Tag Archives: federalism

Failure of Weil nomination heralds more of the same for federal involvement in workers’ comp.

Posted on April 3, 2022 by Jon Rehm

Democratic Senators Joe Manchin, West Virginia, joined Kyrsten Sinema and Mark Kelley, Arizona, and 50 Republicans to torpedo the nomination of Professor David Weil to the head of the Department of Labor’s Wage and Hour division.

Weil, who held the same position during the Obama administration, was a critic of gig economy firms like Uber who misclassify workers as independent contractors. Independent contractor status exempts companies from having to comply with wage and employment laws such as workers’ compensation.

Readers of this blog, likely know state workers’ compensation laws determine whether a worker is an employee and that is a separate analysis about what constitutes an employee for purposes of federal law. Readers of this blog also know that Weil likely would have ran into a steel re-enforced concrete wall of the federal judiciary in trying to enforce federal wage and hour laws for the benefit of workers.

But the failure of Weil likely signals that there is likely no substantive federal legislation that will address deficiencies in state workers’ compensation laws. In 1970, Congress established OSHA and authorized National Commission on State Workers’ Compensation Laws in response to concerns over the sufficiency of state workers’ compensation laws. The recommendation of the Commission lead many states to improve workers’ compensation laws for the benefit of workers.

But if the Senate can’t even confirm someone like Weill to the Department of Labor, then it seems unlikely that the federal government will do anything to improve state workers’ compensations laws.

Many lawyers who represent injured workers take Ronald Reagan’s adage about the government to heart in their practices when it comes to federal law. Whether it’s the byzantine workers’ compensation laws for federal employees, the difficulties of ERISA liens, headaches with Medicare in settling cases or what Professor Michael Duff describes as empty pre-emptions around nuclear workers and air ambulances, workers’ compensation plaintiff’s lawyers are often among the most vehement supporters of state’s rights.

But as evidenced by OSHA and the National Commission, the federal government can be a positive influence on workers’ compensation. But for most workers’ compensation lawyers in practice today, federal law and federal agencies are just another hurdle to overcome in getting justice for client’s injured at work. Unfortunately, that reality doesn’t look to change anytime soon.

Is it better that SCOTUS punted on air ambulance cases

Posted on May 24, 2021 by Jon Rehm

The Supreme Court refused to hear an appeal from a Texas Supreme Court decision that allowed the State of Texas to regulate air ambulance charges in workers’ compensation cases.

The Supreme Court’s refusal to hear the case leaves in place a patchwork of state and federal court opinions about whether the Federal Aviation Act pre-empts state workers compensation laws that limit medical expenses for air ambulances.

Air ambulances and federal pre-emption is a dry and often esoteric, maybe even boring topic. But as Jon Gelman pointed out in his post on the decision, the right to regulate medical expense in workers’ compensation case helps states manage the cost of workers’ compensation. As I’ve pointed out at near ad nauseam, workers’ compensation laws are state-based laws. So, that’s why the air ambulance pre-emption issue matters to workers compensation.

So, what do I think of the Supreme Court’s decision to punt on the issue? Bluntly, I’m kind of relieved. I base my feelings on my big picture views of the Supreme Court and my very narrow interests in Nebraska workers compensation laws.

Do you really want Amy Coney Barrett and friends making decisions about workers comp.?

Well, do you?

From an academic perspective, the Texas Supreme Court decision on workers compensation and air ambulance billing is interesting. It’s really a discussion about the nature of workers’ compensation. Is it primarily an insurance program or is it primarily a law that regulates the relationship between employee and employer? My fear was that the current Supreme Court could pick up on any of the threads within the Texas case and make the law worse for injured workers.

Workers compensation as a law regulating the relationship between labor and management

So, if workers compensation is law that regulates the workplace, the dissent in the Texas decision held that air ambulances charges would be pre-empted. That would be a bad outcome for workers on air ambulance charges. It could also open the door for pre-emption on other issues to the detriment of employees.

