State News : Texas

Casey Sutterfield was a derrick hand who claimed a workers’ compensation injury while working
in North Dakota for a Texas Company, Teravita. He says that after his injury, his employer made
misrepresentations about the availability of workers’ compensation benefits and created a hostile
work environment. He was either fired or resigned, depending on whom you believe. He returned
home to Texas and filed a workers’ compensation claim.
The carrier denied the claim, which was the subject of a contested case hearing in which the DWC
ruled in favor of Mr. Sutterfield. Mr. Sutterfield then sued the employer, the carrier and two
adjusters individually for discriminatory conduct, negligent misrepresentation, and conspiracy. The
employer filed a motion to dismiss the suit asserting that it was based on the employer’s constitutional right to associate with the carrier and to petition the DWC, protected by the Texas
Citizens Participation Act (TCPA). The Dallas Court of Appeals agreed and, on April 1, 2016, the
Texas Supreme Court refused to review the Dallas Court’s ruling.
The TCPA was enacted to “encourage and safeguard the constitutional rights of persons to petition,
speak freely, associate freely, and otherwise participate in government to the maximum extent
permitted by law and, at the same time, protect the rights of a person to file meritorious lawsuits for
demonstrable injury.” The Dallas Court said that participation in a workers’ compensation hearing
at the DWC was an exercise of the employer’s right to petition and that testimony at that hearing
was “an absolutely privileged communication.” Mr. Sutterfield argued that his claims against the
employer were exempt under the TCPA because that act expressly exempts actions brought “under
the Insurance Code or arising out of an insurance contract” from its protection. The Dallas Court
disagreed, holding that his lawsuit was not brought under the Insurance Code, rather it was brought
under the Texas Labor Code and common law and he sought damages, not under the insurance
contract between the employer and carrier, but under the provisions of the Labor Code.
The Dallas Court dismissed Mr. Sutterfield’s conspiracy claim and his claim for employment
discrimination by presenting false testimony during the claim process because the TCPA protected
the employer during the hearing process at the administrative level. The court refused to dismiss
the employment discrimination claims regarding the hostile work environment, representations that
he was not entitled to pursue benefits under the Workers’ Compensation Act and wrongful discharge
as well as the negligent misrepresentation claims, as those were based on statements made outside
the DWC proceedings, and were not protected by the TCPA. The entire opinion can be found at
Tervita, LLC v. Sutterfield, 482 S.W.3d 280 (Dallas App. - 2015, pet. ref’d).

In February, we told you about the Oklahoma Opt-Out statute being ruled unconstitutional by the
Oklahoma Workers’ Compensation Commission. The next move? An appeal to the Oklahoma
Supreme Court filed by Dillard’s, the employer in that case, alleging that the Commission did not
have jurisdiction to strike down the beleaguered statute.
The Oklahoma Supreme Court seems to have tipped its hand, however, on how it will decide the
issue. In another case, decided on April 19, 2016, the Oklahoma high court held that the state’s
Workers’ Compensation Commission had the power to determine whether a provision of the state’s
workers’ compensation law was being unconstitutionally applied to a party in a proceeding before
the Commission.
Many speculate that the Oklahoma Attorney General sees the writing on the wall and anticipates an
unfavorable ruling by the Supreme Court, as evidenced by a Motion for a Stay of the Proceedings
in the Oklahoma Supreme Court. The AG has asked for an additional two months to allow the
Oklahoma Legislature to consider amendments that would address some of the key issues. In other
words, they want time to see if the Legislature can fix the offending portions of the statute that
resulted in the Commission’s decision that the statute was unconstitutional. Of course, pending that
stay, all Opt Out case decisions are on hold at the Commission level pending the outcome of the
Dillard’s appeal.

