Employee’s Total Weekly Workers’ Compensation Payment May Not Exceed Statutory Cap, Court Rules

June 30, 2012 | Appeals | Employment & Labor | Insurance Coverage

The worker’s compensation claimant in this case worked as a collision shop technician in New York, repairing automobiles. In 2005, he suffered three injuries on the job. On February 21, he slipped on ice, injuring his hip and back. On March 18, he suffered a lower back sprain. He left his job on June 27 and later reported hearing loss beginning on that date, attributable to loud noise at his place of work. He applied for and received workers’ compensation benefits for all three injuries.

For the hip and back injuries, the workers’ compensation carrier for the claimant’s employer was directed, in separate awards, to pay the claimant a total of $400 per week – the maximum allowed at that time under New York’s Workers’ Compensation Law.

On September 21, 2007, a Workers’ Compensation Law Judge made an award for the hearing loss claim. The claimant was found to have a permanent partial disability, which entitled him to a “schedule loss of use” award.  In the case of permanent partial disability, the Workers’ Compensation Law assigns as by a schedule, a fixed number of lost weeks’ compensation according to the bodily member injured. The judge found that the claimant’s hearing loss entitled him to 32.145 weeks of benefits at the rate of $400 per week; the award specified a period from September 27, 2005 (the “date of disablement” found by the judge) to May 10, 2006. After considering the workers’ compensation carrier’s objections, the judge concluded on November 23, 2007 that the schedule award was “currently payable in full,” notwithstanding the fact that the claimant had received during the period in question, and was still receiving, $400 per week for his other claims. New York’s highest court, the Court of Appeals, has now reversed that ruling.

In its decision, the Court observed that the provision of New York’s Workers’ Compensation Law that governed the case stated, in relevant part, that:

Compensation for permanent or temporary partial disability, or for permanent or temporary total disability due to an accident or disablement resulting from an occupational disease that occurs . . . on or after July first, nineteen hundred ninety two [and before July one, two thousand seven], shall not exceed four hundred dollars per week.

The Court then ruled that the Board’s decision – that the claimant was entitled to receive $800 per week for a period of roughly 32 weeks – violated the statutory cap. According to the Court, a claimant entitled to a schedule award that was to be paid periodically had to wait until the claimant’s other disability payments had ceased, or had dipped below the cap, to be paid the schedule award.

In the Court’s view, a contrary decision would not only contradict the plain language of the law, but would produce “anomalous” results. For instance, it noted, a worker who was permanently totally disabled in 2005 – a quadriplegic, for example – could receive no more than $400 per week for his or her disability. According to the Court, it made “no sense” for a worker who suffered a hip injury, lower back pain, and a hearing loss in that year to receive $800 per week. It added that it could not be said that time would eliminate the anomaly – i.e., that in the long run no claimant would recover an average of more than $400 per week – because no one could say when, if ever, a “temporary” disability would end. As the Court pointed out, disabilities initially labeled “temporary” might be reclassified as permanent (indeed, the carrier in this case had annexed to its brief documents showing that the claimant’s back sprain had been so reclassified), or they might turn out to be permanent in fact.

The Court therefore held that periodic payments of a schedule loss of use award must be deferred to the extent that those payments, when combined with payments of another disability award, would exceed the cap imposed by the state’s Workers’ Compensation Law. The schedule award was not nullified by the other awards, but had to be deferred until the time came when the cap would not be exceeded, the Court concluded. [Matter of Schmidt v. Falls Dodge, Inc., 2012 N.Y. Lexis 892 (N.Y. May 1, 2012).]

Comment: New York amended its Worker’s Compensation Law in 2009 to provide that schedule loss of use awards “shall be payable in one lump sum, without commutation to present value upon the request of the injured employee.” It remains to be seen what implications the Court’s ruling in Matter of Schmidt may have for cases governed by the 2009 amendment.

New York’s Highest Court Sets Workers’ Compensation Standard

The New York Court of Appeals recently issued another decision involving workers’ compensation benefits.  In this case, the claimant was working as a phlebotomist for New York Neurologic Associates on January 29, 2003, when a computer monitor fell off a shelf and struck her upper back. She suffered a torn tendon in her left shoulder and two herniated discs in the cervical spine. On April 25, 2003, she told her employer that she would not be returning to work because she did not feel well enough to perform her duties. Thereafter, she was employed on and off, on a part-time basis, receiving workers’ compensation benefits for her loss of wages attributable to the accident. She underwent spinal surgery in December 2005. On January 18, 2007, she returned to full-duty work as a phlebotomist.

