Saturday, June 16, 2018

CA: Legislation Sought to Protect Utilities, Lead Paint Manufacturers

As a western U.S. resident currently suffering through rather dramatic wildfires here in the Laramie, WY area, this story from TortsProfBlog caught my eye:

In California, the "tort wars" have been quiet recently.  That may change due to wildfires and a court decision finding lead paint manufacturers liable for a public nuisance.  The state's utilities, potentially on the hook for billions of dollars in damage caused by wildfires, and lead paint manufacturers have sought legislation to protect themselves from damages.  The Mercury News has details.


Michael C. Duff

June 16, 2018 | Permalink | Comments (0)

Friday, June 15, 2018

No Reimbursement for Medical Marijuana in Maine Workers’ Compensation and a Subtle Connection to Undocumented Workers

As a Maine workers’ compensation lawyer, I was interested to read the Maine Supreme Judicial Court’s just-issued opinion in Gaetan Bourgoin v. Twin Rivers Paper Co. In the opinion, the Court holds that Twin Rivers is not required to reimburse Bourgoin for medical marijuana used to treat his chronic back pain from a work-related, permanently disabling injury. Bourgoin had previously used opioids for pain management, but found marijuana, lawfully obtained and used under state law, more effective and less secondarily debilitating. Because of the opinion, he will probably be forced to return to opioid consumption, a very unsatisfactory outcome.

The legal basis for the opinion, which the Court repeatedly asserted as “narrow” despite all appearances to the contrary, was that the federal Controlled Substances Act preempted Maine’s medical marijuana law. Characterizing an employer’s requirement to subsidize an employee’s acquisition as a “positive conflict” between federal and state law, the Court concluded that principles of conflict preemption rendered the Maine administrative order unenforceable against Twin Rivers. Of course, the ruling also means that no other Maine employer can be compelled to reimburse an injured worker for medical marijuana expense.

In the real world, parties simply contract around these kinds of obstacles. Because the alternative may be extended-duration use of opioids, with all that goes with that process, if medical marijuana cannot be explicitly reimbursed, the parties will simply find other ways to put the required funds in an injured worker’s hands.  What interests me as a law professor, however, is the analysis by which the Court arrived at its preemption conclusion, because that analysis could carry unintended consequences.

The Court recites that, under Title 18 U.S.C.S. § 2(a), a federal prosecution can be directed against any individual who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission.” This provision, argues the Court, “reflects a centuries-old view of culpability: that a person may be responsible for a crime he has not personally carried out if he helps another to complete its commission.” Thus, the argument ultimately concludes, the employer here could have been prosecuted under federal law if it took an “active role” in furtherance of the marijuana offense with the intent of facilitating the offense’s commission. The employer on this reading is provided the Hobson’s Choice of violating state or federal law.

But a violation of federal law hardly seems a foregone conclusion. As the dissent points out, it would be nearly impossible to prove an employer had specific intent to violate federal law, a necessary element for conviction. I, of course, agree with the Court that former federal guidance documents expressing a disinclination to federally prosecute marijuana possession purportedly authorized by state law does not save the state marijuana law from preemption. But imagine trying to prosecute an employer for specific intent to violate federal law where, in the context of a countervailing, authorizing state marijuana law: 1) internal federal documents suggest a (broadly publicized) federal lack of interest in prosecuting; and 2) not a single medical provider, employer, or insurance carrier acting under color of state marijuana laws could be shown to have been prosecuted under the Controlled Substances Act. Could it be said in those circumstances that an employer complying with a state workers’ compensation order to reimburse for medical marijuana possessed specific intent to violate federal law? That strikes me as implausible and, as a former federal lawyer, I would not be happy to prosecute such a case.

Furthermore, how would the broad “aid or abet” formulation laid out by the Court work in the context of, to take one stark example, undocumented workers? Does an employer, merely by complying with a workers’ compensation award in favor of its injured, undocumented worker “aid or abet,” in violation of federal law, e.g., 18 U.S.C.S. § 1325 (illegal entry), or 18 U.S.C § 1542 (providing false information to obtain a passport)? Would the employer thereby possess specific intent to violate immigration laws? Surely, state courts in upholding the lawfulness of workers’ compensation awards have implicitly or explicitly rejected such arguments. Will Maine courts now have difficulty with such cases after Twin Rivers?

A final somewhat obscure preemption problem is discussed in the case. The Controlled Substances Act states that it did not intend to “occupy the field in which that provision operates, including criminal penalties, to the exclusion of any State law on the same subject matter which would otherwise be within the authority of the State unless there is a positive conflict between that provision of this title and that State law so that the two cannot consistently stand together.” So, states are not forbidden from legislating, regulating, or enforcing in the field of controlled substances. But state law must yield to federal law where there is a “positive conflict” between the two. When does that happen?  The dissenting opinion quoted constitutional scholar Erwin Chemerinsky:

The phrase “positive conflict . . . so that the two cannot consistently stand together” in [the Controlled Substances Act] has been interpreted as narrowly restricting the preemptive reach of the CSA to “cases of an actual conflict with federal law such that ‘compliance with both federal and state regulations is a physical impossibility.”’ Justice Scalia has written that the plain language of [the Controlled Substances Act] states a congressional intent that the CSA preempt only state laws that require someone to engage in an action specifically forbidden by the CSA. As a California appellate court succinctly put it, “mere speculation about a hypothetical conflict is not the stuff of which preemption is made.”

It is not physically impossible to comply with both the CSA and state marijuana laws; nothing in the more liberal state laws requires anyone to act contrary to the CSA. Only if a state law required a citizen to possess, manufacture, or distribute marijuana in violation of federal law would it be impossible for a citizen to comply with both state and federal law. Similarly, if a state were to make state officers the manufacturers or distributors of marijuana, it might well be impossible for those officials to comply with both state and federal law. No state marijuana law, however, has attempted to require state or local officials to violate the CSA in this manner.

In a nutshell, state marijuana laws do not “require,” they “permit,” in the sense that state authorities agree not to prosecute certain marijuana offenses under state law. The laws are passive in a manner that is reminiscent of state laws or practices that permit business (including through awarding of workers’ compensation benefits) to be conducted “around” illegal immigration. In both contexts the situation is created when a paralyzed federal government is simply unable to keep up with evolving facts on the ground within the states. I doubt Twin Rivers will be followed because there is every indication that the preemptive sweep of the Controlled Substances Act is not nearly as broad as the Court contends.

Michael C. Duff

June 15, 2018 | Permalink | Comments (0)

Wednesday, June 13, 2018

"Is Heroism the Standard?" Redux .... Hershey, PA, June 8, 2018

            Many in the workers' compensation community complain that seriously injured workers can develop a disability lifestyle, become dependent on drugs, and unreasonably extend their disabilities.  Instead of falling into such a lifestyle, these critics argue, disabled workers should show "resilience."  This rhetoric, which I have written about before on this blog, has its genesis in progressive medical/rehabilitation thinking, Muscular Christianity (I think), and, realistically, employer/insurer cost considerations. 

            The complaint is legitimate, and one with which I have some sympathy.  I also believe that some legitimately injured workers do indeed unreasonably extend their disabilities -- if only waiting for a generous lump sum settlement.  Many readers will know of the sharp critique of this type advanced by Dr. Nortin Hadler in his many books.   

            On the other hand, the "duty-of-resilience" critique can go too far, and is often articulated in overly simplistic terms.  At my agency's conference in Hershey, Pennsylvania (June 7-8), an articulate industry speaker, addressing an audience about medical marijuana, posited forcefully that the "choice between opioids and medical marijuana [for chronic pain patients] is a false choice...."  What workers need to do, instead, is show some resilience and "get off their asses!"  After all, a friend of his, who is partially paraplegic, has shown resilience and will often go hiking with him.  If she can do it, so can others!

            I believe the speaker knew his audience and thus took some pleasure in feeding these lions of the community some red meat, and indeed they rewarded this coarse declaration with a leonine roar of applause. 

            Yet, his panel partner, Dr. Michael Wolk, thereupon gently reminded the industry speaker -- and the audience -- that not all people respond to pain and other impairments the same way; indeed, he posited that science has shown that one's genetic make-up can affect the ability to be resilient.

             Dr. Wolk (my God, an astonishing speaker) might also have remarked, as have other physicians at our Pennsylvania conferences, that heroism is not appropriately considered the recovery standard in the first place.  Commentators like the industry speaker, talking about resilience, often invoke exceptional individuals, like Christopher Reeve, but most of us realize that not everyone is Superman. 

            This point was vividly made two years ago in the memoir, A Body Undone: Living on After Great Pain (NYU Press 2016).  The author, Christina Crosby, a professor at Wesleyan University, was rendered quadriplegic in a cycling accident, and has been left with chronic pain as well.  She recounts in her memoir what life is like with such a catastrophic injury, shows that she indeed has great resilience -- but leaves the heroism narrative behind.  She makes clear that her circumstances, like education; a life of reflection and discipline; and the unflagging love and support of her family, make her ability to bounce back possible.  Most of us know that not every injury victim will have these advantages.  (My complete review of Professor Crosby's book is posted at the research website

            Is all this not common sense?  We have known for a century, after all, that young men respond differently to their traumatic wartime exposures.  Some show a grim resilience; some are troubled for life, but are able to continue on; some are broken.  In the modern day, most of us would not address such veterans with the admonition that they get off their asses.  Injured workers deserve the same respect.             





June 13, 2018 | Permalink | Comments (0)

New Book by Professor Douglas E. Litowitz Treats Kafka's Legal Fiction ... and his Workers' Compensation Job!

