employed Giamella, Marine Transport, and/or Container Services. 

Both are related companies owned by Robert Castelo. The companies jointly lease and occupy a large shipping yard. Container Services is in the business of repairing shipping equipment. Marine Transport is in the trucking business, transporting containers from the shipyard to their destinations. Marine Transport’s employees regularly perform mechanical work for Container Services’ customers. The revenues from that mechanical work go to Container Services, and Container Services does not reimburse Marine Transport. Container Services is a union shop that requires it to pay its unionized workers time-and-a-half overtime wages on weekends and holidays. Marine Transport is not a union shop. Sometimes, Container Services’ unionized employees worked on Marine Transport’s payroll, on the weekends, at their regular weekday wages. All workers at the shared workplace were supervised by a manager paid exclusively by Container Services.

Pantano claimed that Marine Transport helped operate the yard and should have known about Container Services’ negligence. Following discovery, the remaining defendants moved for summary judgment. Marine Transport argued that it was not Giamella’s employer. Specifically, although Giamella was on Marine Transport’s payroll, Marine Transport raised the affirmative defense that he was a “borrowed servant/special employee” working for Container Services at the time of the accident. After deferring the motion until after the jury verdict, the judge granted Marine Transport’s motion to dismiss, concluding that Giamella was a borrowed employee working for Container Services when the accident occurred. The court stated: “(1) in every practical sense Giamella was a functional employee of Container Services due to Container Services’ control over his work, and (2) there was no evidence that Marine Transport derived an economic benefit by providing the services of Giamella to Container Services.” 

The Appellate Division reversed and reinstated the jury verdict. The appeals court expressed a reticence to resolve Giamella’s status as a matter of law, “…the facts central to the question, if not the very question itself, could have been determined by the jury.” The Appellate Division found the trial judge erred by performing a complete analysis of the factors and reaching a conclusion on the merits of the borrowed-employee question after weighing the evidence. The Appellate Division discerned that there was substantial evidence to support both main prongs of the borrowed servant analysis (control and business furtherance) in Patano’s favor. Specifically, the appeals court ruled there was “enough evidence for a jury to have found Marine Transport retained sufficient control of Giamella, especially because Marine Transport paid for Giamella’s forklift training after the accident.” The Appellate Division also disagreed with the trial judge that Marine Transport received no financial benefit, “…Marine Transport obviously received financial benefit from the arrangement, or it would not have participated in it.” The court found the idea that Marine Transport would simply donate Giamella’s labor to Container Services “not only inconceivable . . . but incongruent with the indulgent standard afforded the plaintiff when considering the evidence of record on a motion.”

Marine Transport then filed a petition for certification to the Supreme Court, raising several points. As its primary argument in its petition, Marine Transport contended that the borrowed-employee question “is purely a legal issue” that should not be decided by a jury. The court granted certification and noted that the case involved the application of the multi-factor test announced in Galvao v. G.R. Robert Construction Co., 846 A.2d 1215 (N.J. 2004), for evaluating whether a worker who negligently caused a plaintiff’s jobsite injury was a so-called “borrowed employee” of the plaintiff’s own employer. The grant of certification was confined to whether an employer’s vicarious liability under the borrowed-employee doctrine is a question of law to be decided by the court or, conversely, a question of fact reserved for the jury.

In affirming the Appellate Division’s reversal of the dismissal of Marine Transport, the Supreme Court historically noted that the case law before Galvao, plainly signified that a jury, not a judge, must evaluate whether a negligent worker was a “borrowed employee” of the special employer. In many instances, the general employer’s witnesses and proofs will clash with those presented and relied upon by the opposing side. Factual disputes about control and business advantage can readily turn on the assessment of the credibility of competing witnesses. Juries are well-suited to making those assessments, as they are for a host of other factual disputes entrusted to them at trial. 

Based on this historical analysis, the Supreme Court determined that nothing should change the traditional allocation of the jury’s role in borrowed employee disputes in most cases. However, if, under the well-established summary judgment standard, a court were to find that the evidence, viewed in the light most favorable to the non-moving party with all reasonable inferences, is so one-sided that there are no genuine issues of disputed material fact, the court could decide the issue without a jury. 

