Sunday, January 27, 2019

Employee Status: SuperShuttle DFW and The NLRB/D.C. Circuit's "Entrepreneurial Opportunity" Canard

The world of workers' compensation is always well-served to keep abreast of labor & employment law developments outside of its ordinary confines. One of the most essential threshold questions in all of labor and employment law is who qualifies as an "employee." From Dynamex, to state "gig" laws, to various areas of federal law, the question will not evaporate anytime soon. It is axiomatic that one of the easiest ways to reduce labor costs is not to employee "employees." And just as there may be "50 Ways to Leave Your Lover," there may be an equal number of ways not to employ employees. Here I'm cross-posting an excellent blog analysis over on our sister Workplace Law Prof blog authored by my friend, colleague, and labor law casebook co-author Jeff Hirsch, Professor and Associate Dean at University of North Carolina School of Law -UNC Chapel Hill. From the post:

Yesterday, the NLRB issued a decision in the SuperShuttle DFW case, providing yet another analysis to determine whether an individual is an employee or independent contractor under the NLRA. The Board's new approach is basically just to adopt the D.C. Circuit's test from the 2011 FedEx case, which I've examined (and criticized) eleswhere. That test relies most heavily on whether the worker has "entrepreneurial opportunity."

 

As a preliminary matter, it is important to remember that the Supreme Court has held multiple times that when a statute lacks a meaningful definition of "employee," the common-law "right-to-control" test for determining whether someone is an employee or independent contractor should apply. The Court, in Roadway Systems, explicitly held that the NLRA is one of those statutes. So the question for the NLRB is to determine what the common-law test requires.

 

Note that the analysis is not referred to as the "common-law 'entrepreneurial opportunity'" test. That's because, for its long history, that test has stressed that the most important factor is the purported employer's right to control the manner and means of work of the purported employees. Entrepreneurial opportunity may be relevant, along are numerous other factors, but the right to control is the focal point of the test (I'm actually being generous here because entrepreneurial opportunity isn't explicitly a factor in the common-law test, although other factors hint at a similar concern). In fact, in an ironic twist, the D.C. Circuit just last month stressed this exact point with regard to the NLRB's joint-employer test. In that case, the D.C. Circuit gave a pretty strong warning that the Board needs to be careful not to stray too far from the common-law's focus on right-to-control.

 

Despite all of this, in SuperShuttle, the NLRB adopted a D.C. Circuit test that makes entrepreneurial opportunity the overriding concern in the analysis. The NLRB downplayed that that's what the D.C. Circuit did, but that interpretation is just wrong. The court held, among other things, that it was "shift[ing the] emphasis’ away from the unwieldy control inquiry in favor of a more accurate proxy: whether the ‘putative independent contractors have significant entrepreneurial opportunity for gain or loss.’" And that shift, to my mind, is indefensible.

The link for the rest of this excellent analysis is here.   

Michael C. Duff

January 27, 2019 | Permalink | Comments (0)

Wednesday, January 9, 2019

Empty Preemption of Workers’ Compensation: Parallels Between the Hanford Nuclear Facility and Air Ambulance Disputes

I am interested in conflicts between federal and state law in the context of workers’ compensation. And I am especially interested in a phenomenon I have called “empty preemption”: when federal law with little or no substance displaces state law possessing substance. Empty preemption was at the heart of the Oklahoma opt-out drama and is playing a role in the recent Hanford and Air Ambulance disputes – though in reality the overall Hanford controversy is far from “recent.”

The federal government’s newly-filed complaint against the State of Washington alleges that state law impermissibly discriminates “against the Federal Government and its contractors and [its] purported direct regulation of the Federal Government violate[s] the Supremacy Clause.” The law in question, Washington statute 51.32.187, states that “[f]or United States department of energy Hanford site workers, as defined in this section, who are covered under this title, there exists a prima facie presumption that the diseases and conditions listed in [another part of] this section are occupational diseases [within the meaning of Washington law].” As with all disease presumption laws (such as, for example, firefighters’ presumption laws), the effect is to make it easier to establish compensability in a very difficult area of disease causation: but for the relaxation of typical causation standards, a significant number of employees will not be compensated in circumstances where work “probably” caused incapacitating disease. But—and this is the important part—what does the federal government propose in lieu of the Washington approach to this obvious disease causation problem? For that matter, what does the Airline Deregulation Act provide substantively in exchange for stripping states of the right to regulate air ambulances? What does ERISA provide substantively in exchange for stripping states of the ability to regulate employee benefits? The answer is essentially “nothing.”

In many fields of law the purpose of federal preemption seems to have been to prevent states from lowering regulatory floors (although it is also certainly true that disuniformity has been a powerful factor as well). Traditional labor law, which I also teach, ushered in the era of especially aggressive federal preemption under Section 301 of the Labor Management Relations Act (the NLRA, as amended). But the (probably antiquated) theory of that preemption is that labor and management, as co-equal antagonists, may rely on their potent, lawful economic weapons, as determined exclusively by federal labor law, to produce acceptable/reasonable compromises – and states should not be allowed to interfere for their own narrower policy reasons.  

