Tag Archives: Constitutional Law

Feds prosecuting COVID fraud by employees

Posted on June 8, 2020 by Jon Rehm

My jaw dropped last Tuesday when I read a blog post by Ohio-based management defense attorney Jon Hyman.

Hyman posted the Department of Justice criminally charging an employee for allegedly defrauding his employer by submitting a forged doctor’s note stating he had COVID-19. Human Resources and management-side defense social media share a near obsession with Family Medical Leave Act (FMLA) fraud by employees.

So why can HR now sic the FBI on employees who forge off-work notes?

The CARES Act, interstate commerce and taxing power

The answer to this question is the CARES Act. Passed in response to the COVID-19 crisis, the CARES Act amended the FMLA to provide some employees with paid leave related to COVID-19. The CARES Act also used federal funds to expand unemployment benefits related to COVID-19.

Normally state law would govern the prosecution of small-time workplace fraud under crimes like forgery and unemployment fraud. But a federal bailout creates federal criminal jurisdiction. The United States Department of Justice is aggressively prosecuting COVID fraud. Some employer-advocates question the use of the federal power to regulate interstate commerce for the good of employees. But the interstate commerce clause also expands the ability to federalize crime. It seems like employer-advocates are welcoming the expansion of federal authority to prosecute fraud by employees.

Federal taxes partially fund unemployment benefits. This would give the federal government the power to federalize unemployment fraud through the taxing power granted to Congress by the Constitution.

The real COVID fraudsters

The Georgia case is the first known incident of an employee being prosecuted for forging a medical note. COVID-related fraud mirrors workers’ compensation fraud in that most fraud is not committed by employees. Apparently organized crime is submitting false unemployment claims. Some individuals and businesses are falsely submitting claims under the Paycheck Protection Program. If an employee suspects their company is abusing the Paycheck Protection Program they could bring a claim under the False Claims Act.

But while low level employees are not committing the vast majority of COVID fraud, low-level employees are the easiest to prosecute. Prosecuting low-level employees for COVID fraud serves at least two purposes for employers.

Reopening and unionizing

As the perceived threat of COVID recedes, many businesses are reopening and employees are returning to work. Employers complain that some employees are reluctant to return to work because of enhanced unemployment benefits. However many employees are expressing safety concerns about COVID exposure. Publicizing the prosecution of COVID fraud by employees calls into question the legitimacy of employee safety concerns. Criminalizing COVID fraud by employees also allows employers and their mouthpieces in the media to portray workers worried about COVID as welfare cheats.

The use of state power on behalf of employers against employees serves another purpose. Mike Elk of Payday Report tracked walkouts and strikes related to the COVID 19 pandemic. Management-side pundits are also expressing concern about rising pro-union sentiments by employees. Prosecuting employees is one way to intimidate employees who want to form unions or engage in collective action in the workplace.

Why curtailing Auer deference could be bad news for gig economy companies

Posted on April 4, 2019 by Jon Rehm

Newly confirmed Supreme Court Justice Brett Kavnaugh expressed concern about deference to administrative agencies

Last week ride-hailing app., Lyft became the first major gig economy company to go public. Listing shares on the stock exchanges has forced gig economy companies to disclose risks to investors. One of the biggest risks to the profitability of Lyft and other gig economy companes are “regulations” such as wage and hour laws, unemeployment insurance and workers’ compensation.

Gig economy companies have opened a new front in their lobbying efforts to undermine basic workplace protections. But these companies may have an unexepcted nemesis — conservative-leaning Supreme Court justices.

Last week the New York Times reported that Tusk Ventures, a lobbying/venture capital firm, is starting to lobby state regulatory agencies to exempt gig economy workers from state laws regulating employment. The move by gig employers to undermine workplace laws by administrative fiat was prompted by their inability to effectively lobby state legislatures.

Meanwhile last week, the Supreme Court heard oral argument in Kisor v. Wilkie which could curtail or even eliminate so-call Auer deference. Auer deference is the deference that courts give to how an administrative agency interprets their own regulation. Administrative agencies are often in charge of enforcing laws made by legislatures.