It is important to note that this case was not decided in the context of a workers’ compensation case but, rather, a civil action. The tests and case law in the New Jersey workers’ compensation forum for determining a general/special employee relationship are similar, but not the same. However, this case is illustrative of the fact that a claim involving issues of employment are some of the most complex and require extensive factual analysis. Many times, these issues are or can be resolved in the workers’ compensation forum first and will have a great impact, not only on your workers’ compensation benefit exposure, but also on your general liability exposure as well. If you have questions regarding your employment status, possible third-party liability exposure, or possible subrogation issues, you should contact your preferred counsel as soon as possible, regardless of where you are in the litigation process. 

*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. 29, No. 3, September 2023, is prepared by Marshall Dennehey 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. © 2023 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

Firm Highlights

Thought Leadership

SIU Gets a Boost: NJ Supreme Court Affirms Insurers' Right to Litigate, Not Arbitrate, Fraud Claims

In a significant win for insurers' Special Investigation Units, the New Jersey Supreme Court clarified that statutory insurance fraud and racketeering claims may proceed in court rather than through PIP arbitration. At issue was whether insurance fraud claims brought under New Jersey's Insurance Fraud Prevention Act (IFPA) and the state's Anti-Racketeering Act (NJ RICO) are subject to mandatory arbitration under the Automobile Insurance Cost Reduction Act’s (AICRA) PIP dispute-resolution framework. Allstate had sued a network of medical practices, physicians, and related corporate entities, alleging a scheme to extract more than $1.7 million in PIP benefits through fraudulent and misleading billing. The trial court dismissed Allstate's complaint and compelled arbitration, reading AICRA's arbitration clause — which covers "any dispute regarding the recovery of... benefits" under PIP coverage, N.J.S.A. 39:6A-5.1(a) — as sweeping in fraud and racketeering claims along with routine benefit disputes. The Supreme Court affirmed the Appellate Division's reversal, adopting Judge Gilson's opinion below (480 N.J. Super. 566 (App. Div. 2025)) as its own reasoning. The Court held that IFPA and RICO claims fall outside the scope of AICRA's PIP arbitration mechanism because that "streamlined and specialized" process cannot grant the relief those statutes contemplate — treble damages, injunctive relief, broad discovery, and joinder of third parties — and because arbitrators lack authority to award compensatory or treble damages to an insurer. The Court also rejected the argument that Allstate's own Decision Point Review Plans independently compel arbitration, finding those plan provisions no broader than AICRA's own arbitration clause. Notably, the Court expressly disagreed with the Third Circuit's contrary holding in GEICO v. Mt. Prospect Chiropractic Center, 98 F.4th 463 (3d Cir. 2024), concluding it is not bound by that federal interpretation of New Jersey law. Insurers retain the right to pursue IFPA and RICO claims in the Law Division, with a jury trial. For SIU units and NJ insurance carriers, this decision is a significant win: it forecloses defense clinics' primary procedural tool for shunting fraud investigations into limited-scope PIP arbitration, where treble damages, RICO relief, and meaningful discovery were never realistically available. Carriers building cases against fraudulently structured clinics, straw-owned practices, or coordinated billing networks can now proceed with confidence that a well-pleaded IFPA/RICO complaint stays in the Law Division rather than being diverted to arbitration on a motion to compel. Practically, this strengthens SIU's leverage in settlement negotiations, preserves civil discovery tools (subpoenas, depositions, joinder of related corporate entities) critical to unwinding complex ownership and referral schemes, and resolves the split with the Third Circuit in favor of NJ insurers — at least as a matter of state law. Expect increased reliance on IFPA civil actions, rather than PIP arbitration demands, as SIU's primary enforcement vehicle going forward.

Thought Leadership

Congress Passes Financial Exploitation Prevention Act

On June 25, 2026, the House passed the Financial Exploitation Prevention Act of 2025 (“the Act”) by a vote of 414 to 2. The Act allows financial advisors and firms to delay suspicious transactions regarding the accounts of clients who are 65 or older, if they believe financial exploitation has occurred or is about to take place. With the advancement of technology and AI, the House’s overwhelming bipartisan passage of the Financial Exploitation Prevention Act represents an important step in strengthening the financial industry’s ability to combat the growing threat of elder financial exploitation. The Act recognizes what advisors have long known that financial professionals are often the first to detect suspicious behavior but have historically lacked clear legal authority to intervene before irreversible financial harm occurs. From the industry’s perspective, the bill accomplishes several important objectives, including the following: (1) Provides a practical “pause button” by allowing financial professionals to temporarily delay certain transaction requests when there is a reasonable belief that a senior or vulnerable adult is being financially exploited; (2) Empowers financial professionals to act by providing greater certainty that firms can act in good faith to protect clients without unnecessary legal risk; and (3) Strengthens investor protection without sacrificing client rights by allowing temporary delays based on a reasonable suspicion of exploitation, which is intended only to allow additional review and not to deny clients access to their money indefinitely. In sum, the Financial Exploitation Prevention Act will equip financial professionals with practical, carefully tailored tools to stop suspected financial exploitation before client assets are lost. By allowing firms to temporarily delay suspicious transactions under defined circumstances, Congress is recognizing the critical role advisors play as the first line of defense against increasingly sophisticated fraud schemes. The Act strikes an appropriate balance between protecting vulnerable investors and preserving individual financial autonomy, while reinforcing collaboration among advisors, families, and law enforcement to combat financial exploitation. The bill now awaits Senate action.

