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CALIFORNIA CORPORATE & SECURITIES LAW

When Partnership “Members” Are Employees

Last week, I wrote about how AB 2883 changes the definition of “employee” vis-a-vis corporate directors.  See Is A Corporate Director An Employee Subject To Workers’ Compensation?  AB 2883 also rewrites the definition of “employee” for purposes of partnerships and limited liability companies.  Effective January 1, 2017, an “employee” for purposes of California’s workers’ compensation law will include:

(f) All working members of a partnership or limited liability company receiving wages irrespective of profits from the partnership or limited liability company; provided that where the working members of the partnership or limited liability company are general partners or managers, the partnership or limited liability company and the partners or managers shall come under the compensation provisions of this division only by election as provided in subdivision (a) of Section 4151. If a private corporation is a general partner or manager, “working members  company. A general partner  of a partnership or limited liability company” shall include the corporation and the officers and directors of the corporation, provided that the officers and directors are the sole shareholders of the corporation. If  a managing member of  a limited liability company is a partner or member, “working members of the partnership or limited liability company” shall include the managers of the limited liability company.may elect to be excluded from coverage in accordance with subdivision (q) of Section 3352.

Cal. Labor Code § 3551(f) (deleted text in strikeout, new text in blue).

The amended statute includes several oddities.  First, it refers to “members of a partnership”.  Does this include all partners, limited partners, general partners, or some other category?  Second, what makes a member of a partnership or a limited liability company a “working” member? Third, why does Section 3551(c) refer to “actual services” in the case of officers and directors while Section 3551(f) refers to “working” members.  Fourth, if the first sentence of Section 3551(f) refers to both general and limited partners, why are only general partners permitted to elect to be excluded?

As I mentioned in last week’s post, AB 2883 is a camel (i.e., a bill authored by a committee).  Perhaps the legislature will see fit to revisit its handiwork in 2017. 

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