            Aha! The perfect person has written the perfect book for which many of us, lo these many years, have been waiting. Douglas E. Litowitz, who has a Ph.D. in philosophy, and who is also a law professor and practicing attorney, has capped a longtime interest in Franz Kafka by dissecting the gloomy writer/lawyer’s fiction and sharing his findings and analysis with us. In the end, he formulates, as you can tell from the title, a thesis with regard to Kafka’s overall view of the law.  See Douglas E. Litowitz, Kafka's Indictment of Modern Law (University Press of Kansas 2017).  The book is highly accessible (Litowitz first summarizes the essential stories where law is the focus, and then offers his interpretations), a pleasure to read, and animated throughout by the author’s intimate engagement with the subject, sense of humor, and healthy cynicism.  

            For the full review, see





June 13, 2018 | Permalink | Comments (0)

Wednesday, June 6, 2018

Why “Quid Pro Quo” Unconstitutionality Arguments Work Better in Some States than Others

Quid pro quo” arguments resonate more forcefully in Kansas and Florida than in many other states, and there is a state constitutional doctrinal reason why this is so. 

By quid pro quo, I mean the idea that legislatures abolished workers’ rights to civil negligence law suits in exchange for reasonable or adequate workers’ compensation benefits. The workers got “this for that” (the literal translation of quid pro quo). The employers, of course, gave up common law defenses (the unholy trinity) in exchange for tort immunity. That was their “this for that.” A theory exists that if the “quid pro quo” is undone there has been a breach of the deal, and that constitutional infirmity somehow ensues. (I hold the theory in somewhat modified form). The theory makes sense, but surprisingly enough, under both federal and state constitutional law, it is murky as to whether a constitutional violation results from such a breach. The strongest support for the theory would be if the negligence action the worker gave up was itself constitutionally grounded. I have written at some length on this issue (see the link below) and suffice it to say that, as a matter of federal constitutional law, I think the proposition is on shaky ground. It does not help that the U.S Supreme Court has been aggressively uninterested in considering the interplay of state workers’ compensation law and the 14th Amendment. (I suspect that is the ultimate reason the Court did not take up the carriers’ invitation, in American Insurance Carriers et al. v. New York et al., to review the challenge by multiple insurance carriers to the closure of the New York State Insurance Fund: Extreme caution in identifying any federal constitutional interest in a state workers’ compensation case.

Thus, the quid pro quo argument—that a state legislature violates the constitution by arbitrarily taking back what it originally promised in exchange for a (fundamental? important?) negligence right—could probably only gain traction in a state supreme court. “Can the legislature really do that?” Such constitutional litigation raises issues very similar to those arising when a legislature attempts to limit or even eradicate tort damages (e.g., in medical malpractice or noneconomic damages). “Can a legislature really do that?” There are essentially three approaches courts have taken when seeking to answer questions of personal injury rights (including workers’ compensation) reduction: a historically tied approach, a “reasonable alternative” public policy approach, and a legislative power approach.

1).        A historically tied approach holds that relevant state constitutional provisions, like right to remedies and open courts provisions, protect only common law causes of action that existed at the time of the adoption of the relevant constitutional clause. Those causes of action are preserved unless the legislature substitutes another adequate remedy or “quid pro quo” for the affected litigants. This is really the only kind of approach that is necessarily responsive to workers’ compensation claimants’ quid pro quo arguments.

2).        A public policy approach permits the legislature to limit any cause of action and remedy if it creates a reasonable alternative, but, even without creating a substitute, it may alter former rights if it acts for a very important reason or is responding to an overwhelming public need. Under this approach, a state government has an “out” for not providing a reasonable alternative to a cause of action and remedy, but, from the plaintiff’s point of view, and unlike upcoming approach 3, the state must at least establish that it is for a very important reason or is responding to an overwhelming public need. Workers’ compensation claimants’ have a better opportunity to attack workers’ compensation provisions in a state that uses this approach, but not as good a chance as with approach 1.

3).        A third theory allows legislatures the broadest power to alter common law rights and remedies by redefining the notion of legal injury. This theory is sometimes known as “legislative supremacy.” Workers’ compensation claimants have almost no chance of prevailing on a quid pro quo theory in a state using this approach. Just as a state had plenary authority to enact workers’ compensation in the first place, the argument goes, so it has plenary authority to modify workers’ compensation in essentially any way it likes.

You can probably tell from this scheme (you can reader a fuller exposition and some supporting citations here at pp. 168-172), that the success of quid pro quo litigation will depend heavily on a state’s constitutional law doctrine. You may also have discerned that the reason that quid pro quo litigation has been successful in Florida and Kansas is that their state courts employ a variation of approach 1 or 2, above. In Kluger v. White, a 1970s-era Florida personal injury case, the Florida Supreme Court said,

Where a right of access to the courts for redress for a particular injury has been provided by statutory law predating the adoption of the [1968] Declaration of Rights of the Constitution of the State of Florida, or where such right has become a part of the common law of the State . . . the Legislature is without power to abolish such a right without providing a reasonable alternative to protect the rights of the people of the State to redress for injuries, unless the Legislature can show an overpowering public necessity for the abolishment of such right, and no alternative method of meeting such public necessity can be shown.

Thus, in a very significant way, negligence actions have been constitutionalized in Florida. A legislature cannot extinguish a negligence right (or eviscerate the workers’ compensation substitute for the right) unless it “can show an overpowering public necessity for the abolishment of such right, and no alternative method of meeting such public necessity can be shown.” Any wonder why plaintiffs can win in Florida?

Consider the situation in Kansas, which just recently played out again this week in Pardo v. United Parcel Service. Here is the shortest version of the story I can tell. Kansas uses the 6th Edition of the American Medical Association Guides to Permanent Impairment as a proxy for “disability” (some might say slavishly). Pardo received an award for a 2013 shoulder injury. He injured the same shoulder in 2015, but in a separate location in the shoulder. The injury was clear. But the 6th Edition of the AMA Guides dictated no additional disability compensation. The agency did not appear to be fully on board with the determination: it would leave Pardo with no remedy for his injury. But it was (as it is in many states) beyond the agency’s mandate to rule on the constitutionality of the application of the Guides. You know the question: Can the legislature do that? No, as it turns out, because the quid pro quo is built directly into the Kansas constitution under a long string of authority. See if you recognize the analysis (internal citations omitted):

If a remedy protected by due process is abrogated or restricted by the legislature, such change is constitutional if [1] the change is reasonably necessary in the public interest to promote the general welfare of the people of the state, and [2] the legislature provides an adequate substitute remedy to replace the remedy which has been restricted.

The case was remanded. We will see if it is appealed.

There are several states where quid pro quo constitutional arguments may work, either because approach 1, above, has been adopted or because no clear approach has yet been articulated. But it is easy to identify those states where the arguments will almost certainly not work. Just read the constitutional tort reform cases in your state. If you discern approach 3, you have your answer.

Michael C. Duff

June 6, 2018 | Permalink | Comments (0)

Saturday, June 2, 2018

Peter Rousmaniere on Four Injured Worker-Friendly Reforms

            According to columnist Peter Rousmaniere, a movement exists in the insurance community which promotes the adjuster as not just passive dispenser of checks and payer of bills, but instead as a proactive “claims advocate.” Adjusters in the present day, he says, “want to be on the side of the injured worker as he or she tries to navigate the medical system, keep her home life in order, and return to work.” He applauds this movement (he refers to claims professionals, but the rhetoric seems also to be that of the nurse case manager community) and suggests that perhaps state legislatures can similarly act in an enlightened manner and change aspects of workers’ compensation laws that are “unexamined, outmoded, [and] sometimes indefensible.” Peter Rousmaniere, Walking in the Shoes of the Injured Worker, IAIABC Perspectives, p.18 (March 2018).

            Of note is that in developing his thesis, he cites with sympathy some of the aspirational 19 recommendations of the National Commission, a set of advisories that many in the present day (usually without explanation) claim to be obsolete.

            What, in any event, are these unsatisfactory items that Rousmaniere identifies? They are not complex, he notes, like trying to make permanent partial disability awards accurate and adequate. Instead, he claims, they are fairly simple.

           First, persuaded by recent studies, Rousmaniere would do away with employer control of medical treatment. One study, in this regard, showed no real savings by employers when they get to pick the claimant’s physicians, and another actually shows that litigation may increase in employer-control jurisdictions. Instead of lists and employer control, perhaps the better way to address overutilization and other abuses is better injured worker and provider education. “And,” he adds, “utilization review, drug formularies, and other mandated programs may be better ways to improve the quality of care than employer choice laws….”      

            Second, Rousmaniere would follow the National Commission recommendation and either eliminate or drastically cut back waiting periods to just a few days. He acknowledges the traditional employer anxiety that waiting periods are necessary to curtail fraudulent claims, but seems unimpressed by that concern. (My own concern would be not outride fraud but exaggeration.)   The other justification (new to this writer) was that they “were a recognition of built-in delays in reporting and response.” Regarding this concern Rousmaniere has only contempt: “A supervisor’s smartphone can, within minutes of the incident, take and transmit a video of the site of an injury to the claims organization. Immediate triage by phone or telepresence tells the claims payer much of what it needs to know about the injury.”

            Third, Rousmaniere endorses the National Commission thesis that wage replacement be adequate so that the injured worker and his family can keep house and home. The National Commission in its studies discovered replacement rates as low as 30%, and recommended that states set the benefit as a percentage, to wit, “at least 80% of the worker’s disposable income, that is, income after taxes.” Rousmaniere, however, thinks that the figure should likely be higher; after all, the worker, when he goes off work, must still pay for essential benefits such as health, dental and short-term disability.   “It appears,” he declares, that “many workers can’t afford to be injured…. No state to my knowledge has ever looked unto the shortfall problem with the exception of Texas…. [T]hese issues are researchable.”

