Richard M. Murrell, Director of Quality Assurance,

Tennessee Bureau of Workers’ Compensation

Learning Objectives Are constitutional challenges common in the

context of workers’ compensation cases?

What types of challenges to constitutionality are available?

What authority do ALJ’s have to rule on constitutionality of statutes?

What is currently happening?

Are constitutional challenges common in the context of

workers’ compensation cases?

Workers’ Compensation is a one hundred year old social insurance and legal system.

"Once a workers' compensation act has become applicable either through compulsion or election, it affords the exclusive remedy for the injury by the employee or the employee's dependents against the employer and insurance carrier. This is part of the quid pro quo in which the sacrifices and gains of employees and employers are to some extent put in balance, for, while the employer assumes a new liability without fault, it is relieved of the prospect of large damage verdicts." 6-100 LARSON'S WORKERS' COMPENSATION LAW § 100.01.

History of challenges Several challenges were made to the constitutionality

of having a system that gave judicial or quasi-judicial power to an executive agency and limited access to court. (Franklin v United Railways & Electric Co. 1904)

By 1911, more comprehensive legislation began to be passed in various states with most jurisdictions in the United States having some form of Workers’ Compensation in place by 1922.

Mississippi was the last in 1948.

Constitutional Challenges Challenges arise as part of the checks and balances of

our system of government.

The challenges are most common after a legislative change.

The challenges reflect the various interests Needs of the workers and their families

Needs of Employers

Needs of Insurance carriers

Needs of medical providers

Needs of society – cost shifting to other social insurance

What types of challenges to constitutionality are available?

Facial

Claims that the statute is unconstitutional by its terms, as written.

Heavy Burden

Must show

It operates unconstitutionally in common application.

No set of circumstances under which it would be constitutional.

What types of challenges to constitutionality are available?

As applied

While capable of being applied constitutionally in general.

It operates unconstitutionally under the circumstances applicable to the plaintiff.

What authority do ALJ’s have to rule on constitutionality of statutes? Of Course, it depends on the state.

Typically, none regarding a “facial” challenge.

Increasingly allowed for “as applied” challenges. Allows agency to correct drafting errors on rules.

Alter unconstitutional exercise of statutes effect in Rules or Procedures.

Sometimes the nature of the agency requires the exhaustion of the administrative process. Completes the record under the ALJ.

Benefits from agency expertise in fact finding.

Warning for ALJ’s Do not assume a constitutional issue, if presented, is

outside of your jurisdiction.

Always discuss facts that have been presented that in any way relate to the argument made on such an issue.

Conclusory statements in your order cannot substitute for findings of fact, analysis of factors and conclusions of law.

Ouch – You don’t want this! Our review of Mr. Thurman’s contention is made difficult

by the failure of the administrative judge to address the evidence in the record, testimonial and otherwise, bearing on this issue.

The evidence in the record does not support the administrative judge’s conclusory statement that the facts in this case were “not sufficiently similar to the facts of the Hawks case to warrant a similar result upon application of a proportionality test.”

The administrative judge did not discuss the facts relied upon in making the statement or analyze the evidence in the context of the proportionality test.

The Usual Paths for challenges Declaratory Judgement Action

Direct Challenge.

State court typically restricted to a particular district.

Direct Interlocutory Appeal

From an Inferior Court.

From an Agency Tribunal.

Note: The Oklahoma statute may demonstrate an exception to the usual rules.

Categories of challenges “Open Courts”

Deals with the right of access to court for remedies.

Limitations on benefits by direct or indirect legislation.

Procedural Due Process Lack of impartiality in private dispute resolution plans.

Limits on ability to appear, present evidence and cross-examine .

Equal Protection (ban on special laws)

Substantive Due Process Concept of reasonable compensation exchanged for tort immunity.

Unclear validity.

Is the right to recover for personal injury a historically rooted right?

Is this a fundamental right necessary to a system of ordered liberty?

What is currently happening?

General Issues

Opt Out

Cost containment by benefit restriction

A challenge based on failure to increase disability benefits

Oklahoma and Opt-out 2013 Oklahoma Legislature passed amendment

allowing employers to opt out of compliance with the workers’ compensation laws if:

Established a plan designed and governed by the employer but approved by the Commission.

Benefits of the same “form” were included but with employer definitions of scope and work-relatedness.

Retained exclusive remedy.

Presumably under ERISA.

Action was not unforeseen Lobbied for by Association for Reasonable Alternative

to Workers’ Compensation (ARAWC) in Oklahoma, Tennessee, South Carolina and Georgia.

Similar legislation in Oklahoma failed in 2012.

Opposition by injured worker interests and insurance industry mobilized.

Court challenges were swiftly filed.

Oklahoma Supreme Court decision in Vasquez v Dillard’s, Inc., September 13, 2016, struck down the statute.

Vasquez Decision based upon state constitutional provisions

“The core provision of the Opt Out Act, 85A O.S. Supp. 2015 §203 creates impermissible, unequal, disparate treatment of a select group of injured workers. . . .

