State News

In Appeals Panel Decision No. 152184, decided December 29, 2015, t he Appeals Panel reversed
the hearing officer’s determination that the employer tendered a valid bona fide offer of employment
(BFOE) to the claimant, and rendered a new decision that the employer did not tender a BFOE to
the claimant. The hearing officer had found that the employer had issued two offers of employment,
both of which had complied with Rule 129.6.
The two offers, dated approximately one week apart, stated, “The position will entail the following
physical and time requirements” and then listed various work restrictions as noted on the DWC-73,
such as “No standing for more than 1 hour per day,” “No [kneeling]/squatting more than 1 hour per
day,” “No pushing/pulling more than 2 hours per day,” “Must wear splint/cast at work,” and “No
driving or operating heavy equipment.” The claimant appealed the hearing officer’s determination
that these were valid BFOEs, arguing that both offers of employment fail to comply with Rule
129.6(c)(4) because they merely list the restrictions given by the claimant’s treating doctor rather
than state the actual physical and time requirements that the position will entail.The Appeals Panel agreed, noting that Rule 129.6 sets out the requirements for a BFOE and
provides, in part, that “an employer’s offer of modified duty shall be made to the employee in
writing and in the form and manner prescribed by the [Division],” that “a copy of the [DWC-73] on
which the offer is being based shall be included with the offer as well as . . . a description of the
physical and time requirements that the position will entail.”
The Appeals Panel noted that it has previously held that the language in Rule 129.6 is clear and
unambiguous, and that the rule “contains no exception for failing to strictly comply with its
requirements.” In this case, neither offer of employment listed the physical and time requirements
the offered position would entail, nor did they state the specific job position that was being offered.
Instead, both offers of employment only listed restrictions of what the job would not entail, which
does not meet the requirement listed in Rule 129.6(c)(4). Accordingly, the employer did not tender
a BFOE to the claimant.
This decision is a reminder to carriers and employers to ensure their BFOEs to claimants include a
full description of the requirement of the offered position. It is not a bad idea to clarify that the
employee will not be required to perform duties that he/she is specifically prohibited from
performing as noted on the DWC-73; however, the job offer must also include the physical
requirements, time requirements, and state the specific job position that is being offered in order to
meet the requirements of a valid BFOE under Rule 129.6. Appeals Panel Decision No. 152184,
decided December 29, 2015.

At the request of the U.S. Food and Drug Administration (FDA), the Department of Justice filed a
complaint in the U.S. District Court for the Northern District of Texas on January 4, 2016, alleging
that Downing Labs LLC has been engaged in manufacturing drugs that, by virtue of their labeling and/or route of administration, purport to be or are intended to be sterile, but that fail to meet the
safety protections provided under federal law.
The complaint alleges, among other things, that Downing Labs and the individual defendants violate
the Act by introducing or delivering sterile drugs that are prepared, packed, or held under insanitary
conditions whereby they may have been contaminated with filth and/or rendered injurious to health.
The complaint also alleges the drugs are adulterated because the methods used in, or the facilities
or controls used for, their preparation do not comply with current good manufacturing practices
requirements. For example, during one of the inspections conducted by the FDA of Downing Labs
and its predecessor, NuVision Pharmacy Inc., test records showed excessively high levels of
endotoxins. Endotoxins are substances found in certain bacteria that can cause a wide variety of
serious reactions in humans, including high fever and shock. These products were not distributed.
In 2014, records showed that 19 lots of supposedly sterile drugs had tested positive for the pathogens
Staphylococcus haemolyticus and Nocardia nova. These products were not distributed, but the FDA
alleges that the company failed to adequately investigate the cause of these sterility problems. The
complaint alleges that Downing Labs has a long history of manufacturing drug products under
conditions that fall short of the minimum requirements to ensure safety and quality.
The permanent injunction requires Downing Labs and the individual defendants to bring their
processes into compliance with the law. Until then, the defendants are enjoined from manufacturing,
holding, or distributing drugs manufactured at or from their McEwen Road facility (located at
4001McEwen Road, Suite 110, Dallas, Texas). In addition, the FDA has been authorized to order
Downing Labs to stop drug manufacturing should it determine that Downing Labs has violated the
terms of the decree, and may also order Downing Labs to recall drugs or to destroy drugs that are
in the process of being manufactured.

On December 28, 2015, the Division announced that the interest and discount rate as of January 2,
2016 will be 4.19 %. The rate is effective as of January 1, 2016, and will remain in effect through
March 31, 2016. The rate was previously 3.96 %.
The Division is required to compute and publish the interest and discount rate quarterly, on January
1, April 1, July 1, and October 1. Prior to January 1, 1991, the rate was fixed at 4%. As of June 17,
2001, however, the Division is required to calculate the rate based on the treasury constant maturity
rate for one-year treasury bills.

