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Workers' Compensation

Matthews v. National Football League Management Council (NFLMC); Tennesee Titans (Part I of II)

Matthews v. National Football League Management Council (NFLMC); Tennesee Titans: Redefining the California Jurisdictional Equation in Cases Involving Contractual Choice of Law/Forum Provisions (Part I of II)

 © 2012 Raymond F. Correio, Senior Associate, Pearlman, Borska & Wax, L.L.P.; Workers’ Compensation Judge (retired)

On August 6, 2012, the Ninth Circuit Court of Appeal issued a decision that will have a wide reaching impact in cases involving contractual/employment choice of law/forum provisions and whether and in what circumstances California will or will not exercise subject matter jurisdiction in workers’ compensation cases. Although Matthews deals with the choice of law/forum provisions in an NFL player’s contract, the same analytical principles would apply in many employment contracts which contain similar choice of law/forum clauses or provisions.

THE ESSENTIALS IN A NUTSHELL

  • Employment contractual choice of law/forum provision and the related “no waiver” argument of Labor Code § 5000, are not prohibited or automatically invalidated unless an employee first establishes they are otherwise eligible for California workers’ compensation benefits. “The “no waiver” rule applies only when an employee’s workers’ compensation claim is subject to California law.” (Slip Op. at 8692, emphasis added).
  • If the employment contract containing the choice of law/forum clause(s) was formed or entered into in California, especially if the applicant is a California resident, this in and of itself will constitute a significant and substantial contact or interest for California to exercise jurisdiction and apply California workers’ compensation law.
  • Even where the pure aggregate number of factors or contacts with California may not be significant or substantial, if a single factor implicates and impacts the California workers’ compensation statutory scheme (such as the furnishing of medical treatment and related reimbursement issues) then this factor or a similar factor standing alone or in combination may constitute a significant/substantial California interest.
  • Even if an injured worker suffers a specific injury in California this fact alone may or may not be deemed to be a significant or substantial California governmental interest so as to invoke California jurisdiction.
  • If an applicant suffers a portion or portions of a cumulative trauma injury in California this alone will not automatically be deemed a significant or substantial contact with California so as to invoke California workers’ compensation subject matter jurisdiction and negate a contractual choice of law/forum clause.

PROCEDURAL OVERVIEW

Bruce Matthews had a long and distinguished career in the NFL spanning 19 years from 1983 to 2002 playing for the Tennessee Titans and their predecessor teams the Houston Oilers and the Tennessee Oilers. During his 19 year NFL career, he played a total of 13 games in California. There was no allegation or assertion he was ever a resident of California, or that his employment contract was formed or entered into in California.

Matthews retired from the NFL in 2002. In 2008 he filed an Application for Adjudication claiming a cumulative trauma injury spanning his entire 19 year NFL career with pain and disability resulting from playing and practicing professional football at various locations. It is important to note he never filed or alleged any specific or particular injury that occurred in California during any of the 13 games he played in California.

There was a specific clause/provision in Matthews’ employment agreement/contract with the Titans that expressly provided that all workers’ compensation claims would be decided under Tennessee law.

In response to Matthews filing an application seeking California workers’ compensation benefits, the Tennessee Titans and the National Football League Management Council (NFLMC) filed a non-injury grievance contending that by filing a claim for workers’ compensation benefits in California he breached his employment contract. As mandated by the NFL Collective Bargaining Agreement (CBA), the dispute was submitted to binding arbitration.

The arbitrator found the choice of law provision or clause in Matthews’ employment contract was valid and his filing and pursuing a workers’ compensation claim in California constituted a violation or breach of his employment contract. The arbitrator ordered Matthews to “cease and desist” from seeking California benefits and that if any California court awarded him benefits he would also be in breach of his employment contract.

Matthews then filed suit in the Federal District Court in California seeking to vacate the arbitrator’s award. In January of 2011, the Federal District Court denied Matthews’ motion to vacate the arbitration award and granted the Titans and NFLMC’s cross-motion to confirm the award. Predictably, Matthews appealed to the Ninth Circuit Court of Appeal.

FEDERAL LABOR POLICY BACKDROP

Since there was a collective bargaining agreement the court noted that “federal labor policy strongly favors the resolution of labor disputes through arbitration”. However, the court also noted that while arbitration awards are ordinarily upheld and judicial scrutiny of an arbitrator’s decision is extremely limited, there is a narrow exception if an arbitration award is found to be contrary to public policy. In order to capitalize on this “exception”, Matthews argued to both the Federal District Court and to the Ninth Circuit that there was an explicit and well defined dominant public policy which violated and contravened both California workers’ compensation policy and federal labor policy to a degree that required the arbitration award be vacated.

