Tag Archives: u.s. supreme court

Texas Work Comp: Rising Above Critics

Recently, published articles have been critical of the Texas workers’ compensation system and the choice of an “Option” available to Texas employers. Such articles tend to be an accumulation of plaintiff attorney opinions and confusion of out-of-state persons who do not have sufficient working knowledge of the subject matter. This article will address two recent examples:

  1. “The Status of Workers’ Compensation in the United States — A Special Report” by the Workers’ Injury Law and Advocacy Group (“WILG”).[1]

This is a group of attorneys supposedly “dedicated to representing the interests of millions of workers and their families.”[2]  Their paper is at best a rant against the original “grand bargain,” which was struck to create each state’s statutory workers’ compensation system. It is without virtually any legal citations or other back-up. It does, however, illustrate the wisdom of the Texas system in offering a choice — (1) workers’ compensation insurance or (2) the “nonsubscriber” Option. For example, the article notes that many physicians will not take workers’ compensation patients, that 33 states have cut workers’ compensation benefits and that insurance companies continually clamor for reform by lobbying legislatures to cut medical costs or implement other cost savings — all of which the authors say makes it more difficult for the injured worker to recover.

See Also: Who Is to Blame on Oklahoma Option?

The article changes course when it suddenly says that an option to workers’ compensation is at fault, boldly declaring that “opt-out is bad for everyone” and claiming that intervention by the federal government is “immediately needed.” WILG criticizes the no-fault workers’ compensation insurance system and in the same breath castigates those who elect the Texas Option and thrust themselves into the tort system, which plaintiff attorneys have long claimed they love. This is particularly perplexing for Texas readers in view of two factors: (1) the need for plaintiff attorneys has been largely eliminated from the Texas workers’ compensation system,[3] and (2) the fact that the Texas Option gives the injured employee the right to sue for negligence and recover actual and punitive damages. [4]

Responsible employers that elect the Texas Option establish injury benefit plans for medical, lost wage and other benefits.   The benefits are subject to the Employee Retirement Income Security Act (ERISA), which provides numerous employee protections, including communication of rights and responsibilities, fiduciary requirements, and access to state and federal courts.[5] Only negligence liability claims against the employer can be forced into arbitration, which many employers insist upon as a more efficient method of dispute resolution that has been sanctioned for decades by both the U.S. Supreme Court and the Texas Supreme Court. Arbitration even supports awards for pain and suffering and punitive damages. In those cases, plaintiff attorneys have the advantage because an Option employer loses the defenses of contributory/comparative negligence, assumption of the risk or negligence of a fellow employee.

Perhaps the real reason why WILG is fighting Options to workers’ compensation is a combination of not wanting to learn how to succeed at ERISA litigation and fear that other workers’ compensation systems will become as efficient as the Texas system. Why aren’t these self-serving lawyers touting workers’ compensation Option that embraces the tort system they have so righteously pledged to protect?

  1. “Worse Than Prussian Chancellors: A State’s Authority to Opt-Out of the Quid Pro Quo” by Michael C. Duff, University of Wyoming College of Law, Jan. 9, 2016. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2713180

Professor Duff complains primarily about “compulsory arbitration” of workplace claims. He erroneously and boldly declares, “In states both retaining the exclusive remedy rule and allowing employers to opt-out of the workers’ compensation system, employees of opt-out employers are left with no legal remedy for workplace injury.[6]

This apparently refers to the Oklahoma Option, in which an employer can adopt an injury benefit plan with benefits at least equal to or greater than traditional system levels. Such a high benefit mandate may merit application of the “exclusive remedy rule,” which prevents an injured employee from suing their employer. However, Professor Duff overlooks the fact that ERISA provides injury claimants with extensive legal rights, including causes of action for wrongful denial of benefits, failure to produce documents, breach of fiduciary duty and discrimination (including retaliatory discharge). He also overlooks the fact that ERISA claims generally cannot be made subject to mandatory arbitration. [7] So, is this really a matter of having “no legal remedy” or a case of Professor Duff (who is also a WILG member) trying to support the positions and business of his plaintiff attorney friends?