A Dallas doctor and an Arlington pharmacist are among dozens charged in a "pill mill" operation
in Texas and Louisiana that allegedly hired homeless people to pose as patients and obtain
prescriptions for pain medications.
Richard Andrews, DO (of Dallas) and pharmacist Ndufola Kigham (of Arlington) were arrested on
January 20, 2016 on federal charges of conspiracy to distribute a controlled substance. The
indictment alleges that the clinic, McAllen Medical Clinic, allegedly handed out prescriptions for
more than 150,000 oxycodone pills between January 2013 and July 2014, despite knowing "there
was no legitimate medical purpose" for them. Prosecutors involved in the case described that these
operations typically utilize drivers to pick up recruits to pose as patients. The recruits are given
money to pay for their visit to the clinic, and are paid a fee (usually around $30) for their work. The
recruits are coached on what to say to get a specific prescription. The driver takes them to the
pharmacy and pays for the prescription; the drugs are then sold on the street for a profit. If convicted
of the conspiracy charges, Dr. Andrews and Dr. Kigham face up to 20 years in federal prison and
$1 million in fines.

Effective February 1, 2016, Fentanyl Transdermal Patches, MS-Contin, Levorphanol
(Levo-Dromoran), and Morphine ER/Naltrexone (Embeda) will change status from "Y" to "N" drugs
in the ODG's Appendix A. Accordingly, beginning February 1, 2016, prescriptions for these drugs
will require preauthorization. The Division is encouraging system participants to discuss and
coordinate the ongoing course of treatment of claimants who are currently being prescribed these
drugs.

The Division announced it will host two education conferences in 2016: one in Austin and one in
Dallas. The Austin conference will be September 19 and 20 at the Crowne Plaza Austin Hotel, and
the Dallas conference will be October 24 and 25 at the Renaissance Dallas-Richardson Hotel. The
conferences will be geared to health care providers, medical office staff, employers, employee
organizations, carriers, and third party administrators, and will feature general and breakout sessions
on a variety of topics and issues in the Texas workers' compensation system. Conference registration
will be available beginning Spring 2016.

Air Evac EMS, Inc., a provider of emergency air ambulance services, has filed suit in the U.S.
District Court for the Western District of Texas seeking declaratory and injunctive relief. Air Evac
seeks a declaration that the Airline Deregulation Act (ADA) preempts Texas Labor Code Sections
401.001–401.026, and related regulations (which establish a fee schedule and fee guidelines for
reimbursement for air ambulance services to workers' compensation claimants) as applied to
federally-regulated air carriers. Air Evac also seeks to permanently enjoin the Division from
enforcing any provision of the Texas Labor Code (and accompanying reimbursement rules) that cap
the price for Air Evac's services. Alternatively, Air Evac is requesting that the Court declare Texas
Labor Code §§ 415.021, 415.0215, 413.042, and any other section, rule, or regulation that
establishes or limits the price or rate charged, inapplicable to air ambulance providers, and to
permanently enjoin the Division from enforcing these statutes and regulations against air ambulance
providers.
Air Evac claims that the ADA preempts the above provisions because "the ADA requires that it is
the free market, not administrators or courts, that sets an air carrier's prices." The complaint alleges
that the Division establishes and enforces a fee schedule and fee guidelines under state law and
regulations that limit the amount that air ambulance providers can receive for emergency
transportation of injured workers, and that this reimbursement rate is "well below Air Evac's billed
charges, and the usual and customary fare it charges for its services." Air Evac alleges that the ADA
expressly preempts any state law or regulation that purports to restrict or economically regulate the
prices or services of air carriers within the United States, citing 49 U.S.C. § 41713(b)(1).
The complaint alleges that in 2015, Air Evac provided air ambulance services to several workers'
compensation patients, and has been paid only a "small fraction" of its billed charges because of the
Texas Labor Code's reimbursement scheme.

There is talk of a push by the Division to scrutinize DD analysis letters that "exceed the intent of
Rule 127.10(a)(2)." Rule 127.10(a)(2) allows treating doctors and insurance carriers to send the
designated doctor an "analysis of the injured employee's medical condition, functional abilities, and
return-to-work opportunities." The Rule states that the analysis "may include supporting
information such as videotaped activities of the injured employee, as well as marked copies of
medical records," and the analysis "may only cover the injured employee's medical condition,
functional abilities, and return-to-work opportunities as provided in Labor Code §408.0041." (Labor
Code §408.0041 states that the treating doctor and the carrier may send the DD an "analysis of the
injured employee's medical condition, functional abilities, and return-to-work opportunities.") If
the carrier sends an analysis, a copy must be sent to the treating doctor, the claimant, and the
claimant's representative, if any. (Likewise, if a treating doctor sends an analysis, a copy must be
sent to the above parties, as well as the carrier.)
There is no indication as to what language, exactly, the Division interprets as "exceeding the intent"
of Rule 127.10(a)(2). We suspect, however, they may be looking at letters that advocate strongly
for a particular position, cite one-sided legal authority, and/or give instruction to the DD on how he
or she is supposed to opine. Word on the street is that the Division is already looking at samples of
letters it deems possible violators.More to come, surely. To that end, we recommend carriers (or vendors who send letters on their
behalf) review their DD analysis letters to ensure they are not running afoul of the intent of Rule
127.10(a)(2).