BURDEN OF PROOF

The court noted that any party seeking to vacate an arbitration award has the burden of showing the arbitration award violates an explicit, well-defined and dominant public policy. “Matthews must show that his workers’ compensation claim comes within the scope of California’s workers’ compensation regime”, and that he is “within the category of injured employees to which California’s workers’ compensation law extends.” (Slip Op., at 8693).

THE NO WAIVER RULE/EXCEPTION

The crux of Matthews’ public policy argument focused on the choice of law/forum clauses and provisions of his employment contract violated Labor Code § 5000 providing that “No contract, rule, or regulation shall exempt the employer from liability for the compensation fixed by [the workers’ compensation statute].” (Slip Op. at 8691). In essence, any contract or agreement, whether express or implied, entered into by any employee waiving the benefits of the California workers’ compensation system would be automatically deemed null and void. In support of his absolute “no waiver” argument, Matthews relied on the California Supreme Court’s 1934 decision in Alaska Packers Ass’n v Industrial Accident Commission, 1 Cal. 2d 250. He argued that no matter how tenuous, casual, or fleeting the connection was between an employee and the State of California, Alaska Packers barred any employer from using a contractual choice of law clause or provision to prevent an employee from receiving workers’ compensation benefits under California law.

Matthews argued a very broad and expansive application of Alaska Packers which the Ninth Circuit expressly rejected. “The Supreme Court did not hold that California had an “absolute right” to apply its law, irrespective of the extent of its contacts with the employee or employment relationship in question. To the contrary, in each case the Court emphasized California’s substantial interest in the controversy before it.” (Slip Op. at 8699). California has a strong interest in regulating employment relationships entered into or formed within the State of California, particularly when the injury to the employee may result in a burden on the state’s resources. The court also pointed to two other United States Supreme Court decisions basically affirming and applying this same principle. “Indeed, the Supreme Court has recognized that “for a State’s substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.” (Phillips Petroleum Co. v Shutts, 472 U.S. 797, 818 (1985) (quoting Allstate Ins. Co. v Hague, 449 U.S. 302, 312-13 (1981) (plurality opinion)). (Slip Op. at 8699, emphasis added).

The Ninth Circuit in its comprehensive analysis of Alaska Packers held “The no waiver” rule applies only when an employee’s workers’ compensation claim is subject to California law”. (Slip Op. at 8692, emphasis added).

In determining whether an employee’s workers’ compensation claim is subject to California law, there must be an established sufficiency of contacts with California in order for California to apply California workers’ compensation law and negate the choice of law clause in any particular contract.

In Alaska Packers, the injured worker while residing in California was hired in California for seasonal work in Alaska. His employment contract contained a provision or clause where he expressly elected to be bound by the law of Alaska in the event he suffered a work injury. The sufficiency of the contact the applicant in Alaska Packers had with California was the employment contract was formed/executed in California and this was deemed to be a sufficient significant contact so as to negate the choice of law provisions of the contract and require the application of California workers’ compensation law.

We are of the opinion that the creation of the status under the laws of this state is sufficient jurisdictional basis for the regulation of that relationship within this state and the creation of incidents thereto which will be recognized within this state, even through the relation was entered into for purposes connected solely with the rendition of services in another state. (Alaska Packers, Id., at p. 720).

CONTRACT FORMATION CONSIDERATIONS

One lesson from Alaska Packers is clear but not simple! If a contract was formed or executed in California and especially if the applicant was a California resident at the time he entered into the contract, this will be deemed sufficient to establish California’s dominant interest in applying its laws over the less substantial interests of another state. However, the determination of whether an employment contract is formed or entered into in California can often be challenging and perplexing depending on the particular facts and circumstances of each case. For example in Bowen v W.C.A.B. (1999) 73 Cal. App. 4th 15, 64 Cal. Comp. Cases 745, applicant was raised and educated in California. While residing in California, an initial employment contract and subsequent contracts were mailed to him at his California residence by the Florida Marlins. He signed each contract in California. He never played for the Marlins in California and returned to California to live after each baseball season. He also had a California driver’s license and a vehicle registered in the state. The Court of Appeal found the employment contract was formed and legally effective when he signed the contract(s) in California irrespective of other later signatures by a representative of the Marlins and one required by the Commissioner of Baseball after Bowen’s signature.