            Fourth, Rousmaniere would alter the how maximum compensation payable rates are established, rates which in most, if not all, states, are still figures well below the National Commission-recommended 200% of the jurisdiction’s Statewide Average Weekly Wage. Rousmaniere seems to endorse the approach of the Canadian policy wonk Terry Bogyo, who “says they should be based, not on average wage, but on a percentile of wages in a state. A 90th percentile cap would mean that weekly wage replacement could not exceed the gross wages of the 90th highest paid worker in the state. Bogyo notes that labor economists figured out how to calculate wage percentiles 40 years ago, but no state has converted to this method of designing a cap.”



June 2, 2018 | Permalink | Comments (0)

Friday, June 1, 2018

Identifying the Source of Recent Constitutional Challenges

             In a new article, the articulate chair of the Virginia Workers’ Compensation Commission discusses the unprecedented number of constitutional challenges we have seen the last two years or so surrounding state workers’ compensation laws.

            Commissioner Marshall first points out that the basic constitutionality of such laws was long ago confirmed by the U.S. Supreme Court. Further challenges through the decades, meanwhile, have generally been unsuccessful. It is specific provisos, he observes, that in the present day have been the principal target of attack. Most of these challenges, notably, are to markedly retractive laws. Here he reviews challenges to limited attorney’s fees in Florida and Utah, the ability of large corporations to opt out in Oklahoma, the automatic adoption of the 6th Edition of the AMA Guides in Pennsylvania, and the exclusion of agricultural workers in New Mexico (that was actually a longstanding law).  See Wesley G. Marshall, Modern Constitutional Challenges to Workers’ Compensation Systems, IAIABC Perspectives, p.6 (March 2018).

            The phenomenon of the recent constitutionality challenges has been treated in a number of publications. What is remarkable about Commissioner Marshall’s essay is his identification of five factors that have prompted or contributed to the trend.

> He first notes that in the last years of the Obama Administration, increased attention was being paid by the federal government to perceived benefit inadequacies in state workers’ compensation laws. “National attention,” he posits, “may have caused some lawyers and judges to examine laws with greater scrutiny.”

> Commissioner Marshall then notes, secondly, that the various media critiques (like the sharp assessment of state systems by ProPublica and NPR) “may have raised awareness about an unbalancing of the system.”

> Third, “fundamental challenges to the system,” reflected by such things as the radical retraction of Oklahoma opt-out, make aggressive responses more likely; here the author quotes Professor Duff: “When you have legal changes which challenge the fundamental aspects of the whole legal system, then anything is fair game.”

> Commissioner Marshall adds, as a fourth factor, “good lawyering” – groups like the Workers Injury Law Group (WILG), for example, “developed a collaborative approach to identify vulnerable system features and the best venues in which to pursue them.” The author might well have added that in a principal battleground, Oklahoma, the heroic injured worker lawyer Bob Burke threw down the gauntlet against opt out (and other overreaching), and has succeeded in having many of the most offensive provisos, and opt out itself, struck down. Great Caesar’s Ghost, there has not, in the history of workers’ compensation, been such an astonishing performance. “Good lawyering” indeed.

> Finally, as a fifth factor, Commissioner Marshall notes that injured worker attorneys have a vested pecuniary interest in vigorous challenges to benefit cuts. Cuts in benefits (a classic example of retractive legislation) “obviously have a direct impact on attorney compensation. So it seems undeniable that the pursuit of [attorney] compensation is one key consideration.”

June 1, 2018 | Permalink | Comments (0)

Thursday, May 31, 2018

"A Rough System That Should Obtain Just Results": Professor Burton on Work Comp in Israel, Compensation for Diseases, and Restrictive Standards

            In a 2017 article, Professor Burton suggests, perhaps rhetorically, that diseases (defined broadly to include non-acutely-traumatic injuries, like carpal tunnel syndrome, degenerative back problems, and gradual mental stress maladies), be widely compensated and not tied to the demand that work causation always be shown. Instead, a different program altogether would be established to fund, process, and compensate such claims.  See John F. Burton, Jr., Is the Work-Related Test Desirable for all Diseases that Disable Workers?, 39 Comparative Labor Law and Policy Journal 247 (Fall 2017), (subscription required; also on WestLaw). 

            The article, originally part of a collection of essays, reflects the author responding to an assertion of an Israeli colleague that firm rules on disease recovery be established under the workers’ compensation laws of that country. There, confusion apparently exists in this realm, leading to criticism over the integrity of the law. His colleague has called for reform in his country.

             Professor Burton’s plan is largely rhetorical (as I have already suggested), and proposed as a mock solution – here, at least – to the longstanding challenge presented of trying to compensate non-obvious injuries which are nevertheless caused in whole or in material contributing part by work exposures. Removing them from the system altogether is a sort of nuclear option that simply eliminates the issue with one fell blow. An advantage, Burton points out, would be the elimination of the litigation (there is lots of it) that surrounds these non-obvious claims. A disadvantage would be that contests would endure over whether a disease in a particular case exists and the level, if any, of disability which it has produced.  

            Along the way to the conclusion of this largely academic venture, Professor Burton succinctly identifies the other solutions which have, in fact, been attempted in the United States. Here, he provides the reader with a welcome refresher on the trends seen in our country. He identifies, in this regard, four categories of “changes in compensability rules” that are evident among states since 1990. 

  • The first is the legislature limiting pathologic conditions altogether, such as the West Virginia law’s exclusion of mental stress causing mental disability cases. 
  • The second is the legislature restricting compensability when the injury involves aggravation of a pre-existing condition, such as the Florida law’s mandate that, before an injury is compensable, the work causation be the “major contributing factor” (to wit, over 50%), in the malady.
  • The third is legislative change that demands that “objective medical evidence” be submitted to document the authenticity of allegedly disabling conditions, such as (I believe) the Ohio law that “subjective complaints, without objective diagnostic findings, objective clinical findings, or objective test results, are insufficient to substantiate a substantial aggravation.”
  • Fourth, and perhaps most jarring to the Pennsylvania reader, are legislative acts, as in California and Colorado, that allow apportionment in permanent disability awards; under apportionment laws, the employer will be liable only for the degree of disability ascribable to the work injury.

            Burton is dispirited by these restrictive rules (freedom from which we in Pennsylvania have, to date, enjoyed): “I am discouraged by the U.S. experience in recent decades because compensability rules for workers’ compensation benefits have been tightened not on the basis of scientific evidence but instead on the basis of cost-minimization.”

            The reader also learns from Professor Burton of the basic structure of the workers’ compensation laws of Israel. The program there is a national enterprise that began in the 1950s. All employees and self-employed workers are covered by the law. Workers’ compensation is not, however, the exclusive remedy. Instead, the employer may also be sued in tort, with the employer receiving a credit against damages for any workers’ compensation benefits previously received. As for underwriting of the program, risks are insured by the “National Insurance Institute” (Nil), and are financed by payments from the employer that do not vary among employers. Nil also administers the program. All of this shows that Israel has followed the European model (like that of Germany) in establishing its system. It is also notable that in Israel, like most of the industrialized world, all residents are entitled (since 1995 in that country) to medical care through a general health program. The workers’ compensation laws also provide for vocational rehabilitation benefits, another typical feature of European systems.    

             As with any article by Professor Burton, one comes away with a lot of new knowledge. It is perhaps his Israeli colleague, to whom the author is responding, who has the most memorable line. In seeking to reform the system to provide a clear disease compensability standard, “Our foremost concern [is] to fashion a workable model to function well within the existing system. Much like the WC system overall, it is a rough system that should obtain just results….”



May 31, 2018 | Permalink | Comments (0)

Wednesday, May 30, 2018

The Making of Wyoming’s First Workers’ Compensation Treatise

I am embarked, along with my research assistants, rising University of Wyoming College of Law 2Ls John Hornbaker IV and Jeremy Meerkreebs, on the construction of Wyoming’s first workers’ compensation treatise. It is my intention to provide some status updates along the way for those that might have passing interest in such a process.

To begin with, we have been canvassing state-specific workers’ compensation treatises around the country through WorldCat, both to evaluate treatise structures, and to assess the prevalence of such treatises generally.

I am surprised to learn – and I will appreciate being corrected by the community on this score if wrong – that 18 states do not possess (and appear never to have possessed) a state-specific treatise:


The Western over-representation strikes me as interesting. In our own Rocky Mountain region, we think we have found that only Colorado possesses a treatise that is regularly updated. Idaho appears to have had a treatise, but from a distance it seems to be inactive.

Again, all corrections/refinements will be appreciated.

Michael C. Duff

May 30, 2018 | Permalink | Comments (2)

Saturday, May 26, 2018

After Air Ambulance Preemption III: Connections to ERISA Preemption

This, the third installment of my air ambulance series—see the other entries here, and here, is a preemption discussion. I’m sorry to inflict it upon you. Feel free to email me privately at the University of Wyoming for clarification. I’ll almost always respond. Really.

Air ambulance carriers charge a lot. So much so that state workers’ compensation regulators try to make them charge less for transporting injured workers within their respective state boundaries. Thus far, that attempt has been blocked by the preemption provision of the Airline Deregulation Act of 1978, 49 U.S.C.App. §1305(a)(1), which expressly pre-empts the States from “enact[ing] or enforc[ing] any law, rule, regulation, standard, or other provision having the force and effect of law relating to rates, routes, or services of any air carrier . . . ”  For purposes of this discussion assume that air ambulances are air carriers within the meaning of the Act.