In oral argument, Justices Kavanaugh and Gorsuch were very skeptical of the Auer deference. Gorsuch is notoriously skeptical of other types of judicial deference as well. This skepticism is rooted in a view that adminisatrive rule making and interpreation of can run afoul of seperation of powers principles.

So how does this all fit together? Well, even if lobbyists succeed in persuading some state agencies to exclude gig economy workers from employee protection laws, state supreme courts may be less likely to defer to those decisions if challenged, if the Supreme Court further disapproves administrative deference.

Any future judicial challenges to state administrative agencies excluding gig economy workers from laws like worker protection laws could be similar to the successful judicial challenge to the adoption of the AMA Guides in Pennsylvania. In the Protz case, plaintiffs used a non-delegation argument to strike down the use of the use of the AMA Guides to determine permanent disability. Non-delegation is an old argument that dates back to the early 20th century when pro-corporate judges attempted to strike down pro-worker legislation. That conservative argument was refashioned to protect worker’s rights

Similarly, the concept of judicial deference to administrative agencies arose in the immediate post New Deal era. Those agencies were created to protect workers. Judicial conservatives have traditionally opposed administrative deference. But as business interests have infiltrated these agencies, these agencies have been shaped to serve the interests of business. Arguing against administrative deference on a state level would be a way to protect workers’ rights when management-side interests have commandeered administrative agencies.

Either way case law developed to help business interests may be used to protect workers. I am not arguing that the prospective effective end of administrative evidence would be an unmitigated good for employee rights. I understand how administrative deference can help employees and agree that it can be helpful for employees. But I think lawyers need to use every available tool to help their clients whether it’s through litigation or lobbying.

The conflict about how administrative deference could play out in civil rights laws and social insurance laws like workers’ compensation and unemployment is another example of how these laws, enacted for different purposes and different times, can conflict. Ultimately, I believe the best way to “fix” the conflict is to make sure that civil rights laws and social insurance laws are strengthened legislatively. Courts and administrative agencies can merely fine tune laws that are made by the legislative branch.

So how would an effort to lobby state administrative agencies look in Nebraska and Iowa? In Nebraska, workers’ compensation laws are administered by the judicial branch not the executive branch. The court can still make procedural and evidentiary rules, but I doubt the Nebraska workers’ compensation court would exclude a class of workers from the act by its rule making process.

Iowa is an administrative system for workers’ compensation and I’m not as familiar with the inner workings of Iowa as I am with Nebraska. In both states, unemployment compensation is administered by the executive branch. At least in Nebraska I think it would be difficult for a gig economy company to get the Nebraska Department of Labor to rule that a gig economy worker is not covered by our Employment Security Act. Neb. Rev. Stat. §48-604 is very specific about who is excluded from unemployment and has a challenging standard for employers to meet in order to be exempted from paying unemployment.

Furthermore, Nebraska law doesn’t afford the special deference to interpretations of the law by administrative agencies. Nebraska law also dictates that unemployment law, like workers’ compensation, be given an liberal construction that benefits the workers. For those reasons I think a Nebraska court would be skeptical of any rule making that exempted gig economy workers from unemployment benefits. In my mind, I am not sure if any federal court rulings would change how a Nebraska court would rule on the issue.

A quarter-step forward but two steps back on fee scheduling air ambulance charges in workers compensation

Posted on January 3, 2019 by Jon Rehm

Congress may have implemented a partial legislative fix in response to a growing number of state and federal court decisions, the most recent out of the 4^th Circuit Court of Appeals, holding federal law regulating aviation preempts workers’ compensation fee scheduling of air ambulance bills.

The FAA Reauthorization Act authorized the Secretary of Transportation to appoint an advisory committee to suggest rules about charges for air ambulance services. But this “fix” may actually give air ambulance companies more power to avoid having their charges “fee scheduled” under state workers’ compensation laws.

The main controversy about air ambulance charges is that users, including injured workers, can be stuck with paying the difference between what insurance paid and what is billed. In workers’ compensation, when a provider accepts the “fee schedule” then an employee can not be billed further by the medical provider.

