Friday, May 25, 2018
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 TortsProf.com—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
Monday, May 21, 2018
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
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
Thursday, May 17, 2018
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
Monday, May 14, 2018
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.
YOU ACKNOWLEDGE AND UNDERSTAND THAT YOU AND COMPANY ARE WAIVING THE RIGHT TO SUE IN COURT OR HAVE A JURY TRIAL FOR ALL CLAIMS, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED IN THIS ARBITRATION AGREEMENT. THIS ARBITRATION AGREEMENT IS INTENDED TO REQUIRE ARBITRATION OF EVERY CLAIM OR DISPUTE THAT CAN LAWFULLY BE ARBITRATED EXCEPT THOSE CLAIMS AND DISPUTES WHICH BY TERMS OF THIS ARBITRATION AGREEMENT ARE EXPRESSLY EXCLUDED FROM THE REQUIREMENT TO ARBITRATE.
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
Friday, May 11, 2018
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
Wednesday, May 2, 2018
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).
Sunday, April 29, 2018
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
Friday, April 20, 2018
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
Wednesday, April 18, 2018
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 benefit “plans.” 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
Saturday, April 14, 2018
Last week, WorkCompCentral ran a story on cumulative trauma claim-filing in California (behind a paywall here). The story, and readers’ comments following the story, revealed the sharp differences of opinion on whether and why there have been increases in cumulative trauma claims in that state. I do not want to wade into the empirical debate. Rather, I want to share some thoughts about why cumulative trauma cases are simply legally hard.
When (and how) did the straw break the camel’s back? The truth of the matter is that in many instances we simply cannot know. One has arthritis in one’s joints. One also works with one’s hands over a period of years. At a certain point, disability for work manifests itself. One doctor says that work made a major/substantial/significant contribution to the present disability. Another doctor says the present disability is completely unrelated to work
The truth is often somewhere in the middle. I, for example, was a heavy laborer for 15 years before heading off to law school. I hurt my back several times. If I can’t get out of bed tomorrow to teach my workers’ compensation class, could I prove that my disability that day “arises out of” my present employment? I’m a law professor – not exactly a contact sport. Are there times when standing in one spot while teaching aggravates my back pain (which has never completely gone away since my first injury at age 23)? Certainly. Do I have a preexisting, non-occupational back condition? Probably. Would any of my present symptoms be in existence were it not for my prior occupational injuries from decades ago. Probably not. The point is – it is complicated. And a legal system’s evaluation of disability considering these complexities will be unpredictable. No “evidence-based science” can tell me my back does not hurt.
I cover joint causation—as we would term this problem in tort vocabulary—with my students every year in first-year torts class. Two negligently created fires (often caused by locomotives in the early cases) descend simultaneously upon a lonely farmhouse and burn it to the ground. Under a traditional “but for” causation test, who would pay for the resulting damage? Surprisingly, possibly no one. If we remove the conduct of negligent actor #1, does the harm still occur? Yes – because of the negligence of actor #2: it cannot be said that “but for” the negligence of actor #1, the harm would not have occurred to the plaintiff/owner of the farmhouse. But negligent actor #2 may make the same argument: it cannot be said that but for the negligence of actor #2, the harm would not have occurred. One was left with the scarecrow from Wizard of Oz pointing in both directions. In the meantime, we have a burned-out farmhouse. What can we do? Some say the harm must fall on the farmer: better he or she bear the loss than that unfairness results. But wait a minute. We had two negligent actors (which we assume for this hypothetical). How can there be no recovery? Talk about unfairness! Because of this “but for” result—a wrong being left completely unremedied—some “jurisprudents” came up with a different solution. If either actor’s negligence was a “substantial factor” in bringing about the plaintiff’s harm, each would be jointly and severally liable for plaintiff’s harm. (They could decide in a separate action how to apportion damages between themselves, but the plaintiff was only required to pursue one of the joint tortfeasors for all the damages).
From the perspective of a defendant, this is an unfair outcome, especially if the definition of “substantial” is unclear, or too easy for plaintiffs to establish. But, from a plaintiff’s perspective, in the absence of such a rule, negligent actors—those who have breached a standard of care or legal duty—would otherwise be let off the hook completely. Then, the entirety of the loss would fall on the plaintiff. From the plaintiff’s perspective it is sour grapes for defendants to be heard complaining about paying for the costs of harms they (at the least) helped to create.