Empty preemption, on the other hand, provides no mechanism of pushback to prevent descent beneath reasonable regulatory floors. It has the effect of removing regulatory floors altogether. (This has a great deal to do with why we cannot achieve state-level health care reform – ERISA preemption is always getting in the way because two-thirds of health care is provided through employee benefit plans). This is why I am so leery of the prospect of federal involvement in state workers’ compensation systems. Do you really want an environment in which states have no say with respect to air ambulance reimbursement or disease causation standards (to name only the most recent issues)? My ten years as a federal lawyer coupled with almost as many years as a federal administrative law professor have done nothing to raise my confidence in federal white knights. All of this is in tension, of course, with the notion that federal constitutional rights have a role to play in protecting baseline injury rights, but I nevertheless think they do.   

The federal government’s suit in Hanford—which I, for one, ascribe to structural ticking timebombs rather than to naked political partisanship—is especially hard to swallow. The federal government (through excruciatingly convoluted mechanisms) cedes its sovereign immunity to allow for state workers’ compensation regulation, but apparently only on its terms. I would imagine some thought is being given in Washington legislative circles to crafting a more neutral occupational disease provision that does not expressly apply only to Hanford employees. Then we can expect arguments that the nominal general applicability of that law is a pretext and/or has the effect, if not the purpose, of directly regulating the federal government. At that juncture, of course, the bloom will be off the rose: it will become baldly apparent that the federal government simply does not want to pay.

One lesson both Washington and Wyoming legislators have no doubt learned is that it is unwise to explicitly reference in state legislation a federal law one is trying to work around. That provides some pretty low hanging fruit for federal lawyers (or other parties invoking federal policies) to pluck. It is also interesting to note that both Washington and Wyoming are monopolistic states, so the dormant federalism problems existing in workers’ compensation generally appear amplified.

Michael C. Duff

January 9, 2019 | Permalink | Comments (0)

Tuesday, January 8, 2019

Does Bankruptcy Law Treat Injury Rights More Seriously than Workers’ Compensation and Tort Law?

The major issue in judicial review of workers’ compensation and tort reform laws is the level of “scrutiny” judges are to apply when considering constitutional challenges to the statutes. Generally, a challenger has the heavy burden of demonstrating that a law is “irrational” before it will be set aside or modified by a court. There are very few laws—even laws that are fundamentally unfair, lopsided, or just plain mean—that can be affirmatively shown to be “irrational.” As it is often articulated in the equal protection context (due process analyses are very similar in most states), a state law must be upheld if it is rationally related to any legitimate interest of the state. Additionally, the legitimate interest of the state need not be one that actually motivated legislators to enact the legislation. It is enough if the interest is now advanced and that it is “conceivable.”  If attorneys for the state fail to advance a conceivable interest, appellate court judges often seem willing to help them. The bottom lines is that, in the hierarchy of rights, injury rights (whether workers’ compensation or tort) are not deemed sufficiently important to warrant heightened judicial scrutiny of legislative acts impinging them.

But if state law tort rights are so unimportant, why are Article I federal bankruptcy judges without authority to hear them? In Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., a 1982 case in which a company petitioning for reorganization made a claim against another company for breaches of contract and warranty—purely state law claims—the U.S. Supreme Court, in an opinion authored by Justice Brennan, held that the conferral of jurisdiction upon Article I (of the U.S. constitution) judges to hear state law claims involving traditional actions at common law such as existed at the time of the drafting of the Constitution was unconstitutional. Quoting much earlier law, the Court reaffirmed the principle that, Congress cannot “withdraw from [Art. III] judicial cognizance any matter which, from its nature, is the subject of a suit at the common law. . .” Because the judge in Northern Pipeline was, therefore, effectively not constitutionally authorized to hear such state law claims, the Court not only reversed and remanded the case, but scuttled the entire bankruptcy system, requiring convoluted and heroic measures to temporarily resuscitate and place on life support the entire system, the nature of which are beyond the scope of this post.

In Stern v. Marshall, the Court held that a counterclaim of tortious interference with a gift, although made during a bankruptcy proceeding and statutorily deemed a “core proceeding,” was a state common law claim that did not fall under certain exceptions justifying exercise of federal jurisdiction. Stern was a notorious (and highly entertaining) case involving the struggles of the late Anna Nicole Smith with the son of 90+ year old decedent, J. Howard Marshall. Smith alleged J. Howard orally promised her half of his estate, which primarily consisted of a 16% interest in Koch Industries, then worth $1.6 billion. Son disagreed. Arguments were advanced in both state probate and federal bankruptcy courts (naturally, the courts disagreed). Without wading into arcane questions about the history of the “tortious interference with a gift” cause of action, it is enough to say that Stern (2011) underscores the general “traditional common law actions” rationale of Northern Pipeline (1982). How do tort claims get caught up in bankruptcy law? By arguably becoming part of the bankruptcy estate. Their validity and valuation are often placed at issue in determining what “property” the bankruptcy trustee acquires and how the property will be distributed to unsecured creditors. 