But since many courts hold that a state cannot regulation air ambulance charges, state fee schedules do not apply to air ambulances in that situation. This is because when a state law conflicts with a federal law, the federal law preempts the state law. Charges for air ambulances are often in the tens of thousands of dollars because of the cost of helicopter flight.

On a negative note for workers, the fact that the Department of Transportation is issuing rules regarding air ambulance charges could strengthen the case that the regulation of air ambulance expenses preempt state workers’ compensation fee schedules.

In another downside for workers, the air ambulance industry will get three members of the advisory board that will be helping to draft the rules, while there will be one “consumer representative” as well as two other representatives generally representing the health insurance industry. There is a chance that consumer interests could get short-shifted by the Department of Transportation.

One upside for workers is that the legislation indicates that it should breakdown air ambulances expenses between transportation and non-transportation expenses. Non-transportation expenses could be more likely to be subjected to fee schedules which would reduce the cost of air ambulance services.

Recent case law would indicate there was an emerging majority view that the fee scheduling of air ambulance charges under state workers’ compensation laws would be preempted by federal law. The 4^th Circuit Court of Appeals upheld a federal court in West Virginia that held that state regulation air ambulance charges would be preempted by federal law. The 4^th Circuit joined the 10^th Circuit, 11^th Circuit and courts in Florida, Kansas, Kentucky, North Dakota, Texas and West Virginia in holding that workers compensation fee scheduling of air ambulance services are preempted by federal law.

Three things disturbed me when I read over the recent 4^th Circuit decision and the West Virginia federal decision it upheld. The first thing that bothered me was any lack of discussion by the court about how fee schedules fit into the beneficent purpose of workers’ compensation laws. Legal analysis oftentimes requires balancing of different interests, but there was no more than cursory balancing of interests in the latest air ambulance case.

Fee schedules were generically described as a “regulation” in the most recent air ambulance case. The deregulation of air service was described by the District Court as an unvarnished good. Recent press coverage has demonstrated how business interests have worked to influence the federal judiciary. The recent air ambulance cases show a strong anti-regulatory bent and how that influence may manifest in court decisions.

Finally, the District court upheld a contracts clause challenge to state workers’ compensation fee schedules. I don’t know if the contracts clause argument would have succeeded without the pre-emption argument, but the contracts clause has historically been used to strike down workplace safety and workplace rights laws. As a plaintiff’s attorney, I don’t like seeing the contracts clause being used to weaken workers’ compensation laws. Again, this could show how business interests are influencing the federal judiciary.

But if Congress has legislated on air ambulance fees and the DOT will be regulating the area, there is some possibility that Congress or the DOT could change those rules and regulations in a way that would help workers, by say, ruling that air ambulances have to accept workers’ compensation fee schedules if one is in place. Ideally air ambulances would be excluded by Congress from the definition of common carrier as argued by proponents of the West Virginia fee schedule for air ambulances.

Will there be a fix for legislation like the Protz fix?

Posted on December 27, 2018 by Jon Rehm

Doing the math: How the AMA 6th costs workers with a wrist injury

In a dubious triumph for bi-partisanship, Pennsylvania reduced workers’ compensation benefits for many if not most workers with permanent injuries in 2018. 2018 was a bad year legally for workers rights and the so-called Protz fix was emblematic of the year for a few reasons.

But 2018 also showed some glimmers of hope for workers such that there may be fixes for legislation like the Protz fix.

Legislatures take, courts make and vice versa

Pennsylvania Governor Tom Wolf signed HR 1840 which legislatively overturned the Protz decision which held Pennsylvania’s language using the “most recent” edition of the AMA Guides to Permanent Impairment to determine compensation for permanent injuries was unconstitutional. Pennsylvania “fixed” the Protz decision by expressly adopting the AMA 6^th.

The AMA 6^th has been criticized, correctly in my view, because it is bases impairment on inability to do general life activities versus working activities. A recent study confirms this suspicion long held by plaintiff’s attorneys. From a practical point of view, the AMA 6^th usually leads to an injured worker receiving less compensation than they would under previous editions of AMA impairment “cookbook.”