On May 29, 2007, following a hearing, the Workers’ Compensation Board classified the claimant with a permanent partial disability. It did not order benefits because she was engaged in full-duty work at the time. She continued to work until December 21, 2007, when various health issues forced her to quit. As she later explained, she had “migraines, numbness in [her] hand, [and] back pain” and she found it difficult to “use [her] hands to do the blood pressure and draw blood.”

In 2008, the claimant posted her resume on job-search websites, seeking both general phlebotomy jobs and customer service positions. She had two extremely brief periods of employment as a phlebotomist at New York hospitals. On May 22, 2008, a Workers’ Compensation Law Judge “continued” her case so that a hearing could be held on issues including whether she had voluntarily withdrawn from the labor market. In other words, the central question to be decided, before awarding wage replacement benefits, was whether the claimant had maintained a sufficient attachment to the labor market.

At the hearing, held on August 5, 2008, before a Workers’ Compensation Judge, the claimant testified concerning her health and her attempts to find employment. Asked what injuries contributed to her disability, she mentioned her neck and shoulder, as well as health issues that she said were unrelated to her workplace accident, namely migraines, hernias, and pinched nerves in her lower back. Questioned about her attempts to find work, the claimant explained that she was trying to look for a job that was “lighter,” or less physically taxing, than a phlebotomist position. She had submitted her resume for customer service positions, but those jobs and others she had tried to get required more lifting or standing than she could manage, because of her lower back condition and hernias.

The Workers’ Compensation Judge found that the claimant had made a valid effort to find work and “had not voluntarily removed herself from the labor market.” The insurance carrier for New York Neurologic Associates sought review by the Workers’ Compensation Board. On March 13, 2009, the Board denied the claimant’s claim for benefits after December 21, 2007. The Board found that she had “failed to conduct a reasonable job search” after December 2007, in that the “jobs under consideration by the claimant were not reasonable given her work restrictions, which primarily involve her unrelated low back condition.” The Board therefore ruled that, although her original withdrawal from the job market was not voluntary, she had not established attachment to the labor market and continuing entitlement to benefits.

An intermediate appellate court in New York, in a divided decision, reversed the Board’s determination. The majority inferred, from the fact that the claimant had not voluntarily withdrawn from the workforce in 2007, that her subsequent loss of wages was attributable to her disability, adding that it was incumbent upon New York Neurologic Associates to rebut the inference of causation or prove that the reduction in employment was solely due to factors unrelated to the disability.  The case reached New York’s highest court, the Court of Appeals, which, in a divided decision, reversed.

In its decision, the Court explained that a claimant must demonstrate that his or her reduced earning capacity was “due to the disability,” not due to factors “unrelated to the disability.”  By finding alternative work consistent with his or her physical limitations, or at least showing reasonable efforts at finding such work, a claimant could prove to the Board that the cause of his or her reduced income was a disability, rather than unwillingness to work again.

The Court continued by noting that the Board, in reaching a decision on this question, should consider the circumstances under which the claimant originally stopped full-duty work. According to the Court, if the Board determined that a workers’ compensation claimant had a permanent partial disability and that the claimant retired from his or her job due to that disability, an inference that his or her reduced future earnings resulted from the disability “may” be drawn, the Court continued.  It added that the same was true regardless of whether a claimant had completely retired from the work force or merely had withdrawn from the particular employment in which he or she was engaged at the time of the accident.

The Court then considered the Board’s finding that, as of August 2008, the claimant had not made a reasonable search for work consistent with her physical restrictions. The Court explained that that determination was a factual one that an appellate court must uphold as long as there was substantial evidence to support it. Here, it pointed out, the evidence concerning the types of work that the claimant had attempted to find and her lack of success in those endeavors, together with the absence of evidence of attempts to find less physically taxing work, constituted relevant proof adequately supporting the Board’s conclusion. Therefore, it found substantial evidence to support the Board’s determination.

Accordingly, the Court reversed the decision of the intermediate appellate court and reinstated the decision of the Workers’ Compensation Board. [Matter of Zamora v. New York Neurologic Associates et al., 2012 N.Y. Lexis 893 (N.Y. May 1, 2012).]

Foreign Employees Not Counted As Company’s Employees For Title VII Purposes

The plaintiff in this case sued her former employer, Pipe & Piling (U.S.A.) Ltd., and her former supervisor for discrimination under Title VII, the federal anti-discrimination law, and under Michigan’s Civil Rights Act. She obtained a judgment against the defendants of $25,000 in compensatory damages, $25,000 in punitive damages against her former supervisor, and $175,000 in punitive damages against her former employer. However, damages under Title VII are limited by a sliding scale based on the number of persons employed by a defendant-employer. The defendants then moved to reduce total damages to $50,000, the statutory cap for employers with fewer than 101 employees under 42 U.S.C. § 1981a(b)(3)(A).