Back to cumulative trauma in workers’ compensation cases. (Workers’ compensation is a no-fault but not a no-causation system). Assume we have cause #1 of disability, work-related microtrauma over potentially a long period of time, and cause #2 of disability, non-work-related trauma (or, even more simply, aging or degeneration). Someone is going to pay for the disability in this joint (or multiple) cause situation. When we construct legal rules—say we insist that the disability will not be covered by workers’ compensation unless the major contributing cause to its manifestation is one or more identifiable work events—we are making a policy choice that cause #2 will be responsible for the costs of disability. That is, the costs will be borne by the disabled individual (or the public at large) rather than by the industry employing the worker. The problem is that legal rules often operate “covertly.” It is often not clearly seen by the casual observer in which direction liability is being tossed. I think it would be far better to hold cost-allocating discussions out in the open. We all know that is not what happens.
I will conclude by noting how prescient was the German Workers’ Compensation Act of 1884. Although that act is sometimes cursorily described as “social insurance,” that description hardly does the statute justice. It was in fact a law establishing an intricate unitary system taking up explicitly, in three separate headings, “Sickness,” “Accident,” and “Disability.” To me, the benefit of such a structure is the explicit way it insures various types of incapacity for work. One would not spend time in high-stakes (and expensive!) finagling over whether an “accident” has occurred or what, precisely, “caused” the incapacity. Different expenses were charged to the appropriate categories, and the entire expense—whether privately insured or paid by the state (both approaches were used within the same statute)—was considered at the front end of the process.
I suppose I might have some objection under such a system to the loss of any concept of a “wrong” that produced the worker’s incapacity in the first place. I do not mean “wrong” in an individual case, of course—we abandon that idea within America workers’ compensation, in any event. No—I mean the notion that, in the abstract, a worker was surrendering a valuable civil cause of action premised on commission of a wrong in exchange for participating in the system. Still, the structure is somewhat reminiscent of 24-hour wraparound plans that were under much discussion in the 1990s. Ultimately, in present times, one would have to do a very careful cost-benefit analysis to determine if such an idea would pass the straight face test. But I doubt the problem of cumulative trauma would seem quite as intractable as it sometimes does now.
Michael C. Duff
Wednesday, April 11, 2018
This Friday, April 13, 2018, in Room 178 at the University of Wyoming College of Law in Laramie, Wyoming, attorney George Santini, a fellow of the College of Workers' Compensation Lawyers, and I will be conducting the final Wyoming Workers' Compensation Symposium of the year, concluding the 4-event series. The program is entitled "Select Workers’ Compensation Administrative and Evidentiary Issues."
We will keep video and materials from the symposia up on the event site. I'd appreciate hearing from those who have streamed or attended live any of the symposia. Classroom space is scarce and I'll have to decide very soon whether to run similar programs next year.
Monday, April 9, 2018
As I have been arguing for some time, there is no doctrinal reason employers could not subject workers' compensation claims to mandatory arbitration. Alexander Colvin has just updated his 2017 report on the expanded general use of mandatory arbitration agreements by employers. He argues in an executive summary to the report, "Under such agreements, workers whose rights are violated—for example, through employment discrimination or sexual harassment—can’t pursue their claims in court but must submit to arbitration procedures that research shows overwhelmingly favor employers." The key findings of the report are:
- More than half—53.9 percent—of nonunion private-sector employers have mandatory arbitration procedures. Among companies with 1,000 or more employees, 65.1 percent have mandatory arbitration procedures.
- Among private-sector nonunion employees, 56.2 percent are subject to mandatory employment arbitration procedures. Extrapolating to the overall workforce, this means that 60.1 million American workers no longer have access to the courts to protect their legal employment rights and instead must go to arbitration.
- Of the employers who require mandatory arbitration, 30.1 percent also include class action waivers in their procedures—meaning that in addition to losing their right to file a lawsuit on their own behalf, employees also lose the right to address widespread rights violations through collective legal action.
- Large employers are more likely than small employers to include class action waivers, so the share of employees affected is significantly higher than the share of employers engaging in this practice: of employees subject to mandatory arbitration, 41.1 percent have also waived their right to be part of a class action claim. Overall, this means that 23.1 percent of private-sector nonunion employees, or 24.7 million American workers, no longer have the right to bring a class action claim if their employment rights have been violated.
