Constitutional Challenges to State Workers’ Compensation Laws

Episode Notes

Transcript

Workers Comp Matters

Constitutional Challenges to State Workers’ Compensation Laws

07/31/2017

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Intro: This is ‘Workers Comp Matters’ hosted by attorney Alan S. Pierce; the only Legal Talk Network program that focuses entirely on the people and the law in workers’ compensation cases. Nationally recognized trial attorney, expert, and author, Alan S. Pierce, is a leader committed to making a difference when workers’ comp matters.

Judson Pierce: Welcome to Legal Talk Network and Workers Comp Matters. My name is Judd Pierce and I’m an attorney at Pierce, Pierce & Napolitano in Salem, Massachusetts. We’re bringing you today another edition of Workers Comp Matters with our special guest and usual host to the show Alan Pierce who’s well near dear to my heart. Alan welcome!

Alan Pierce: Thank you son!

Judson Pierce: He is not a brother or an uncle as some people might think. He is actually my dad and I’ve been working here for a long time, but this is only my second program interviewing Alan. He’s been well known in the field of Workers Compensation for many, many years. I won’t say exactly how many but more than I.

And before we get in to the topic of today, I’d like to thank our sponsor Case Pacer, practice management software dedicated to the busy trial attorney. To learn more, go to casepacer.com. And PInow, find a local qualified private investigator anywhere in the United States, visit pinow.com to learn more.

And today we’re talking about Constitutional Challenges to State Workers Compensation Laws. Alan, over the past few years, they’re been several noteworthy cases holding all or parts of states’ workers comp laws unconstitutional. How did this develop?

Alan Pierce: It’s good question Jud! You’re correct! Going back to the last dozen or so years and most recently the last two or three years there have been a group of cases and a group of states holding that their particular workers comp laws or particular provisions of the workers compensation statutes, did not pass constitutional muster primarily on issues of due process of law or equal protection under the law. And this seems to be a growing trend around the country. There are cases pending in many more jurisdictions as we speak.

So, I think today, we may want to visit some of the states where this issue has come up and perhaps, I’d like to begin by going back a little bit in time and just sort of putting in framework how the judiciary, especially the appellate courts get involved in workers comp.

As pretty much everybody knows workers comp is no longer a new and novel system. It came into existence in the United States beginning at the turn of the 20^th Century particularly in 1911, in which various states in order to deal with the toll that injured workers and their families were suffering as result of being injured on the job, established workers comp. And it’s been referred to as the grand bargain of the great trade off.

It basically is a contract, the social contract between employers and their workers, labor and management in which employers receive exclusive immunity from being sued in tort and the injured worker gets a predictable adequate and reasonable benefit for being hurt on the job.

And when that’s system first was proposed, it faced a lot of constitutional challenges and it wasn’t until 1917 that the United States Supreme Court in the case of New York Central Railroad Company versus White looked at the scheme of a basic no-fault system of benefits and exchange for an employee or an individual not having access to a trial by jury as guaranteed by the constitution. And as the Court stated in 1917, liability without fault is not a novelty in the law and the workmen’s compensation law is not repugnant to the provisions of the Fourteenth Amendment.

So that pretty much settled the argument as to whether the concept of exchanging tort remedy for a workers comp remedy was constitutional and of course over the ensuing century workers compensation law is developed.

It got to the point that if you look back sitting here of today in 2017 over the past hundred years, we have seen different, I would say eras of workers comp. We had a long period before 1972 in which the law was developing. Additional coverages were established, occupational diseases were recognized, repetitive stress injuries were recognized, other types of injuries and illnesses were recognized.

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So in 1972, because many of the 50 states workers comp laws were really not up to speed in terms of duration of benefits or amount of benefits the Federal Government by establishing this national commission came up with about 19 or 20 or so essential recommendations to states to enact and over the ensuing dozen or so years in to the early 80’s, most of the states that were deficient in the workers comp system came in line with these Federal guidelines.

There were really guidelines or recommendations and as a result, benefits across the board, across the country were increased, durations of periods of disability were increased, the maximum that an injured worker could collect per week was geared towards the state average wage instead of a fixed monetary amount set by the legislature and a variety of other things.