When I started practicing in 2005 a worker who had a carpal tunnel surgery usually had a 5 percent impairment under the AMA 5^th. Now, that same injury is typically a 1 percent impairment under the AMA 6^th.

For a worker in Nebraska earning $15 per hour, the difference between the two impairments on a wrist injury amounts to $2800. After the Protz “fix” was passed, the Pennsylvania Compensation Rating Bureau filed for a 14.74 decrease in workers’ compensation insurance rates.

My big takeaway from the Protz decision and the subsequent “fix” is just how much work needs to be done politically to make sure injured workers are fairly compensated for their injuries. The Protz “fix” passed easily. Plaintiff’s lawyers resorted to constitutional challenges because many state legislatures have weakened workers’ compensation laws. Protz shows that appellate victories can be fleeting because legislatures can easily overturn those decisions.

Does the plaintiff’s bar need to worry about “constitutional challenges” of their own?

2018 also saw some disturbing court decision that could impact workers’ compensation. In SEC v. Lucia the United States Supreme Court held an investment adviser convicted of securities fraud by the Securities and Exchange Commission (SEC) was unconstitutionally convicted because the Administrative Law Judge (ALJs) who tried his case was hired in violation of the appointments clause. Iowa is one of many states workers’ compensation cases are heard by Administrative Law Judges that are hired as civil servants rather than appointed by the Executive. SEC v. Lucia could help employers/insurers to make persuasive appointments clause arguments under state constitutions that such arrangements are unconstitutional.

Protz relied on an argument about unconstitutional delegation of legislative powers which is fundamentally a conservative argument which was used to strike down New Deal legislation. Workers’ compensation reforms have also been challenged on a contracts clause basis which is another conservative argument used against pro-workers legislatsion in the past. Maybe these arguments appeal to conservative pro-business types, but they could be used against advocates for injured workers and their clients.

But there are some reasons for hope that emerged in 2018.

2018: Reasons for hope for injured workers

But 2018 did see gains for Democrats in state and federal elections. To be blunt, pro-worker is often a code for “Democrat”. While there are some exceptions, most conservatives are terrible for workers. Democrats generally oppose extreme conservatives, so they serve some purpose. But in Pennsylvania the so-called Protz fix was signed by a Democratic governor and supported by Democratic state legislators. In my experience, many Democratic elected officials aren’t going to support workers unless they get prompted, but they are usually lack the same ardor to gut workers’ rights.

More hope can be found outside the realm of electoral politics. In 2018 citizens started taking direct action. Some of the biggest gains made for workers in recent memory happened during teachers’ strikes in Arizona, Oklahoma and West Virginia this year. The chattering classes asked “Why don’t these striking teachers just vote for the right people?” Well, they tried and it didn’t work. Rank and file teachers in Arizona, Oklahoma and West Virginia found a better way to advocate for themselves.

The teachers strikes took place in the wake of the Janus decision that dealt a blow to public sector unions. Workers’ rights were also dealt a blow by the Epic decision that, among other things, allowed employers the right not to join class and collective action cases through so-called arbitration agreements. Workers for Chipotle and Uber have come up with the ingenious hack of filing in mass for individual arbitrations.

I see the challenge for 2019 for lawyers for injured workers’ is finding away for this newly emerging energy and creativity from workers in support of their own rights focused on improving workers’ compensation. I’ve written before about state senators Dan Quick of Nebraska and Lee Carter of Virginia who used their bad experiences with workers’ compensation to try to improve the workers’ compensation laws in their state.

So while lawyers for injured workers may be on the defensive in the legislative and judicial arena, we may have newfound allies that could help us reverse the steady erosions of workers’ compensation laws.

Kansas court holds adoption of AMA 6th violates due process

Posted on August 6, 2018 by Jon Rehm

The Kansas Supreme Court undid one small part of Sam Brownback’s legacy

The Kansas Supreme Court ruled on Friday that adoption of the American Medical Association Guides to Permanent Impairment, Sixth Edition (AMA Sixth) to pay permanent injuries under their workers’ compensation act violated constitutional rights to due process because it gave injured workers an inadequate remedy for work injuries.