- Mandatory arbitration is more common in low-wage workplaces. It is also more common in industries that are disproportionately composed of women workers and in industries that are disproportionately composed of African American workers.
- Among the states, mandatory arbitration is especially widespread in California, Texas, and North Carolina, but in all of the 12 largest states by population over 40 percent of employers have mandatory arbitration policies.
I was especially struck by the finding that the growth of mandatory arbitration has been accelerating in the last five years.
For employers who have adopted mandatory arbitration, the survey asked them how recently they had adopted this policy. Among the employers with mandatory employment arbitration, I find that 39.5 percent of them had adopted their policies within the last five years, i.e., from 2012 to 2017, whereas 60.5 percent had adopted their policies more than five years ago. This cut-off date is important because it was in 2011 that the Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion, ruling that class action waivers in the mandatory arbitration agreements were broadly enforceable. This means there was a substantial growth in the adoption of mandatory employment arbitration during this five-year period following the Supreme Court giving a green light to the use of mandatory arbitration clauses to bar class actions.
It is also interesting to note the density of mandatory arbitration by state (see below). I find it unsurprising. What readers should consider is why this trend would stop at the hallowed gates of workers' compensation. All I can say is that I find no legal reason it would do so. The FAA preempts all sorts of state law very broadly. And though it is useful to follow the tea leaves for reversals of policy, I am perpetually alarmed that the workers who are not transformed into independent contractors as "Gig" workers, will be swept into arbitration by the FAA.
Michael C. Duff
Sunday, April 8, 2018
Iowa has joined the race-to-the-bottom parade by enacting (the bill was sent to the Governor last Monday, April 2) a Gig law of startling facial applicability to almost any employer dispatching employees from a remote location utilizing online technology. I would not want to be one of these “contractors.”
As in the other laws previously discussed, here, and here, “marketplace contractors” are treated as independent contractors, and not employees of a “marketplace platform,” for all purposes under state or local law. A marketplace contractor is “a person or organization, including an individual, corporation, limited liability company, partnership, sole proprietor, or other entity, that does all of the following”:
(1) Enters into a written agreement with a marketplace platform to use the marketplace platform’s digital network to connect with individuals or entities that seek to obtain services from the marketplace contractor.
(2) Performs services for individuals or entities upon connection through a marketplace platform’s digital network in exchange for compensation or payment of a fee.
(3) Does not perform the services offered by the marketplace contractor at or from a physical business location that is operated by the marketplace platform in the state.
A “market platform” . . . “means a person or organization, including an individual, corporation, limited liability company, partnership, sole proprietor, or other entity, that operates a digital network to connect marketplace contractors to individuals or entities that seek to obtain the type of services offered by marketplace contractors.”
A market contractor shall be treated as an independent contractor if the “The marketplace contractor and marketplace platform agree in writing that the marketplace contractor is engaged as an independent contractor;” “The marketplace platform does not unilaterally prescribe specific hours during which the marketplace contractor must be available to accept service requests submitted through the marketplace platform’s digital network;” “The marketplace platform does not prohibit the marketplace contractor from engaging in outside employment or performing services through other marketplace platforms;” “The marketplace contractor bears its own expenses incurred in performing services.”
Few words. Much damage.
There are relatively unimportant carveouts and caveats for freight operators (I am not sure who won this exemption, but I have a guess or two), governmental entities, Native American tribes (jurisdictional concerns), and religious entities (constitutional concerns). Interestingly, “contractors” previously required to possess a license under Iowa law for performance of a service before the Gig law must continue to do so. This inclusion reflects that legislators fully understand just how expansive the law may become. The company that formerly sent its electrician “employees” to your house may now be tempted to send much cheaper “independent contractors” instead—but at least those “contractors” will be licensed to do electrical work. Thank goodness for small favors, but, if fires break out, I hope the “platforms,” and not the contractors, are held responsible for non-possession of the license. As has been the case in other states, I will be interested to learn if special laws challenges ensue if it turns out that the legislation specially benefits a narrow swath of identifiable commercial actors, arguably discriminating against other commercial actors in the state, potentially in violation of Article III, Section 30 of the Iowa Constitution.
