Tackling the Elephant in the Room: Exclusive Remedy

How I spent my time at the National Workers’ Compensation & Disability Conference discussing the exclusive remedy doctrine

By Deborah G. Kohl, Esq.

As all workers’ compensation practitioners know exclusive remedy is the linchpin of the “great social bargain” underlying the workers’ compensation system within which we toil on a daily basis. The workers’ compensation statutes are premised on the employer making payment to an injured worker in a no-fault system with the employee agreeing to forgo possible tort remedies in return. The employee receives money to live on and has necessary, related medical expenses paid and in return the workers’ compensation payment becomes the “exclusive remedy” for the injury. Easy. Both sides get something and in return give something: The employee gets paid and the employer is off the hook for any potential lawsuit.

For the last 100 years (give or take) the parties have basically agreed that this give and take anchored by the exclusive remedy doctrine works for all parties. Sure, there have been instances where one side or the other has tried creative arguments to circumvent the system but all in all, it has worked for everyone.

And then we begin to see cracks in the foundation. Sometimes small and sometimes large but almost always based in legislation designed to test the structure either by lowering or eliminating benefits or by creating alternative programs without any acknowledgment that this may ultimately result in the demise of exclusivity and thereby cause the collapse of the system.

November 2014 National Workers’ Compensation and Disability Conference

The November 2014 National Workers’ Compensation and Disability Conference held in Las Vegas featured a program on the issue of direct and peripheral attacks on the exclusive remedy. Tom Robinson, Lex Larson and I were asked to speak on this issue. It didn’t take much thought to recognize that any discussion of exclusivity needed to focus on Oklahoma opt-out and the recently decided Florida Circuit Court decision in FWA et al v Florida (commonly called Padgett) decided 8/13/14.  

Lex Larson led the discussion with an overview of Padgett and Oklahoma opt-out and the common themes to be explored. As Lex so rightly noted, “They both bring into question the basic fundamental social bargain that made workers’ compensation systems possible in the first place.”

Historically, the common law provided a remedy for a person injured by another. Then the U.S. Constitution followed, protecting each of us from the loss of life, liberty or property without the due process of law. Under the state workers’ compensation acts the individual’s common law right to file suit against an alleged tortfeasor and have a trial by jury is removed arguably without due process. However, the U.S. Supreme Court in 1917 held in NY Central Railroad Company v White, 243 US 188 (1917), that the NY Workman’s Compensation Law was constitutional. The Court found that a state legislature could alter common law rights if a “reasonably just substitute is provided”. The Court made clear that “[t]his, of course, is not to say that any scale of compensation, however insignificant, on the one hand, or onerous, on the other, would be supportable.”

Lex Larson posed just that question to the audience: When is the replacement for the tort system a reasonable alternative? A system that pays a dollar for an injury is obviously not a reasonable alternative to the loss of your common law tort rights but at what dollar level do you draw the line below which a system is providing an unconstitutional level of benefits and reversion to tort law is the only remedy?

It is important to understand both the decision in Padgett and the provisions of the opt-out system in Oklahoma to frame an answer to the Larson question.

Padgett

Mrs. Padgett was employed by the County government when she injured her shoulder after falling over boxes left by a co-employee on the floor on January 27, 2012—a fairly typical scenario for a workers’ compensation injury. Normally, a claim for benefits would be filed under the state workers’ compensation act. However, in this case, civil suit was filed against the employer alleging negligence. As anticipated the insurer raised the exclusive remedy defense. The case then became the poster child for what the employee’s bar would allege is wrong with the Florida workers’ compensation system.

The case was ultimately amended to include a count for declaratory relief seeking to declare the workers’ compensation act invalid. The insurer then withdrew its exclusivity defense. The technical status of the claim has since been called into question but most importantly, the decision focused on the adequacy of the benefits available to injured workers under the Florida workers’ compensation act.

