State News

CONSTRUCTION WORKPLACE MISCLASSIFICATION ACT

TO BE STRICTLY CONSTRUED TO FIND INDEPENDENT CONTRACTOR STATUS

By Jeffrey D. Snyder, Esquire

In an on En Banc Opinion, the Commonwealth Court of Pennsylvania, in D&R Construction v. WCAB (Suarez) and in Department of Labor and Industry v. WCAB (Suarez),Nos. 1558 C.D. 2016, 1578 C.D. 2016, 1574 C.D. 2016, and 1575 C.D. 2016, has held that, in a construction workplace, the common law analysis of employee versus independent contractor centering on the right of control is now abrogated by the Construction Workplace Misclassification Act (CWMA) by which all the Act’s requirements must be satisfied in order for a given individual to be classified as an independent contractor. 

By way of background, in a persuasive but not binding Opinion of the Workers’ Compensation Appeal Board (Board),Cassatt v. Venue, Inc., 2015 W.L. 7422308 (WCAB, October 22, 2015), the Board held that despite the fact that there was not a written agreement between the parties, the totality of the circumstances supported independent contractor status in the construction workplace and on that basis the Board found that overall the requirements of the CWMA were satisfied.  This Cassatt Opinion was not adopted elsewhere and is strongly counter-veiled by other appellate cases of earlier and more recent vintage but still leaving doubt about the state of common law analysis in a construction workplace.

In the case of (Suarez), on October 26, 2010 the Claimant filed a Claim Petition against D&R, alleging injury during the course of employment on August 28, 2010.  D&R filed an Answer in part asserting that the Claimant was an independent contractor and not an employee of D&R.  There was then a Claim Petition against the Uninsured Employer Guaranty Fund.  The issue of independent contractor versus employee was bifurcated.

The WCJ denied the Claim Petition relative to the bifurcated issue, concluding that the Claimant was an independent contractor and not an employee of D&R on the date of injury.  The Claimant appealed to the Board.  The Board reversed the WCJ and remanded the matter for further proceedings.  In doing so, the Board concluded that the Claimant was not an independent contractor but rather an employee of D&R at the time of injury, relying on the CWMA with factors the Board considered “instructive”. 

Noting that the matter was bifurcated on the issue of independent contractor versus employee, with the litigation not yet completed on the entire case before the Workers’ Compensation Judge, D&R and the Fund asked the Board to issue a statement pursuant to §702(b) of the Judicial Code allowing for an immediate Appeal from what was in essence an Interlocutory Order on employment relationship.  That request was denied by the Board, followed by Petition for Review with the Commonwealth Court, alleging an abuse of discretion in denying the request for immediate Appeal.  The Commonwealth Court accepted the Appeal via the Petitions for Review, limiting the issues to whether the Board erred in retroactively applying the CWMA to determine whether the Claimant was an independent contractor and whether the Board erred by considering the CWMA as guidance for the application of the common law analysis to determine who qualifies as an independent contractor.

First, D&R and the Fund argued that the Board erred in retroactively applying the CWMA.  The Commonwealth Court concluded that the CWMA was not intended to be applied retroactively, this particular injury occurring before the enactment of the CWMA.

The Commonwealth Court, then dealing with the substantive application of the criteria of the CWMA held that the criteria in the CWMA must be established in order for an individual in the construction industry to be deemed an independent contractor and not an employee for purposes of Workers’ Compensation.  “The absence of a single criterion will negate the independent contractor’s status, and the individual will be deemed an employee”.  There was to be no weighing test – each criterion appearing in the CWMA must be met, different than the common law test of focusing on the right of control with consideration of the totality of the circumstances.  In other words, the criteria in the CWMA are not guidelines, they are requirements that must each be satisfied in total to find independent contractor status. 

