Workers’ Compensation Law Prof Blog

Is Diva Limousine’s Race-to-the-Bottom Suit Against Uber Coherent?

The pattern has now become clear. The Uber strategy continues to be to shunt as many independent contractor suits into arbitration as possible, where it no doubt hopes they will be silently and favorably (or at any rate non-precedentially) resolved. Plaintiffs, for their part, seek Uber/Lyft driver class participants who intentionally/presciently or inadvertently opted out of arbitration. Shannon Liss-Riordan soldiers on.

An additional wrinkle has developed, however. A company—a burdened industrial competitor—claiming to have played by “the rules,” alleges injury caused by another company (Uber) not playing by the rules. The torts professor in me hears this as a tortious interference with business relations claim, and it is one that presumably will force a public ruling on the merits respecting the employee-status of Uber’s drivers, since Diva is not in (what I will call) “arbitration-privity” with Uber: no sweeping this dispute into arbitration (i.e., under the rug).

Of course, it has since “time immemorial” been the law that commercial injury resulting from a better business model is “damnum absque injuria” (I discuss with my students every year Holmes’s famous 19^th century dissent in Vegelahn v. Guntner). As Holmes long ago put it, “the doctrine generally has been accepted that free competition is worth more to society than it costs.” But not illegal competition. Although I do not have access to the Diva case pleadings, I assume the arguments will unfold around California statutory and case law similar to the principles embodied in the Restatement Second of Torts §§ 762-774. (Interestingly, Diva itself has previously been the subject of wage law violation allegations, see Ghazaryan v. Diva Limousine, Ltd., 169 Cal.App.4th 1524 (2008) – clean hands problem?).  

All of this has significant implications for workers’ compensation because workers’ compensation law presumes and requires the existence of covered employees. If employee categories are extinguished through reclassification in one legal regime, there is the very real possibility that the extinction will spread. The public’s broad misunderstanding of Dynamex demonstrates the popular inability to distinguish employee standards across employment law regimes. And I suspect that reality is behind this entire renewed gambit (which is not exactly stealthy to lawyers with some gray hair).

Michael C. Duff

Facial Challenges to Workers’ Compensation Statutes and the “No Set of Circumstances” Test

While we are in a relative national workers’ compensation constitutional-challenge lull (there may be other things going on in the world), it is worth mentioning an important threshold point. It is one thing to argue that a provision of a workers’ compensation statute is unconstitutional as applied to a particular workers’ compensation claimant. It is quite another thing to launch a facial challenge against such a provision. A facial challenge to a legislative act is the most difficult to mount successfully, since it is customarily said that the challenger must establish that there is no set of circumstances in which the provision could be constitutionally applied. In Castellanos v. Next Door – the 2016 Florida attorney’s fee case – the fight over the constitutional adequacy of the attorney’s fees, as applied to the case at hand, was only one aspect of the dispute. A second (and threshold) aspect concerned whether, assuming the fees were inadequate, it could be said that there was “no set of circumstances” in which the fees would be adequate (this formed, in my view, the core of the dissent's position). In that regard, the Court essentially concluded that the risk of due process deprivation occasioned by inadequate attorney’s fees exceeded the utility of applying the “no set of circumstances” principle. In the language of the Court, the Florida statute had created an irrebuttable presumption that attorney’s fees were reasonable and “the constitutionality of irrebuttable presumptions . . . is a distinct body of case law that differs from the typical ‘facial’ versus ‘as applied’ cases cited by [the] dissent.” (The Court could reach that conclusion in Florida because, for complicated state-law reasons, workers’ compensation rights have elevated constitutional importance in Florida in comparison to most other states).

The “no set of circumstances” test, first announced in U.S. v. Salerno by Justice Rehnquist, bears some resemblance to the problem of litigation standing. “A facial challenge to a statute requires the challenger to establish that no set of circumstances exists under which the statute would be valid. See U.S. v. Salerno, 481 U.S. 739, 745 (1987).” Our adversarial legal system disdains abstract challenges of laws, and almost exclusively authorizes disputes involving imminent “concrete and particularized” harms. When a litigant makes a facial challenge, she is arguably asserting claims on behalf of others who are similarly-situated. This does not sit well with many courts.