The widow and son of a deceased employee receiving workers’ compensation death benefits from
Texas Mutual recovered a settlement from a third-party. Texas Mutual asserted its statutory
subrogation rights and suspended benefits based on its future credit. The widow and son brought
bad faith claims against Texas Mutual. Texas Mutual filed a motion to dismiss on the grounds that
the plaintiffs’ claims fall within the exclusive jurisdiction of the Division of Workers’
Compensation. The trial court denied Texas Mutual’s motion to dismiss. Texas Mutual filed a
petition for writ of mandamus against the trial court judge which the El Paso Court of Appeals
conditionally granted. Citing the Texas Supreme Court cases of Ruttiger, Morris, and most recently,
In re Crawford, the court of appeals stated that the Division has exclusive jurisdiction over any
cause of action or claim which arises from the investigation, handling, or settlement of a workers’
compensation claim. The court noted that in deciding whether a cause of action falls within the
exclusive jurisdiction of the Division, it must look at the substance of the claim rather than the label
assigned to it by the plaintiffs. Here, plaintiffs’ claims, no matter how artfully pled, arose from
Texas Mutual’s assertion of its subrogation interest and suspension of benefits, issues over which
the Division has exclusive jurisdiction.
In re Texas Mutual Insurance Co., No. 08–15–00343–CV, 2016 WL 921317 (Tex. App.--El Paso
Mar. 9, 2016, no pet. h.).

Ronald Santorsola signed an employment agreement which required arbitration of claims alleging
workers' compensation retaliation. He reported an injury two months after he was hired and filed
a workers' compensation claim. A month later, he was terminated. He sued his former employer
under section 451.001 of the Texas Labor Code, alleging that he was terminated for filing a workers'
compensation claim. His employer sought to enforce the arbitration agreement. Mr. Santorsola
argued the agreement was unconscionable and unenforceable because it contained an agreement
requiring him to split the arbitrator's fee with his former employer that would deter him from
arbitrating his claim because he would not be able to afford it. The trial court agreed with Mr.
Santorsola ruling that the agreement was unconscionable and unenforceable. The Corpus Christi
Court of Appeals held that the trial court did not abuse its discretion in so ruling because the
fee-splitting agreement contained no cap on the amount the employee would be required to pay and
no provision allowing the arbitrator to modify the terms of payment.
AOF Services, LLC, v. Santorsola, No. 13–14–00641–CV, 2016 WL 1165829 (Tex. App.--Corpus
Christi Mar. 24, 2016, no pet. h.).

Marisa Lopez-Wagley has been named Deputy Commissioner of Enforcement. The Division’s
enforcement section which was managed by TDI will once again be managed by the Division.
Nick Canaday has been hired as the Division’s General Counsel to replace Dirk Johnson. Mr.
Canaday represented the Division while at the Office of the Attorney General and has many years
of workers’ compensation experience in private practice. He also has the rare distinction of having
successfully argued a case to the United States Supreme Court.

The Division is seeking input on the development of a new Compound Medications Plan-Based
Audit for physicians that prescribe compound drugs.
Many of you are probably familiar with the recent increase in the number of compound drugs being
prescribed by some physicians. By far, the most common type of compound drug being prescribed
is topical creams. These are usually pain creams or scar creams. These creams are often billed at
astronomical sums, sometimes over $10,000.00 for a one month supply. These creams often contain
common, inexpensive ingredients and have no proven efficacy over FDA approved drugs.
CBS News ran a national story last year on insurance companies receiving outrageous billing for
unwanted prescription creams. The story reported on a Dallas compounding pharmacy under federal
investigation for its practices.
The ODG Treatment Guidelines do not recommend compound drugs as a first line therapy. Rather,
commercially available, FDA-approved drugs should be given an adequate trial. The ODG also
notes,
Recently, some pharmacies have been making and marketing stock compound drugs
for the WC patient population. Among the FDA “Red Flags” for Enforcement Action
on Compounded Drugs is: "Compounding drugs in anticipation of receiving
prescriptions, except in very limited quantities in relation to amounts compounded
after receiving valid prescriptions."
One has to wonder whether the physicians prescribing these compound creams have some
motivation for doing so other than the patient’s best interests. These physicians should keep in mind
that if they have a compensation arrangement with or financial interest in the pharmacy, they are
required to disclose it in accordance with DWC Rule 180.24.