The decision in Johnson v. US Food Service came on the heels of a recent Oklahoma decision that upheld the constitutionality of the AMA Sixth in that state’s workers’ compensation law. Injured workers in Kansas were likely helped by the Kansas applying heightened scrutiny in assessing a due process violation rather than applying what amounts to rational basis scrutiny like the Oklahoma court did in upholding their use of the AMA Sixth.

The Kansas court also seemed to be persuaded by findings of fact and legislative history about the problems with the AMA Sixth in how it compensates work injuries. The court was particularly persuaded by findings that the AMA Sixth lead to lower impairment ratings because it measured impairment based on inability to do general life activities rather than activities related to working. The Kansas decision throwing out the use of the AMA 6^th will likely be persuasive to trial courts in other states when deciding whether impairment under the AMA 6^th sufficiently compensates injured workers.

The decision was also premised on the fact that injured workers give up the right to a trial by jury to pursue a tort claim against the employers to receive workers’ compensation benefits. According to the Kansas court, compensating employees under the AMA 6^th when combined with other recent changes to Kansas workers’ compensation law meant that employees were giving up too much in exchange for not being able to sue their employers and have a trial by jury.

Last month, I posted “Appellate courts aren’t going to save workers’ compensation.” Maybe I was too pessimistic in that assessment considering Johnson case. But a closer reading of the Johnson case shows my thesis is still sound. The Kansas court went through an exhaustive list of anti-worker reforms made by the Kansas legislature in 2011 and 2013 to that state’s workers’ compensation laws. With the exception of using the AMA 6th, those anti-worker reforms are still law in Kansas. I hope the decision in Johnson will help advocates for injured workers rollback other negative changes made to workers’ compensation law in Kansas. But the changes to Kansas’ workers’ compensation laws came through the political arena and victories in the political arena are the only sure way to insure fair compensation for injured workers in Kansas and in the rest of the country.

I agree with the outcome and most of the reasoning supporting the Johnson decision. But I disagree with the court’s literary flourish arguing that injured workers aren’t heard in adminisatsrive hearings or bench trials. The majority of my court room experience comes in what amount to bench trials in the Nebraska Workers’ Compensation Court. In my experience the injured worker gets to tell their story and — just as important – management witnesses are forced to answer for their treatment of injured workers as it relates to issues being tried. At least in Nebraska, trials in worrkers’ compensation cases can address that emotional need for justice outside fiancial compensation. But for most people, the finanical outcome of a case is more important than the process used to obtain the outcome.

Thomas Robinson, editor of the leading treatise on workers’ compensation law, stated the Kansas court’s focus on assigning fault for an injury misses the point of workers’ compensation which means defined compensation for a work injury regardless of fault. I agree with this point. I’ve written about the role of fault in the suppodedly no fault world of workers’ compnesation. I will be interested to read Robinson’s take on fault and workers’ compensation.

Appellate courts aren’t going to preserve workers’ compensation

Posted on July 5, 2018 by Jon Rehm

The Supreme Court rejected a challenge to a “reform” of New York workers’ compensation laws made by Liberty Mutual

Employee advocates, me included, are still trying to process just how bad this latest session of the Supreme Court was for workers. There were bad decisions in wage and hour, whistleblower, forced arbitation and labor law. In lower profile decisions, the court may have encroached into how work injury cases are litigated and rejected a constitutional challenge to state level reforms.

The Supreme Court may have handed employers/insurers a way to mount constitutuonal challneges to some state workers’ compensation laws in Lucia v. SEC. (Lucia is of more immediate concerns to Longshore and FECA practitioners who have their cases heard by ALJs ). In many states, like Iowa, workers’ compensation cases are heard by Administrative Law Judges that are hired as civil servants rather than appointed by the Executive. SEC v. Lucia could help employers/insurers to make persuasive appointments clause arguments under state constitutions that such arrangements are unconstitutional.

Advocates for injured workers have taken some solace in a string of good outcomes in front of state courts in Kansas, Pennslyvania, O klahoma, Florida and Alabama. But even that run of state-level wins has come to a halt for now.

