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), https://cllpj.law.illinois.edu/ (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….”
Wednesday, May 30, 2018
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:
AZ, AR, DE, HI, KS, MI, MT, NE, NV, ND, OK, OR, SD, UT, VT, WA, WV, WY
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
Saturday, May 26, 2018
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
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).