What this did is, it led to increased costs, increased amount of the — value of claims and perhaps it was too much too soon because it was barely 8 or 10 or 12 years after we saw this increase of benefits, we started to see and we continue to see across the country, many state legislatures reacting to these increased costs, these increased premiums and the pleas of employers that the costs are too onerous, that they have reduced benefits in all forms and in the different states to the point that the most egregious reductions have not been able to be fixed by the legislatures.

So as a result, attorneys representing and advocating for injured workers have looked to another branch of our three party governmental system to try to address these particular issues.

Judson Pierce: Yeah, generally changes come from the legislature, so in — what you’re talking about now, going to the courts and looking for their decision on issues, can you tell us a little bit about what those issues are that people are petitioning the courts for some redress?

Alan Pierce: Yeah! Well, first of all when you talked about going through a legislature, we have to look at P-word which is Politics. The legislature is a highly political body. When bills are filed, usually the proponents lineup behind them, the opponents lineup behind them and there are the debates, committee meetings, compromise and sometimes nothing happens. And over the years frankly, the business community, the insurance community probably has had more legislative clout than injured workers have and it’s been very, very frustrating for those of us who represent injured workers to try to reverse the trend of reduction of benefits.

Let me give you a couple of examples and this goes — the first one I think I’ll start with is in New Mexico. New Mexico is a state in which a good deal of the workforce is engaged in farm work or agriculture, and for many years there was an exclusion from workers compensation coverage for agricultural workers, for farm workers, and attempts were made through the legislature to have the legislature broaden the coverage to include farm workers.

This was just routinely unsuccessful. You can imagine that the agriculture industry and the farm work industry was very powerful. There might have been hundreds of small farms and agricultural businesses but there were probably 8 or 9 large conglomerates and they were very successful.

So, some creative attorneys filed a lawsuit that wormed its way up to the New Mexico’s Supreme Court and in a decision in 1994 and again in 2016 the New Mexico Supreme Court concluded that there is no unique characteristic that distinguishes injured farm and ranch labors from other employees of agricultural employers and such a distinctions is not essential to accomplish the act’s purposes.

So, as a result of the New Mexico Supreme Court indicating, there was no rational basis to distinguish between farm workers or agricultural workers and other workers that by denying them coverage violated the tenants of the Equal Protection and Due Process Clauses of the New Mexico Supreme Court.

Other states, have dealt with this in the last few years, probably the two states most notable are the State of Oklahoma and the State of Florida.

Judson Pierce: Alan, what types of the issues did those cases in Florida and Oklahoma examine?

Alan Pierce: Well, let’s start with Florida. There have been three or four cases that have gained a lot of notoriety. One of them is the Castellanos case which is Marvin Castellanos versus Next Door Company.

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This was a decision that was issued by the Florida Supreme Court, little over the year ago in April of 2016. In the Castellanos case, the Florida Workers’ Comp statute mandated a conclusive fee schedule for awarding attorney’s fees to claimants in workers’ compensation cases that was to put it mildly extremely low and worked to discourage attorneys from taking a workers’ comp case.

And as a result, there was really an uneven playing field. Keep in mind, we recognized that attorneys’ fees can and should be statutorily regulated, but apparently the formula used in Florida was so low that it was an anomaly, and keep in mind there is no restriction on insurers or employers spending money for legal resources to defend the claim.

So the fee schedule was challenged and under the particular statute, the Supreme Court in Florida concluded that the particular section that mandated a conclusive fee schedule was unconstitutional as it denied due process of law under both the Florida and the United States Constitutions.

In the Castellanos’ case, the amount that Castellanos’ attorney was awarded under their fee schedule for the hours that he put in, successfully obtaining an award of medical payments to his client, came out to about $1.53 per hour.

A lot of states have a fee schedule that it might have a specific amount. For example, here in Massachusetts if we have to file a claim over a denied medical bill and we are successful early on the fee can range anywhere from $500 to $1500 and if we are forced to take it to hearing, it can be as high as $5,500 or $5,600.

But in Florida, the attorneys’ fee was limited to no more than 10% of the benefit sought up to a certain amount and if you are chasing down a medical bill for a $1,000 and you have to attend hearings and file claims and incur expense and you get 10% of a $1,000, it’s clearly not an equal playing field.