“We conclude that the CWMA is not a clarification of the traditional test [under common law].” The Court observed that under the Workers’ Compensation Act, there was no bright line rule for determining whether a particular relationship is that of an employer-employee or owner-independent contractor.  Various consideration for that status and against it were then discussed by the Court.  “Thus, in sum, under the common law, there are no mandatory factors, but rather there is weighing of factors, with control being a primary factor.”  “In contrast, under the CWMA, unless certain criteria are met, an individual in the construction industry will be deemed to be an employee and not an independent contractor.  These criteria are mandatory, and the absence of any one criterion will negate the independent contractor status, and the individual will be deemed an employee.”  “Thus, each criterion has equal weight”.  The Court noted that under the CWMA, there are requirements for a written contract for the services, the maintenance of a business location separate from the location of the person for whom services are being performed by the individual and maintenance of liability insurance during the term of the contract of at least $50,000.00.  The CWMA was noted to exclude consideration of the failure to withhold federal or state income taxes or to pay Workers’ Compensation premiums.  “Thus, while some of the requirements set forth in the CWMA may be similar to some of the traditional factors, the CWMA does not clarify the common law, particularly given the aforementioned differences.”  In conclusion, the Court discussed the various other elements under the CWMA that must be strictly met in order to find an independent contractor relationship.  Ultimately, the Commonwealth Court reversed on the basis that the Board had intermingled the common law test with the test under the CWMA in the case where the date of injury predated the effective date of the CWMA and involving substantive change was not to be retroactive.  The Court noted that the CWMA was not meant to apply to other industries or professions and that mixing that CWMA test with the common law test would create a new (hybrid) analytical framework for independent contractor versus employee status that was not the intention of the CWMA.  “Therefore, we hold that the Construction Workplace Misclassification Act may not be used as guidance for the application of the traditional factors under the common law to determine whether an employment relationship existed.”  The Court remanded the case to the Board to consider whether the Claimant sustained his burden of proof of showing an employer-employee relationship solely under the traditional factors as set forth in the common law.

ConnorsO’Dell LLP

                                                                     Trust us, we just get it!  It is trust well spent!

We defend Employers, Self-Insureds, Insurance Carriers, and Third Party Administrators in Workers’ Compensation matters throughout  Pennsylvania.  We have over 100 years of cumulative experience defending our clients against compensation-related liabilities, with no attorney in our firm having less than ten (10) years of specialized experience, empowering our Workers’ Compensation practice group attorneys to be more than mere claim denials, enabling us to create the factual and legal leverage to expeditiously resolve claims, in the course of limiting/reducing/extinguishing our clients’ liabilities under the Pennsylvania Workers’ Compensation Act.

Every member of our Workers’ Compensation practice group is AV rated.  Our partnership with the NWCDN magnifies the lens for which our professional expertise imperiously demands that we always be dynamic and exacting advocates for our clients, navigating the frustrating and form-intensive minefield pervasive throughout Pennsylvania Workers’ Compensation practice and procedure.

Teague Campbell Dennis & Gorham, LLP is pleased to announce that Michael C. Sigmon has joined the firm’s Raleigh office.  Mike comes to Teague Campbell from Brooks, Stevens & Pope, P.A. and will be Of Counsel in the Workers’ Compensation Practice Group. Mike has more than 30 years of active trial experience before the Industrial Commission and North Carolina courts.  He is a North Carolina State Bar Certified Specialist in Workers’ Compensation, a Certified North Carolina Superior Court Mediator and an accredited Veterans Administration benefits attorney.

Senior Partner Dayle Flammia said, “Mike embodies the core values of Teague Campbell and shares our vision of investing in the whole client and their success. We are honored to welcome him to the team and look forward to sharing the knowledge and experience he brings.”

There can be little doubt as to the popularity and effectiveness of alternative dispute resolution (ADR) when dealing with workers’ compensation claims. The uncertainty, expense, and time involved necessitates that most claims get resolved through mediation outside of an administrative hearing and likely appeal through the court system.

Through my years of practice, I have discovered that one seldom used form of ADR is mediation followed by arbitration of issues on which the parties are deadlocked. Med-Arb, as it is referred to in the ADR world, can be a very effective tool for many claims.

Because the Department of Labor (DOL) must approve all workers’ compensation resolutions, the parties must first agree that the decision of the arbitrator will be binding, and the decision will be submitted to the DOL for adoption and approval. Such an agreement is then presented to the DOL, followed by an order entered by the DOL agreeing to adopt, as its own, the arbitrator’s decision, findings and conclusion. The parties then proceed to attempt mediation of the case. If a settlement is reached on all issues, a settlement agreement is prepared, signed and submitted for DOL approval. If the parties are deadlocked on some, or all issues, the mediation is then converted to an arbitration and submitted to the arbitrator for decision and later adoption by the DOL.

While theoretically any claim could utilize Med-Arb as an ADR tool, the claims that stand to benefit the most are those where medical causation is in dispute on some portion of the claim, and entitlement to future medical expenses is an issue. In those situations, my experience has proven that often the underlying claim is more easily resolved if the medical dispute can be resolved as well.

