TT&H eNotes: Workers’ Compensation – July 2018
June 29, 2018
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SIGNIFICANT CASE SUMMARIES
Whitmoyer v. WCAB (Mountain Country Meats) No 52 MAP 2017 (June 19, 2018)
By: Paul A. Pauciulo, Esquire
The Supreme Court has eliminated the Employer offset for future medical expense paid after a third party recovery pursuant to Section 319 of the Pennsylvania Workers’ Compensation Act.
Claimant suffered a work-related injury on January, 1993, that resulted in the amputation of part of his arm. His Employer paid specific loss benefits and was responsible for his ongoing medical benefits. Claimant obtained a third party settlement several years later of $300,000.00. Claimant and Employer entered into a Third Party Settlement Agreement in which Employer was entitled to a net subrogation lien of $81,627.87. The balance of recovery (fund for credit against future workers’ compensation payable, subject to reimbursement to Claimant of expenses of recovery at the rate of 37% on credit used) was $189,416.27. Claimant later argued that Employer could only take a credit toward future installments of compensation, which he interpreted to mean only indemnity benefits.
Section 319 provides as follows:
Where the compensable injury is caused, in whole or in part, by the act or omission of a third party, the employer shall be subrogated to the right of the employee, his personal representative, his estate or his dependents, against such third party to the extent of the compensation payable under this Article by the employer; reasonable attorney’s fees and other proper disbursements occurred in obtaining a recovery or in effecting a compromised settlement shall be prorated between the employer and employee, his personal representative, his estate or his dependents. The employer shall pay that proportion of the attorney’s fees and other proper disbursements at the amount of compensation paid or payable at the time of recovery or settlement bears to the total recovery or settlement. Any recovery against such third party in excess of compensation theretofore paid by the employer shall be paid forthwith to the employee, his personal representative, his estate or his dependents, and shall be treated as an advance payment by the employer on account of any future INSTALLMENTS OF COMPENSATION. (emphasis added)
The Supreme Court focused on specific statutory language in Section 319 that addresses the employer’s obligation regarding any future installments of compensation. The court, after performing a close review of the statutory language, reaches the conclusion that the provision of the statute that addresses pro rata subrogation offset for future installments of compensation is limited to only disability benefits, and not medical benefits under the Act, based on the phrase “installments of compensation”.
The Court finds that the employer’s Section 319 lien consists of both medical and indemnity already paid, in calculating employer’s subrogation return with respect to a third party recovery. After employer and carrier receive the subrogation return from the third party recovery, the employer is then entitled to pro rata offset for only future indemnity benefits, not future medical. Under the Court’s decision, the offset, or credit, for future medical expenses paid after the third party recovery is eliminated.
Going forward, employer/insurance carrier will not be entitled to pro rata subrogation credit against future medical expense after a third party recovery. The Supreme Court in Whitmoyer changes the law, and imposes a significant limitation on the rights of the employers and insurance carriers for subrogation.
Questions regarding this case may be directed to Paul A. Pauciulo at 215-564-2928 x 8510 or firstname.lastname@example.org.
Department of Labor and Industry, UEGF v. WCAB (Lin and Eastern Taste), No. 27 EAP 2017, (June 26, 2018)
By: Mary G. March, Esquire
The Pennsylvania Supreme Court has determined that the Construction Workplace Misclassification Act is inapplicable where the putative employer is not in the business of construction.
Fu Xiang Lin (Lin), a seasoned remodeler, was hired to perform remodeling work for Eastern Taste, a restaurant that had not yet opened for business. Lin was hired by his sister-in-law, Sai Zheng Zheng (Zheng) and Zheng’s husband, Kond Bin Wang (Wang) oversaw the project and told Lin what work needed to be done. Wang purchased materials for the project, but Lin brought and used his own tools. Lin was hired only to do the remodeling work and was not going to work in the restaurant when it opened.
On March 28, 2011, Lin fell and suffered injuries rendering him a paraplegic. Lin filed a workers’ compensation claim against both Eastern Taste and the UEGF as Eastern Taste did not maintain workers’ compensation insurance.
Workers’ Compensation Judge Bruce Doman found that Lin’s work was not in the “regular course” of Eastern Taste’s business and that his employment was “casual in character”. Because Lin failed to prove he was an employee of Eastern Taste he was not entitled to workers’ compensation benefits under the Workers’ Compensation Act. Judge Doman then addressed whether the outcome would be different if the Construction Workplace Misclassification Act (“CWMA”) applied. The CWMA prohibits the improper classification of employees as independent contractors where an individual performs services in the construction industry for remuneration. 43 P.S. Section 933.3 (a). Judge Doman concluded that the CWMA did not apply because Eastern Taste “is a restaurant in the restaurant business and not in the construction business.” Judge Doman reasoned that like a homeowner who hires a contractor to perform work in the home, such a contractual relationship may involve construction activities, but the homeowner is not “in the construction industry” for purposes of the CWMA.