Judson Pierce: The costs outweigh the actual receipt of any sort of money from that action. The costs of bringing that action would exceed that. So that was their argument that it was an unconstitutional provision, because it would effectively limit people from getting lawyers, because lawyers wouldn’t want to take on that work.

Alan Pierce: Right!

Judson Pierce: I mean, it used to be years ago to represent a veteran in a disputed claim for veterans’ benefits. The US Congress, right after the Civil War made it a crime for a lawyer to charge more than $5 to represent this veteran. Now it may perhaps, at the end of the Civil War, that may have been a reasonable fee. Somewhere in the following century it was raised to $10 but finally at some point it was determined that, putting a $10 cap was not fair.

Now in Florida, we also had another issue, why don’t we choose that for a little bit? Before we go to Florida, let’s take a quick break for a message from our sponsors.

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Judson Pierce: And we are back with our special guest, the regular and usual host of Workers Comp Matters, Alan Pierce. We left off with describing what had happened with the Oklahoma case, we are going to discuss, or you are going to add what was prevalent in the Florida case that come down. Alan, could you give us a description on what happened there?

Alan Pierce: Yeah, well in addition to the Castellanos case which I referred to before our break, there were couple of other cases of note, one is the Padgett case, and in Padgett the argument was that the exclusive remedy provision of the Florida’s Workers Compensation law was unconstitutional.

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However, that case received some traction at the circuit level, that a circuit court judge found that the act was unconstitutional. However on appeal there were some standing issues and issues really unrelated to the merits, so that the Supreme Court declined to hold the Florida statute unconstitutional.

There was also another case Stahl v. Hialeah Hospital, in which again a required copay for medical visits after maximum medical improvement and the elimination of permanent and partial disability benefits was argued to be inadequate remedy at law. And both in Padgett and Stahl, the idea was to bring a claim against the employer on the grounds that the remedy under workers’ comp was a breach of the grand bargain, that there was not a fair exchange for losing the ability to sue the employer for a benefit that had been reduced and reduced and reduced over the years so that the adequacy of the benefit no longer was sufficient to justify the exclusive remedy enjoyed by the employer.

Judson Pierce: Now, Utah had a similar action or similar case having to do with attorney’s fees in the case of injured workers, Association of Utah, it was held that there was a violation of the separation of powers. Could you talk a little bit about that interesting aspect to this discussion?

Alan Pierce: Yeah. Now first keep in mind Judson, you and I are both workers’ comp lawyers and probably the reason that we’re workers’ comp lawyers is that in Law School, we probably or at least, I will speak for me, you are much brighter than I am, we probably had trouble with Con Law. I never thought, I would even be speaking on a podcast or speaking before a group about constitutional law. I am not a constitutional lawyer. I am a comp lawyer, however, anybody out there who practices workers’ comp or is involved in workers’ comp in any fashion, I think at this point needs to be aware of some of these issues and you are right.

I have to give credit, by the way I have to give credit in Florida to Mark Zientz. He is a very creative attorney down in the Miami area who brought a couple of those cases I referred to and Jinks Dabney, an attorney in Utah, had a similar case in which the attorney’s fees were challenged.

And this is interesting because you can get into the courts, you can get a constitutional issue framed a couple of different ways, maybe even more than a couple of ways. You can do it the way they did it in Florida by actually suing the employer. The other is to look at the separation of powers between the executive, the legislative, and the judicial branch.

Now, in Utah, you basically had the legislature restricting or stating what the attorney’s fee should be when the court in Utah when faced with this issue, said, you know what, this is a function of the judiciary, the judicial branch of government has the power to oversee legal fees for lawyers. They are the branch of government that regulates what lawyers can charge and can receive and so forth.

So, the Supreme Court in Utah, and I’m really, really summarizing this very, very briefly, they basically said that this is a judicial function. It is not a regulatory or legislative function and they basically said that this violated this particular attorney fee provision, violated the separation of powers doctrine in the both the State and the Supreme Court.

And in an even more recent case in Alabama, in the case of Clower v. CVS Caremark, the same conclusion was reached, it was a little broader case, but again, in Alabama, the trial court found that there was a division or a breach of the separation of powers.