Therefore, we hold that the Oklahoma Employee Benefit Injury Act, 85A O.S. 2014 §§201-213, is an unconstitutional special law under the Oklahoma Constitution, art. 5, §59.” Vasquez v. Dillard's, Inc., 2016 OK 89, P1 (Okla. Sept. 13, 2016)

History of the Claim Vasquez, Dillard's employee, injured her neck and

shoulder as she lifted shoe boxes while working on September 11, 2014.

On that date and on September 24th, she filed claims for benefits under Dillard's Opt-Out plan.

Dillard's denied the claims on October 3 and 10, 2014, respectively.

The employee appealed to the Workers' Compensation Commission, filing a Notice of Claim for Compensation on December 5, 2014.

Collateral defensive action The employer sought removal to federal court on

August 6, 2015 on grounds that the federal court had exclusive jurisdiction under the Employee Retirement Income Security Act (ERISA).

The United States District Court for the Western District disagreed and remanded the cause to the Commission on September 30, 2015.

Commission Action Heard Argument in February 2015.

Issued an order in the cause on September 26, 2015.

Found the Opt Out Act

constituted an unconstitutional special law.

denied equal protection to Oklahoma's injured workers.

denied injured workers the constitutionally protected right of access to courts.

Oklahoma Supreme Court On March 17, 2016, Dillard's filed a petition for review

with the Supreme Court.

Extensive briefing

Employer

Employee

State Attorney General

Various amici curiae

Employee's Submission of Supplemental Authority, occurred on the afternoon of July 30th.

Discussion “We have recently determined in Robinson v. Fairview

Fellowship Home for Senior Citizens, Inc., 2016 OK 42, 371 P.3d 477, that the Commission has no authority to determine the facial constitutionality of the Opt Out Act as a special law. Therefore, the Commission's determinations of constitutionality were not authorized as a blanket strike of the Opt Out Act.”

“The portion of Robinson important to these proceedings is found at ¶14. It provides that "this Court has a duty to review the constitutionality of a challenged legislative enactment when presented with a justiciable case or controversy. . . ." We are presented with such a cause here.”

Concurring opinion 1 “I write separately to emphasize that I would expand

on the majority's special law analysis and address other areas in which the Opt Out Act is constitutionally deficient.”

“Specifically, . . . the Opt Out Act fails to provide adequate due process protections.”

Concurring opinion 2 “The bottom line in the case before us is this: The state

of Oklahoma can either allow an employer to opt out of the state's workers' compensation system entirely and lose exclusive remedy protections; OR the state can require an employer to provide coverage for work-place injuries under the state's workers' compensation system and be given the protections of exclusive remedy.”

“Thus, under the Texas system, participation in the workers' compensation system is ‘voluntary and elective as to both employer and employee.’”

Dissenting opinion “Neither the majority or concurring opinions, nor the

Commission set forth or address the specific facts in this case.

Rather than addressing the facts of the case, the Commission went straight to the heart of the Opt Out Act and ruled that it was facially unconstitutional.

Dillard's appealed to this Court but the majority, like the Commission, skirted the facts in its mission to find the entire Opt Out Act an unconstitutional, special law.”

Florida and Benefit Restriction The Florida Experience

Castellanos v. Next Door Company

Westphal v. City of St. Petersburg

Stahl v. Hialeah

These cases merely illustrate the challenges in Florida.

Several cases have raised issues; some successfully while others, not so much.

Castellanos v. Next Door Company

Whether Section 440.34, Florida Statute (2009), which mandates a conclusive fee schedule for awarding attorney’s fees to the claimant in a workers’ compensation case, is unconstitutional as a denial of due process under the Florida and United State Constitutions.

Background Castellanos’ attorney prevailed in his workers’

compensation case and was successful in resisting numerous defenses.

The judge of compensation claims found that 107.2 hours of work were reasonable and necessary in litigating the case.

Based on the statutory fee schedule, which awarded fees based on the amount of benefits secured, the fee awarded to Castellanos’ attorney was equal to $1.53 per hour.

Supreme Court Determined that the statute was unconstitutional under

both the State and Federal constitutions as a violation of due process.

The Statute allowed no determination whether the fee awarded by judge of compensation claims was reasonable—either grossly inadequate or grossly excessive.

“Stated another way, the statute establishes a conclusive irrebuttable presumption that the formula will produce an adequate fee in every case.

This is clearly not true, and the inability of any injured worker to challenge the reasonableness of the fee award in his or her individual case is a facial constitutional due process issue.”

Dissent 1 The statute “embodies a policy determination by

legislature that there should be a reasonable relationship between the value of the benefits obtained in litigating a workers’ compensation claim and the amount of attorneys’ fees the employer or carrier is required to pay to the claimant.”

“While this policy adopted by the legislature may be subject to criticism, it unquestionably passes the rational basis test.”