The Oklahoma Supreme court rejected a constitutional challenge to Oklahoma’s mandated use of American Medical Association Guides (AMA Guides) to Permanent Impairment, Sixth Edition. Thomas Robinson pointed out the case was distinguishable from a Pennsylvania case strking down a law mandating the use of the “latest” guides because the Oklahoma legislature expressly adopted the AMA 6th to determine how they would pay scheudled member disability.

Oklahoma isn’t the only state where consitutional challenges to anti-workers changes to workers’ compensation laws have failed recently. The Supreme Court denied certiorari — refused to hear an appeal — from a New York Court of Appeals decision overruling a contracts clause and takings clause challenge to New York’s workers’ compensation law by workers’ compensation insurer, Liberty Mutual. Liberty Mutual was challenging the end of employer contributions to New York’s Special Fund for Reopened Cases that was part of reforms to New York’s workers’ compensation laws made in 2013. The Fund for Reopened cases allows employees to be compensated for cases where claims were at least 7 years old and no benefits had been paid for three years. Essentially the Fund ensures that the costs of old work injuries don’t get unfairly shifted on to workers and other payors. By abolishing the employer contribution, New York state essentially stuck workers’ compensation insurers with the cost of old injuries without being compensated by employers.

Essentially the Supreme Court refused to consider overturning state-level workers’ compensation reform based on the federal constitution. I think there is some consolation in the fact that the successful challenges to workers’ compensation were made on due process and equal protection grounds, while the unsuccessful New York challenge was based on the takings and contract clause. Historically the contracts clause was used to strike down pro-worker laws enacted by states starting in the late 19^th century. (I also find some personal consolation that the successful constitutional challenges to comp reform have been mounted by plaintiff’s lawyers from small firms, while the New York challenge was unsuccessfully argued by a former United States Solicitor General.)

The demise of the Fund for Reopened Cases was prompted by an earlier reform that abolished the Second Injury Fund in New York because insurers pushed former Second Injury Fund cases into the Fund for Reopened Cases. Second Injury Funds were intended to encourage hiring of injured employees by ensuring that new employers were not stuck with the entire cost of aggravation of old injury by a previously injured worker. New York is far from the only state that has abolished second injury funds. Insurance thought-leader types seem to believe that Second Injury Funds aren’t necessary because of the Americans with Disabilities Act. Anyone with any experience litigating ADA cases for employees would beg to differ.

Fundamentally, the failed New York and Oklahoma court challenges are illustrative of disturbing larger trends in the arena of workers’ compensation. First, constitutional challenges are not a foolproof method of defeating workers’ compensation reform. Secondly even when court challenges do succeed they represent the inverse of the conditions that made workers’ compensation laws possible. Workers’ compensation laws were enacted by legislatures in the face of a court systems that as a whole was either indifferent or hostile to the interests of workers hurt on the job. Now advocates for injured workers look to courts for relief from hostile legislatures. Looking to state appellate courts as an antidote to workers’ compensation reform may become less of an option as anti-worker Governors appoint anti-worker judges. Ensuring the workers’ compensation system protects injured workers will probably depend on the same type of mass politics that lead to the enactment of workers’ compensation laws. That kind of politics is probably beyond the scope of the relative small number of attorneys who represent injured employees, but those of who represent injured workers’ need to ally with broader worker movements and make sure that workers’ compensation is a high priority for other worker advocates.

Compstitutional Law 101: Part 2: Will Sveen signal a move to judicially dismantle the “grand bargain”?

Posted on April 12, 2018 by Jon Rehm

Watch out for what these three could say in Sveen v. Melin

WILG is hosting a summit on the constitutional challenges in workers’ compensation on April 18th, I won’t be able to attend, but this post and my last post are my contribution to this ongoing discussion.

Stating that “a seemingly obscure case could have far-reaching implications” is one of the most overused clichés in legal blogging and journalism. But a case involving a dispute over the proceeds of a life insurance policy might impact the constitutional basis for workers’ compensation and other state laws protecting employees.