It is common to hear commentators assert that every federal court that has considered the air ambulance preemption question has concluded that the Airline Deregulation Act preempts state attempts to regulate the price of air ambulance services. But it is probably more accurate to say that only two federal circuits, the 10th circuit in EagleMed, LLC v Cox, 868 F.3d 893 (10th Cir. 2017); and the 11th Circuit in Bailey v. Rocky Mountain Holdings, LLC, --- F.3d ---- (11th Cir. 2018), have dealt specifically and substantively with the air ambulance preemption provision enacted in 1994 (quoted and linked above). The other “modern era” (post-1994) reported air ambulance circuit court cases, Air Evac EMS, Incorporated v. Texas, Department of Insurance, Division of Workers' Compensation, 851 F.3d 507 (10th Cir. 2017) and California Shock Trauma Air Rescue v. State Compensation Ins. Fund, 636 F.3d 538 (9th Cir. 2011) concerned jurisdictional or standing issues.

The Airline Deregulation Act preemption language is broad and was meant to be. Essentially, all state laws “relating to” air carriers’ rates, routes, or services are effectively nullified. The language is sufficiently broad, in fact, that plaintiffs have thought it necessary to argue that as to certain state law claims it is “trumped” by another federal law, the McCarran–Ferguson Act, which provides in relevant part: “No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance.” There is more to say about this argument (and about the McCarran-Ferguson Act) than is presently necessary for my purposes. It is enough to say that EagleMed and Bailey rejected the argument because they concluded that setting of air ambulance fee schedules is not “regulation of the business of insurance,” an explicitly protected state sphere. This development was perhaps presaged in the 2003 Supreme Court ERISA case, Kentucky Assoc. of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003). That analysis is too long to include here but, in brief, the Court in that case ceased using the McCarran-Ferguson Act as an interpretive aid for understanding the scope of ERISA’s insurance savings (of state law from preemption) provision.  

The lead U.S. Supreme Court case on Airline deregulation Act preemption is Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992), a case in which airlines sued to enjoin state attorneys general from enforcing state deceptive practices laws against airlines’ advertising. The most important thing to know about Morales is that it utilized Employee Retirement Income Security Act of 1974 (ERISA) preemption principles to assess whether the Airline Deregulation Act preempted state law. Why?  ERISA preempts all state laws “relating to” employee benefit plans. The Airline Deregulation Act preempts all state laws “relating to” carrier rates, routes or services. Very similar preemption language; very similar preemption analysis. The Court continued the ERISA analogy in American Airlines v. Wolens, 513 U.S. 219 (1995).

Under ERISA, the Supreme Court once read that statute’s “relating to” language in perhaps the broadest manner possible. A state law was said to relate to employee benefit plans when it had a “connection with” or made any “reference” to them. See Shaw v. Delta Airlines (1983). (the “reference to” line of cases is probably still good law; the “connection with” line of cases is fraught with complexity). After slightly more than a decade, the Supreme Court itself (in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) ) began making quasi-metaphysical observations that the Shaw language could not possibly be as broad as it seemed:

Section 514(a) marks for preemption “all state laws insofar as they ... relate to any employee benefit plan” covered by ERISA, and one might be excused for wondering, at first blush, whether the words of limitation (“insofar as they ... relate”) do much limiting. If “relate to” were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course, for “[r]eally, universally, relations stop nowhere,”. . . But that, of course, would be to read Congress’s words of limitation as mere sham, and to read the presumption against pre-emption out of the law whenever Congress speaks to the matter with generality.

The Court also remarked in Travelers that,

Indeed, in cases like this one, where federal law is said to bar state action in fields of traditional state regulation . . . , we have worked on the “assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.”

Thus, the Supreme Court began to conclude that ERISA could not be deemed to preempt state law unflinchingly because of the facial breadth of the ERISA preemption provision. (And to repeat, the ADA preemption provision also uses the “relate to phraseology). There must be demonstrated a clear and manifest purpose of Congress to preempt where historic state police powers are involved, and the presumption is against preemption of state law. I have seen no language from the Supreme Court suggesting that it will cease using ERISA principles when analyzing Airline Deregulation Act preemption claims. If that is correct, and because Morales preceded Travelers, I do not think EagleMed’s and Bailey’s seemingly perfunctory treatment of the “relate to” phraseology is warranted. If one assumes that regulation of workplace injury is a historic police power of the States—and I do—where is the evidence of Congress’s clear and manifest purpose to preempt traditional state workers’ compensation regulation of air ambulance services? In any event, I suspect this may be the last ground upon which Airline Deregulation Act preemption litigation may be realistically pursued in the circuit courts. The next move would belong to Congress.    

The stage for this litigation was perhaps set by the Supreme Court’s opinion in Northwest, Inc. v. Ginsberg,  134 S.Ct. 1422 (2014). In Northwest, a breach of contract case involving an airline’s termination of a customer’s frequent flyer membership for alleged improper conduct, Justice Alito managed to make it through the majority opinion without once citing a single ERISA preemption case (let alone, Travelers), except indirectly through Morales, stating that the relevant state (contract-based) law was preempted if it had “a connection with, or reference to” airline prices, routes, or services. That is obviously ERISA language borrowed from Shaw, but it may not be an accident that Shaw was never cited. (Are there institutional concerns about muddying ERISA preemption law?)

The strongest argument against applying (or even thinking about) Travelers was identified by Justice Thomas's dissent in Wolens. “Congress has recently revisited § 1305 [in 1994], and said that it ‘d[id] not intend to alter the broad pre-emption interpretation adopted by the United States Supreme Court in Morales,’ H.R.Conf.Rep. No. 103-677, p. 83 (1994).” But this does not answer the question of how broad preemption should be under current law because Morales relied on Shaw, which was significantly modified by Travelers with apparent subsequent acquiescence by Congress. Morales, moreover, as had Shaw before it, embraced the proposition that  “[s]ome state actions may affect [airline fares] in too tenuous, remote, or peripheral a manner” to have pre-emptive effect.

In the end, the federal courts must decide 1) if they will continue to apply ERISA preemption analysis; and 2) if so, whether that [Shaw] analysis must be updated considering Travelers. Even assuming Shaw [bizarrely] applies, where is the “tenuousness” line, and can there be any convincing argument that Congress meant to preempt state regulation of air ambulance services? So far as I can discern, EagleMed and Bailey failed to analyze these questions adequately.

Michael C. Duff

May 26, 2018 | Permalink | Comments (0)

Friday, May 25, 2018

Recent State Constitutional Challenges Involving Medical Malpractice Law

As I have pointed out at some length, Download Worse than Pirates final, there is a close relationship between state constitutional challenges to medical malpractice limitations on tort recoveries and challenges to workers’ compensation inadequacy similarly grounded in state constitutions. Over at—which I highly recommend to those interested in thinking about evolving workers’ compensation law—two interesting medical malpractice cases have been featured recently.

First in Pennsylvania:

A mother and son who together experienced a failed liver transplant argued to the Pennsylvania Supreme Court on Monday that the seven-year med mal statute of repose should be struck down as violating the state constitution's "open courts" provision.  The statute of repose was one of many provisions included in the MCARE statute, passed in 2003 to deal with an alleged med mal crisis in Pennsylvania.

And another In Wisconsin:

In 2011, a Wisconsin woman had all four limbs amputated.  A jury determined health care providers were responsible by negligently failing to diagnose an infection and awarded her $25.3M.  The non-economic damages portion of the award was approximately $16.5M.  WI has a med mal cap on non-economic damages of $750,000.  The trial judge ruled the cap was unconstitutional as applied to the plaintiff's case.  The intermediate appellate court went further and ruled the cap was unconstitutional.  Tomorrow the Wisconsin Supreme Court hears arguments in the case.

Again, for links to the full stories visit TortsProfblog.

Michael C. Duff

May 25, 2018 | Permalink | Comments (0)

Monday, May 21, 2018

Murphy Oil and an Even Slipperier Slope of Forced Arbitration: Game Over?

The Supreme Court’s ruling today in Murphy Oil/Epic Systems/Ernst & Young may be read narrowly as an opinion holding that the National Labor Relations Act does not trump the Federal Arbitration Act (FAA): Congress’s desire to facilitate arbitration, it appears, outweighs employees’ rights to engage in concerted activities for mutual aid or protection. One of the hats I wear is “labor law professor,” and my co-authors and I will be updating our labor law casebook to reflect the change.

But Murphy Oil means much more than which of two federal statutes prevails when there is a conflict between them. The right question to be asking is whether any employment statute, federal or state, may overcome the FAA. In the workplace context, what the FAA represents is a privileging of a fictitious agreement between employer and employee to waive a judicial forum for resolution of all workplace disputes. By fictitious, I do not mean that the employee failed to sign the arbitral agreement. The document is real. The employee’s signature on the document is real. What is fictitious is the notion that the employee realizes what she is signing or has any real choice in an era of expanding arbitration to refuse to sign it. Why bother? The next employer will insist on the same thing. But this is no more an agreement than the other contracts of adhesion I argued about many years ago in my first-year of law school contracts class. The employee unwittingly waives the right to judicial review of an adjudicator/arbitrator’s award. An arbitrator need not cite a case or analyze law. Indeed, a patently erroneous decision cannot be reversed simply because it is wrong. The employee has simply waived the substantive law.