I now have an operating theory for the timing of these laws. It momentarily appeared that John Thune’s ceaseless quest for a national Gig law was about to conclude successfully with inclusion of an explicit independent contractor provision in the new Tax Act. Many understand that ensconcing such a provision in federal tax law could act as a driver, exporting a disintegrated employee definition to other realms of state and federal law. However, the current administration, while expanding tax breaks to “independent contractors,” did not supply the radical redefinition of employee status some had desired, apparently preferring to make Gig employment more attractive to Gig employees. (A move that strikes me as authentically “conservative”). I suspect that state legislators, understanding the volatility of the political landscape in a mid-term election year, decided to strike while the iron was hot. More’s the pity . . .
I’m disappointed that my law school classmate, Secretary of Labor Alex Acosta (we both graduated from Harvard Law School in 1995), appears now to be complicit in the “new economy” canard. Previously, I knew him at the National Labor Relations Board as a reasonably straight shooter. (I have defended him publicly from unfair broadsides in that regard). But regulatory capture is a dark game. Having been unable to reliably win on the merits of "classical" employee arguments in federal courts, weak state governments have been commandeered to change the playing field entirely by altering the law, even as the federal government withdraws guidance on employee misclassification. Policy makers in the 19th and 20th centuries rejected a bleak world of wholly unprotected contractors. Welcome to the 21st century.
Michael C. Duff
Friday, April 6, 2018
Upton Sinclair once remarked, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.” I have that quote in my mind as I marvel at the onslaught of Gig laws that morphed, right before our eyes, from devices required to relax employment status in aid of “new” employers in a “new” economy to excuses to mandate independent contractor status be applied to obvious employees who have been dispatched to a job site “online” by some supervisor sitting back at the office. This deregulatory episode, like the Oklahoma opt-out fiasco that preceded it, is simply a species of bedlam propagated by those who have a financial interest in tearing things apart but, in the end, have little actual “skin in the game.” (Just look for the shadows in the background).
There have been some interesting articles over the last couple of weeks on the future of workers’ compensation. I was especially struck by Andrew Simpson’s piece, in the Insurance Journal of March 26, reporting on remarks by Richard Victor, Senior Fellow at Sedgewick Institute, made at the Workers’ Compensation Research Institute Annual Meeting in Boston last month. I assume for purposes of this discussion that those remarks were accurately recounted. I understand Mr. Victor to have argued that the magnitude of current external pressures is such that the internal workers’ compensation “system” may not have the resiliency to endure. He mentioned the meta-issues as being centered on labor shortages, immigration policy, and health care policy. Because labor shortages may prompt employers to hire less than their ideal candidates as employees, injury rates may go up (although the mechanism is not entirely clear); we could alleviate labor shortages with a sensible immigration policy that replenishes our work force in historically familiar ways, but may lack the political will to do so; because our health care policy appears to be increasing, rather than reducing, costs for many in vulnerable populations, we may have created a moral hazard: those who cannot obtain health care in the general market may attempt to (expensively) use workers’ compensation for that purpose. The upshot, according to Mr. Victor, is:
The effects of all these trends, including the labor shortage, an aging workforce, more case-shifting, growing cost-sharing, a larger uninsured population will introduce a doubling of what the number of injuries would have been had none of these things happened into a world where injury frequency has been dropping every year . . . Then he adds to those factors the growth in the average cost per claim that just happens normally because prices and wages go up, throws in the likely growing duration of disability, and accounts for a few other forces at play, to arrive at his scenario for 2030: “You end up with a 300 percent increase in workers’ compensation costs without increasing benefits to injured workers.”
To this tension I feel compelled to add, as a teacher of ERISA, the rather startling fact “that 66 percent of working Millennials have nothing saved for retirement, and the situation is far worse for working Millennial Latinos. Some 83 percent of Latinos in this generation have nothing saved for retirement.” The original policy justification for an all-preempting pension and benefits ERISA regime was that it would ensure employers continued to voluntarily provide retirement plans. With the spread of 401(k) plans, to which millennials (and others) cannot afford to contribute, I suspect the political appetite for preemption (and the brake that it places on state-level health care innovation) may wane. Perhaps we were once willing to trade a weak health care regime for a strong pension regime, but that is no longer the contemporary choice offered. Bear in mind that in 2016 17.5 trillion dollars of benefit assets from employer-sponsored plans were under management. Now imagine that money shifting elsewhere. That prospect explains resistance to structural change. But the resistance cannot go on forever. And once states are fully free to innovate in health care, it is inconceivable that the workers’ compensation regime would continue to look as it does today.