Judson Pierce: Well, I was a brilliant constitutional student in Law School. I must say that my professor actually said I was the most amazing constitutional law student he has ever had. Now I’m very, very bashful, I’m not that astute in con law matters but getting back to workers’ comp matters, say you’re an attorney listening to this podcast and you have an issue with scarring benefits in your state. And the scarring benefits are either diminished from where they once were or discriminatory based on sex, meaning that women who have a scar on their arms or in their legs do not get the benefit of compensation for that because it’s not deemed a visible scar because it can be clothed.

What is your sort of first to do list in terms of bringing an action to try to get that piece of the — say you’ve been to the legislature, you’ve been trying to advocate for a change to that portion of the statute, it’s got you nowhere, no traction. You want to bring a constitutional action on this. What do you do?

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Alan Pierce: All right well, what you are referring to and we both have had experience of this back in 1992, here in Massachusetts, we do have a provision that disfiguring scars are to be compensated. Before 1992, there was no limitation on which part of the body the scar was located. It would be looked at, evaluated according to a schedule and a guideline.

Clearly in an effort, as part of the efforts in 1992, to reduce premiums and to cut benefits, the legislature here, as has been done in another states, limited compensation for disfiguring scars, to scars that are on the hands, neck or face and those of us, who are at the committee meetings back then, representing injured workers heard first hand that the reason was well these are the areas of the body that are easily visible and should be compensated.

There was some discussion and there has been discussion ever since at the legislature that this isn’t fair especially to women who routinely, as part of their general appearance and dress might have areas of their body exposed that men do not and that scarring on their legs or on their upper torso should be compensated.

The legislature has not been receptive to that argument and I don’t know if this rises to the level of a denial of equal protection but I would think that if somebody wanted to challenge that, one might frame an argument that this is discriminatory against women, that there is no rational basis.

If the rational basis is that it is the area of the body that shows and it can be shown that with women, their legs show as much as their hands or face might show to the outside world that it may indeed be an impermissible limitation on benefits. It also may create two classes of beneficiaries.

And the other idea that seems to run through some of these cases is that there has to be a rational basis for these distinctions. And some of the courts, particularly in Oklahoma, which I’d like to get to before we close, the court in Oklahoma in a couple of noteworthy cases basically said, if you are reducing benefits solely to achieve a reduction in cost for financial purposes that that may not be enough that there was a bargain created, that an injured worker would get so much in benefits in exchange for giving up his/her right to sue.

And if that right to sue has not been re-established but the benefit level that was there when this bargain was struck has been reduced and reduced and reduced again; at some point, there has been in a sense a breach of contract that the benefit offered in exchange for the exclusive remedy enjoyed by the employer is no longer an adequate and reasonable benefit.

Judson Pierce: Well that’s interesting, the workers’ comp system itself, can that be deemed the contract between government or employer and employee?

Alan S. Pierce: Yes, and that runs right through all of the early cases. This is a contract. I’d like to think of it as a covenant. I’d like to think of it as more than just a contract where each party gets something and each party gives something up. I think the fact that the general precept that an employer, who employs labors to create a product has a responsibility for the effects of the injury that occurs in the creation of that product. And as a result, there is a contract between employer and employee.

It is been referred to, as I said earlier, as the Grand Bargain or the Great Trade-Off. It is a concept that runs through all of the early cases and even some of the most recent constitutional cases. And the two I’d like to just talk on very quickly, and the two, I think our audience maybe most familiar with, are the Oklahoma cases, the Vasquez and the Torres cases.

Both of these were brought by Bob Burke, I have to give him a lot of credit. He is a very creative and passionate attorney in Oklahoma and the Vasquez case and we did a show with Bob Burke in which the Vasquez case held that the opt-out mechanism, where employers can opt-out of the workers’ comp system, yet retain the exclusive remedy defense, was patently unconstitutional.

And that was the case where there was an alternative system of workers’ comp put into the workers’ comp law where employers, in a sense, create their own system of benefits, which were supposed to be substantially identical to the regular Oklahoma statute, but they really weren’t.