In March, the Supreme Court heard oral argument in Sveen v. Melin (paywall). In Sveen, a former spouse was challenging a Minnesota law automatically removing a spouse as beneficiary of an insurance policy upon divorce. The grounds for the challenge is the so-called contracts clause of the United States Constitution which prohibits states from passing laws that impair the obligation of a contract.

Pro-corporate legal commentators have long lamented the demise of the contracts clause at the expense of laws enacted by states under 10^th Amendment police powers. When these pundits and academics write about a “contracts clause revival”, they are really writing about diminishing the rights of states to enact laws under their police powers.

One of the most important set of state laws enacted under police powers are workers’ compensation laws. In New York Central Railroad v. White state workers’ compensation laws were found to be constitutionally enacted under a state’s 10^th Amendment police powers. State laws regulating workplace safety and the ability to injured employees to seek legal redress were one of the primary drivers for the broad recognition of police powers in the late 19^th century. A good discussion of the background behind the expansion of state police powers is found in the 1898 Supreme Court case of Holden v. Hardy. In short, the Supreme Court found that state workplace safety laws were a response to the new industrial economy of the late 19^th century and valid exercises of state police powers.

University of Chicago Law Professor Richard Epstein argued that minimum wage laws violated the contracts clause. It’s not much of an intellectual stretch to argue that mandatory workers’ compensation laws would violate the contracts clause using Epstein’s interpretation of the contracts clause. A gig economy employer like Uber subjected to a state workers’ compensation law might argue that they should not be subjected to such a law under the contracts clause.

On April 2nd the Supreme Court reversed 70 years of precdent in narrowly construing exceptions to the Fair Labor Standards Act in the Navarro case. Navarro will likely have the effect of pushing plaintiffs to file more wage and hour cases under state laws. A revived contracts clause could cut off or curtail opportunities for justice for victims of wage theft in state court.

A potential contracts clause revival should concern advocates for injured workers for other reasons. In recent years, attorneys for injured workers have had a fair amount of success in overturning anti-worker changes to workers’ compensation laws based on state constitutions. That avenue would likely be blocked with a full-blown contracts clause revival.

In the late 19^th and early 20^th century, state laws regulating workplace conditions were struck down under 14^th Amendment substantive due process. But substantive due process also allows claims for a broad variety of civil rights that are disliked by judicial conservatives, so the substantive due process clause is disfavored by courts. The contracts clause allows courts to strike down worker-friendly state laws without creating a mechanism for expanding rights for suspect classes of individuals like prisoners or victims of police brutality. In New York Central v. White, the Supreme Court considered and rejected arguments overturning workers’ compensation laws on substantive due process grounds and contracts clause grounds.

Finally, a broad interpretation of the contracts clause would allow the Supreme Court to overturn state workers’ compensation laws while still maintaining the narrowed interpretation of interstate commerce the Roberts court appear to be endorsing in NFIB v. Sebelius. As I wrote in a post last week, a narrow construction of the commerce clause could be a high hurdle in enacting worker-friendly chagnes to workers’ compensation laws on a federal level.

Sveen v. Melin will likely be decided this spring. If the Supreme Court strikes down the Minnesota law based on the contracts clause, I will be interested to read the language of the opinion. I will also be interested in reading any concurring opinions from hard core conservatives like Gorsuch, Thomas and Alito as those opinions could be a clue as to where the court could be going on contracts clause jurisprudence. It is unlikely that Sveen v. Melin will be grounds to invalidate state workers’ compensation laws. Supreme Court decisions are limited to actual cases and controversies that are presentd to them. But Sveen could be another step in undercutting New Deal and Progressive Era refroms. The Supreme Court has been chipping away at New Deal era laws in cases like Navarro and the Tackett decision in 2015. A bad decision in Sveen might accelerate the rollback of pro-worker laws.

More Takeaways from the Demise of the Oklahoma Option in Workers’ Compensation

Posted on December 8, 2016 by Jon Rehm

The Oklahoma Supreme Court’s decision to strike down the so-called “Oklahoma Option” in Vasquez v. Dillard’s was one of the biggest events in the world of workers’ compensation. Vasquez represents a growing trend by advocates for injured workers recognizing that workers’ compensation is a matter of constitutional law. But the Vasquez decision is important for other reasons.