I am struck by the facility with which the Supreme Court deemed adjudication of common law (including) tort rights to implicate separation of power issues in bankruptcy law. Tort claims, after all, intersect with bankruptcy cases only occasionally. Is it really such a big deal that an Article I bankruptcy judge may occasionally adjudicate a common law tort right? The Court, in an opinion authored by Chief Justice Roberts, said “yes”:

A statute . . . may no more lawfully chip away at the authority of the Judicial Branch than it may eliminate it entirely. “Slight encroachments create new boundaries from which legions of power can seek new territory to capture.” . . . Although “[i]t may be that it is the obnoxious thing in its mildest and least repulsive form,” we cannot overlook the intrusion: “illegitimate and unconstitutional practices get their first footing in that way, namely, by silent approaches and slight deviations from legal modes of procedure.” . . . We cannot compromise the integrity of the system of separated powers and the role of the Judiciary in that system, even with respect to challenges that may seem innocuous at first blush . . . Article III of the Constitution provides that the judicial power of the United States may be vested only in courts whose judges enjoy the protections set forth in that Article. We conclude today that Congress, in one isolated respect, exceeded that limitation in the Bankruptcy Act of 1984.

I am not, of course, contending that workers’ compensation cases may not lawfully be heard by state administrative law judges whose decisions are ultimately subject to judicial review. The bankruptcy cases under discussion are about the limits of legislative power in restricting judicial review. The Supreme Court has said that Congress may not authorize in bankruptcy (except in some cautiously limited instances) Article I judges to hear tort law claims (ultimately deciding them if the cases are not appealed). Tort law is sufficiently important to require its adjudication by Article III federal judges holding their offices for life during good behavior and receiving for their services compensation that shall not be diminished during their tenure. The purpose of these protections is to diminish the potential for the executive and legislative branches interfering with traditional rights. How, then, may tort law (and derivatively workers’ compensation law) simultaneously be sufficiently unimportant to allow state legislatures to chip away at injury remedies policed only by under-protective rational basis review?  I suppose the answer will be said to hinge on principles of federalism. But I find that answer unsatisfying. I wish that state judiciaries would uphold values concerning state common law rights (or rights flowing from these rights) with the same level of vigor.

Michael C. Duff

 

January 8, 2019 | Permalink | Comments (0)

Saturday, January 5, 2019

Additional Commentary on the Wyoming Air Ambulance Workers' Compensation Bill

Sometimes lost in Wyoming air ambulance discussion is the realization that Wyoming possesses a monopolistic workers’ compensation system. Accordingly, when an air ambulance company may charge what it likes, given distorted market conditions, that “economic rent” is extracted directly from the state treasury. Compare this situation to a state with a private insurance market in which losses are ultimately passed on to consumers (admittedly subject to some form of state regulation) rather than directly to taxpayers. It is no wonder that Wyoming (which has no state income tax) sometimes seems to become confused about what workers’ compensation benefits really are – an historical substitute for tort damages. The state “experiences” payment of workers’ compensation benefits as it would payment of discretionary “welfare” benefits.

And in Wyoming’s defense, and in the defense of other states trying to ward off the “empty preemption” of the Airline Deregulation Act (“empty” in the sense that the ADA occupies a regulatory field without providing any substantive regulatory exchange from the federal scheme), the preemption determinations being made in the Airline Deregulation Act/ERISA context (the federal courts have drawn the ERISA analogy, not I) are hardly consistent. So, in EagleMed, for example, the 10th Circuit said:

when a statute contains an express preemption clause, “we do not invoke any presumption against pre-emption but instead focus on the plain wording of the clause, which necessarily contains the best evidence of Congress’ pre-emptive intent.”

But compare this statement with the Supreme Court’s ERISA opinion in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., probably the lead case pushing back against the aggressive express preemption outlined in Shaw v. Delta Airlines (an ERISA case routinely invoked by the ADA preemption cases). In Travelers, Justice Souter stated, in considering preemption language identical to the ADA preemption language:

 . . . we have never assumed lightly that Congress has derogated state regulation, but instead have addressed claims of pre-emption with the starting presumption that Congress does not intend to supplant state law . . . 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.”

Discerning Congressional intent is seldom a simple matter; but one can understand in this context an argument that Congress did not clearly and manifestly express a purpose in the ADA to bar state action in workers’ compensation, surely an area of traditional state regulation. It is worth repeating that the Supreme Court’s opinion in Morales v. Trans World Airlines, Inc., upon which every subsequent Supreme Court ADA preemption case has relied, was decided in 1992, while Travelers was decided in 1995. I sense that the same “pushback” analytical considerations at play in Travelers will need to be brought to bear by the Supreme Court to adequately address the scope of ADA preemption as applied to state workers’ compensation systems. Of course, a federal Congressional fix would be desirable, but you will excuse me if I doubt its emergence. In the meantime states will probably have to consider reinsurance structures to contend with the problem if they want to avoid the Wyoming gambit of attempting to reopen the quid pro quo.

Michael C. Duff

January 5, 2019 | Permalink | Comments (0)