The ancient Greek philosopher Heraclitus is reputed to have said that nothing endures but change, and certainly Mr. Victor’s remarks persuade that change is coming. But what I have always loved about the story of workers’ compensation—some history, some no doubt lore—was that during the stupefying change occasioned by the industrial revolution, adaptation was bargained, not imposed. I do not fear change so much as I fear loss of social negotiation to cram-down techniques. Thus, I was heartened to hear recently of Kansas’s proposed increase to workers’ compensation death benefits and Wisconsin’s against-the-present-current enforcement of appropriate worker classification. These developments bespeak remembrance of rights’ boundaries set a century ago by those who believed in fairness and in a society where all stakeholders had skin in the game. Evasion simply won’t do.
Michael C. Duff
Monday, April 2, 2018
The talented Pittsburgh attorney Justin D. Beck (Thomas, Thomas & Hafer LLP), has authored a new analysis addressing the law and ethics of disability management, with a focus on the activities of nurse case managers. Little seems to be written about this issue, even though the involvement of nurse case managers in the system has increased over the decades and is a frequent point of contention.
The 2008 ABA Workers’ Compensation Sections CLE in Tucson, for example, featured a rare panel on nurse case managers. I recall being mortified when a veteran injured workers’ lawyer barked at a nurse on the panel, from the audience, that she and her colleagues were nothing but “spies” for the carrier, and that they would never be participant in the claim of any his clients.
Mr. Beck, in his essay, has been thorough, examining codes of conduct, interviewing system players, studying state laws that govern the issue (Pennsylvania, our state, has none), and analyzing select cases where nurse case managers have been sued. He seems persuaded (I think) that when nurse case managers hew to their ethical codes and enjoy the cooperation of claimants’ counsel, a constructive relationship can develop, with potentially better outcomes for seriously injured workers.
To read the complete article, see www.davetorrey.info.
Thursday, March 29, 2018
A Major Event: Complete Papers from Rutgers Law Symposium, "Demise of the Grand Bargain" Published, Available Free Online
The complete papers of the September 23, 2016 Rutgers Law School Symposium, “The Demise of the Grand Bargain: Compensation for Injured Workers in the 21st Century,” have now been published. They appear in the Rutgers University Law Review, Volume 69, Issue 3 (Spring 2017) a quarterly which can also be read free online: http://www.rutgerslawreview.com/home/current-issue/.
I have already summarized the lead article, by Professor Emily Spieler, and noted my effort in this blog. That article, (Re)assessing the Grand Bargain: Compensation for Work Injuries in the United States, 1900-2017, is a tour de force and shouldn’t be missed. (See my summary at www.davetorrey.info.)
The other major articles, which follow that of Professor Spieler, are:
• Alison Morantz, Julia Bodson, Sarah Michael Levine, & Marcus Vilhelm Palsson, Economic Incentives in Workers’ Compensation: A Holistic, International Perspective;
• Robert F. Williams, Can State Constitutions Block the Workers’ Compensation Race to the Bottom?; and
• Robert L. Rabin, Accommodating Tort Law: Alternative Remedies for Workplace Injuries.
Commentaries featured in the issue include:
> George W. Conk, Deadly Dust: Occupational Health and Safety as a Driving Force in Workers’ Compensation Law and the Development of Tort Doctrine and Practice; and
> Charles R. Davoli, Challenges of the Changing Legal Structure of Workers’ Compensation and the Changing Workforce
This special Symposium issue also includes four shorter commentaries and two transcripts of remarks – one by Professor Mike Duff, who heads this blog.
Tuesday, March 27, 2018
More Contractual Opt-Out: The Gig Race to the Bottom Rolls on to Georgia and Back to the 19th Century
Updated: I have learned from Georgia attorney Tom Holder that this legislation was not brought to the floor. It appears there was the right kind of pressure at the right time. In this lawyer's opinion, this is a very good outcome.
I have recently analyzed a Tennessee statute purportedly originated by Handy, Inc. and currently enacted in almost identical form in five other states throughout the country: Indiana, Utah, Kentucky, Florida and Iowa. Tennessee made six. And now Georgia is about to be seven. I will not bother analyzing the Georgia bill (it is essentially the same as the other transparently coordinated laws), but you will find its text here.
