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As Iraq War Winds Down, Some DBA Issues Are Resolved While Others Remain in Dispute

January 20, 2012 (20 min read)
Mark Reinhalter By Mark A. Reinhalter, Counsel for Longshore
Office of the Solicitor, U.S. Department of Labor, Washington, D.C.
A quiet ceremony in Baghdad on December 15, 2011 marked the official end of the United States intervention in Iraq (Washington Post, December 15, 2011). In support of the military operations in Afghanistan in 2001 and Iraq in 2003, the United States government contracted with private providers for services at historically unprecedented levels. The extent to which the wars were conducted using contractor services is demonstrated by the Department of Defense's series of LOGCAP (Logistics Civil Augmentation Program) contracts. For example, the US Army named Halliburton/KBR as the sole provider of food, dining hall, water, housing, laundry, sanitation, and waste management services for US troops worldwide (Defense Industry Daily, Aug. 3, 2011). The LOGCAP 3 contract ran for five years and resulted in the payment of over $17 billion dollars to Halliburton, including $15 billion for services provided in Iraq alone (Defense Industry Daily). Other government agencies such as the Department of State and the US Agency for International Development contracted for additional services ranging from translation, personal security for diplomats, and training of local police forces to pest control on military bases. Infrastructure reconstruction and improvement projects included the building and repair of power plants, airports, and communication networks. In March 2010, more than 200,000 private contractors were working in Iraq and Afghanistan (T. Christian Miller, ProPublica, September 23, 2010). Between September 2007 and June 2010, the number of private contractors in Afghanistan exceeded the number of US military troops by 41,000 according to Pentagon reports (San Antonio Express, December 26, 2011).
Providing such extensive services resulted in an increased number of injuries and deaths. In 2003, approximately 500 Defense Base Act, 42 U.S.C.S. § 1651-54 (DBA) claims were reported to the U.S. Department of Labor. By comparison, reported DBA claims have averaged around 13,000 per year for each of the last several years. During the first six months of 2010, more contractor employees were killed than soldiers in Iraq and Afghanistan combined (Miller, ProPublica, September 23, 2010). And, although the final convoy of U.S. troops has now left Iraq, thousands of civilian contractors remain, consisting of 5,000 security contractors who are supported by an equal number of personnel to cook, clean and provide transportation and other services (San Antonio Express, December 26, 2011). Moreover, the 105,000 U.S. troops currently in Afghanistan continue to be supported by more than 100,000 private contractors (Id.).
This growth in private contracting and the injuries resulting from it have resulted in increased DBA litigation. Some issues have been resolved but others remain the subject of ongoing litigation. The principal disputes center on coverage under the Act, calculation of the proper average weekly wage (AWW), the correct duration of entitlement for the non-scheduled permanent partial loss of wage-earning capacity, and determining appropriate federal court jurisdiction governing the review of claims determinations.
I. Coverage under the DBA
A. Military Bases under 42 U.S.C.S. § 1651(a)(1) and (2).
The DBA covers injuries and deaths sustained by employees engaged in any employment at a military, air, or naval base acquired by the U.S. from any foreign government after 1940 or “upon any lands occupied or used by the United States for military or naval purposes in any Territory or possession outside the continental United States.”  The United States has not acquired any military bases from any foreign government since 1940, even considering our interventions in Iraq and Afghanistan. And, although the United States occupied both countries for military purposes after 2001, neither is a Territory or possession of the United States. The question arose, therefore, whether the Green Zone in Baghdad, Iraq was covered under any of the sections of 1651(a). The Benefits Review Board held that it was not a military base within the meaning of those sections. Z.S. v. Science Applications International, Corp., 42 BRBS 87 (2008), BRB No. 08-0223 (Nov. 26, 2008).[fn1] The Board rejected the argument that the Green Zone had been acquired by conquest because the U.S. military did not control the entire area and individuals within the Green Zone were not required to follow the United States military’s rules or standards of procedure.
B. Employment under a contract with the United States under 42 U.S.C.S. § 1651(a)(4).
The largest category of workers covered under the DBA are those within section 1651(a)(4) who are engaged in employment “under a contract entered into with the United States or any executive department, independent establishment, or agency thereof (including any corporate instrumentality of the United States), or any subcontract, or subordinate contract with respect to such contract, where such contract is to be performed outside the continental United States ... for the purpose of engaging in public work.” 42 U.S.C.S. § 1651(a)(4).