Workers compensation as a law regulating insurance

The concurring opinion in the Texas held that their state’s regulation of air ambulance charges in workers’ compensation cases was not pre-empted because workers compensation is a law regulating insurance. Under the federal McCarran-Ferguson Act those laws are state laws and not subject to pre-emption. At least two trial Judges in the Nebraska Workers Compensation Court take this approach. Since the Supreme Court hasn’t weighed in on the issue, I can take this approach on air ambulance charges for the benefit of my clients in Nebraska.

But the Texas court also held that air ambulance charges weren’t pre-empted based on an originalist view of federalism. The Texas opinion starts out about states retaining some sovereignty when entering into the Union. In my view this language seems real overwrought. If I was a law student reading that opinion today, I might put a note like “Sir, this is a Wendy’s” by that passage.

Some plaintiff’s lawyers will go down the state’s rights rabbit hole. But I don’t like the state’s rights approach because it gives states the rights to implement lousy workers compensation laws. Texas is a model for how the state’s rights approach fails workers.

McCarrran-Ferguson: State’s rights lite?

McCarran-Ferguson is a more pragmatic argument against workers compensation pre-emption. But McCarran Ferguson is based on some dubious legal fiction. McCarran-Ferguson was passed to more or less repeal the Southeastern Underwriters case. That case held that insurance was interstate commerce.

Now the notion that insurance is interstate commerce would seem obvious to most people, but insurance wasn’t held to be commerce during much of the Lochner era. The Roberts court also seemed to question whether insurance was interstate commerce when they upheld the Affordable Care Act in 2012.

My other problem with McCarran-Ferguson is that it limits how we think about workers’ compensation. It locks judges and lawyers into adopting a legal fiction in order to give workers a fair outcome in workers compensation cases regarding air ambulance charges and other issues where federal laws could undercut recovery under state workers’ compensation laws.

McCarran-Ferguson also cements “states rights” thinking about workers compensation. Such thinking precludes the possibility of federal intervention for the benefit of employees that helped workers in the 1970s and 1980s. Originalist thinking and the Lochner era thinking behind McCarran Ferguson by plaintiff’s attorneys also prevents thinking how to make much needed reforms to our social insurance system in general.

Not as simple as ABC

Posted on March 29, 2021 by Jon Rehm

Much of the discussion over worker classification, whether over California’s Prop 22/AB5 or the federal Protecting the Right to Organize or PRO Act, centers on the use of the employee-friendlier ABC test in distinguishing employees from independent contractors. Employees enjoy the benefit of employment laws, independent contractors don’t.

But even if the ABC test appears to apply, workers don’t always enjoy protections under the laws. Understanding the ABC test better, helps explain why workers don’t always win even if the ABC Test applies.

The ABC test – control in fact

At least in Nebraska, if an employer can answer these four questions no, then their worker is not an employee : 1) worker free from control of work both under contract and in fact 2) service is outside of normal course of business and 3) the workers is customarily engaged in a trade, occupation, profession or business.

The biggest hurdle to obtaining employment status is showing a worker is free from control “in fact.” How exactly do you determine if a worker is free from control in fact? Courts like to use tests. The good news is the courts already have tests that they can use to distinguish a contractor from an employee.

The bad news is that these common law tests are the reason why the ABC test statutes were passed in the first place. More bad news, is that I believe many state court and federal judges will continue to apply common law tests to determine control in fact under the ABC test. Using common law tests tends not to work out well for workers.

I think the role of judges in interpreting statutes is a good transition to another reason why the ABC test is far from a panacea for worker injustice issues. Courts, aided by lawyers from management, are going to find ways not to apply the ABC test. I can think of at least two ways employers could dodge the ABC test when it would appear to apply.

Narrow definition of wages for state unemployment

In Nebraska, the ABC test applies to unemployment insurance. But our state Supreme Court found away around applying the test.

In Omaha World-Herald v. Dernier, the Nebraska Supreme Court held that a newspaper distributor for the Omaha World-Herald was not earning wages for the purposes of unemployment benefits. (Nebraska later broadened the definition of wages for unemployment, but kept the Dernier exemption for newspapers).

Narrow definition of interstate commerce for Fair Labor Standards Act

The 7^th Circuit Court of Appeals, in a decision written future Supreme Court Justice Amy Coney Barrett, found that Grub Hub drivers were not covered by the Fair Labor Standards Act because the drivers were not engaged in interstate commerce. The court ruled that commerce between the states was only incidental to the drivers’ employment.