See Also: Strategic Implications of the Oklahoma Option

Professor Duff makes it clear in the rest of his long article that the real enemy is an employer’s ability to implement a employment dispute resolution system that includes arbitration. Professor Duff omits the fact that he is bucking almost the entire U.S. judicial system, which endorses arbitration. For example, the U.S. Supreme Court clearly maintains that arbitration is right, proper and allowed.[8] “By agreeing to arbitrate a statutory claim, a party does not forego the substantive rights afforded by the statute, it merely results in submitting the resolution of the claim in “an arbitral, rather than judicial, forum.”[9] The Texas Supreme Court has been even more clear by stating that “. . . an agreement to arbitrate is a waiver of neither a cause of action nor the rights provided under [The Texas Labor Code]” and is not the denial of a right but rather simply “an agreement that those claims should be tried in a specific forum.”[10]

Oddly, when discussing his arguments against arbitration, Professor Duff states emphatically that it might be “acceptable if employees have knowingly signed pre-injury waivers of workers’ compensation benefits.” [11] What Professor Duff apparently does not understand is that pre-injury waivers of negligence claims have long ago been essentially outlawed in Texas, and an injured employee under the Texas Option retains his rights to sue the company for negligence. [12] The Texas Labor Code also specifies strict conditions under which an employee is allowed to even settle such a tort claim — i.e., only after at least 10 days have passed following the employee’s receipt of a medical evaluation from a non-emergency care doctor, the agreement is in writing with the “true intent of the parties as specifically stated in the document” and the provisions are “conspicuous and appear on the face of the agreement.”[13]

Like the WILG report, Professor Duff confuses benefit and liability exposures in Texas and Oklahoma, overlooks available legal remedies in both states and refuses to accept well-established public policy and judicial precedent that favors arbitration of employment-related claims.

Conclusion

The publication titled, “Non-Subscription: The Texas Advantage,” [14] states that, “Fortunately . . . legislators who drafted the first workers’ compensation laws in 1913 were farsighted enough to provide an option.” Employers that elect the Texas Option to workers’ compensation are subjected to an extra measure of liability as they cut out the middleman and decrease the taxpayer expense of the governmentally prescribed workers’ compensation system. Those Option employers that are operating legally and responsibly should be credited with advancements, such as improving worker access to better medical care, offering modified duty job availability and oftentimes providing better wage replacement benefits.

At the end of the day, perhaps WILG and Professor Duff should make an investment of their time to learn how ERISA protects injured workers and how to litigate an ERISA dispute. These authors should also further consider the ample remedies under Texas law for employer negligence liability, an exposure that provides more incentive to maintain a safe workplace.

No doubt, pursuing such claims does require some effort. Perhaps, therefore, the real objectives of these two papers is a desire to maintain the profitability of legal work favoring injured workers and reducing the attorney effort.

[1]https://s3.amazonaws.com/membercentralcdn/sitedocuments/wp/wp/0245/745245.pdf?AWSAccessKeyId=0D2JQDSRJ497X9B2QRR2&Expires=1458161961&Signature=7rYh45nzAcLAZ%2BYqPx1HilrodQ4%3D&response-

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filename%2A%3DUTF%2D8%27%27WILG%2520
Grand%2520Bargain%2520Report%25201%252D16%252Epdf

[2] www.wilg.org

[3] St. Mary’s Law Journal 2000, “Texas Workers’ Compensation: At Ten Year Survey – Strengths, Weaknesses and Recommendations,” Phil Hardburger, Chief Justice, Court of Appeals, Fourth District of Texas, San Antonio, page 3, 41, citing to research an oversight counsel on workers’ comp, an examination of strengths and weaknesses of the Texas Workers’ Compensation System (August, 1998).

[4] Tex. Lab. Code § 406.033 and Carlson’s Texas Employment Laws Annotated, 2015 Edition.

[5] 29 USC Chapter 18, Subtitle B, Parts 1, 4 and 5.

[6] Page 3 of Professor Duff’s treatise.

[7] 29 C.F.R. 2560.503-1(c)(4); see also Professor Duff’s footnote 26, stating “in Texas and Oklahoma, employers are able to combine opt-out with arbitration.”

[8] Scherk v. Alberto-Culver Company, 417 U.S. 506, 519, 94 S. Ct. 2449, 41 L. Ed. 2nd 270 (1974) (holding that arbitration clauses are, “in effect, a specialized kind of forum-selection clause.”)

[9] Id. at 631 quoting Mitsubishi Motors Corp v. Solar Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985).

[10] In re Golden Peanut Company, LLC, 298 S.W.3d, 629 (Tex. 2009).

[11] Professor Duff at page 2.

[12] Tex. Lab. Code see 406.033(e) and (f) (a legal cause of action by an employee who claims to be injured on the job “may not be waived by an employee before the employee’s injury or death”); Tex. Lab. Code 406.033(a).