A significant issue arose after the Coalition Provisional Authority of Iraq (CPA) was created and began issuing solicitations and awarding contracts. The question was whether workers engaged in employment under contracts between private contractors and the CPA were covered by the DBA. For example, in early March 2004, contracts were solicited for a multitude of goods and services, including aerators, AK-47 assault rifles, sand bags, portable X-Ray units, battery cells, vehicles, berets, turbine parts, a police records management system, information technology products, agricultural equipment, satellite data communications, and railroad equipment and parts (Halchin, Congressional Research Service report dated April 29, 2004).
In Tisdale v. American Logistics Services, et al., 44 BRBS 29 (2010), the Benefits Review Board held that the CPA is an entity of the United States under section 1651(a)(4). The Board reasoned that to be an agency within the meaning of (a)(4) the U.S. must have a degree of effective control over the entity, although such control need not be exclusive. The Board held that the applicable factors to be considered in determining whether an entity is an agency of the U.S. include: “(1) power of the United States to initiate and terminate; (2) effectuation of government purposes by the entity; (3) exclusion of private profit; and (4) limitation of employment to government connected persons.” Analyzing and applying those factors and consistent with the purposes of the Act, the Board held that the CPA was an agency of the U.S. as that term is utilized in DBA section 1651(a)(4).
The Board also decided a second important coverage question – whether an employee of a US government contractor in Iraq for the purpose of developing future contracts was covered by the DBA. Z.S. v. Science Applications International, supra. The BRB affirmed an administrative law judge’s decision denying coverage because the claimant was not working under a specific, identifiable contract while in Iraq, she lacked the requisite security clearance to work on a government contract, and her timesheets charged her employer’s corporate overhead account rather than a government contract account.
C. Employment under a contract approved and financed by the United States under the Foreign Assistance Act, 22 U.S.C.S. § 2151, in which the contract is performed outside the U.S. pursuant to 42 U.S.C.S. § 1651(a)(5).
Many activities relating to foreign policy and national defense are financed by the government under the Foreign Assistance Act, 22 U.S.C.S. § 2151 (FAA). The FAA has been found to be a successor to the Mutual Security Act of 1954, referenced in DBA section 1651(a)(5). Ross v. DynCorp, et al., 362 F. Supp. 2d 344, 353 (D. D.C. 2005), citing Overseas African Construction Corp. v. McMullen, 500 F.2d 1291, 1294-96 (2d Cir. 1974). Thus, contracts approved and financed by the U.S. under the FAA come within the coverage of the DBA. Although agencies such as US AID and the State Department often sponsor initiatives and programs through procurement vehicles other than contracts, such as grants or cooperative agreements, the grantees and parties to those cooperative agreements may enter contracts using the funds financed under the FAA. Employees performing work under those arrangements outside the United States may be covered under section 1651(a)(5). Indeed, the district court found the deceased employee in Ross covered under the DBA even though the contract in question was not funded exclusively under the FAA. Accordingly, although NATO and the United Nations are not departments or agencies of the U.S. government within the meaning of DBA section 1651(a)(4), some of their activities might come within coverage of the DBA through section 1651(a)(5).
D. Employment Within the Zone of Special Danger
The United States Supreme Court has held that in DBA cases the usual requirements of LHWCA section 2(2), 33 U.S.C.S. § 902(2), that an injury or death arise out of and in the course of employment, do not apply. O’Leary v. Brown-Pacific-Maxon, Inc., 340 U.S. 504, 95 L.Ed. 483, 71 S. Ct. 470 (U.S. Sup. Ct. 1951). Rather, recovery under the DBA is available so long as the injury arises out of a “zone of special danger.” Id.  As the Supreme Court stated: “[t]he test of recovery is not a causal relation between the nature of employment of the injured person and the accident….All that is required is that the ‘obligations or conditions’ of employment create the ‘zone of special danger’ out of which the injury arose. 340 U.S. at 506-07. In order to rebut the presumption of DBA coverage under the zone of special danger doctrine, the employer must produce evidence that the employee had “go[ne] so far from his employment and become so thoroughly disconnected from the service of his employer that it would be entirely unreasonable to say that injuries suffered by him arose out of and in the course of his employment.” 340 U.S. at 507. More recently, the Ninth Circuit applied the doctrine to hold that an employee injured in a late night bar fight while on the Pacific Ocean’s Johnson Atoll was covered by the DBA. Kalama Services, Inc. v. Director, OWCP (Ilaszczat), 354 F.3d 1085, 37 BRBS 122(CRT) (9th Cir. 2004), cert. denied 543 U.S. 809, 160 L.Ed. 2d 12, 125 S. Ct. 36 (2004).