The commerce clause, or interstate commerce, is how federal laws that protect employee pass constitutional muster. Federal courts can also narrowly interpret what constitutes commerce for the purposes of federal law. That narrow definition of commerce stated in US v. EC Knight is why workers’ compensation is a state law. Up until 1947, insurance was excluded from the definition of interstate commerce, which would help explain why unemployment insurance laws are dual state and federal laws.

The junkyard dog of bad faith in multi-state workers’ compensation claims

Posted on February 22, 2021 by Jon Rehm

The constitutional right to travel freely within the United States combined with the fact, by fluke of legal history, that workers’ compensation laws are state laws often leads to injured workers having to pursue claims in distant states.

Fortunately, this glitch in our legal system sometimes allows injured workers to pursue and collect benefits in multiple states. Experienced and competent workers’ compensation lawyers know to see if other states have jurisdiction and to try to compare benefits between states.

But I’ve never heard lawyers discuss the impact of bad faith laws when it comes to picking a jurisdiction to bring a claim. I think it’s a fact to ponder.

What is bad faith?

A bad faith claim is a way to sue an insurer for failing to pay a claim without a reasonable basis. At least two states that border Nebraska, South Dakota and Iowa, have bad faith claims for workers’ compensation. Nebraska courts have rejected bad faith claims because the exclusive remedy of penalties under Neb. Rev. Stat. 48-125 punishes employers for unreasonable denials. Penalties under 48-125 include attorney fees, usually computed on an hourly basis, and 50 percent fee on late payment of indemnity benefits. The 50 percent penalty doesn’t apply to late payment of medical bills. In practice these fees and penalties are almost always awarded for late payments of benefits due to clerical oversights.

One former workers compensation judge in Nebraska compared 48-125 to a yipping in porch dog. In short, these remedies don’t discourage questionable denials.

But in other states instead of yipping porch dog, the junkyard dog of bad faith lurks for insurers and claims administrators who find cute ways to deny claims.

The junkyard dog of bad faith vs. the yipping porch dog of Neb. Rev. Stat. 48-125

A recent South Dakota Supreme Court decision reversed a workers’ compensation bad faith verdict of $500,000 with $10,000,000 in punitive damages. You don’t see eight-figure verdicts in the universe of Nebraska workers’ compensation The decision was reversed, but it was reversed based on a decision about a jury instruction rather than the size of the verdict. So what is the practical effect of an insurer being liable for an eight figure verdict for an unreasonable denial of a claim?

I think it goes without saying that the prospect of a massive bad faith verdict encourages employers to pay claims. So even if the underlying benefits may be better in a state like Nebraska without bad faith, the pressure of a bad faith claim in another state, may encourage an insurer to pay benefits under another state’s laws.

So even if long-term and maximum benefits are worse under one state’s laws, at least in the short-term getting paid some benefits is better than not getting paid benefits at all.

That’s why it could make sense to initially collect benefits in a state with worse benefits but stronger penalties for non-payment, then collect in a state with better underlying workers’ compensation benefits but weaker penalties for non-payment of benefits.

Some, may complain that workers collecting benefits in two states are “getting two bites at the apple.” That argument misses the point that workers’ compensation benefits, which by design, don’t fully compensate workers for their harms and losses from a work injury. Supreme Court Justice Hugo Black equated workers’ compensation benefits to pension-type benefits. These incomplete benefits are part of the “grand bargain” of workers’ compensation which pays workers benefits for work injuries in spite of fault.

But another part of the grand bargain, is that by fluke of legal history, that workers’ compensation laws are state laws. Sometimes this means workers are forced to pursue cases in distant states and/or are stuck with terrible benefits. But on some occasions it means that workers can collect benefits in multiple states. The presence of strong bad faith laws in a state may affect where an employee initially brings their claim.

Workers' Compensation Watch

Published by Rehm, Bennett, Moore & Rehm

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Tag Archives: federalism

Failure of Weil nomination heralds more of the same for federal involvement in workers’ comp.

Is it better that SCOTUS punted on air ambulance cases

Not as simple as ABC

The junkyard dog of bad faith in multi-state workers’ compensation claims

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