Opt-Out is Still Viable

Though some commentators declared the defeat of the Oklahoma option was the death of opt-out, many justices on the Oklahoma Supreme Court who overturned the Oklahoma option would disagree.

A concurring opinion contrasted the Oklahoma opt-out system with the Texas opt-out system. In Texas, employers are not required to have or “subscribe” to workers’ compensation. But if Texas employers do not subscribe to workers’ compensation, injured Texas employees can sue their employer in tort with all affirmative defenses stripped away. This encourages employers to carry workers’ compensation insurance. Nebraska has a similar law for agricultural employers who are exempt from having to carry workers’ compensation.

Oklahoma’s “opt-out” created separate workers’ compensation systems: the state system under the Administrative Workers’ Compensation Act (AWCA) or the private systems under the Oklahoma Employee Injury Benefit Act (OEIBA), where employees were eligible for the same benefits but where employers could draft their own rules for eligibility. Regardless of whether an employee was covered under the AWCA or the OEIBA, employers still had to be covered under one system or another, and employees could not sue their employer in tort for work injuries. What doomed the Oklahoma option was the fact that unfair procedures under the OEIBA created separate but unequal workers’ compensation systems.

The contrast between the now defunct Oklahoma option and the still-viable Texas opt-out system was reinforced when the Vasquez court rejected Dillard’s argument that Vasquez’s claim was pre-empted by the federal Employee Retirement Income Security Act (ERISA) law. Under the Oklahoma option, plans under the OEIBA were to be governed by the ERISA law. However, since OEIBA served as workers’ compensation and ERISA plans that serve as workers’ compensation plans do not pre-empt state workers’ compensation laws, the OEIBA was not pre-empted by federal law. In contrast, state law claims against employers on disability insurance plans who are “nonsubscribers” in Texas are pre-empted by ERISA.

Few, If Any States, Are Going to Implement the Oklahoma Option

The Oklahoma option was struck down on equal-protection grounds based on the Oklahoma state constitution. Most other states have similar provisions in their state constitutions. In Nebraska, that provision is found at Article III, Section 18 of our state constitution. This provision concerns itself with disparate treatment in much the same manner as does the language of the 14^th Amendment of the U.S. Constitution, which prohibits a state from making or enforcing any law that denies any person within its jurisdiction “the equal protection of the laws.” Distinctive Printing & Packaging Co. v. Cox, 232 Neb. 846, 443 N.W.2d 566 (1989). Even in a state without an equal protection clause in the state constitution, separate but unequal workers’ compensation systems could be likely be struck down on equal-protection grounds under the U.S. Constitution.

Injured Workers Are a Protected Class

Injured workers are sometimes subject to retaliation for bringing workers’ compensation claims. In 2013, the U.S. Supreme Court distinguished “discrimination” or “protected status” from “retaliation” or “protected activity” cases under Title VII and held that there was a higher burden of proof for employees bringing a retaliation case than for an employee bringing a discrimination case. However, if injured workers are thought of as a protected class, then discrimination in the form of termination should be thought of as a form of discrimination, and those claims should be subject to a more relaxed burden of proof than required in the Nassar case.

Workers' Compensation Watch

Published by Rehm, Bennett, Moore & Rehm

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Tag Archives: Constitutional Law

Feds prosecuting COVID fraud by employees

The CARES Act, interstate commerce and taxing power

The real COVID fraudsters

Reopening and unionizing

Why curtailing Auer deference could be bad news for gig economy companies

A quarter-step forward but two steps back on fee scheduling air ambulance charges in workers compensation

Will there be a fix for legislation like the Protz fix?

Kansas court holds adoption of AMA 6th violates due process

Appellate courts aren’t going to preserve workers’ compensation

Compstitutional Law 101: Part 2: Will Sveen signal a move to judicially dismantle the “grand bargain”?

More Takeaways from the Demise of the Oklahoma Option in Workers’ Compensation

The CARES Act, interstate commerce and taxing power

The real COVID fraudsters

Reopening and unionizing

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