And this is just the beginning. As I have written previously, arbitration has been expanding. I have harbored a suspicion that the only reason it was not expanding faster was that employers were concerned Murphy Oil/Epic Systems would come out the other way. I do not for a minute dispute a contention made by Justice Ginsburg, blithely dismissed by opinion-author Neil Gorsuch, that the decision will lead to the “underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”  And, as I have said previously, there is absolutely nothing to prevent the spread of forced arbitration to workers’ compensation cases. (I would love to hear arguments to the contrary—I’ve heard nothing convincing). Arbitration has already made its way into state tort law. It will continue to encroach on the rule of law until the U.S. Congress stops it.

A great irony for workers’ compensation lawyers is that the dilemma over “contracting out” was at the center of uncontroversial enactment of the UK’s workers’ compensation statute in 1897. During debate, in 1893, on amendment of the 1880 English Employer’s Liability Act, the contending factions could not come to agreement on the question of whether employers and employees should be permitted opt-out of statutory coverage in exchange for voluntary employer contribution to worker friendly societies. The strengthening organized labor movement and Asquith’s liberals were adamantly opposed to contracting out. Chamberlain’s Unionists and the Conservatives disagreed. When the factions could not agree, workers’ compensation was the resulting grand bargain, for years later. It is a long story and my reason for mentioning it here is to point out that roughly 120 years later we have returned to the same old question and find ourselves in an era of warmed-over Lochner and yellow dog contracts.

Michael C. Duff

May 21, 2018 | Permalink | Comments (0)

Saturday, May 19, 2018

After Air Ambulance Preemption II: No, General Health Insurance Won’t Pick Up the Tab (and a Couple of Additional Points)

As I mentioned in my last post (immediately preceding this post), Wyoming is arguing, in EagleMed, that if the state’s workers’ compensation division fails to pick up some, or all, of the expense of air ambulance transportation, injured workers could submit bills for the balance to their general health insurance carriers. That contention is called into question by the facts of Bailey v. Rocky Mountain Holdings, a case recently decided by the 11th Circuit. In Bailey – which was not a workers’ compensation case—a child was airlifted to a West Palm Beach hospital following an automobile accident. The child, who later died, was covered by his parent’s automobile accident policy. Under Florida law, one of the ways the schedule for coverage limits could be established was as a percentage of Medicare reimbursement limits. To keep the facts as simple as possible, suffice it to say that what the policy would pay was far less than what the air ambulance provider billed. Like the Wyoming situation, a provision of state law stated that, if more was due under the bill than was provided by the schedule, the air ambulance carrier could not bill the victim directly. Somewhat different than the Wyoming case, the carrier had gone ahead and billed the family of the deceased victim anyway, prompting a class-action suit centered, under a variety of counts, on a theory of deceptive or unfair/trade and collection practices. The actual holding of Bailey is that these state law actions are preempted by the Airline Deregulation Act.

I write specifically to point out that the parent of the deceased accident victim in Bailey did submit the air ambulance bill to both his automobile insurance carrier, State Farm (under a PIP policy), and to his general health insurance carrier, Aetna. The result? The total charges were $27,975.90. State Farm paid $6911.54. Aetna paid $3681.60. The insured did not pay the balance of $17,382.76 and, because the average American does not even have enough in savings to cover a $1000 emergency, this is hardly surprising.

Thus, Wyoming’s argument that sticking the injured worker with the large air ambulance bill will “work” because someone else will pick it up strikes me as implausible. I also wonder what the end game of the air ambulance companies could possibly be. Just because state regulators can’t disrupt this flavor of monopoly does not mean that the road, in the end, will lead elsewhere than to the personal bankruptcies of some very vulnerable people.  

In my next post, I’ll explain why states and plaintiffs are not prevailing (and won’t prevail) on McCarron-Ferguson-based anti-preemption arguments.

Michael C. Duff

May 19, 2018 | Permalink | Comments (0)

Thursday, May 17, 2018

After Air Ambulance Preemption: An Injured Worker Left with No Remedy Offends the Quid Pro Quo

I have written a little about air ambulance preemption elsewhere and I won’t pause at length to note some of the inconsistencies I see between Airline Deregulation Act preemption and evolving ERISA preemption analysis. As a thought experiment, though, I invite you to re-read the U.S. Supreme Court’s 1995 Travelers’ opinion, and then to compare it to the Supreme Court’s 1992 air ambulance opinion in Morales v. Trans-World Airlines (in which the Court unabashedly utilized an ERISA preemption analysis, much to the consternation of the then Texas Attorney General). I suspect you will note some tension, and one may not need much persuading that a case in which litigant TWA was already defunct may now be even more long-in-the tooth. Simply put, Morales was pre-Travelers, and that is a problem.

Nonetheless, the federal circuits will continue to muck about in the pre-Travelers ERISA preemption thicket until stopped. One such muck-about case is the 10th Circuit’s EagleMed decision. A good partial summary of the case can be found here, but I will endeavor to give you my own severely truncated birds-eye view followed by reflections on what has been unfolding after preemption was found.

Air ambulance costs have been skyrocketing and a few years ago some air ambulance companies billed the Wyoming workers’ compensation system the market rate for rendering services to Wyoming-eligible injured workers. The state refused to pay those rates and capped reimbursement according to a state schedule. Ultimately the 10th circuit opined that the Wyoming schedule, imposing a maximum charge for air ambulance services, was preempted. So far the story is familiar, but what is seldom asked is what happens after a finding of air ambulance preemption.

In EagleMed, while the federal circuit court upheld the federal district court’s finding of preemption, it reversed the lower court’s conclusion that, because the schedule had been preempted, full reimbursement to the air ambulance companies followed as a matter of course. On this question, the federal circuit court remanded to state workers’ compensation officials because it was not clear what the state was willing to pay in the absence of the preempted schedule. (That, of course, is a state question). The state hearing officials essentially agreed with the federal district court: with the fee schedule gone, the state was required to pay whatever the air ambulance companies chose to charge. The state appealed (Wyoming’s system is monopolistic, so the state is the de facto insurer), and Wyoming’s attorney general has recently filed a brief Download EagleMed - AG's brief, in support of the appeal, with the Wyoming Supreme Court. The attorney general argues that the state legislature would never originally have provided unlimited reimbursement for air ambulance services, for to do so would put the state in the position of writing a blank check. The generic Wyoming ambulance reimbursement language states:

If transportation by ambulance is necessary, the division shall allow a reasonable charge for the ambulance service at a rate not in excess of the rate schedule established by the director under the procedure set forth for payment of medical and hospital care.

Because the air ambulance rates established under authority of this language has been preempted, however, what is the state to do? It cannot establish a maximum rate of reimbursement without suffering preemption. Is the preempted language severable from the rest? “If transportation by ambulance is necessary, the division shall allow a reasonable charge for the ambulance service . . .” It is perhaps not surprising that the air ambulance companies took the position, before the Wyoming workers’ compensation officials, that the fee schedule is separable from the general obligation to pay for ambulance services. Wyoming, on the other hand, takes the position that the reimbursement provision, as it pertains to air ambulance services, is not separable from the fee schedule and that, in effect, the entire provision has been preempted as it applies to air ambulance reimbursement. If Wyoming is wrong, and the provision survives without the fee schedule, there is no limiting boundary (beyond reasonableness?) for reimbursement.

Another wrinkle in the EagleMed remand emerges because one provision of Wyoming law states that medical providers are not permitted to bill injured workers directly for work-related injury costs.

Fees or portions of fees for injury related services or products rendered shall not be billed to or collected from the injured employee.

The Wyoming attorney general argues that, in context, this provision applies only to health care providers and hospitals. The federal courts were not so sure, and I am not convinced given the reference in the ambulance reimbursement provision set out above to “under the procedure set forth for payment of medical and hospital care.” Some linkage is occurring in that language, and I doubt it can be easily de-linked. Resolution of the issue is important because, if the “no bill” provision does not pertain to air ambulance services, the injured worker herself might be directly billed by the air ambulance companies. On this reading, who would pick up the excess—the difference between what a fee schedule might (eventually) provide, and the full costs of air ambulance services? Wyoming concludes that the cost should fall on the injured worker, but that the excess could be made up by employees’ health insurance or air ambulance “Medigap” insurance. But what reason is there to think that an employee’s general health insurance would cover such a loss? Why should it if the expense is clearly work-related? Could such insurance coverage be mandated at the state level? If the employer’s health plan is self-insured, any attempt to mandate air ambulance insurance would be preempted by ERISA. The state could mandate such coverage for all insured health plans under the savings clause to ERISA’s preemption provision; but this is a small monopolistic state with no primary workers’ compensation market. Secondary markets in such an environment might become quite complicated. And, of course, if the coverage became too onerous the employer could simply drop health care coverage altogether. As for a Medigap model, who pays, and what would be the premium? 

Although this might strike you as a somewhat exotic problem – how many people, after all, require air ambulances? – the problem is far from abstract in a rural state like Wyoming, where hospitals are few and far between, where fully-accredited trauma centers are non-existent, and where workplaces can be scattered and remote. (As we used to say in South Jersey, “get me over the bridge!). Many serious injuries are treated in neighboring Colorado at hospitals that are often far away. Access to air ambulances could be a matter of life and death for a substantial number of injured workers. Ask yourself whether your state would tolerate any substantial workers’ compensation non-coverage of ambulance costs. Is it credible to say that these are not “medical costs” and therefore may simply be avoided, as the state of Wyoming is arguing?