The Bowen court stressed that the point in time of when, where and in what manner a contract for hire comes into existence are indispensable factors or determinations in the contract for hire equation and cannot be ignored. (Bowen, Id. at p. 22).

In contrast, if the employment contract was not formed or entered into in California, there is no subject matter jurisdiction. (See Sustarich v W.C.A.B. (2001) 66 Cal. Comp. Cases 967(writ denied) [Flight attendant accepted contract in Hawaii where she was temporarily residing after leaving California]; McCauley v W.C.A.B. (1996) 61 Cal. Comp. Cases 1310 (writ denied) [contract made in Texas not in California]

Cases where California agents or contract advisors are involved also complicate contract formation determinations. In Tampa Bay Devil Rays v W.C.A.B. (Luke) (2008) 73 Cal. Comp. Cases 550 (writ denied) California subject matter jurisdiction was found where both the applicant and agent were in California when applicant accepted the terms of his employment. In contrast, no California subject matter jurisdiction was found where only the agent was in California and the applicant was outside the state when he accepted the contract of employment. (Ioane v Great Divide Ins. Co. (2010) 38 CWCR 242, 2010 Cal. Wrk. Comp. P.D. Lexis 416 (panel decision)

There are a veritable legion of contract formation cases that should be analyzed carefully depending on the particular facts and circumstances of each case. See: GATX-Fuller, Ltd. v W.C.A.B. (1979) 44 Cal. Comp. Cases 199 (writ denied); Reynolds Electric; etc. Co v W.C.A.B. (Buckner) (1966) 65 Cal. 2nd 438, 31 Cal. Comp. Cases 415; New York Yankees v W.C.A. B. (Montefusco) (2001) 66 Cal. Comp Cases 291 (writ denied); Trism Specialized Carriers v W.C.A.B. (Cochran) (1996) 61 Cal. Comp. Cases 1338 (writ denied); Anderson v W.C.A.B. (1998) 63 Cal. Comp. Cases 425 (writ denied) See also, Herlick, Cal Workers’ Comp Law § 13.01[2] and St. Clair § 2:260

THE PACIFIC EMPLOYERS OVERLAY OF UNREIMBURSED MEDICAL TREATMENT IN CALIFORNIA AS A SIGNIFICANT STATE INTEREST

The Ninth Circuit extensively discussed and analyzed the decision of Pacific Employers Insurance Company v Industrial Accident Commission, 10 Cal. 2d 567 (1938) noting that in determining the sufficiency or significance of an injured worker’s contacts with California, it is not always a strict balancing test but rather an analysis involving the particular nature of the significant or substantial interest or interests that may implicate California public policy.

In Pacific Employers, the applicant was a resident of Massachusetts, and the contract of employment was formed and made in Massachusetts. The employer’s primary headquarters was also in Massachusetts. The employment contract had a choice of law/forum provision indicating that in the event of a work injury the law of Massachusetts would apply.

Applicant was only employed temporarily or “casually” in California to address a problem in one of his employer’s factories in Oakland when he was injured and evidently received contemporaneous medical care and treatment. He then filed an Application for Adjudication. In response defendant raised the issue of the lack of California jurisdiction based on the choice of law provision in the employment contract and the substantial aggregate contacts and connections applicant had with Massachusetts as opposed to California.

The California Supreme Court en banc observed that in determining whether California had a significant or substantial governmental interest in the controversy that would be superior to Massachusetts’ interest, that all of the factors when considered in aggregate appeared to support the greater interest of Massachusetts. However, the particular facts and circumstances of every case must be analyzed carefully.

The Court found a single significant California or governmental interest superior to the other aggregate factors in the “medical and hospital expenses which were incurred in this state and had not been paid at the time of the hearing.” The Court noted the reimbursement of medical expenses and the furnishing of adequate medical care to injured workers standing alone constituted a significant California interest. Moreover, there would be the additional burden of physicians who provided reasonable and necessary medical treatment having to go to another state in order to be reimbursed if no California jurisdiction was found. Based on these facts, California’s interest was deemed to be superior to that of Massachusetts. A close reading of Pacific Employers indicates that even though the applicant suffered a specific injury in California this fact or factor alone without the added interest of the unreimbursed medical treatment expenses may not have been substantial enough to implicate a California governmental interest or public policy factor superior to the total aggregate interests of Massachusetts.