Result

No-Cause Jury Verdict Secured in Wrongful Death Trial

We successfully obtained a no-cause jury verdict in a 13-day wrongful death trial. The decedent, a 59-year-old man, was admitted to the emergency room on February 15, 2019, with complaints of abdominal pain, decreased appetite, and constipation, despite the use of laxatives. The patient did not complain of any nausea, vomiting, or diarrhea. He had a significant medical history including diabetes, hypertension, prior coronary artery stenting, morbid obesity (with past gastric bypass surgery), longstanding ventral hernia, and back pain. A CT scan revealed multiple hernias and a potential closed-loop bowel obstruction, leading to a surgery consultation. Our client, an emergency general surgeon, interpreted that the patient did not have a closed loop or any significant obstruction and recommended non-surgical management. The patient was approved to have clear liquids, and had a vomiting incident shortly after, but our client was not notified. The patient was returned to NPO status, and after improving overnight, he was returned to “clears” and additional medical and renal consults were ordered. Our client did not receive any communications from the residents/nurses of any changes in the patient’s condition. On February 18, 2019, two rapid responses were called due to increased heart rate and vomiting. It is believed that the vomiting resulted in aspiration, causing sepsis, ultimately leading to the patient’s death. During the trial, the plaintiff’s sole medical expert highlighted imaging on the wrong hernia, which called into question all of his opinions in the case. We made key objections related to the expert testimony, limiting what the allegations were, and preventing new allegations from being made. After approximately two and a half hours of deliberating, the jury returned a no-cause verdict. 

Thought Leadership

New Jersey Expands Family Leave Protections Effective July 17, 2026

On January 17, 2026, Governor Murphy signed into law legislation expanding the New Jersey Family Leave Act (NJFLA). Beginning July 17, 2026, significant amendments to the NJFLA will expand job-protected family leave to smaller businesses and more employees across the state. The new law broadens coverage by lowering the threshold for private employers from 30 employees to 15 employees, meaning many smaller businesses will now be subject to the NJFLA. Employees of state and local government agencies will continue to be covered regardless of the size of the employer. The amendments also make it easier for employees to qualify for leave. Under the revised law, an employee will be eligible after three months of employment and at least 250 hours worked during the preceding 12 months, replacing the previous requirement of 12 months of employment and 1,000 hours worked. Currently, New Jersey's Temporary Disability Insurance (TDI) and Family Leave Insurance (FLI) programs provide eligible employees with wage replacement while they are on leave but do not independently guarantee job protection. The recent amendments to the New Jersey Family Leave Act (NJFLA) expand these protections by extending job-protected leave to additional employees. Under the amended law, employees receiving TDI or FLI benefits may be entitled to return to the same position they held before taking leave, or to an equivalent position with the same seniority, status, pay, and benefits. Although the legislation also states that it does not expand or modify an employee's reinstatement rights under the NJFLA, the amendments appear to provide job protection to eligible employees receiving TDI or FLI benefits without requiring them to separately satisfy the eligibility requirements of the NJFLA or the federal Family and Medical Leave Act (FMLA). As a result, some employees may be entitled to longer periods of job-protected leave than were previously available under existing law. With these amendments, New Jersey continues to strengthen workplace protections by expanding access to job-protected family leave for eligible employees. These changes significantly expand access to job-protected family leave and may require employers to update their leave policies, employee handbooks, and HR practices. Notably, employers who were previously not required to administer NJFLA may need to amend their policies and/or create new protocols to come into compliance with the NJFLA. Failure to do so would prove costly, as the penalties for non-compliance are significant.