Reduced to its essence the situation boils down to this. Suppose I run my business “online” and direct workers to a customer. If those workers agree in writing that they are independent contractors, and if I am not personally on site to supervise the workers, the workers are deemed independent contractors as a matter of law.
The impact of the laws is obvious. Given the fast and loose way in which they are written, any company that dispatches workers and supervises them remotely has effectively been permitted to opt out of workers’ compensation regulation. To confirm my claim, simply imagine any company that uses online dispatching (of virtually any kind) to route workers to customers. Then read any of these statutes and tell me why all such workers of that company could not be classified as independent contractors.
Proponents of such legislation say the laws will simplify the independent contractor analysis. They sure will! As an aside, I doubt very much that the spread of these laws is being funded by a handyman company. So, I invite my readers to “follow the money.” Let me know what you find out.
The universal salve for the wounds occasioned by this species of de-regulation seems to be that the employer and employee have agreed to a de facto waiver of rights. Freedom of contract, it seems, cures all ills. It was precisely struggles over “contracting out” that lead to abandonment of employer liability statutes and establishment of the English Workmen’s Compensation Act of 1897. The labor movement of that day, having only recently obtained the widespread right to vote (the U.K.'s embrace of anything resembling democracy came later than many imagine), would only agree to allowance of contracting out under the liability laws if an employee received adequate additional consideration beyond mere employment. David G. Hanes, The First British Workmen's Compensation Act, 1897 37-41 (Yale University Press 1968). So fractious were the debates over contracting out that the door to workers’ compensation was opened and has remained open in Anglo-American law for almost 120 years. Remarkably, we are having--under the guise of opt-out, compulsory arbitration, independent contractors, and gig laws--a debate that raged, and was apparently not resolved, in the late 19th century.
Mark my words – if the pulverizing of the expanding class of contract workers continues, large consequences will follow. This is a bona fide race to the bottom.
Michael C. Duff
Monday, March 26, 2018
In the 1880s, English tort law had a doctrinal problem. A third-party could sue an employer vicariously for the tort of the employer’s employee committed within the scope of employment, a rule so familiar now it is nearly ubiquitous to us. But the rule was relatively new in the late 19th century and, what is more, the employer’s employee did not have, in the same manner, a vicarious cause of action against his or her employer for the negligent acts of a second, co-employee, committed within the scope of that employee’s employment. American lawyers recognize this principle as the “fellow-servant rule,” a major historical spoke in the “unholy trinity” wheel of employer affirmative defenses that routinely defeated negligence cases filed by employees in the mid-19th to early-20th centuries. What is less familiar to American lawyers is how the fellow-servant rule emerged under tort law in the first place.
By the mid-19th century, the English courts had fashioned a doctrine known as “common employment.” If the employer-principal worked among his employees, he was able to commit a negligent act because he was working with them. But if the same employer-principal was not physically present at the workplace, he could not be negligent. Why? Because he could not “directly” act negligently. In other words, vicarious liability did not apply in the workplace in the context of the master-servant relation. The fellow-servant (co-employee) effectively acted as a superseding cause blocking attribution of negligence to the employer-principal. “Common employment” was the doctrinal support for the fellow-servant rule. Ultimately, the doctrine probably derived from Priestly v. Fowler, decided in 1837, but its origins are not clear and it was confusingly mixed, even in Priestly itself, with elements of assumption of the risk. It is interesting that that Priestly’s author, Lord Abinger, failed to cite a single opinion in support of the rule. Wilson & Levy, Workmen’s Compensation (Oxford University Press 1938), Vol. I, p. 25, n.2.
In the debates preceding enactment of the English Employers Liability Act of 1893, Henry Asquith, then-Home Secretary and future Prime Minister, advocating on behalf of the Gladstone Government’s proposed bill, utilized to great effect the rhetoric of non-discrimination. Employees were not, as some contended, being afforded preferential treatment by the stripping of the employer “common employment” defense. On the contrary, employees were being placed in the same position as third-parties by preventing the unfair denial to them of a cause of action premised on vicarious liability. Asquith, in other words, argued for non-discrimination. Opening-up of workplace vicarious liability necessarily decimated what we would call the fellow-servant rule. But events need not have moved in this direction. Many lawyers were opposed to the entire concept of vicarious liability, and it, rather than the doctrine of common employment, might have been eliminated. But as injury occasioned by intensifying industrialism expanded—inside and outside of the workplace—constriction of liability was already, by the early 1890s, broadly politically unacceptable.