THE “DISCRETE” OR “SPECIFIC INJURY” VERSUS A CUMULATIVE TRAUMA INJURY

In its decision, the Ninth Circuit used the phrase or term “particular injury” once, the term “discrete injury” five times and “specific injury” once. It is the author’s opinion based on the context in which these phrases and terms are used throughout the decision, they are clearly synonymous and interchangeable in that a “particular injury”, and “discrete injury” are both synonymous with a “specific injury” as defined by Labor Code § 3208.1 which states.

Specific and cumulative injuries.

An injury may be either: (a) “specific”, occurring as the result of one incident or exposure which causes disability or need for medical treatment or (b) “cumulative” occurring as repetitive mentally or physically traumatic activity extending over a period of time, the combined effect of which causes any disability or need for medical treatment. The date of a cumulative injury shall be the date determined under Section 5412. (emphasis added).

It is clear that the Ninth Circuit seriously questioned whether any cumulative trauma injury based on one day of a long cumulative trauma period or even several days of a cumulative trauma period that may have occurred in California would standing alone, be sufficient or substantial enough to invoke California workers’ compensation subject matter jurisdiction.

On the record before us, however, Matthews has not shown that his claim falls within the scope of the Pacific Employers rule. In his application for workers’ compensation benefits, Matthews asserted that he suffered cumulative injuries incurred at “various” locations between 1983 and 2001. He did not allege any specific injury in California or a need for medical services in California. Matthews likewise did not allege in this complaint before the district court that he suffered any discrete injury in California. (Slip Op. at 8695).

It is clear Matthews briefed and argued that the 13 games he played in California during his 19 year career contributed on a cumulative trauma basis to his injuries and any related disability. The court distinguished between discrete specific injuries and a cumulative trauma mechanism of injury in terms of their alleged substantiality in invoking California workers’ compensation jurisdiction.

Matthews may be correct, as a matter of fact, that every game (or at least most games) contributed to his cumulative injuries, but it is not clear that, as a matter of California law, this means he falls within the category of employees to whom California extends workers’ compensation coverage. The facts underlying Matthews’ claim are distinct enough from existing California cases that we cannot say whether the California courts would consider Matthews’ limited contacts with the state sufficient to justify the application of California law. (Slip Op. at 8695-96, emphasis added).

As a consequence, the mere fact there are multiple “one day” portions of a career cumulative trauma claim that occurred in one or more games in California by an individual not otherwise regularly employed in the state will not be considered as a sufficient or substantial contact(s) to involve California subject matter jurisdiction.

We hold that Matthews has not alleged sufficient contacts with California to show that his workers’ compensation claim comes within the scope of California’s workers’ compensation regime (Slip Op. at 8688).

Recent WCAB panel decisions even before the Matthews decision reflect a renewed interest and analysis by workers’ compensation Judges and the WCAB questioning whether a one or two day portion of a long cumulative trauma claim occurring in California constitutes a sufficient contact to invoke California subject matter jurisdiction.

In Vaughn Booker v Cincinnati Bengals (2012) (WCAB Panel Opinion and Decision After Reconsideration, 2/8/12) the applicant played only one game in California during his three year NFL career. His contract was not made in California. In analyzing whether applicant was “regularly employed” in California under Labor Code § 3600.5(a) the WCAB emphatically stated:

Here as discussed above, applicant played only one game in California in his three seasons with the Cincinnati Bengals. In our view, one day of California employment in three years cannot constitute “regular employment” as a matter of law.

The WCAB also opined that based on these facts, California had no significant interest in such a tenuous workers’ compensation claim of an employee “…whose contract was not made here, who worked in California for one day in three years, and otherwise had no significant connection to California.”

In Michael Jameson v Cleveland Browns (2012) (WCAB panel decision 4/20/12) the WCAB in rescinding and remanding the case back to the Trial WCJ, cited Booker with respect to subject matter jurisdiction. In Jameson applicant, who in a four year NFL career, played only one game in California.

PART II WILL ADDRESS

1. The troublesome footnote two.

2. Will a specific injury or injuries suffered in California standing alone constitute a significant substantial interest for purposes of invoking California subject matter jurisdiction.

A commentary on past and future tactical issues and strategy in light of Matthews.