Med-Arb deserves your consideration on many claims. If there are questions, please do not hesitate to let me know.

To speed healing and improve return to work times, the Division has proposed a rule requiring that every claimant be given a magnetic copper bracelet and compression wraps infused with magnets and copper.  The chiropractic lobby is strongly in support of the proposal stating that the “science” is sound.  On a somewhat related note, if you’d like to purchase a magnetic copper bracelet, James Loughlin will sell you one for 4 easy payments of $24.95.

Jacqueline Harrison, a Hearing Officer in the Houston West Field Office, has moved on from the Division. No word yet on whether she’s left the world of workers’ compensation.

The claimant was injured on a large construction project.  As a result, his left leg had to be amputated above the knee.  He recovered workers’ compensation benefits through his employer.  He also sued one of the subcontractors on the job for his injuries.  The jury awarded a total of $43 million in damages.  However, the Fourteenth District Court of Appeals in Houston reversed and rendered judgment that the claimant take nothing from the subcontractor.Berkel & Company Contractors, Inc. v. Lee. 
 
The court held that the subcontractor was entitled to claim the exclusive remedy defense because the subcontractor and claimant were co-employees.  This determination was based on a provision in the Workers’ Compensation Act that deems the general contractor to be the employer of the subcontractor and the subcontractor’s employees if the general contractor enters into a written agreement with the subcontractor to provide workers’ compensation insurance coverage to the subcontractor and the subcontractor’s employees.  It was undisputed that the general contractor agreed to provide workers’ compensation insurance to all its subcontractors.
 
The court also clarified the application of the intentional-injury exception to the exclusive remedy defense. The court held that the evidence was insufficient to show that a vice-principal of the subcontractor knew to a substantial certainty that his conduct would bring about harm to a particular victim, or to someone within a small class of potential victims within a localized area. --James Loughlin, Stone Loughlin & Swanson, LLP

On July 6, 2017, Howard Gregg Diamond, M.D. was indicted on federal criminal charges including conspiracy to distribute controlled substances, possession with intent to distribute controlled substances, health care fraud, aiding and abetting, and money laundering.
           
The indictment alleges that Dr. Diamond conspired with others to write prescriptions for drugs including hydrocodone, oxymorphine, methadone, fentanyl, morphine, oxycodone, alprazolam, and zolpidem, without a legitimate medical purpose.  The conspiracy is alleged to have resulted in the overdose deaths of at least seven individuals.  At the time of his arrest, Dr. Diamond was reported to have on or about him a firearm, possible marijuana, and expired passports. 
 
On July 20, 2017, the Texas Medical Board issued an order temporarily suspending Dr. Diamond’s medical license based on their determination that his continuation in the practice of medicine would constitute a continuing threat to the public welfare. --James Loughlin, Stone Loughlin & Swanson, LLP

On July 19, 2017, Sentrix Pharmacy filed Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Florida.  How does that apply to Texas, you ask?  
 
Sentrix Pharmacy is located in Pompano Beach, Florida but mails compound pain creams and scar creams to injured workers in Texas.  Past charges include $2,488.99 for a one month supply of pain cream and $12,050.06 for a one month supply of scar cream. 
 
On July 7, 2017, Sentrix Pharmacy filed comments to the Division’s informal compound drug rule proposal we reported on last month.  The proposed amendments would require preauthorization for compound drugs.  Not surprisingly, Sentrix opposed the amendments.
 
In its comments, Sentrix argues with a straight face that compound pain creams are a valuable tool in the fight against the opioid epidemic and that if preauthorization is required for compound pain creams, it could contribute to the opioid epidemic.  No mention is made of all of the other more effective, less expensive treatments for pain than a $2,500 jar of compound pain cream.
 
We commend the Division's efforts to require preauthorization for compound drugs. Preauthorization is typically required for treatments and services that are costly, medically questionable, or subject to abuse.  Compound drugs fit the bill on all three counts. --James Loughlin, Stone Loughlin & Swanson, LLP

The Medicare Secondary Payer Act requires primary payers, including workers’ compensation carriers, to reimburse Medicare for payments it made for healthcare for which the primary payer was responsible.  Many carriers have reported seeing an increase in secondary payer recovery activity by Medicare, particularly with regard to demands for reimbursement of services that bear no relation to the compensable injury. 
 