Numerous other cases have applied and refined the zone of special danger doctrine in recent DBA claims. These cases include Urso v. MVM, Inc., 44 BRBS 53 (2010); Fear v. CSA, Ltd., 43 BRBS 139 (2009); and Rogers v. Halliburton Services, 42 BRBS 56 (2008). In Urso, the BRB found the employer’s cross-appeal (to the employee’s and Director OWCP’s appeals) to be untimely thereby precluding its challenge to an ALJ’s decision, 2008-LHC-00852, that the contractor’s apparently accidental fatal drug overdose in Beirut, Lebanon came within the zone of special danger. The BRB nevertheless noted that the deceased worker’s decision to get an unusually large tattoo while employed overseas was foreseeable activity as was his self-administration of legally obtained pain medications. Thus these activities did not “thoroughly disconnect” the worker from his employment. In Fear, the BRB declined to find the claim covered under the zone of special danger doctrine. Applying its usual analysis of the presumption set forth in section 20(a), 33 U.S.C.S. § 920(a), and the related requirement that a claimant make out a prima facie case, the BRB concluded that the cause of the claimant’s injury (use of a chemical facial peel that resulted in burns and a related psychological injury) was personal in nature and not rooted in his conditions and obligations of employment. In Rogers, the BRB defined the limits of the zone of special danger by analyzing whether the injury occurred as a result of the obligations and conditions of the overseas employment. The claimant was injured in an altercation with military police personnel who were handcuffing him and putting him in body armor in order to fly him home after he resigned from a position at a military base in Kabul, Afghanistan. The Board reversed the ALJ’s conclusion that claimant’s behavior removed him from the zone of special danger, holding that neither the ALJ’s finding that claimant was at fault nor his finding that the injury-causing incident did not directly involve either the employer or its personnel were valid considerations.
II. Average Weekly Wage
Because of the high risk of injury and the remote and extreme nature of working conditions, remuneration for many contractor jobs in Iraq and Afghanistan is extraordinarily high. And, because a worker’s compensation rate is derived from his wages, 33 U.S.C.S. § 908, it is predictable that the issue of how to calculate an injured DBA worker’s average weekly wage (AWW) has generated considerable controversy. It is generally conceded in DBA cases that the applicable provision for determining AWW is section 10(c), 33 U.S.C.S. § 910(c), because virtually all DBA workers are required to work, or at least be available to work, seven days per week. (Section 10(a) contemplates only five and six day per week workers.) In early ALJ decisions issued after US involvement in Iraq and Afghanistan began and increasing numbers of DBA claims were filed, employers and carriers argued that DBA workers’ overseas wages were not reflective of their true wage-earning capacity and that DBA AWW computations should therefore be based on a “blend” of overseas and pre-deployment domestic earnings.
In the first case presenting that issue, the BRB affirmed an ALJ’s finding that claimant’s employment in Iraq was not comparable to his employment in the United States because his overseas job title of labor foreman denoted managerial responsibilities greater than he had held in stateside positions as a laborer and maintenance worker. The ALJ further found that claimant’s work in a combat zone was inherently different from his work in the United States by virtue of its dangerous location and the fact that his job required safety and security measures that would not have been present in his United States work. The BRB reasoned that basing the AWW solely on the wages claimant earned overseas appropriately reflected the increased pay claimant received based on his Iraq work, and fully compensated him for the earnings he lost due to injury. The BRB held that relying exclusively on wages earned in Iraq was proper under section 10(c), 33 U.S.C.S. § 910(c), because it gave due “regard to the previous earnings of the injured employee in the employment in which he was working at the time of the injury,” the section 10(c) standard. Proffitt v. Service Employers Int’l, Inc., 40 BRBS 41 (2006).