And when the Oklahoma Supreme Court took a look at that, they agreed with Burke that this was clearly unconstitutional to create two-classes of people, there was no rational basis and they declared the opt-out statute unconstitutional.

(00:24:51)

Right around the same time, there was another case, the Torres and that was interesting. In Torres, one of the sections of the Oklahoma Act regarding cumulative trauma, those cases that might result in carpal tunnel syndrome or repetitive activity that would then create an injury, I guess the legislature in an attempt to curb the cost of those cases, established a 180-day rule, which basically meant that any worker who contracted a repetitive stress injury had to have been engaged in that job for no less than a 180-days for that employer.

So somebody doing rapid manipulative work and came down with a condition after a 179 days would not collect any benefits; where if, somebody who might have worked for a 181 days would. And there is no medical justification for a 180-day period before which you are not injured and after which you are injured that this was recognized as again, creating two classes of individuals.

And in holding this unconstitutional, the Oklahoma Court said that there was a well known principle that a legislature’s authority to create or abolish a right or benefit, does not mean that the legislature has the authority to create an unconstitutional condition related to that right or benefit, and they went on to say that this particular piece of legislation does more than merely identify what employees are covered by workers’ comp or define a statutory cause of action and in doing so, it was both over inclusive and under inclusive which made the statute unconstitutional.

So that’s what we are starting to see and I don’t think we’ve seen the end of it.

Judson Pierce: Do you know of any cases that are pending right now which our listeners would like to make sure that they are aware of?

Alan S. Pierce: Yes. Well first of all, I want to give credit to law professor, Emily Spieler, at Northeastern University. She has identified the most recent state workers’ comp statutes, some of which we have referred to both in Oklahoma, the Farm Workers, the Florida, and the Oklahoma cases. There is also the most recent case in Pennsylvania where the AMA Guides was found to be unconstitutional. The use of the AMA Guides, it wasn’t that the guides themselves.

By the way, for our listeners, the AMA Guides for the evaluation of permanent physical impairment has various editions. The most recent Sixth Edition has been controversial. It is a reduction in ratings and basically, in holding in Pennsylvania, that that was unconstitutional was because the legislature abrogated its responsibility to set the rates and they said, all insurers and they state workers’ comp act must use the AMA Guides. And that was an improper delegation of authority from the legislature to a private company.

Our friends at WILG, the Workers’ Injury Law and Advocacy Group, has identified several states, more than several states in which there are potential issues for constitutional challenges. Those are – and I’ll just read off the states where some of these issues are pending and if anybody wants information, they can contact me through Workers Comp Matters or at my email address  HYPERLINK “mailto:[email protected]” [email protected].

But California, Colorado, Connecticut, Florida, Georgia. Iowa, Louisiana, Maryland, Massachusetts, Michigan, New York, North Carolina, Pennsylvania, South Dakota and Virginia; all have issues percolating up to through the system on various issues both in terms of attorney’s fees, choice of physician, caps on medical, pre-authorization of medical, AMA Guides, duration of benefits, all the way down their line.

I can’t predict how many, if any of those challenges will be successful. But if you are located in any of those states or you are in a state in which the benefit levels had been drastically reduced by your legislature, it’s certainly worth a consultation with a constitutional expert to determine if there is a basis for an Equal Protection, Due Process, argument, and elicit that aid because again, there is less politics in the judiciary.

I’m not saying it’s without politics but there’s a whole lot of politics going on in the legislature. And I think in the matter of fairness and equity; unfortunately, it might take the longer and more expensive route to go through the court systems to effectuate change.

Judson Pierce: Well, I appreciate the time you gave us. This has been a very interesting discussion and it does bring me back 20 years to Con Law, my first year at law school and how exciting of course that was. I’d like to thank our host, our guest for today, Alan Pierce for joining us.

For those of you listening, please tune in to the next show, and go out and make it a day that matters. Thank you very much.

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Outro: Thanks for listening to Workers Comp Matters today on the Legal Talk Network, hosted by attorney Alan S. Pierce, where we try to make a difference in workers’ comp legal cases for people injured at work. Be sure to listen to other Workers Comp Matters shows on the Legal Talk Network, your only choice for legal talk.

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