[13] Tex. Lab. Code 406.033(f) and (g).

[14] Published by the Texas Association of Business.

Appeals Court Settles Key Work Comp Issue

The U.S. Court of Appeals for the 9th Circuit has issued its long-awaited decision in the Angelotti Chiropractic Inc. v Baker case. In what can only be considered a resounding win for both the legislature’s power to create the workers’ compensation system and the Department of Industrial Relation’s authority to enforce the provisions of SB 863, the appeals court has, in its 32-page decision, upheld the portions of the lower court’s decision that were favorable to the DIR and reversed the portion that had challenged the validity of the statutory scheme. The result is a knockout, but not necessarily final, victory for the legislature and employer community’s efforts to rein in lien litigation madness.

One of the hallmarks of the most recent reforms to the worker’s compensation system in SB 863 was the adoption of both lien filing and lien activation fees. The intent of the fees was to filter out some of the less valid liens, encourage realistic settlement of liens before litigation and ultimately reduce the backlog of pending liens. Under the structure legislatively created, liens filed before Jan. 1, 2013, (the effective date of the statute) would be subject to an “activation fee” of $100 to actively pursue the lien before the W.C.A.B. Additionally, all pending liens as of Jan. 1, 2013, were required to have paid an activation fee by Jan. 1, 2014, or else be dismissed by operation of law. The second prong of the effort to reduce the backlog was to require lien claimants filing after Jan. 1, 2013, to pay a $150 filing fee. The challenge in this case was to the lien activation fee only, but the case has been watched carefully as similar arguments have been made in opposition to the lien filing fee. For many, Angelotti was considered a bellwether case on the lien fee validity.

Not surprising, shortly after its passage, the issue of the validity of the lien fee provisions in SB 863 was attacked in court with various challenges. In a ruling with what appeared to have the most potential for the challengers, a lower court had previously ruled that the plaintiffs in the Angelotti litigation had demonstrated a substantial likelihood of prevailing in their efforts to have the lien activation fee provisions declared unconstitutional. While by no means final, the resulting decision was accompanied by a temporary restraining order prohibiting the DIR from enforcing the lien activation fee provision. In its decision, the lower court rejected some of the plaintiff’s arguments that the lien activation fee violated constitutional prohibitions under the takings clause and the due process clauses of the U.S. Constitution. That part of the claim was dismissed. The lower court, however, was much more impressed with the equal protection arguments advanced by the plaintiffs, finding that the different treatment of institutional lien claimants vs. direct medical providers did not constitute a rational distinction. As a result of the temporary injunction, the DWC suspended its enforcement of the lien activation fee provisions but appealed the ruling.

In its decision, the appeals court upheld the district court’s rulings dismissing the plaintiff’s causes of action based on the takings and due process arguments, finding that the lower court’s rationale was well-founded. (The dismissal of those issues had been sought by the Angelotti plaintiffs.) However, in response to the defendant’s appeal of the restraining order and the failure to dismiss the equal protection claim, the court soundly rejected the lower court’s ruling that plaintiffs had established a probability of prevailing on an equal protection argument, reversing that holding and vacating the existing restraining order prohibiting the DIR from enforcing the lien activation fee provisions. That argument was based on the different treatment between institutional lien claimants (such as insurance companies) and private lien claimants (such as individual practitioners).

In reversing the lower court, the circuit court found the distinctions created by the legislature were both rational and within the wide latitude of the legislature to create:

“The legislature’s approach also is consistent with the principle that ‘the legislature must be allowed leeway to approach a perceived problem incrementally.’ Beach Commc’ns, 508 U.S. at 316; see also Silver v. Silver, 280 U.S. 117, 124 (1929) (stating that ‘[i]t is enough that the present statute strikes at the evil where it is felt and reaches the class of cases where it most frequently occurs.’). Targeting the biggest contributors to the backlog-an approach that is both incremental, see Beach Commc’ns, 508 U.S. at 316, and focused on the group that “most frequently” files liens, see Silver, 280 U.S. at 124,-is certainly rationally related to a legitimate policy goal. Therefore, on this record, ‘the relationship of the classification to [the Legislature’s] goal is not so attenuated as to render the distinction arbitrary or irrational.'”