On appeal to the WCAB, the Board reversed Judge Doman’s decision, finding that Lin’s employment was not “casual” in nature and that Lin was an employee of Eastern Taste. The Board based its decision upon the definition of an employee under the Workers’ Compensation Act and did not consider whether the CWMA applied.
On appeal, the Commonwealth Court reversed the Board’s decision and again found Lin was not an employee of Eastern Taste and thus was ineligible for benefits under the Workers’ Compensation Act. The Commonwealth Court found that the Appeal Board had exceeded its authority when it “engaged in impermissible fact-finding” and then relied upon those facts that were inconsistent with Judge Doman’s factual findings. The Commonwealth Court held that the Appeal Board committed error in not basing its conclusions upon the facts as found by Judge Doman.
The Commonwealth Court reviewed Judge Doman’s factual findings to see if they supported the conclusion that Lin was an employee as opposed to an independent contractor. This analysis was based on the considerations set forth in Universal Am-Can, Ltd. V. WCAB (Minteer), 762 A.2d. 328 (Pa. 2000), which requires a review of the following factors:
- Control of the manner work is to be done;
- Responsibility for results only;
- Terms of the agreement between the parties;
- The nature of the work or occupation or business;
- Which party supplied the tools;
- Whether payment is by the time or by the job;
- Whether work is part of the regular business of the employer;
- The right to terminate the employment at any time.
Id. at 110. The Commonwealth Court found that Wang was in charge of what needed to be done but that he did not control the manner in which the work was completed. Further, Lin’s contractural arrangement was to provide remodeling work, not to work in the restaurant. Finally, the Commonwealth Court found that Lin supplied his own tools. Based on these findings, the Commonwealth Court determined that Lin had failed to meet his burden of establishing he was an employee under the Workers’ Compensation Act.
The Commonwealth Court then reviewed whether Lin was an employee under the terms of the CWMA. The CWMA provides distinct criteria to be satisfied before “an individual who performs services in the construction industry for remuneration” may be classified as an independent contractor for purposes of workers’ compensation. See 43 P.S. Section 933.3(a). To fall within the purview of the CWMA, the services performed must be “in the construction industry.” 43 P.S. Section 933.3(a).
From this determination, Lin filed an appeal to the Pennsylvania Supreme Court.
The Supreme Court stated that “the dispositive question was whether ‘an individual who performs services in the construction industry for remuneration” refers to an individual who works for a construction business, or to an individual whose job duties merely involve construction activities.” The Supreme Court concluded that the CWMA was enacted to address problems in the construction industry and not entities such as restaurants that perform remodeling work. To find otherwise, the Court noted that every homeowner that hired an individual to do a home repair could be subject to criminal prosecution under the CWMA for failure to have workers’ compensation insurance. Thus, the Supreme Court held, “the CWMA is inapplicable where the putative employer is not in the business of construction.”
Whitfield v. WCAB (Tenet Health Systems), No. 608 C.D. 2017 (June 6, 2018)
By: Justin D. Beck, Esquire
The landmark ruling of 2017’s Protz struck the entirety of Section 306(a.2) from the Pennsylvania Workers’ Compensation Act, and with it, all provisions pertaining to Impairment Rating Evaluations. In three cases released June 6, 2018, Commonwealth Court took a significant step forward in clarifying the retroactive effects of Protz, ruling that claimants who have received their most recent payment of compensation within the three years prior to filing Petitions to Reinstate are entitled to an evidentiary hearing and potential reinstatement of Temporary Total Disability (“TTD”) benefits.
In Whitfield, the claimant had suffered a work injury in March 2002, and began receiving TTD benefits in September of that year, following a short period of TPD payments. In June 2006, the claimant underwent an IRE pursuant to the Fifth Edition of the AMA Guides, which determined that the claimant had a 44% permanent impairment. Based upon that IRE, a WCJ modified the claimant’s disability status from total to partial as of the date of the IRE. The WCAB affirmed the modification in June 2009.
Notably, in the post-Protz litigation, the parties had stipulated that the claimant did not raise the question of constitutionality before the original WCJ or the Board.
Ultimately, the claimant received benefits at the total disability rate from September 2002 until July 2015. On November 13, 2015, one month following Protz I, the claimant filed a Petition to Reinstate. Finding that Protz I was not retroactive, the WCJ denied the Petition. The Board affirmed, concluding that the claimant waived the right to challenge the constitutionality of the IRE when she failed to do so during the initial litigation of her change in status.
Commonwealth Court reversed. The court held that, as a threshold matter, a claimant may bring a Petition to Reinstate if filed within three years of the last date of compensation paid. Therefore, since the claimant last received payment of compensation in July 2015, and the time restrictions of Section 306(a.2) were now stricken from the Act, her Petition was timely.
Next, the court explained that, until the IRE provisions were struck down as unconstitutional in Protz II, a claimant’s disability status could be modified from total to partial disability in one of two ways: (1) based upon evidence of earning power; or (2) based upon an impairment rating, without regard to earning power. Following a strict statutory analysis, the court turned to Section 413(a) of the Act, which governs time restrictions related to Petitions to Reinstate. The court determined that, because earning power had not played any role in the claimant’s change from total to partial disability status, the term “disability,” as utilized in Section 413(a), should be read to encompass both that which is a result of earning power or the result of an IRE-induced status.