The Division announced early this month that it is maintaining the four-region split of Field Offices
(North, Coastal, South, and West) and the respective Team Leads over each (Cheryl Dean, Ken
Huchton, Carol Fougerat, and now Teresa Hartley, replacing Don Woods). In an interesting twist,
however, it was announced that the Team Leads will supervise not only the Hearing Officers in their
regions, but the BROs as well. The former BRO team leads will now be acting as "liaisons" between
the BROs and the new Team Leads.
Jennifer Hopens and Allen Craddock will serve as regional Managers over the North/West and
South/East halves of the state, respectively.

In an extension of the principle established in Cunningham v. Atlantic States Cast Iron Pipe Co., 386N.J. Super. 423 (App. Div. 2006), the Appellate Division ruled on January 22, 2016 that an employee who was fired while on light duty was not entitled to temporary disability benefits because the firing was not related to his injury.   

The case, entitled Katzenstein v. Dollar General, A-1141-13T3 (App. Div. January 22, 2016) arose from a compensable accident on August 22, 2012 when Mr. Katzenstein, a store manager, injured his knee, requiring authorized treatment.  On September 19, 2012, Dollar General returned Katzenstein to light duty work.  On September 28, 2012, Dollar General terminated Katzenstein for leaving several employees in the store without supervision while he went to the bank to deposit the previous day’s earnings.

Following his termination, petitioner Katzenstein filed for unemployment benefits; however, he was denied benefits because he was terminated for misconduct.  On October 17, 2012, Dr. Basch, the authorized treating doctor, opined that petitioner could not work due to his knee injury.  Katzenstein continued to treat with Dr. Basch, who maintained the light duty restriction with no lifting over 25 pounds. 

Katzenstein filed a motion for medical and temporary disability benefits in the Division of Workers’ Compensation. He relied on Dr. Basch’s opinion that he could not work at all because he needed knee surgery. 

On February 28, 2013, a consent order was entered providing that the parties agreed without prejudice that petitioner would receive temporary disability benefits from November 14, 2012 to February 14, 2013.  When the three months ended, Katzenstein filed a motion to enforce the order and to obtain ongoing temporary disability benefits. 

In his motion, Katzenstein misstated the reason he did not get unemployment.  He asserted that he lost his unemployment claim because “was unable to engage in employment due to the injury to my right knee.” He did not mention that he had been denied benefits because he had been fired for misconduct.  The Judge of Compensation focused on this misrepresentation and the fact that Katzenstein’s injury was not the reason he left his job. Rather, he was fired for misconduct.  The Judge noted petitioner was lacking in candor and also noted that there was no evidence that petitioner had any prospect of new employment.  Petitioner then filed an appeal.

One week before the Judge of Compensation issued his decision, the Board of Review overturned the denial of unemployment benefits on the basis that petitioner’s conduct was reasonable and not an act of misconduct.  

The Appellate Division applied the rule in Cunningham and said that the two cases were similar because the petitioner inCunningham was injured on the job, returned to work, but was subsequently terminated and found not entitled to continuing temporary disability benefits while recovering from surgery.   In this case petitioner was injured on the job, placed on light duty, and then fired for a violation of company policy.  The court said that the burden was on petitioner to prove that he would have worked.  The Court said, “In determining that Katzenstein was not credible, the judge found he was neither offered employment after he was terminated nor declined employment due to his work-related disability.”  The Court wrote:

Here, the judge of compensation properly applied Cunningham.  The judge assessed whether Katzenstein, after being terminated, had a promise or prospect of employment that he had to forego due to his disability.  In determining that Katzenstein was not credible, the judge found he was neither offered employment after he was terminated nor declined employment due to his work-related disability.

This case is an important one.  It is the first Appellate Division case dealing with the right of the employer to terminate temporary disability benefits following job termination after an employee has been placed on light duty. The case does not discuss the rule in Harbatuk, which is that an employer can terminate temporary disability benefits to someone who turns down light duty.  This employee accepted light duty and presumably thought his temporary disability benefits would continue until he could either return to work full duty or until maximal medical improvement.  The Katzensteincase now applies the Cunningham rule to situations where someone is fired while on light duty for reasons unrelated to the work injury.  Petitioner was not able to show that he was fired because of his injury or that he had prospects of employment which he was unable to perform because of his injury. 

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John H. Geaney, Esq., is an Executive Committee Member and a Shareholder in Capehart Scatchard's Workers’ Compensation Group.  Mr. Geaney concentrates his practice in the representation of employers, self-insured companies, third-party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act and Family and Medical Leave Act. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063 or by e‑mail at jgeaney@capehart.com.