The appellate court further noted it was the plaintiff’s burden to negate “every conceivable basis” that might have supported the distinction between exempt and non-exempt entities. The circuit (appellate) court said the district court did not put the plaintiffs to the proper test in this regard, instead rejecting the argument made by the defendants (DIR) that the activation fee was aimed at clearing up a backlog of liens. The circuit court found multiple flaws with the lower court’s analysis on this argument, including that it failed to give proper deference to the legislature’s fact finding. Instead, the court held the proper application of correct legal principles demonstrated the plaintiffs, rather than showing a likelihood of success, actually showed no chance of success:

“…that plaintiffs have no chance of success on the merits because, regardless of what facts plaintiffs might prove during the course of litigation, ‘a legislative choice is not subject to courtroom fact-finding and may be based on rational speculation unsupported by evidence or empirical data.’ See Beach Commc’ns, 508 U.S. at 315. Thus, the presence in the commission report of evidence suggesting that non-exempt entities are the biggest contributors to the backlog is sufficient to eliminate any chance of plaintiffs succeeding on the merits.”

While the plaintiffs in this matter have further appeal rights, it does not appear that under this decision the plaintiffs will be entitled to a trial at the lower court. The court not only vacated the injunction but took the unusual step of reversing the trial court’s denial of defendant’s petition to dismiss the equal protection cause of action. As noted in the above quote, the legislative authority to fashion a remedy effectively eliminated any chance of plaintiff’s prevailing.

Comments and Conclusions:

While the decision in this appeal took some time to come, the finality of the decision, and the tenor of the court’s ruling, will undoubtedly be considered well worth the wait. By reversing the lower court’s failure to dismiss the equal protection clause, the appellate court left very little opening for preservation of this lawsuit. While the plaintiffs can both ask for a rehearing and appeal to the U.S. Supreme Court, those levels of appeal come with rapidly diminishing probability of success.

With the DIR no longer hamstrung by the restraining order, we can anticipate a rapid enforcement of the lien regulations requiring activation fees. What will be a fascinating sideshow to this will be what happens to the provisions of Labor Code § 4903.06(a)(5), the requirement to pay the activation fee on any pre-1/1/13 lien claim on or before 1/1/14, a date long since passed. The DWC stopped collecting activation fees pursuant to the now vacated restraining order shortly after the TRO issued. Interestingly the language on the W.C.A.B.’s website indicated lien claimants were not obligated to pay the activation fee to appear at a hearing or file a DOR. However, it makes no mention of the dismissal language in 4903.06.

It is highly likely that few if any lien claimants paid activation fees by 1/1/14. It also seems unlikely, though not necessarily impossible, that the DIR or W.C.A.B. will be able to enforce the dismissal by operation by law provisions without allowing some kind of grace period for lien claimants to comply with the activation fee requirement before lowering the boom on liens without such fees. Lien claimants are now in something of a no man’s land with the faint hope that a further appeal may save them from the lien activation cost, but the compliance clock will probably be ticking, and once it stops the jig will be up on their liens.

It would certainly make sense for any current lien claimants, especially those who are set for hearings, to start looking into complying with the activation fee requirements. Showing up at the W.C.A.B. on a pre- 1/1/13 lien claim without having paid the activation fee may very well result in dismissal in the very near future. For defendants, with the TRO no longer in force, it is game on as far as activation fees are concerned. I intend to start raising the issue tomorrow…(or at least at my next hearing with a pre-1/1/13 lien claim).

On a side note, a similar case in state court, Chorn v Brown, was also recently decided in an unpublished decision. In that case, a lien claimant had challenged the lien statutes on both activation and lien filing fees. The case has been dismissed for lack of subject matter jurisdiction in the superior court. As a practical matter, the dismissal is really more of a procedural issue than a substantive one. The court of appeal noted the proper remedy for Chorn was to pursue a petition for writ of mandamus in the court of appeal, a step Chorn has actually initiated. However, a petition for writ of mandamus requires an appellate court to decide the issue has merit, a rather dubious proposition at this point. However, it is one more step to finally clearing up the DIR/DWC/W.C.A.B.’s authority to deal with the lien morass that, while somewhat abated in the past couple of years, continues to plague the system.

The Hidden Traps in Same-Sex Ruling

Employers should move quickly to review and update as necessary their human resources and employee benefit policies and practices concerning when same-sex partners of employees are treated as the spouses of the employees in light of the U.S. Supreme Court’s June 26, 2015, decision in Obergefell v. Hodges.

Employer and employee benefit plan leaders and their consultants are cautioned that the decision requiring states to allow same-sex couples to marry does not eliminate ambiguities or differences in state laws and documentation of marriage. Consequently, policies, practices and programs for administering the employment and employee benefit rights of married employees need to be carefully tailored to identify and require proof of marriage evenhandedly. Administrators must take into account variances and potential biases in state documentation and practices that could create complications or even liabilities for employers and plans if not appropriately considered.