It is also interesting to note that at the time of the practical elimination of the fellow-servant rule there was not (yet – it would come a mere four years later with passage of the first English workers’ compensation act) a broad movement for eliminating contributory negligence or assumption of the risk (volenti non fit injuria). These, of course, were the other two defenses making up the unholy trinity. The reason seems to have been that English employers had been voluntarily contributing (often significantly) to worker “friendly societies,” cooperative organizations created and run by employees – a kind of collective, but private, self-insurance (a very interesting subject in its own right). The Government (and others) were concerned that ramping up liability by eliminating defenses would cause employers to stop contributing to these societies. (The lines of argument sound, to my ears, much like arguments that are made against subjecting voluntary employee benefit plans to excessive regulation: employers might drop the plans altogether in response—the risk, of course, is that something mandatory might fill the gap).
Thus, the evisceration of the unholy trinity was underway under Anglo-American tort law before workers’ compensation arrived in the United States. And even before workers’ compensation arrived in England.
Michael C. Duff
Thursday, March 22, 2018
Many readers will know of the significant workers’ compensation reforms being proposed in Kentucky. I would characterize the suggested modifications, when viewed in the aggregate, as significantly retractive. What most quickly caught my eye, as someone who is not a Kentucky lawyer, were the following provisions (this is just a sampling—though an important one—of the proposals):
- All indemnity benefits would normally terminate when an injured worker reaches the age of 67
- Employees would have the burden of proving that intoxicants did not cause their accidents
- Permanent Partial Disability benefits would be capped at 15 years, but injured workers would be allowed to file for an additional 104 weeks of benefits with the Kentucky workers’ compensation agency, within 75 days before termination of the 15-year period. As I read the bill, the injured worker would also have to convince an administrative law judge that medical treatment remains necessary at the end of the permanent partial disability period, whether that be 15 or 17 years. In other words, medical benefits could be cut off.
With respect to the third bullet point (I think the first two speak for themselves), one does not have to be especially adept to imagine a 25-year old who is very seriously injured on the job. Again, stupendous sophistication is not required to understand that the same 25-year old, although very seriously hurt, may not be totally disabled in the sense of being physically incapable of doing anything. I repeat that I am not a Kentucky lawyer. But I can see clearly enough that “permanent total disability” means, under Kentucky law, “the condition of an employee who, due to an injury, has a permanent disability rating and has a complete and permanent inability to perform any type of work as a result of an injury.” Kentucky Revised Statutes §342.0011(11)(c) (emphasis mine). That sounds pretty demanding to this Maine lawyer. (As an aside, some quick research suggests to me that the odd lot doctrine has been cited only once ever in the reported Kentucky cases). This all seems to lead to the conclusion that the 25-year old worker may be in serious trouble at age 42. Not to worry, one might suppose – the cost of the injury after age 42 will simply be shifted to the Social Security Administration. (An approach that placed the Kentucky Supreme Court and the Kentucky legislature at loggerheads in the not distant past).
Tyler White, the president of the Kentucky Coal Association, asserts, in defense of the proposed law:
“The workers’ compensation system is designed to compensate injured workers in [an] attempt to get them back to work, benefiting themselves and their employer, . . . The system is not designed to sustain claims that extend well beyond the career span of an injured worker.”
Leaving to one side the questionable absoluteness of the effective claim that the career span of a worker is a mere 17 years, I am inclined to protest (with due respect) that Mr. White fails to make mention of the actual legal and constitutional basis of the workers’ compensation quid pro quo. As readers of this blog well know, workers in the U.S. originally obtained workers’ compensation rights, about a century ago, in exchange for foregone tort rights. The system was “designed” in such a way that the exchange of rights was to be reasonable. Kentucky courts took full cognizance of the arrangement a long time ago. Phil Hollenbach Co. v. Hollenbach, 181 Ky. 262 (1918). This bill does not from my vantage point look reasonable. One can only hope that the Kentucky Supreme Court will subject the bill – should it unadvisedly become law – to the scrutiny it deserves. My late grandfather, a Harlan County Kentucky coal miner, who suffered with and died from black lung in Kentucky, would expect no less.
Michael C. Duff