Here, it seems to me, is the fundamental disconnect. Workers’ compensation—indemnity and medical benefits—is not, like other forms of employee or social welfare benefits, discretionary. It is the quid pro quo for a tort suit. It is a right. The cause of action lies against the employer, whether insurance exists to cover the liability, or it does not. The situation in Wyoming is complicated because the state is the insurer. Regardless, the categorical abrogation of a workers’ compensation benefit (previously assumed to exist) means that a remedy is missing. With respect to that remedy—damages for the cost of air ambulance travel—the employee must be permitted, at a minimum, to pursue relief in tort against the employer, whether the cause of action is likely to be successful or unsuccessful. This is true in any state in which hyperinflated medical expense becomes “uninsurable.” Liability does not disappear because the liable entity becomes insurable. Indeed, in Wyoming, the right to recovery for physical injury is explicitly constitutional, and I would argue that the same is implicitly true in other states under various state constitutional provisions. Section 10(a) of the Wyoming Constitution states: "No law shall be enacted limiting the amount of damages to be recovered for causing the injury or death of any person." It will be most interesting to see what the Wyoming Supreme Court decides. 

Michael C. Duff 

May 17, 2018 | Permalink | Comments (0)

Monday, May 14, 2018

Will Arbitrators Decide the Scope of the Gig Economy?

My colleague and co-editor of this blog, Judge David B. Torrey, pointed out to me recently that several of the gig “worker” contracts contain mandatory binding arbitration provisions. Preliminary to the question of whether a worker is an employee, is the question of who makes that determination. You could be excused for imagining it would be a court, but that is quite possibly not the case.

Let’s consider an easy hypothetical. Imagine an individual working for the supermarket delivery chain “Instacart.” The individual is hurt in the course of the work. The Instacart “master” agreement requires that virtually all employment disputes be arbitrated. 

[T]he Parties agree that to the fullest extent permitted by law, ANY AND ALL DISPUTES OR CLAIMS BETWEEN YOU AND INSTACART shall be exclusively resolved by final and binding arbitration by a neutral arbitrator, including without limitation any and all disputes or claims BETWEEN YOU AND INSTACART, whether in contract, tort, or otherwise, relating to the formation (including unconscionability and invalidity), existence, breach, termination, interpretation, enforcement, validity, scope, and applicability of the Agreement, or the Services agreed to herein, or any claim on any basis under federal, state, or local law, which could otherwise be heard before any court of competent jurisdiction. By signing this Agreement, and unless otherwise stated in this Arbitration Provision, the Parties hereby waive their right to have any dispute, claim, or controversy decided by a judge or jury in a court.

Now suppose the worker files an employment lawsuit. The company takes the position that the worker is not covered by the applicable employment statute. I think that under existing arbitration precedent the dispute will very likely be subject to arbitration. As many readers will already know, there is virtually no meaningful judicial review of arbitration awards. Thus, in addition to the evolving disuniformity of the substantive statute law of employee status, procedural disuniformity may soon be added: the private ordering of employee status.

I should point out that, under the Instacart agreement, individuals have the right to opt-out of the agreement within 30 days. I leave it to the reader to decide whether that is a sufficiently-long time to be meaningful.

Judge Torrey also pointed out to me that the TaskRabbit agreement very unusually excludes workers’ compensation, and most other types of administrative employment, claims from its scope. (It is not the case for the Instacart agreement noted above or for, e.g., Handy, Inc.) The rub there, however, is that it might easily be argued that whether an individual is an employee is antecedent to the question of whether the individual in fact possesses a workers’ compensation claim and must therefore be decided by an arbitrator. I think the waiver language is broad enough to render such an argument colorable:

This agreement to arbitrate, contained in Section 20, (“Arbitration Agreement”), is governed by the Federal Arbitration Act and survives the termination of this Agreement or your relationship with Company. Claims include, but are not limited to, any dispute, claim or controversy whether based on past, present or future events arising out of or relating to: this Agreement and prior versions (including the breach, termination, enforcement, interpretation or validity thereof), the TaskRabbit Platform, services, Tasks, your relationship with Company, the threatened or actual suspension, deactivation or termination of your User Account or this Agreement, payments made by you or any payments made or allegedly owed to you, any city, county, state or federal wage-hour law, compensation, breaks and rests periods, expense reimbursement, wrongful termination, discrimination, harassment, retaliation, fraud, defamation, trade secrets, unfair competition, emotional distress, any promotions, offers made by Company, breach of any express or implied contract or breach of any express or implied contract or covenant, claims arising under federal or state consumer protection laws; claims arising under antitrust laws, claims arising under the Telephone Consumer Protection Act and Fair Credit Reporting Act; and claims arising under the Fair Labor Standards Act, Civil Rights Act of 1964, Uniform Trade Secrets Act, Americans With Disabilities Act, Age Discrimination in Employment Act, Older Workers Benefit Protection Act, Family Medical Leave Act, Employee Retirement Income Security Act (except for individual claims for employee benefits under any benefit plan sponsored by Company and covered by the Employee Retirement Income Security Act of 1974 or funded by insurance), and state statutes, if any, addressing the same or similar subject matters, and all other federal and state statutory and common law claims. All disputes concerning the arbitrability of a Claim (including Claims about the scope, applicability, enforceability, revocability or validity of the Arbitration Agreement) shall be decided by the arbitrator, except as expressly provided below.


In addition, the terms of the overall agreement include a “workers classification” provision, in Section 13, that would likely make it easy for a court to conclude that such issues were contemplated by the parties to be reserved for arbitration.

While I think parties could agree to reserve such questions for court determination, I do not believe these "agreements" manifest such an intent.

Michael C. Duff

May 14, 2018 | Permalink | Comments (0)

Friday, May 11, 2018

More Independent Contractor Confusion: A New Massachusetts Workers’ Compensation Decision

The independent contractor question in employment law is developing into a unique form of incoherence. When the California Supreme Court issued its recent opinion in Dynamex, I pointed out that the independent contractor test that court employed—a modified form of the ABC test—was only applicable to industries covered by “wage orders,” under a legal construct—the wage order—launched in the early twentieth century. Dynamex did not reach the employee definition under workers’ compensation, however, and the present situation is that California now possesses multiple employee definitions, depending on the state statute in question, or on whether an industry is covered by a wage order defining employee broadly (or independent contractor narrowly, if you prefer). My casual reading of some recent commentary suggests that many folks in the workers’ compensation community feel that it is just a matter of time until the ABC test—or something like it-- makes its way into California workers’ compensation. Perhaps. But a recent case from Massachusetts—a state that Dynamex specifically mentioned as utilizing the ABC test in certain contexts—reveals that this may not necessarily be true. It seems quite possible that some states will be willing to simultaneously function with multiple employee definitions applicable to different state employment statutes. 

In September 2010, Ms. Ives Camargo fell off a ramp and hurt her right knee and right hand. She missed no time from work on that occasion. On January 7, 2011, Ms. Camargo reported a second injury; she slipped on ice while delivering newspapers, injuring her right leg. Following this second injury, she was hospitalized and eventually underwent two surgeries, one for her right knee and the other for her right hand. She filed an initial claim for workers compensation benefits in 2012 with the Massachusetts Department of Industrial Accidents. The insurance carrier disputed the claim. After a preliminary conference, an administrative judge issued an order directing the carrier to pay temporary total incapacity benefits. The carrier appealed and, following a formal administrative hearing, an administrative judge determined that Ms. Carmago was an independent contractor and therefore not entitled to workers' compensation benefits. The appellate division of the administrative agency affirmed.

On review, in Ives Camargo’s Case, No. SJC-12368, 05/10/2018, the Massachusetts Supreme Judicial Court made clear that various employee tests exist under Massachusetts employment law (or, depending on how you look at it, various separate independent contractor tests). "Employees,” under workers’ compensation law, are defined as "every person in the service of another under any contract of hire, express or implied, oral or written," with certain exceptions not relevant to the case at hand. The employee vs. independent contractor test within workers’ compensation law involves 12 factors that may sound familiar:

(a) the extent of control, by the agreement, over the details of the work; (b) whether the one employed is engaged in a distinct occupation or business; (c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision; (d) the skill required in the particular occupation; (e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; (f) the length of time for which the person is employed; (g) the method of payment, whether by the time or by the job; (h) whether the work is a part of the regular business of the employer; (i) whether the parties believe they are creating the relation of master and servant; (j) whether the principal is in business; (k) the tax treatment applied to payment . . .; and (l) the presence of the right to terminate the relationship without liability, as opposed to the worker's right to complete the project for which he was hired . . .

The problem is that Massachusetts also has another employment law provision distinguishing independent contractors from employees. Under Massachusetts General Laws, Chapter 149, section 148B—the chapter of Massachusetts laws applicable to Massachusetts labor laws generally, but not to workers’ compensation law (though it cross-references the workers’ compensation statute, Chapter 152)—it is more difficult to classify a worker as an independent contractor rather than an employee. The provision states, in relevant part:

For the purpose of this chapter and chapter 151, an individual performing any service, except as authorized under this chapter, shall be considered to be an employee under those chapters unless:

(1) the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and

(2) the service is performed outside the usual course of the business of the employer; and,

(3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

(b) The failure to withhold federal or state income taxes or to pay unemployment compensation contributions or workers compensation premiums with respect to an individual's wages shall not be considered in making a determination under this section.


Readers will recognize this as a version of the ABC test, and the court is undeniably correct in confirming that the Massachusetts legislature has explicitly afforded less statutory coverage to workers under the workers’ compensation statute than under other state labor laws. Indeed, the court goes on to say that no fewer than four employee definitions are applicable under various Massachusetts employment laws (I’ll omit discussion here in the interest of space).  Why all the variability? According to the court, “Each involves a complex allocation of costs and benefits for individuals, companies, and State government itself. Other States that employ multiple tests for determining employee or independent contractor status depending on the context have emphasized these differences.” That answer is not satisfying, and one may be forgiven for entertaining a different explanation: certain potentially liable regulated entities under one statute have the “ear” of the legislature, while other regulated entities, governed by other statutes, do not. It would make for an interesting empirical study, for example, to investigate whether workers whose benefits are paid from public tax money are more likely to be classified as “employees” than those paid benefits by private insurance carriers.