For example, on a low back sprain/strain claim, the carrier may receive a demand for reimbursement of services for treatment of COPD, diabetes, or other ordinary diseases of life.  In other cases, the provider’s bill may list a compensable diagnosis code but no treatment was actually provided for that condition.  Finally, in some instances treatment may have been provided for both related and non-related conditions, yet the carrier receives a demand for the full amount.
 
It appears that in many instances Medicare is not making an initial determination about whether and to what extent the services it paid for were actually for the compensable injury.  If the beneficiary has a prior workers’ compensation claim, Medicare simply sends a demand letter.  InCIGA v. Burwell, a federal district court case out of California, decided January 5, 2017, the court rejected Medicare’s argument that the primary payer is responsible for both the related and unrelated conditions when the provider combines the services into a single charge.  According to the court, Medicare must attempt to apportion the charges between related and non-related services. 
 
The court also held that Medicare is bound by state law in determining whether the insurance carrier is required to reimburse Medicare.  The Fifth Circuit Court of Appeals reached the same conclusion inCaldera v. Ins. Co. of the State of Pa., decided in 2013.  Therefore, if Medicare contends that a disputed condition for which it paid for treatment is related to the compensable injury, the proper forum for resolving that dispute would be the administrative dispute resolution process provided by the Texas Workers’ Compensation Act.  So far, however, it does not appear that Medicare has attempted to invoke the Division’s dispute resolution process.        
 
The Division’s involvement would be welcomed to help address the problems carriers are having with Medicare reimbursement claims.  In 2014, then Commissioner Rod Bordelon wrote a letter to Medicare to address a related problem in which Medicare would not pay for medical services because the Medicare beneficiary had a previous workers’ compensation claim.  Topics to be addressed in a new letter may include facilitating a process to better identify the compensable injury and related services before a blanket demand letter is sent, and, in the event of a disagreement, clarifying the process for resolving that dispute.  For example, do Medicare or Medicare/Medicaid managed care providers meet the definition of a “health care insurer” under section 409.0091 such that they are required to follow Labor Code section 409.0091 and submit a DWC-026 healthcare insurer reimbursement form? --James Loughlin, Stone Loughlin & Swanson, LLP

By now, those of you reading this blog know that in order for an injury to be compensable in South Dakota, the injury must arise out of and be in the course of the employment. Pretty straight forward, right?

Not so much.

While South Dakota adopts the “coming and going rule, establishing that an employee is not covered for purposes of workers’ compensation while coming from and going to work, the law has also established a ‘gray area’ regarding what is, and what is not. covered. Three seminole cases in South Dakota address this topic: Norton v. Deuel Sch. Dist. 2004 S.D 6; Fair v. Nash Finch Co., 2007 S.D. 16; and Terveen v. South Dakota Dept. of Transp. 2015 S.D. 10. These cases make it clear that a fact investigation into a workers’ compensation claim must include an analysis of minute details of the claim.

In Norton, the SD Supreme Court found that personal activities involving self-care, such as eating, resting, smoking, or using bathroom facilities should be considered in the course of employment. In Fair, the Court found that an employee’s deviation from work duties does not ‘automatically constitute departures from employment, but may … be found insubstantial.’” Fair was injured while she was exiting Family Thrift after a brief deviation from her usual direct route to her vehicle. The Court found that while it was reasonable to expect employees to exit the premises after work, it was also reasonable to expect Fair to engage in personal shopping after her shift had ended. Thus, the Court found that mere fact that an employee deviates from their work does not preclude a finding that the injuries are compensable.

Insubstantial deviations have been defined as those “largely the kind of momentary diversions which, if undertaken by an inside employee working under fixed time and place limitations, would be compensable under the personal comfort doctrine.” Arthur Larson, Larson Workers’ Compensation § 17.06[3] (2014). If someone engaged in an act for personal comfort, they do not leave the course of employment unless the extent of the departure is so great that an intent to abandon the job temporarily can be inferred. Id. at §21. In Terveen, the Court adopted the majority rule around the nation, finding that an employee who has made a personal side-trip has to ‘get back on the beam’ before being deemed to have resumed the business trip. Id. § 17.03[5]. Additionally, the Court noted that the deviation cannot be substantial.

Now you are probably wondering, what information you need to find out during an investigation. Some information you need to know will include finding out what the employee was doing at the time of the injury; did the employer authorize, expressly or impliedly, that running personal errands was acceptable; was the employee on their typical route home, did they get lost, or, perhaps, were they stopping for food? These cases are very fact specific so be sure to take the time to gather all the facts you need to make a determination.

As always, we are here and happy to help. Give us a call anytime.