High Courts in Several States Strike Down Legislative Challenges to the Heart of the Workers’ Compensation System
As we put together last year’s edition of the Workers’ Compensation Emerging Issues Analysis series, I observed that 2016 would likely be a turbulent year, one that we could easily call “the year of the Opt Out.” That, of course, was a safe prediction, given the fact that battle lines had been so clearly drawn over Oklahoma’s controversial Opt Out law and that somewhat similar legislation had been introduced in the state houses of both South Carolina and Tennessee, with rumors that North Carolina would soon follow. Based on several constitutional challenges to the Oklahoma law, legislators in South Carolina and Tennessee allowed their sessions to expire without acting on the proposed laws.
Lex Larson and I posited that during 2016 those Oklahoma challenges would likely produce some of the most important case law in decades. That turned out to be true. As discussed below, in September 2016, the Supreme Court of Oklahoma, in a 7–2 decision, struck down the core provision of the Opt Out law as unconstitutional, doing so on the basis that the law favored one group of injured employees over another, based solely on whether the employer had chosen to stay within the classic, state-run system.
While Opt Out discussion often sucked the oxygen out of many workers’ compensation debates and conferences during 2016, there were other important challenges afoot in other states, particularly Florida. Earlier this year, the Florida Supreme Court handed down its long awaited decision in Westphal and another important decision in Castellanos, both discussed below as well.
And so, as we put together the theme for this year’s edition of Workers’ Compensation Emerging Issues Analysis, my close colleague, Robin Kobayashi, and I settled on “Equal Justice Under the Law,” since that term more or less encapsulates the common thread that seems to wind its way through all the important 2016 court decisions. Can state legislatures—often at the bidding of well-heeled employers—carve out special laws that eat away at the original workers’ compensation bargain and yet continue to provide immunity from suit for employers?
Can lawmakers allow some employers to set up shadow systems of compensation law, with shortened notice and claim provisions, arbitrary statutes of limitations, restrictive definitions of injury, employer-managed medical care, and no real recourse to state courts where conflicts arise? Should employers be given “a choice” without a commensurate choice allowed for the employee? Does society sit back and watch, forgetting that it is supposed to be the third party at the work-related injury and illness table since significant costs may end up being shifted to the public sector?
Within this new edition, whether it is altogether satisfactory to do so, we have joined these questions into the “equal justice” theme. Do terms such as equal justice and due process still apply to work-related injuries and illnesses? We hope so. A great deal is at stake. Here follows a quick overview of five significant equal justice decisions during 2016.
Oklahoma Supreme Court Strikes Down State’s Opt Out Law
As noted above, the most significant case this year—indeed in many years— was Vasquez v. Dillard’s, Inc., 2016 OK 89 (Sept. 23, 2016). Speaking for the majority, Justice Watt observed that the employer, Dillard’s, had contended the Opt Out law was not a “special” law, since it applied to “all employers,” rather than injured employees. The majority was unconvinced, noting the title of the Act made no mention at all of employers. Instead, it referenced “injured employees.”
The majority also cast aside Dillard’s argument that the Opt Out law provided a baseline of “Core Coverage” in § 203(B), guaranteeing individual employees equal treatment, finding that position “incredible” [Opinion, ¶ 20]. The majority stressed that instead of providing employees of qualified plan employers equal rights with those of employees falling within the traditional Workers’ Compensation Act, the “clear, concise, unmistakable, and mandatory language” of the Opt Out law provided that “such employers are not bound by any provision of the Workers’ Compensation Act for the purpose of: defining covered injuries; medical management; dispute resolution or other process; funding; notices; or penalties [Opinion, ¶ 22, emphasis by the majority].
Nor was the Opt Out law related to any legitimate government objective. As noted above, the majority indicated the state could have no legitimate interest in treating one group of injured workers one way and another group of similarly situated workers differently based solely upon a choice that their employer had made. The majority added finally that the offensive provision could not successfully be severed from the Opt Out law. The majority indicated the decision applied not only to the Vasquez dispute, but also to all other pending cases. Opt out employers have 90 days from a subsequent order to be entered by the Court in order to secure the required coverage under the state-run system.
Oklahoma High Court Strikes Down State’s 180-Day Cumulative Trauma Employment Rule
The Supreme Court of Oklahoma didn’t just find fault with the state’s Opt Out law, it also held an important provision in the “conventional,” state-run system could not pass constitutional muster. In March 2016, the Court, in in Torres v. Seaboard Foods, LLC, 2016 OK 20 (Mar. 1, 2016), held the provision in Okla. Stat. tit. 85A, § 2(14) that disqualifies a claimant from recovering for a “cumulative trauma” injury unless the claimant has completed at least 180 days of “continuous active employment with the employer” was unconstitutional as violative of the Due Process Section of Oklahoma’s Constitution [Art. 2, § 7].
Torres, a former employee, filed a workers’ compensation claim alleging that she had sustained a cumulative injury arising out of and in the course of her employment with her former employer and that she needed surgery to treat the injury. The employer denied the claim, contending that Torres had not worked a continuous 180-day period and could not prevail under the restrictions contained in Okla. Stat. tit. 85A, § 2(14). The ALJ denied Torres’ claim on that basis and the Commission affirmed.
Using a point that it would later take up in Vasquez, the Court said that the language of § 2(14) created two classes of employees alleging a cumulative injury and that there was insufficient reason to treat them so differently. Nor was the court persuaded that the state’s interest in preventing fraud justified the disparate treatment since the 180-day bar provision prevented the filing of a non-fraudulent workers’ compensation claim as well as a fraudulent one.