In any event – the confusion has caused me to think about a very particular torts question. If all independent contractors are really not the same, should the businesses utilizing them always be insulated from tort liability when their independent contractors engage in tortious conduct (which is the normal tort rule)? After all, the premise for insulation from tort liability in such circumstances is that the independent contractors, and not the businesses utilizing them, are in control of the work. But can that any longer be assumed to be true? We now have a plethora of independent contractor definitions within states; and it seems to me that courts in tort cases may have an increasingly difficult time dismissing cases (at least on the pleadings) alleging a business is liable for the negligent conduct of its “independent” contractor. Under many new state gig laws, a business could in fact be controlling (within the meaning of tort law) work performed by workers who are not formally classified as employees.

Back to Ms. Camargo. She worked as the independent contractor of an independent contractor (a more common situation these days)—Publishers Circulation Fulfillment, Inc.—since 2001. “PCF provides home delivery services for newspaper publishers and pays delivery agents to deliver newspapers to subscribers.  PCF does not publish its own newspapers. Instead, it acts as a middleman to deliver published newspapers.” So, first the newspapers stop directly employing people to deliver and hire an independent contractor to do the work. Then the employees of the independent contractor are themselves deemed independent contractors. It is a game of musical chairs, and Ms. Camargo simply wasn’t fast enough. Still, her injuries are real, and as I tell my first-year law students, someone will pay (even if it is her). The only question is who. Perhaps she was more likely to have been covered as an employee under the 12-factor test in Massachusetts than under the new gig law in Iowa. But that will hardly matter to her now.

Michael C. Duff

May 11, 2018 | Permalink | Comments (0)

Wednesday, May 2, 2018

Dynamex Checks a Gig Line: California Supremes Respond to Intensifying Employee Misclassification

There are two things that workers’ compensation professionals should know right off the bat about the California Supreme Court’s magisterial opinion in Dynamex Operations West v. Lee. First, although the case addresses the never-dying question of whether an independent contractor is in reality an employee, it does not apply to California workers’ compensation cases, which, under Borello (see infra.), utilize a different employee definition than those under consideration in Dynamex. Indeed, the purpose of Dynamex is to make the finding of employee status easier than under Borello. Second, the case does not technically even apply to all of California wage and hour law, let alone to all California employment law. The facts are simple: a driver (and similarly situated drivers) claimed to be employees who were deprived of various statutory rights. A delivery company that utilizes their services says the workers are independent contractors. That is all you really need to know. Dynamex ultimately holds that

[W]e conclude that in determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the “ABC” test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes:  (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity

Dynamex, a case not explicitly about the Gig economy (it actually involved delivery drivers) but with Gig economy implications, is just over 80 pages long. But the case’s length does not derive from inherently difficult concepts. Whenever one is confronted with a fact-intensive, class-action issue (which is really what the case is about), coupled with infamously fact-intensive, employee-status disputes (where factors must be discussed even when a court eventually dismisses their applicability), one is likely in for a long ride. At the end of the day, however, Dynamex reveals: a jurisdiction can a) make it analytically very easy to classify a putative employee as an independent contractor; b) make it very difficult to do so; or c) opt for something in the middle. Recent Gig laws occupy position a); traditional Restatement-like and Economic Realities factor tests occupy position c); and simplified “ABC” and what I’ll now call the modified ABC/Dynamex test occupy position b).



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May 2, 2018 | Permalink | Comments (0)

Sunday, April 29, 2018

Workers’ Compensation in Kansas: A Pedagogically-Useful “Quid Pro Quo” Case

I realize that cases do not emerge from life to serve as teaching exemplars for the students in my workers’ compensation or torts classes. Nevertheless, such a case, Endres v. Creekstone Farms et al., --- P.3d ---- 2018 WL 1883918, was recently decided in Kansas on April 20. It is a case that squarely presents core considerations of the essence of the workers’ compensation-for-tort quid pro quo.

In Endres, a high-ranking employee, Steven Endres, suffered what may have been the beginnings of a heart attack at work. He was treated and returned to work by a company nurse, who allegedly misdiagnosed his condition as “gastroesophageal reflux disease.” Later, after work, Endres suffered a heart attack on the golf course and was pronounced dead in an emergency room. All legal practitioners will note the causal difficulty of this “ticking time bomb” case, and additionally appreciate the rigors of proving medical causation in workers’ compensation heart attack cases. But what makes this tragic case conceptually challenging is that, because of recent, drastically limiting changes to the Kansas Workers’ Compensation Act (cases have become harder for employees to establish), Endres never would have had an opportunity to prove workers’ compensation causation.

When Endres’s widow filed a negligence complaint in a Kansas trial court, in connection with the nurse’s alleged misdiagnosis (I omit here discussion of the dual capacity doctrine: was the nurse acting as a medical professional or as “the employer”?), that court predictably (for most of us) dismissed the complaint on a motion-to-dismiss/demurrer under the expected theory that the civil action was barred by the workers’ compensation exclusive remedy. (Dismissal at this stage is significant because all the reviewing court was left with on appeal were bare pleadings). On appeal, an intermediate Kansas appellate court remanded. First, the appellate court concluded that it could not on the pleadings (i.e., as a matter of law, on a motion to dismiss) be established that Endres had suffered a workers’ compensation-eligible injury due to recent substantial changes in Kansas workers’ compensation law. Second, the appellate court decided that, because Endres’ estate could not apparently recover under workers’ compensation, the negligence claim could not be dismissed as a matter of law. In the words of the court, “If there can be no recovery under the [Workers’ Compensation] Act, then the exclusive remedy provision of the law does not apply and the motion to dismiss should not have been granted.”

But what was the implicit reason the negligence claim could not be dismissed? Because it would leave the plaintiff without an argument for any remedy. I ask my students, every year, if a state could simply eliminate all causes of action for personal injury: suppose a state decided to eliminate both tort and workers’ compensation remedies because, overall, it found the costs of any such remedies (in terms of suppression of business activity) to exceed their benefits. Each year, my students respond, “no, of course not.” But courts have said that “no one has a vested right in any rule of the common law.” Thus, if a workers’ compensation claim were unavailable, it is far from logically axiomatic that a tort claim must necessarily be allowed. After all, the U.S. Supreme Court has said, in Duke Power Co. v. Carolina Env. Study Group, “it is not at all clear that the Due Process Clause, in fact, requires that a legislatively enacted compensation scheme either duplicate the recovery at common law or provide a reasonable substitute remedy.”

But it might first be asked how the Kansas Workers’ Compensation Act was modified to such an extent that the Endres appellate court was confident that a workers’ compensation claim was likely not maintainable. The court mentioned several alterations. The Kansas Act now excludes liability for preexisting conditions when the injury is “solely an aggravation” of a preexisting condition. A “prevailing factor” requirement was added to the Kansas Act, which now provides that “‘[p]revailing’ as it relates to the term ‘factor’ means the primary factor, in relation to any other factor. If the primary factor causing Endres' cardiac arrest, acute myocardial infarction, or death was not Nurse Young's misdiagnosis—but rather Endres' preexisting coronary condition—then the Plaintiffs’ claim is not compensable under the Act.”  Most importantly, the Kansas legislature significantly changed the definition of “accident.” Under the 2015 version of the Kansas Act,

Accident means an undesigned, sudden and unexpected traumatic event, usually of an afflictive or unfortunate nature and often, but not necessarily, accompanied by a manifestation of force. An accident shall be identifiable by time and place of occurrence, produce at the time symptoms of an injury, and occur during a single work shift. The accident must be the prevailing factor in causing the injury.

The old workers’ compensation conundrum. Point to the precise moment when the injury occurred? Very often it simply cannot be done. To complicate matters, the Kansas legislature has also added a “heart amendment” to the Kansas Act requiring that “claimants must demonstrate that their coronary and cerebrovascular injuries arose out of something more than the exertion required of their usual work in the course of their regular employment.”

In the interest of space, I omit additional discussion of the appellate court’s excellent analysis. The court’s penultimate conclusion was that,

if the Plaintiffs’ claims are not compensable under the Kansas Workers Compensation Act, then the [trial] court erred when it granted the Defendants’ motion to dismiss on the pleadings. The Defendants have not met their burden to show that that Act provides for the Plaintiffs’ recovery. We cannot reasonably hold that Plaintiffs’ claim is compensable under the Act based on the allegations in the petition.

The court’s ultimate conclusion:

Within its four corners, the Plaintiffs' petition [that is, the original negligence claim – ed.] states a claim for which relief may be granted. Kansas common law recognizes a claim for “loss of chance to survive” when a plaintiff was already suffering from some injury or illness and a misdiagnosis is alleged to have diminished the plaintiff's chance of surviving from that preexisting injury or illness. The claim is similar to an ordinary medical malpractice claim, but with a reduced standard of proof of causation.

Thus, the case was remanded and either the defendant-employer (oddly enough) will have to prove the viability of a workers’ compensation claim; or the plaintiff-employee will be permitted to commence discovery on the wrongful death claim.   

As I ceaselessly tell my torts and workers’ compensation classes, someone will pay for the costs of injury. If a legislature wants to write entire classes of injuries out of its workers’ compensation statute, one can hardly fault a reviewing court for employing the avoidance canon to duck the cosmic question of whether legislatures may eliminate damages for injury. While it may be true that “[a] person has no property, no vested interest, in any rule of the common law,” I sleep easier at night knowing that many courts continue to respect ancient boundaries. In my opinion, effective retraction of a workers’ compensation remedy must (at a minimum) lead to “reactivation” of tort, if the rule of law is to mean anything at all.