John Burton was deposed and testified that the 2003 amendments eliminating full medical care, eliminating partial loss of earning capacity and declaring the Act the exclusive remedy for employees, spouses, children and estates for injuries or death on the job makes the Act “[n]o longer an adequate replacement remedy in place of common law tort as required by the 14th amendment to U.S. Constitution or by the Florida Constitution.”

Based on his review of all of the testimony and arguments, Judge Cueto found that the 2003 Florida Workers’ Comp Act was unlawful, invalid and unconstitutional. He further found that it was an inadequate and unreasonable replacement for the tort remedy that workers had given up in the “social bargain”; therefore, the tort remedy should be reinstated.

While ultimately this decision may not stand for a variety of reasons, the Judge has raised any number of specific issues that need to be addressed by either the Florida Supreme Court and/or the legislature.

The clear take away for other states is again the question posed by Lex Larson: At what level has the legislature gone so far as to impinge on the social bargain and tread on due process?

Oklahoma Opt Out

Over the last decade or so, “reform” or “deform” legislation (depending on your point of view) has been enacted in many states signaling potential inroads on the exclusive remedy. Most recently, Oklahoma enacted an opt-out provision allowing an employer to provide coverage either under the traditional workers’ compensation system or under a private parallel system (ERISA). The opting-out employer must provide benefits that are essentially the same as under the state system but the manner of litigation and the specific provisions are left to the employer. As Tom Robinson pointed out, the opt-out employer could for example eliminate attorneys’ fees (thereby potentially denying access to counsel), eliminate benefits for individuals with pre-existing conditions, or create a different standard of proof.

Essentially, the opt-out statute creates two classes of employees with potentially different rights, different benefits and different access to litigation. The state system employees would be able to file claims under the state litigation process while the opt-out system employee would only have access through the Federal Courts.

Another concern raised in our discussion was the burden shift to the Social Security and public benefits systems. Obviously those employees who are not able to work, are not eligible for benefits under the parallel system and foreclosed from litigation, may very well turn to the taxpayer for assistance.

This of course brings into play many constitutional issues ranging from due process through equal protection. Most importantly it raises the whole specter of when do statutory changes result in such a manifest violation of the social bargain that the only answer is to void the exclusive remedy doctrine and reinstate the tort remedy.

As Lex Larson so correctly noted, opt-out might create a problem where the employer based system is so bad that it no longer represents an alternative to the tort system.

Conclusion

We all agree that the fundamental building block of the workers’ compensation system is the exclusive remedy doctrine. The U.S. Supreme Court found workers’ compensation constitutional despite the loss of the common law right to trial by a jury because there was a viable substitution offered by the statute. Incursions into the benefits available under state statutes carry the risk that the bargain has been breached. The alternative is not one which any of the participants in the system from employee to employer to insurer to legislature should lightly enter into without forethought and consideration of all of the potential consequences.

So, my NWCDC time was spent on an elephant of a topic in a room filled with folks who understood that this was just the beginning point of an important ongoing discussion that has no answers but requires constant review, attention and thought.

About the author. Deborah G. Kohl is an attorney concentrating in the areas of workers’ compensation and disability law. She has been in practice for over 30 years with an office in Fall River, MA. She is a graduate of the University of Rhode Island and Northeastern University School of Law. She is a frequent lecturer and author on workers’ compensation law. She is the co-author of LexisNexis Practice Guide Massachusetts Workers’ Compensation (2014). She is the editor of Massachusetts Workers’ Compensation Sourcebook and Citator (2013, 2014) (MCLE). She is a fellow and President of the College of Workers’ Compensation Lawyers and has been elected as a member of the National Academy of Social Insurance (NASI). She has served as Chair of the American Association for Justice (AAJ) Workers’ Compensation Section and as President of Workers’ Injury Law & Advocacy Group (WILG). She currently serves as a member of the WILG board and as a Vice President of the ABA TIPS Workers’ Compensation Section. She is on the Board of the Massachusetts Academy of Trial Attorneys (MATA) and is the chair of the Massachusetts Bar Association Workers’ Compensation Section.

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