The plaintiff did not contest the applicability of the Title VII statutory cap to her action, but she argued that her former employer should be considered an “integrated enterprise” with Pipe & Piling Ltd., a Canadian corporation, and thus that it had over 101 employees and a different cap should apply. The court rejected that argument, finding that employees of Pipe & Piling Ltd. should not be counted for purposes of the statutory cap because foreign employees of foreign corporations should not be counted towards the total number of a defendant’s employees.

According to the court, this interpretation of Title VII was supported by two statutes. First, 42 U.S.C. § 2000e(f) stated that “with respect to employment in a foreign country, such term (‘employee’) includes an individual who is a citizen of the United States.” Additionally, § 2000e-1(c)(2) stated that “Sections 2000e-2 and 2000e-3 of this title shall not apply with respect to the foreign operations of an employer that is a foreign person not controlled by an American employer.” Because Title VII excluded foreign employees of a foreign employer not controlled by an American employer, the court continued, it was “plain” that the foreign employees of a foreign corporation were not considered employees for purposes of Title VII.

Thus, the court ruled, even considering Pipe & Piling (U.S.A.) Ltd. and Pipe & Piling Ltd. as a single employer, the foreign employees of Pipe & Piling Ltd. – who were not protected by federal anti-discrimination laws – should not be counted as employees for purposes of Title VII, and the defendants, when limited to employees in the United States, qualified for the $50,000 Title VII cap. Therefore, the court granted the defendants’ motion to amend the judgment and ordered the $25,000 compensatory damages award to be attributed to the plaintiff’s Michigan state law claim, and the plaintiff’s punitive awards of $25,000 against her former supervisor and $175,000 against her former employer under Title VII to be reduced proportionally to $6,250 and $43,750, respectively. [Quinn v. Pipe & Piling Supplies (U.S.A.) Ltd., 2012 U.S. Dist. Lexis 39500 (W.D. Mich. March 22, 2012).]

Claimant Not Entitled To Continued Long Term Disability Benefits When Policy Standard Changed To “Any Gainful Occupation” From “Regular Occupation”

The plaintiff in this case worked as a truck driver for J. B. Hunt Transport Services. Prudential Insurance Company of America served as claims administrator for the ERISA plan that J.B. Hunt sponsored. In 2005, the plaintiff applied for long term disability benefits under the plan when she had to quit working because of pain in her neck, back, and left knee, among other problems. Because the plaintiff’s knee injury prevented her from operating a clutch with her left leg, Prudential found that she met the plan’s initial definition of “disabled” under its “regular occupation” standard. Prudential therefore awarded benefits to the plaintiff.

In 2007, however, Prudential discontinued the plaintiff’s benefits. One year of payments under the plan triggered an “any gainful occupation” standard for disability, and Prudential decided that, although the plaintiff’s knee pain prevented her from working as a truck driver, there were other jobs that she could do.

The plaintiff sued and sought to have the court overturn Prudential’s denial of her long term benefits under the policy as unreasonable. The court, however, ruled that Prudential had not abused its discretion by denying the plaintiff further benefits under the plan’s “any gainful occupation” provision.

As the court explained, the plaintiff was entitled to more benefits only if she was “disabled” under the plan. After the first 12 months of disability, the plan considered the plaintiff “disabled” if, because of the same injury, she was “unable to perform the duties of any gainful occupation for which [she was] reasonably fitted by education, training, or experience.” The court observed that, on appeal, Prudential determined that the plaintiff did not meet this standard and thus no longer qualified for long term disability benefits under the plan. It based its decision on an independent medical-records review by an experienced doctor, the plaintiff’s treating chiropractor’s opinions, and a vocational assessment. According to the court, Prudential “was entitled to rely on this evidence.”

The court pointed out that an employability assessment identified four gainful occupations for which the plaintiff was suited, taking into account her education, training, and experience: semiconductor bonder, surveillance system monitor, food checker, and assembler; all were classified as “sedentary” or “light.”

Accordingly, the court concluded, Prudential’s decision was a reasonable one. The plaintiff could do some available jobs and Prudential therefore had not abused its discretion when it determined that she was not disabled within the meaning of the “any gainful occupation” provision. [Brown v. Prudential Ins. Co. of America, 2012 U.S. Dist. Lexis 41414 (E.D. Ark. March 27, 2012).]