Other cases then arose, often presenting a situation in which the claimant’s injury occurred after only a brief period of overseas work but under an employment contract that ran for at least one year. In K.S. [Simons] v. Service Employees Int’l, Inc., 43 BRBS 18 (2009), aff’d on recon. en banc, 43 BRBS 136 (2009), the BRB held that where claimant was employed on a long-term contract in Iraq, it was appropriate to base his AWW solely on his overseas earnings rather than on stateside wages or a combination of both. The Board reversed the ALJ’s use of “blended” or combined overseas and stateside earnings during the year immediately preceding his injury to calculate an AWW. Instead, the Board mandated the exclusive use of overseas earnings in order to account for the plain language in section 10(c). The Board reasoned that the claimant was enticed to work in a dangerous environment in Iraq and Kuwait in return for higher wages and that his potential to maintain this higher level of earnings was cut short by his injury. Thus, his overseas earnings provided the best evidence of claimant’s capacity to earn absent injury. On reconsideration, the Board rejected the employer’s argument that the higher overseas earnings should form the basis for the AWW calculation only if the claimant’s injury was caused by the peculiar dangers of overseas work. Acknowledging that section 10(c) affords an ALJ broad discretion, the Board noted that such discretion was not unfettered and the exclusive use of overseas wages provided the legal framework within which an ALJ may exercise his discretion in determining the amount of claimant’s AWW. Simons is currently pending on the employer’s appeal before the United States District Court for the Southern District of Texas, Case No. 4:11-cv-01065.
In S.K. [Khan] v. Service Employers Int’l, Inc., 41 BRBS 123 (2007), an ALJ based the claimant’s AWW on just five weeks of work in Iraq resulting in an AWW of almost $900 per week and refused to include domestic earnings from work performed over the course of the full 52 weeks prior to the DBA injury. Consideration of the claimant’s domestic wages would have produced an AWW of only $313 per week. The foreign earnings included “uplifts” consisting of a five percent foreign service bonus, a 25 percent area differential, and a 25 percent hazard/danger pay. On appeal, the BRB reversed the ALJ’s refusal to modify his AWW determination to also include increases to the “uplifts” that fellow employees received and overtime pay that the claimant would have been expected to earn if not injured.
Other types of special payments have also been included in DBA AWW calculations. In Obadiaru v. ITT Corp., 45 BRBS 17 (2011), the Board affirmed the ALJ’s decision to include payments claimant received for travel expenses in his AWW calculation because they were “wages” and not excludable “fringe benefits.” The contract clearly enumerated the amount to be paid for travel and when it would be paid (at the six- and twelve-month employment marks). However, because claimant had ceased working due to the injury as of the date the final installment of the travel expenses was to be paid, the Board analogized that final installment to a post-injury contingent bonus and held it should not be included in the AWW calculation.
III. The Theory of Two-tiered Compensation Awards
The higher average weekly wages paid to DBA claimants in many cases have led employers and carriers to argue creative theories in an attempt to limit their liability for the ongoing loss of wage-earning capacity. In particular, one ALJ accepted, only to be reversed by the BRB, the argument that a claimant’s entitlement to a section 8(c)(21) non-scheduled permanent partial disability award should exist only for the time during which the claimant intended to continue in DBA-covered employment (33 U.S.C.S. § 908(c)(21)). Raymond v. Blackwater Security Consulting, L.L.C., 45 BRBS 5 (2011), appeal pending, Ninth Circuit No. 11-71587. Analogizing DBA work to the inevitably short-in-duration but highly compensated career of a professional athlete, the employer contended that the claimant should be entitled to a section 8(c)(21) award measured by his DBA AWW only for the time period during which he intended to continue to work in a war zone. Thereafter, the employer argued, the proper measure of the award was the difference between his post-injury earning capacity and the earnings the claimant had in previous domestic jobs. The BRB held that there is no legal basis for measuring the claimant’s wage loss against two different sets of earnings and creating two tiers of compensation awards for the same injury. Rather, the award must be based on the AWW at the time of the injury and the claimant’s post-injury earning capacity. It is well-established that the LHWCA does not compensate workers based on the hypothetical economic status that they would have enjoyed but for a work-related injury. Section 8(c)(21) compensation awards do not take into account such factors as future retirement plans, anticipated raises, and other expected, but unrealized, changes to claimant’s future earnings which might have occurred if no injury was suffered. The statute simply does not permit the two-tiered type of award the ALJ ordered here.