Michael C. Duff

April 29, 2018 | Permalink | Comments (2)

Friday, April 20, 2018

The Colorado Gig Bill – An Idea in Partial Retreat?

I have been reading some very good pieces of late on Gig deregulatory laws authored by Judge David Langham, here, Brandeis Dean David Weil, here, and, and author and policy analyst Peter Rousmaniere, here. I think a sustained critique of these laws is emerging. (I will say in passing that I partially disagree with Peter’s thesis that people Gig because they like it; I think they convince themselves they like the "freedom" of gigging because no real work is available).

It is possible that state Gig bill drafters are hearing the dialogue. How else to explain the very curious Colorado iteration of a Gig bill? (for purposes of this discussion I refer exclusively to Senate Bill 18-171, here). I will say at the outset that as of the time I am writing this is merely a bill and has not yet been enacted as law. But what a curious bill. To start off with, the bill replaces the ten-factor Restatement Second Section 220 of Agency test with a ten-factor independent contractor test of its own (I will omit some of the threshold Handy, Inc.-drafted definitions, which I have explained at length elsewhere on this blog). A Gig “worker” does not perform “employment,” under 8-70-140.9 of the proposed Senate bill, if:

(a)  The services performed by the contractor are governed by a written contract executed between the contractor and a marketplace platform that states that the marketplace contractor is providing services as an independent contractor and not as an employee;

(b)  All or substantially all of the payment made to the marketplace contractor is based on the performance of services or other output;

(c)  The marketplace contractor is allowed to work any hours or schedules the contractor chooses; except that, if the contractor elects to work specified hours or schedules, the contract may require the contractor to perform work during the selected hours or schedules;

(d)  The marketplace contractor is able to perform services for other parties;

(e)  The marketplace platform does not provide on-site supervision during the performance of services by the marketplace contractor;

(f)  The marketplace platform does not require the marketplace contractor to obtain training;

(g) The marketplace contractor bears all or substantially all expenses that the contractor incurs in performing the services;

(h)  The marketplace platform does not require the marketplace contractor to use specific materials, supplies, or equipment in performing services, other than the marketplace platform's online-enabled application, software, website, or system;

(i)  The marketplace contractor does not perform service requests at or from a physical business location that is operated by the marketplace platform; and

(j) The written contract between the marketplace platform and the marketplace contractor states, in a conspicuous manner, that the marketplace contractor is not entitled to unemployment benefits under articles to of this title, and that the marketplace contractor is responsible for paying applicable taxes on income the contractor earns pursuant to the contract relationship.

I do not have much to say about these factors other than to ask the reader to consider how much a contested hearing over employee-status would begin to resemble a traditional employee-status hearing under this test. Just looking over the list casually I can quickly imagine fact disputes on almost every factor.

But that is not what I find most interesting about the bill. Consider the following language at 8-40-301(10)(b) of the bill:

(b) (I) Notwithstanding any other provision of this subsection (10), an individual marketplace contractor that performs services for pay for a marketplace platform shall be deemed to be an employee, regardless of whether the common-law relationship of master and servant exists, unless:

(A)  The individual is free from control and direction in the performance of the service, both under the terms of the contract for performance of service and in fact; and

(B)   The individual is customarily engaged in an independent trade, occupation, profession, or business related to the service performed.

(II)   For purposes of this subsection (10)(b), the degree of control exercised by the marketplace platform for whom the service is performed over the performance of the service or over the individual performing the service must not be considered if the control is exercised pursuant to the requirements of any state or federal statute, rule, or regulation.

(C)  Compliance by the parties with the conditions specified in subsection (10)(a) of this section creates a rebuttable presumption of an independent contractor relationship between the marketplace platform and the marketplace contractor that may be overcome only by clear and convincing evidence.

This is very odd language. First, in b(I), there is some suggestion that an individual, if not determined to be a “market contractor,” could be deemed an employee even if not a common law servant. Perhaps that is current Colorado law, but it is, in any event, expansive. I wonder if that is what the drafter intended.

Second, (b)(I)(A) states that notwithstanding any other provision of the Gig bill, the “contractor” will be deemed an employee unless: the individual is free from control and direction in the performance of the service, both under the terms of the contract for performance of service and in fact. Does that not simply return us to the control test? Perhaps the drafter seeks to avoid that outcome, in (b)(II), by writing “the degree of control exercised by the [putative employer] . . . must not be considered if the control is exercised pursuant to the requirements of any state or federal statute, rule, or regulation.” Translation: if the Gig employer is compelled to exercise control by law, it is not “real” control. While I do not know what the courts will make of that language, I am confident that it does not work to undo (b)(I)(A).

Finally, (b)(I)(B) suggests that “notwithstanding” the Gig law, the individual is an employee unless engaged in an independent trade, occupation, profession, or business related to the service performed. Frankly, that seems to hyper-prioritize on of the Restatement 220 factors. Section 220(2)(b) provides, as only one factor for the fact-finder to consider, “whether or not the one employed is engaged in a distinct occupation or business.” Thus, if working for a "marketplace platform," without having a separate business related to the task at hand, one "shall be" deemed an employee (?!)

In short, this is a curious, odd bill. Fortunately, some of my former Wyoming law students are practicing workers’ compensation attorneys in Colorado. I am confident they can help straighten this out should it come into law. What the prior Gig bills, upon which I have previously commented, lacked in morality they made up for in clarity. This bill seems an attempt to pay lip service to a bad idea. It is a partial retreat, whether intentional or unintentional.

Michael C. Duff

April 20, 2018 | Permalink | Comments (0)

Wednesday, April 18, 2018

New ERISA Disability Benefit Claims Rules and Their Relevance to Workers’ Compensation

During the Oklahoma workers’ compensation opt-out debate of a few years ago, one of the major objectionable features of the opt-out law was the design of the benefit determination “hearings” that employees could be forced into. Opt-out employers, whose “alternative benefit plans” would be governed by ERISA, were at liberty to select benefit eligibility fact-finders, and to pick and choose between competing medical opinions, when disability for work was at issue, with only a vague guarantee that the employee’s treating doctor’s opinion would be considered. This structure was recognized to be in sharp contrast with public workers’ compensation systems governed by state administrative procedure acts and constrained by constitutional notions of procedural due process.

But ERISA administrative hearing procedures (exhaustion of such procedures is required before a court case may be brought) may have just marginally improved, and it is important to maintain contact with developments in ERISA because, whether folks realize it or not, nearly all employee benefits are provided through exclusively-federally-regulated employee benefitplans.” And unless such a plan is a government plan, a church plan, or a plan “maintained solely for the purpose of complying with applicable workmen’s compensation laws or unemployment compensation or disability insurance laws,” it is governed by ERISA. So, whenever you hear of any state-based design to compensate injured workers that “sorta, kinda” sounds like workers’ compensation, but isn’t, you have likely entered the realm of ERISA without realizing it (and, as an aside, it is tax law and the Supreme Court’s opinion in Nationwide Mutual Ins. Co. v. Darden that will determine whether the workers covered by such an alternative scheme are “employees”).

The rationale for the historical license afforded ERISA benefit determinations by plan claims administrators is two-fold. First and foremost, with respect to employee welfare benefit plans (as distinguished from pension plans), ERISA contains no substantive requirements for the content of the plans, which can be terminated and amended at will by employers/plan sponsors. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995).  An employer-provided disability plan, for example, may lawfully provide a beneficiary with $5 per month or $5000 per month. All ERISA requires is that an employer provide what it promised to provide in a required written plan instrument (we’ll somewhat dubiously pretend for purposes of this discussion that the employee knew what the plan provided and that this is a good-faith issue of contract).

Second, because the provision of benefit plans in the United States is entirely voluntary—employers provide them to attract talent and gain tax benefits—the concern has been that if one makes the granting of benefits sufficiently onerous, employers will simply stop providing them.

All of this would be well and good were employment not the welfare benefit (especially medical care) delivery vehicle mechanism of first resort for most people. A benefit denial machine—which is the way some commentators have effectively conceived of the structure—possesses diminished social utility.

There has been one caveat to the unfettered control of claim (denial) procedures by plan sponsors (denial occurs administratively either internally, by the Plan, or externally post-denial, if the claimant opts for administrative rather than court review). Under ERISA §503, every employee benefit plan shall—

(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and

(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.

Department of Labor regulations interpreting Section 503 are located at 29 CFR 2560.503-1 and, on April 2, amended regulations, originally promulgated in 2015, were finally implemented. Among the new regulations is this item:

In the case of a plan providing disability benefits, the plan must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Accordingly, decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical or vocational expert) must not be made based upon the likelihood that the individual will support the denial of benefits. 29 C.F.R. 2560.503-1(b)(7)

That a rule had to be included explicitly requiring that Plans ensure independence, impartiality, and that various employment and retention decisions relevant to adjudicators and experts not be biased is astonishing. It is, indeed, hard to read the rule as other than a tacit admission that the attributes associated with fair hearings have been broadly found wanting.

My workers’ compensation textbook devotes discussion to the issue of whether purported neutral medical structures, in workers’ compensation, are neutral-in-fact. One thing seems clear. If you allow interested parties to structure adjudication, you are likely to wind up with what any reasonably sophisticated citizen might predict. A full review of the new ERISA review regulations suggests that, even allowing for the risk of employers terminating disability benefit plans, a bridge-too-far may have been reached.

Michael C. Duff

April 18, 2018 | Permalink | Comments (0)