Circuit Court Rejects Claims Based On Allegedly Inaccurate Summary Plan Description

The plaintiffs in this case were employees of Litton Industries, Inc., and participated in its retirement plan, which was called Litton Industries, Inc., Retirement Plan B (“Litton Plan B”). Following corporate mergers and plan modifications, the plaintiffs sued the successor corporation, Northrop Grumman, and Northrop Grumman Retirement Plan B (“Northrop Plan B”), the plan that replaced Litton Plan B, under ERISA to enforce their understanding of their rights under Northrop Plan B.

In particular, the plaintiffs alleged that the administrative committee in charge of the plan failed to ensure that plan participants were furnished with a summary plan description (SPD) that was “sufficiently accurate and comprehensive” and that included “a statement clearly identifying circumstances which may result in . . . offset [or] reduction . . . of any benefits” that the participants would reasonably expect. After the district court granted summary judgment to the defendants, the plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit. They argued that the circuit court should reform the terms of Northrop Plan B’s master documents to be consistent with the terms of an earlier SPD.

The circuit court refused to do so, however. It explained that the plaintiffs had presented no evidence that Northrop Plan B contained terms that failed to reflect the drafter’s true intent. It also ruled that there was no evidence that Northrop Plan B contained terms that were induced by fraud, duress, or undue influence, explaining that the alleged inconsistency between the SPD and the plan master document was “not evidence of fraudulent inducement.”

Moreover, the circuit court rejected the plaintiffs’ argument that the administrative committee had breached its fiduciary duty by failing to enforce the terms of the SPD instead of the terms of the plan master document, finding “no such duty.” As the appellate court pointed out, the committee “may have a duty to enforce the terms of the plan,” but the terms of an SPD were “not the terms of the plan.” Finally, the circuit court noted that the plaintiffs failed to show that their current positions were any different than they would have been without the inaccurate SPD. It therefore affirmed the district court’s decision. [Skinner v. Northrop Grumman Retirement Plan B, 673 F.3d 1162 (9th Cir. 2012).]

Court Rejects Plan’s Decision Involving Eligibility of Person Who Had Undergone Sex-Reassignment Surgery

When the plaintiff in this case was born, she was declared to be male. In her early twenties, she was diagnosed with gender dysphoria, in which a patient’s psychological identification of gender does not match the anatomical identification. The plaintiff subsequently underwent sex-reassignment surgery, was issued a replacement birth certificate that designated her sex as female, and was married to a male.

The plaintiff’s husband, an employee of United Parcel Service and a participant in its health care plan, completed an enrollment card for the plaintiff and the plan administrators enrolled her in the plan as an eligible family dependent.  The plan subsequently terminated the plaintiff’s benefits, however, explaining that it learned that the plaintiff had undergone a “male to female sex reassignment surgery” and that applicable Minnesota law stated that a “a marriage between persons of the same sex” was prohibited. It concluded that the basis for the plaintiff’s marriage to her husband was not one that was “currently recognized under any express provisions of Minnesota Law.” Accordingly, the plan decided, the plaintiff was “not an eligible dependent.”

The plaintiff appealed the termination, contending that she had been judicially and administratively recognized for all purposes as female. The appeal was rejected, and the plaintiff went to court.

In its decision, the court first declared that recognition of same-sex marriage was “not at issue here,” and it made “no determination” regarding the application of the plan to same-sex marriages. Rather, the court continued, the question was whether the plaintiff had changed her sex under Minnesota law so that her marriage was recognized as an opposite-sex marriage under Minnesota law.

It pointed out that the plaintiff had complied with all of the Minnesota procedural requirements for a valid marriage: The plaintiff had obtained a marriage license, had been married in a formal ceremony before two witnesses by a person authorized to solemnize marriage ceremonies, had received a government-issued marriage certificate, and had the marriage recorded in a county “Legal Marriage Record.”

The court then found that Minnesota law recognized the plaintiff’s marriage as a marriage between a man and a woman because Minnesota law recognized the plaintiff’s sex as female. It added that it was not the plan’s role “to impose its own definitions of gender and marriage upon its participants.” In this case, the court stated that the plan had ignored all evidence of the State of Minnesota’s view of the plaintiff’s sex and marital status and that its decision “was not only wrong” but also was “a flagrant violation of its duty under any standard of review.”  In sum, the court decided that the plan had erred when it terminated the plaintiff’s participation as an eligible family dependent, and it reversed that action. [Radtke v. Miscellaneous Drivers & Helpers Union Local #638 Health, Welfare, Eye & Dental Fund, 2012 U.S. Dist. Lexis 46093 (D. Minn. Apr. 2, 2012).]

Reprinted with permission from the July 2012 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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