Since the Supreme Court ruled that the Equal Protection Clause of the U.S Constitution entitled same-sex couples to equal treatment with married heterosexual couples under federal law in U.S. v. Windsor, 133 S.Ct. 2675 (2013), employers have faced several challenges understanding and updating their policies and practices with respect to employees involved in same-sex relationships.

The Obama administration’s aggressive reinterpretation of federal employment, employee benefit, tax and other laws and regulations placed pressure on employers to update their policies and practices concerning when to recognize employees in same-sex relationships as marriages for employment, employee benefits and other purposes.

As the Windsor decision did not address whether the U.S. Constitution also guaranteed same-sex couples a right to marry under state law, disparities in the treatment of same-sex marriages between the states and rapid changes in the state statutory and judicial rules governing these determinations created significant challenges. Employers had to determine if a same-sex couple could marry in a particular state and the right and duty of the employer in response to such an arrangement.

Today’s Obergefell ruling will help to resolve some, but not all, of this uncertainty by answering the question whether states may refuse to allow same-sex partners to marry or refuse to recognize marriages of same-sex partners. The Obergefell decision settles this debate by holding that the U.S. Constitution requires all states to allow same-sex couples to marry on the same terms as apply to heterosexual couples.

Employers still face many challenges. While states must now treat same-sex and opposite-sex couples equally under marriage laws, determining consistently whether two individuals are legally married in any particular state remains anything but simple. Variations in the marriage laws of the states mean the requirements for and proof of marriage can vary significantly.

Care must also be taken to manage potential discrimination risks that might arise from the adoption of policies that treat same-sex vs. opposite-sex partners disparately. There could be administrative complications and compliance risks. There could also be sex discrimination liability exposures under the Civil Rights Act and other laws.

Parties should act promptly and carefully with the advice of counsel to evaluate and update their policies to respond to the new decisions and these other challenges and duties.

Supreme Court Drama — but Little Impact on Health Insurance

On March 25, the U.S. Supreme Court heard oral arguments in two highly anticipated cases involving the Affordable Care Act (ACA) and competing claims of religious freedom and the access to contraception.

The ACA (also known as Obamacare) requires employers that provide health insurance to employees to cover several types of contraception. Two for-profit employers, Hobby Lobby and Conestoga Wood Specialties, object to four of the 20 forms of required contraception, which company owners believe cause abortions.

The penalty for failure to provide coverage for these additional forms of contraception could cost Hobby Lobby upwards of $475 million a year for its 13,000 employees, or almost $37,000 a year in fines per employee.

The key issue is whether the Religious Freedom Restoration Act (RFRA), passed by Congress in 1993 to protect the exercise of religion in all but extreme cases, applies to for-profit secular businesses and whether the religious beliefs of the owners can “pass through” the corporate veil and define corporate religious values that may violate a provision of federal law.

The Supreme Court must determine whether Hobby Lobby’s religious practice is “substantially burdened” by the contraception requirement. If so, the government needs to show that there is a “compelling state interest” and that it is using the “least restrictive means” to achieve the goal.

The federal government argues that the ACA is generally applicable to all companies and does not specifically discriminate against companies owned by individuals who object to the ACA on moral grounds. The government also argues that corporations do not have the same rights as individuals to exercise religious beliefs.

Hobby Lobby and Conestoga Wood are arguing that, because the Supreme Court found in Citizens United v. Federal Election Commission (2010) that corporations have free speech rights and can spend money in federal elections, then corporations also have religious rights under the First Amendment.

During the oral argument, Justices Elena Kagan and Sonia Sotomayor suggested that the companies could avoid the controversy altogether if they stopped providing health insurance and simply paid the $2,000 per-employee annual tax for not buying health insurance. For Hobby Lobby, that would amount to $26 million a year, far less than the cost of insurance itself.

In response, Chief Justice John Roberts said, “I thought that part of the religious commitment of the owners was to provide healthcare for its employees.”

The Supreme Court is unlikely to come to a consensus on this case, and a split decision is anticipated in June. The court may rule narrowly that corporations can seek an exemption from certain forms of contraception and that further issues along these lines need to be handled on a case-by-case basis. While the Hobby Lobby case may have an impact on the future of corporate law and how broadly free exercise of religion is defined, the decision will not likely have a significant effect on the ACA, which the court previously found constitutional. There will also likely be little impact on how the insurance industry will interpret and apply the law.