But this is a very tough-minded and, I would contend, unfair stance to take when it is as plain as the nose on your face that in many or even most instances application of the unconstitutional-as-applied statutory provision (say, use of the 6^th Edition of the AMA Guides to the Evaluation of Permanent Impairment to calculate permanent partial benefits) is likely to harm a claimant. In fact, the idea sounds somewhat backwards. Maybe, once a given law has been found unconstitutional as applied, it should be presumed unconstitutional in other contexts. That might incentivize legislatures to get rid of the law, because it is apt to be successfully challenged in future litigation. If, for example, workers’ compensation benefit calculation is found to lead to an unconstitutionally-low benefit amount in a given case, why must the entire universe of workers’ compensation claimants wait until there are no instances in which a benefit calculation could be performed constitutionally before scrapping the law? (A proof of a negative that will always be very difficult to carry out).

And the truth of the matter is that in various kinds of cases, courts (often sub silentio) simply do not apply the “no set of circumstances” principle because it would be unacceptably harsh and inimical to broader legal values. Chief among the cases are those involving abortion restrictions and restrictions on speech. Typically, courts do not simply leave “bad” state laws in those areas “on the books” waiting, as it were, to inflict more unconstitutional harm. Rather, courts craft and refine overbreadth doctrine, allowing a litigant to challenge the constitutionality of a statute on the basis that the statute is overbroad: in permissibly restricting the constitutional rights of some the law impermissibly restricts other persons’ constitutionally-protected rights, which the litigant before the court will be allowed to vindicate, for purposes of efficiency and justice. Similarly, in Castellanos, the Florida Supreme Court, without being completely explicit about what it was doing, concluded that the risk of overly-broad constitutional deprivation of claimant access to attorneys outweighed the benefits of “concreteness” and justified not (in effect) severing the as-applied attorney’s fee dispute from future theoretical disputes (which may or may not have had merit). This is an overbreadth analysis, and it is of a type I would expect claimants to pursue in future workers’ compensation cases.

Although Salerno has not been cited with great frequency in recent workers’ compensation cases, that may simply evince recognition on the part of litigants of the difficulty in bringing facial challenges. I think the principle, though often Draconian in effect, is alive and well, whether cited in claimant or employer/carrier challenges. In the very interesting 2017 Colorado case, Dami Hospitality v. Industrial Claims Appeals Office, for example, a Colorado appeals court accepted a (small, Korean-owned) employer’s claim that imposition upon it of a fine of $841,200 for not carrying workers’ compensation insurance over several years violated Colorado and federal constitutional protections against governmentally-imposed “excessive fines.” Tellingly, unflinchingly citing Salerno (a federal case, after all, decided in the context of federal, criminal-context, due process law), the court rejected a facial challenge to the applicable Colorado statute and regulations explicitly authorizing the fines. Salerno is alive and well in both state and federal contexts and will have to be contended with in any future facial constitutional challenges of workers’ compensation laws.

Michael C. Duff

Article Treats Hoary Issue: Whether a Juror can be an Employee of the Sponsoring Government Unit for Workers' Compensation Purposes

        A law student writing in the St. John's Law Review has treated the hoary issue of whether an injured jury member is to be considered an employee of the sponsoring municipality for workers' compensation purposes.  Corey Baron, Twelve Injured Men: Why Injured Jurors Should Not Receive Workers' Compensation Coverage From the Courts, 91 St. John's Law Review, p.957 et seq. (Winter 2017).   The author explains in articulate fashion the positions of the majority (jurors are NOT employees) and minority (jurors ARE employees).  He then concludes that the New York rule should be no, and that this rule should be created not in the precedents but, instead, via statutory amendment.  

        For support, he argues that juror work is not hazardous – and workers' compensation was, and is, intended only for hazardous work, particularly (under the New York statute), in the realm of municipal employment. 

        It seems to this writer that the traditional reasons for excluding jurors -- (1) lack of a contract of employment, (2) service on a jury as a matter of civic duty -- are the more persuasive arguments for such exclusion.  Most state statutes include all types of labor, hazardous or not.  (We'll set aside Wyoming!) 

            In any event, Mr. Baron has collected all the arguments in his valuable essay.