Florida: 104-Week Limitation on TTD Benefits
In June 2016, a divided Supreme Court of Florida rendered its long-awaited decision in Westphal v. City of St. Petersburg, 194 So.3d 311 (Fla. 2016), striking down as unconstitutional the state’s 104-week limit on temporary total disability benefits [see § 440.15(2)(a), Fla. Stat.] for workers who are totally disabled and incapable of working, but who have not yet reached maximum medical improvement. The majority found that the provision violated article I, section 21, of the Florida Constitution, as a denial of the right of access to courts, since it deprived an injured worker of disability benefits for an indefinite amount of time, and in the process, created “a system of redress that no longer functions as a reasonable alternative to tort litigation” [Opinion, p. 2].
The majority said it could not rewrite a statute, like § 440.15(2)(a), that was plainly written. There was but one reading of the statute: the 104-week limitation on TTD benefits results in a statutory gap in benefits, in violation of the constitutional right to access to courts. The majority added that while the stated purpose of the workers’ compensation law was to “assure the quick and efficient delivery of disability and medical benefits to an injured worker and to facilitate the worker’s return to gainful reemployment at a reasonable cost to the employer” [§ 440.015, Fla. Stat.], § 440.15(2)(a), Fla. Stat. operated in the opposite fashion. The majority concluded that for workers like Westphal, the workers’ compensation law lacked adequate and sufficient safeguards and could not be said to continue functioning as a “system without contest” that stands as a reasonable alternative to tort litigation.
Some of the majority’s language in Westphal may sound familiar. It echoes some of the points argued by the intervenors in the Padgett case discussed in last year’s edition. They contended that over the years Florida workers’ compensation benefits to injured workers had been eroded to the point that the workers’ compensation law was no longer a reasonable alternative to tort litigation. In August 2014, Judge Jorge E. Cueto, Circuit Court for Miami-Dade County, agreed. He held the exclusive remedy provision of the state’s Workers’ Compensation Law [§ 440.11, Fla. Stat.] was unconstitutional. As reported last year, however, in State of Florida v. Florida Workers’ Advocates, et al., 2015 Fla. App. LEXIS 9531 (1st DCA, June 24, 2015), Judge Cueto’s decision was repudiated, largely on procedural grounds. The majority’s decision in Westphal shows that the underlying issues presented in Padgett have not gone away.
Florida: Mandatory Attorney Fee Schedule for Claimants
In another split decision, the Supreme Court of Florida, in Castellanos v. Next Door Co., 2016 Fla. LEXIS 885 (Apr. 28, 2016), held that the mandatory attorney fee schedule contained in § 440.34, Fla. Stat., which precludes any consideration of whether the fee award is reasonable to compensate the attorney, is unconstitutional under both the Florida and the United States Constitutions as a violation of due process.
In the underlying case, through the assistance of an attorney, Castellanos prevailed in his workers’ compensation claim. Because § 440.34 limits a claimant’s ability to recover fees to a sliding scale based on the amount of workers’ compensation benefits obtained, the fee awarded to Castellanos’ attorney amounted to $164.54, $1.53 per hour for 107.2 hours of work, as determined by the JCC (note that the employer/carrier’s attorney expended 115.20 hours in the case).
The majority of the Court indicated that in Florida, the right of a claimant to obtain a reasonable attorney’s fee when successful in securing benefits had been considered a crucial feature of the workers’ compensation law since 1941 and that the litigation of workers’ compensation claims had become more complex to the detriment of the claimant, “who depends on the assistance of a competent attorney to navigate the thicket.” The court said it immaterial that the fee schedule could, in some cases, result in a constitutionally adequate fee. The statute precluded every injured worker from challenging the reasonableness of the fee award. That was the statute’s downfall.
New Mexico High Court Strikes Down Farm and Ranch Laborer Exclusion
A provision of the New Mexico Workers’ Compensation Act (Act) [N.M. Stat. Ann. § 52–1–6(A) (2015)] that excludes farm and ranch laborers from its protections, although other agricultural workers are not so excluded, is unconstitutional under the Equal Protection Clause of Article II, Section 18 of the New Mexico Constitution, held the state’s Supreme Court, in a divided decision [Rodriguez v. Brand West Dairy, 2016 N.M. LEXIS 150 (June 30, 2016)].
The majority indicated that the farm and ranch laborers excluded by § 52–1–6(A) were similarly situated to other employees of agricultural employers with respect to the purposes of the Act. The majority concluded that there was no unique characteristic that distinguished injured farm and ranch laborers from other employees of agricultural employers. Moreover, such a distinction was not essential to accomplishing the Act’s purposes.
The Pendulum Swings
It’s likely an oversimplification, but some within the workers’ compensation community say that our world is like a pendulum; it swings back and forth, sometimes favoring the employee, sometimes the employer. Employee-oriented interests appear to have had a good year. They would likely argue that 2016 is a single year and that it comes on the heels of a long period during which employers have been favored. As most of us know, it is often an issue of whose ox is being gored.
Currently, Oklahoma employer groups argue it’s their ox that is feeling the pain. Those groups will continue to push back wherever possible. As one colleague recently quipped to me in a phone conversation regarding the Oklahoma Supreme Court’s holding in Vasquez, there is some talk in the Sooner State of mounting a campaign to replace some of the Vasquez majority with justices that might be more employer-friendly. As I understand things, the justices are currently serving staggered six-year terms. It might take some time to replace the required number and even then, would they ignore the doctrine of stare decisis? Is equal protection primarily a matter of politics? I hope not.
Tensions are mounting on both sides in Florida and several other states. There is even some push back from the federal level, where the increases in outlay for Social Security benefits is prompting some to suggest we need a set-aside system for permanent indemnity benefits to match the one already in place for future medical care. May we live in interesting times.