IV. Judicial Review of Benefits Review Board decisions in DBA Cases
The DBA incorporates all of the LHWCA provisions that are not modified by its own provisions, 42 U.S.C.S. § 1651(a), but the DBA also has its own judicial review provision. Under DBA section 1653(b), 42 U.S.C.S. § 1653(b), judicial review of an administrative decision lies in the federal court governing the district director’s office which filed and served the compensation order under review. Hice v. Director, OWCP, 156 F.3d 214, 32 BRBS 164(CRT) (D.C. Cir. 1998). The Courts of Appeals are, nevertheless, split on whether this means that Board decisions are initially reviewable in the circuit court or whether they must first be challenged in the district court in the appropriate geographic area. The Seventh and Ninth Circuits have concluded that Congress meant to incorporate into the DBA the LHWCA as amended in 1972. Under the applicable provision, 33 U.S.C.S. § 921(c), appellate review in these circuits lies with the United States Court of Appeals for the circuit in which the district director’s office is located. Pearce v. Director, OWCP, 647 F.2d 716, 13 BRBS 241 (7th Cir. 1981); Pearce v. Director, OWCP, 603 F.2d 763, 10 BRBS 867 (9th Cir. 1979). The Second Circuit has also recently adopted this view. Service Employees Int’l, Inc. v. Director, OWCP (Barrios), 595 F.3d 447, 44 BRBS 1(CRT) (2d Cir. 2010).
Other circuits have held to the contrary. The Fifth Circuit held that LHWCA section 21(c) which provides for review by the U.S. Court of Appeals for the circuit in which the injury occurred, is not immediately applicable to BRB decisions in DBA claims. Instead, review of a BRB decision is to be undertaken initially by a district court, and thereafter by a court of appeals. AFIA/CIGNA Worldwide v. Felkner, 930 F.2d 1111, 24 BRBS 154(CRT) (5th Cir. 1991), cert. denied, 502 U.S. 906, 116 L.Ed. 2d 241, 112 S. Ct. 297 (1991). The Fourth, Sixth and Eleventh Circuits have adopted a similar view. Thus, in those circuits, a Board decision must first be challenged in the appropriate district court, and only then may be appealed to the court of appeals. ITT Base Services v. Hickson, 155 F.3d 1272, 32 BRBS 157(CRT) (11th Cir. 1998); Lee v. Boeing Co., Inc., 123 F.3d 801, 31 BRBS 101(CRT) (4th Cir. 1997); Home Indemnity Co. v. Stillwell, 597 F.2d 87 (6th Cir. 1979), cert. denied, 444 U.S. 869, 62 L.Ed. 2d 94, 100 S. Ct. 145 (1979).
Now pending in the Ninth Circuit is a case challenging the view that the location determining the court’s jurisdiction is the geographic location of the district director who files the compensation order under review.  McDonald v. Aecom Technology Corp., 45 BRBS 45 (2011), BRB No. 10-0720 (Sept. 19, 2011), appeal pending, Ninth Circuit No. 11-73485. On appeal, the employer contends that the determinant location should be that of the ALJ who rendered the compensation order. The BRB held that the plain language of section 1653(b) dictated that the operative location is that of the office of the district director that filed and served the ALJ’s decision. Thus, the BRB treated language in Pearce v. Director, OWCP, 603 F.2d 763, supra, suggesting that the applicable law is determined by the location of the ALJ, as mere dicta. The Board concluded that the better reasoning was that set out in Hice v. Director, OWCP, supra and Lee v. Boeing Co., Inc., supra, which relied on the fact that even after the 1972 transfer of hearing authority to ALJs, district directors remain the officials primarily responsible for claims.
Footnote:
1. The BRB described the Green Zone as approximately a two to three square mile area in Baghdad, Iraq, which was cordoned off and separated from the rest of Baghdad by 10-foot high concrete walls. Private security contractors provided most of the protection. The Zone provided a secure place to house Coalition Forces, diplomats, contractors, and news media. Coalition Forces included both military and civilians from other countries including Italy, Australia, the Netherlands, and Great Britain. The Green Zone was the primary base of operations for the Coalition Provisional Authority. Additionally, many indigenous Iraqis lived in the Green Zone and set up shops and markets there. Military enclaves and headquarters were also located in the Green Zone.
© Copyright 2012 U.S. Department of Labor. All rights reserved. Reprinted with permission. This article will appear in an upcoming issue of Benefits Review Board Service – Longshore Reporter (LexisNexis).
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