Notably, the court also held that it made little sense to require a claimant seeking reinstatement based upon an unconstitutional IRE to show a change in earning power when the employer was not required to show the same when it had the claimant’s disability status modified from total to partial. Indeed, in some cases, claimants may not be able to show a change in earning power as their earning capacity was, and remains, zero. Thus, the court held that claimant need not show a change in physical condition in order to meet the burden of proof for reinstatement, but instead, can merely present testimony of continued total disability. If credited, the same shall suffice to establish an entitlement to reinstatement.
Whitfield now provides clarity to scenarios wherein a claimant has received 500 weeks of partial disability benefits pursuant to a prior IRE determination, and now seeks to reinstate total disability benefits within three years of the last date of compensation paid. The court unequivocally held that such claimants may seek reinstatement, however, the burden initially lies with the claimant to establish ongoing total disability – though the same need not be proven by any medical evidence. Where a claimant presents testimony in favor of continued total disability, the burden of proof then shifts to the employer to prove the contrary. If the employer fails to present such evidence, or the claimant’s evidence is found to be more persuasive, reinstatement is proper.
Foreshadowing future opinions to come, Commonwealth Court stated in the final footnote of the decision, “We do not resolve whether Protz II would apply to cases in which the last payment made was outside the 3-year period in Section 413(a).”
Pavlack v. WCAB (UPMC South Side), No. 702 C.D. 2017 (June 6, 2018)
Moore v. WCAB (Sunoco, Inc.), No. 715 C.D. 2017 (June 6, 2018)
By: Justin D. Beck, Esquire
In two sister cases, Commonwealth Court applied the new analysis as established by Whitfield in similar post-500 week reinstatement claims.
In both cases, the claimants sought to reinstate and modify benefits, respectively, in the face of prior IRE determinations. The claimants’ petitions had been previously dismissed, based upon post-Protz I case law, which had held that such petitions were untimely if the issue of constitutionality had not been raised within 60 days of the original modification to partial disability.
Commonwealth Court found the claimants’ petitions timely, in light of Protz II. As that case struck the entirety of Section 306(a.2) from the Act, the time restrictions contained therein were also now eliminated, and, thus, the provisions of Section 413(a) of the Act controlled.
Further, the court applied the new proof structure established by Whitfield, holding that, in order to establish entitlement to reinstatement of benefits where the change of status was predicated upon an IRE, a claimant must demonstrate that he or she continues to be disabled. The court emphasized that this burden may be satisfied through a claimant’s own testimony, without the need for medical evidence. As noted above, the burden then shifts to the employer to prove the contrary.
With Pavlack and Moore, the court put to rest arguments relying upon pre-Protz II precedents such as Thompson, Riley, and Gillespie, holding that such reliance is now undermined by the fact that the time-based restrictions central to each was contained within the now-stricken Section 306(a.2). Accordingly, citing the now-controlling Whitfield, the court reiterated that a claimant has three years from the most recent payment of compensation to file a petition seeking to reinstate benefits.
Coffman v. Kline, 167 A.3d 772 (Pa. Super. 2017)
By: Anthony J. Gabriel, Esquire
Pennsylvania Workers’ Compensation Settlements of Less than $5,000 Remain Subject to Domestic Relations Non-disbursement Orders. This is a 2017 case, but a good reminder to be aware of child support arrearages and non-disbursement orders.
The claimant in an underlying workers’ compensation litigation had accrued child support arrearages totaling $13,890.32. When the Lehigh County Domestic Relations Section (“DRS”) became aware that claimant was negotiating a compromise and release settlement with his employer, it issued a non-disbursement order pursuant to its authority under 23 Pa.C.S. §4305, and served it upon the third-party workers’ compensation claim servicer (“TPA”). That order precluded TPA from disbursing any settlement payment owed to claimant as a result of his workers’ compensation claim until further directed by the court.
The claimant ultimately entered into a compromise and release agreement with his employer which was approved by the workers’ compensation judge (“WCJ”). The WCJ, in his decision, noted that claimant’s settlement fell below the statutory threshold of $5,000 enumerated in 23 Pa.C.S. §4308.1(i) regarding child support liens by operation of law. Thus, notwithstanding the non-disbursement order, TPA, relying on the WCJ’s order, released the entire settlement payment to claimant. DRS subsequently filed a petition for contempt against TPA.
The Superior Court found that §§4308.1 and 4305 are complementary measures designed to achieve the overarching public policy goal of insuring the collection of support arrears. Thus, a Domestic Relations Section may affirmatively act under §4305 to ensure the collection of any amount of settlement. Accordingly, the TPA was in violation of the non-disbursement order when it issued settlement proceeds to claimant. Please note that TPA was also found to be in civil contempt for its willful violation of a court order when it disbursed the settlement proceeds to claimant.
As long as a non-disbursement order is properly issued, the workers’ compensation insurance carrier is required to comply with the non-disbursement order, even if the settlement is for less than $5,000.