Dissent 2 Noted that the majority rewrote the attorney fee

statute to avoid the standard governing facial challenges. (Unconstitutional under all circumstances)

“The majority is really deciding that reasonable attorney’s fees are constitutionally required.”

Westphal v. City of St. Petersburg Is a worker who is totally disabled as a result of a

workplace accident, but still improving from a medical standpoint at the time temporary total disability benefits expire, deemed to be at maximum medical improvement by operation of law and therefore eligible to assert a claim for permanent and total disability benefits?

Supreme Court concluded that the 104 week limitation on temporary total disability benefits results in a statutory gap in benefits and is a violation of the constitutional right to access the courts.

Of note The constitutional yardstick “is whether the scheme

continues to provide adequate, sufficient, and even preferable safeguards for an employee who is injured on the job.”

If the statute continues to provide sufficient safeguard for the injured employee, it qualifies as an alternative to tort litigation.

Benefits should not be viewed in isolation from the rest of the workers’ compensation statute. . .

Continued notes It was observed that there has been a continuous

reduction in benefits to injured workers with specific reference to the right of the employer/carrier to select the treating physicians, the implementation of the major contributing cause standard and the post-maximum medical improvement co-pay.

A concurring opinion indicates at least one Justice believes the workers’ compensation scheme as a whole is unconstitutional and in need of a major legislative—not judicial—reform.

Stahl v. Hialeah Hospital A nurse at Hialeah Hospital, brought a challenge to the

Workers’ Compensation Act, alleging that

The $10.00 copay for medical visits after a claimant has attained maximum medical improvement and

The elimination of permanent and partial disability benefits,

Rendered the workers’ compensation law as an inadequate exclusive replacement remedy for a tort action.

Stahl Essentially, the claimant in this case, was challenging the

constitutionality of the entire Florida Workers’ Compensation System.

The attorney arguing on behalf of the claimant took the position that the changes made to the Workers’ Compensation Act render the Act no longer constitutionally permissible because of cumulative reduction in medical and indemnity benefits.

First District Court of Appeal Found that both amendments did withstand the

rational basis review

Co-pay ensures reasonable medical cost after MMI

Partial and Permanent disability was supplanted by impairment income benefits.

On appeal to the Supreme Court

Exercised discretion to discharge jurisdiction and

refused to hear the issues presented.

Aftershocks in Alabama Nora Clower vs. CVS Caremark (May 2017)

A circuit Court Judge found two provisions unconstitutional. $220 per week cap on compensation at MMI.

15% cap on attorney fees.

$220 per week was above minimum wage in 1987 when the law was passed. The argument is that inaction by the legislature has resulted in unconstitutional violation of Equal Protection clause.

This is a trial level decision; not binding on other litigants and subject to appeal or revision.

Interesting Tidbits The issues were presented by motion filed January 31

and directed to be served on the Alabama Attorney General, Luther Strange.

On February 8, former Alabama Senator Jeff Sessions was confirmed as US Attorney General.

Luther Strange was appointed to the Senate seat February 9 and Steve Marshall was appointed as Alabama Attorney General on February 12 and was finally served on the motion April 25.

The trial judge ultimately issued sua sponte an indefinite stay on the order.

Consideration of federalization “The competing interests of employers looking to

control costs and workers looking to maximize benefits and coverage have long been at odds. Recently, some in Congress have expressed concern that the lack of federal oversight of workers’ compensation has led to changes in state policies that have negatively affected workers.”

Congressional Research Service, Workers’ Compensation: Overview and Issues

Scott D. Szymendera (April 20, 2017)

Almost Done!

THANK YOU

Sources and Additional Reading Richardson v. Board of Dentistry, 913 S.W.2d 446

(Tenn 1995)

Thurman v Tennessee Department of Safety and Homeland Security, No. M2016-02215-COA-CV (Tenn Ct App 2017)

Florida: An Overview of Recent Decisions (LexisNexis Newsroom, 2016)Robert J. Grace, Jr., Esq., The Bleakley Bavol Law Firm, and Lyle Platt, Esq., Clarke & Platt, P.A.

Sources and Additional Reading Florida Workers’ Comp Adjudication (Blog Articles, June 21, 2017)Hon.

David Langham, Deputy Chief Judge of Compensation Claims for the Florida Office of Judges of Compensation Claims and Division of Administrative Hearings

THE OPT-OUT OF WORKERS’ COMPENSATION LEGISLATION: A CRITICAL BRIEFING AND THE VASQUEZ V. DILLARD’S CASE, Tort Trial & Insurance Practice Law Journal, Fall 2016 (52:1) Hon. David B. Torey, Workers’ Compensation Judge, Pennsylvania Department of Labor & Industry

CONSTITUTIONAL CHALLENGES TO STATE STATUTES AND RULES, 17 th ANNUAL ADVANCED ADMINISTRATIVE LAW COURSE , State Bar of Texas September 22-23, 2005 Chapter 16 , MARY A. KEENEY, Esq. and SUSAN G. CONWAY, Esq.