The Division adopted amendments to rule 132.7, regarding duration of death benefits for eligible
spouses, and rule 132.13, regarding burial benefits, to conform the rules to 2015 legislative changes.
The changes allow spouses of first responders to remarry and continue to receive death benefits.
The changes do not apply to non-first responder spouses so they should not remarry if they want to
continue to receive death benefits. The changes also increase the maximum burial benefit from
$6,000 to $10,000 for injuries occurring on or after September 1, 2015.

The revised DWC Form-042 Claim for Workers’ Compensation Death Benefits restructures the
form to increase readability, highlight additional required documentation, and revise the title to
Claim for Workers’ Compensation Death Benefits.
The all-new DWC Form-154 Workers’ Compensation Complaint form provides a simple,
standardized form for filing workers’ compensation complaints. The Division notes that a person
does not have to use the form and a complaint may also be submitted through its website, email, fax,
written correspondence, or even in person.
The form defines a complaint as a “written allegation that a system participant has violated Title 5,
Subtitle A, of the Texas Labor Code or Texas Department of Insurance, Division of Workers’
Compensation (TDI-DWC) rules.”

On March 15, 2016, the Centers for Disease Control and Prevention published its guidelines for
prescribing opioids for chronic pain to address the country’s prescription drug abuse epidemic.
Among the recommendations are that opioids should not be first-line therapy for chronic pain. The
recommendations states, “Nonpharmacologic therapy and nonopioid pharmacologic therapy are
preferred for chronic pain. Clinicians should consider opioid therapy only if expected benefits for
both pain and function are anticipated to outweigh risks to the patient.”
The recommendations also recommend a low starting dosage: “When opioids are started, clinicians
should prescribe the lowest effective dosage. Clinicians should use caution when prescribing opioids
at any dosage, should carefully reassess evidence of individual benefits and risks when considering
increasing dosage to =50 morphine milligram equivalents (MME)/day, and should avoid increasing
dosage to =90 MME/day or carefully justify a decision to titrate dosage to =90 MME/day.”
In a related development, the FDA has announced plans to add a boxed warning - its most serious
type - to all immediate-release opioid painkillers. The label will specify that the drugs should only
be used when other medications alternative therapies cannot control patients’ pain.

In an interview with NPR, United States Department of Labor Secretary Thomas Perez called laws
in Texas and Oklahoma that allow employers to opt out of providing traditional workers’
compensation insurance a “pathway to poverty” for people who get injured on the job.
Mr. Perez said the Labor Department is commissioning a report about the opt-out trend and cutbacks
in workers' comp benefits “to document the precise nature of this problem across the country.” It’s
also been reported that the Labor Department is currently investigating a large provider of opt-out
plans in Texas to determine “whether the company's plans or models contain provisions that
interfere with or prevent the exercise of ERISA rights by covered employees.”
On March 18th, Stanford law professor Alison Morantz released her study of the impact of nonsubscription
on 15 large companies that provided their Texas employees with a workers’
compensation alternative. She found that the costs per worker fell by about 44 percent.
Ms. Morantz did not examine whether workers were better off with the alternative plans or whether
the savings came at their expense. However, she concluded her “findings suggest an urgent need
for policymakers to examine the economic and distributional effects of converting workers’
compensation from a cornerstone of the social welfare state into an optional program that exists
alongside privately-provided forms of occupational injury insurance.”
Last month, we reported that the Oklahoma Workers’ Compensation Commission declared
unconstitutional the recently enacted state law allowing employers to opt-out of the state-regulated
workers’ compensation system, i.e., become non-subscribers, as they are referred to in Texas.