Sunday, March 6, 2016

Constitutional Challenge Recap and Overview

At the Louisiana Workers’ Compensation Conference last month, I provided an overview of some constitutional challenges to workers’ compensation. Five years ago, that would have been a ten minute discussion, but constitutional challenges have more recently trended from the exception to the norm.

For context, remember our federal government is a product of power granted by the people and the states. The federal government is defined and empowered by the U.S. Constitution. And, each state also has its own constitution. There are similarities and consistencies among them, but differences also. When discussing constitutional challenges, it is critical that we remember these might be based on a state’s constitution, the U.S. Constitution, or both.

I was surprised by the response to my audience question “from where did your rights come.” A majority insisted their rights came from the U.S. Constitution. A lone voice in the audience shook her head vehemently and insisted they were wrong. I agreed and reminded them that “all men are created equal, they are endowed by their creator with certain inalienable rights.” Government does not give rights; you have rights because you exist.

Upon the fundamental foundations of inalienable rights and government power, states have enacted a statutory process for the mutual renunciation of rights and we call it workers’ compensation. The mutuality is critical as both the employer and employee gave up precious rights in this bargain that some label "grand." 

The recent constitutional challenges primarily fall into several categories including the preemption doctrine, separation of powers, due process, equal protection, access to courts, and compensation for labor. There are other bases argued in some, but this covers a majority.

Preemption is not a new subject. The U.S. Constitution has been around for over 230 years. Preemption is based upon Article VI., “the Supremacy Clause.” If the U.S. government exercises a legitimate power, and legislates, then the states are precluded from contradicting that action. Furthermore, under some constructs, such as the “dormant commerce clause,” the states may be precluded from acting to regulate commerce in an area in which the federal government is empowered, but in which it declines to act.

Another constitutional concept often cited is access to courts. There is no stated recognition of a right of access to courts in the U.S. Constitution. That right has been implied however through the 5th and 14th Amendments; the basis is that no rights are protected if an individual cannot enlist the aid of the judiciary in enforcement. The First Amendment is also sometimes cited in the argument of access to courts.

The 14th Amendment memorializes protection of equal protection and due process. Many ponder the seeming repetition of due process recognition in the 5th and 14th Amendments. Some joke "we like due process so much we put it in the Constitution twice." The explanation is simple, early U.S. Supreme Court analysis concluded that the Bill of Rights protections forbid the national government, that is the one created by that constitution, from impairing rights, but did not prevent the states from doing so. With the reiteration of this language in the 14th, and the addition there of “no state shall,” the recognitions of the Bill of Rights are extended to protect against actions by the states.

“Logrolling” is a concept that is limited primarily by State constitutions. There is no logrolling prohibition under the United States Constitution. Essentially, these provisions require legislation be limited to a single subject. It is not uncommon for statutory changes to face such challenges. An Oklahoma reform challenge recently was Coates v. Fallin, raising this point. 

How did modern workers’ compensation begin? The concept was in large part copied from European efforts at social insurance. Some early 20th Century laws were deemed unconstitutional. Courts struggled with the employer’s liability without fault, and found this violated employer due process. In 1911 New York passed the first successful Worker’s Compensation. In New York Cent. R.R. v. White, 243 U.S. 188, 37 S.Ct. 247, 61 L.Ed. 667 (1917), the U.S. Supreme Court concluded that Worker’s Compensation was a constitutional abrogation of existing rights. That conclusion was predicated upon the concept of this “Grand Bargain,” in which both employers and employees gave up rights and gained benefits. Thus began a long history of belief in this system. But more recently, there have been many challenges in the news.

New Mexico produced an equal protection decision in 2015. Its statute provided benefits and protection for most workers, but excluded agricultural workers. Some challenged that distinction and the New Mexico appellate court concluded that this distinction had no logical basis. It concluded that the statute did not provide “equal protection” and was thus unconstitutional. Rodriguez v. Brand West Dairy, 356 P.3d 546 (N.M. Ct. App. 2015). The New Mexico Supreme Court is considering the issue now.

Tennessee had a 2015 constitutional challenge in Martinez v. Lawhon. Martinez is an immigrant, who did not possess the appropriate employment paperwork. Tennessee created a distinction in its Worker’s Compensation law, providing for decreased benefits when an injured worker is not present/working in the state legally. The stated purpose is to encourage compliance with federal immigration statutes.

Martinez sued and sought a determination that this distinction violated equal protection under the 14th Amendment, but primarily argued that this violated the preemption doctrine, a foundational element of American federalism. Martinez’ argument is that the U.S. government alone has the authority to control immigration and the spirit of this Tennessee statute was to affect, influence or control immigration decisions in Tennessee.

The Tennessee court concluded the Tennessee statute violated the preemption doctrine, citing Arizona v. United States, 567 U.S. -----, 132 S. Ct. 2492 (2012). Because the federal government is empowered and charged to regulate immigration, the states are preempted from doing so. This trial court decision is also pending appellate review.

Florida also discussed preemption in 2015 in two very interesting cases. The Florida workers’ compensation statute contains penalties for specific actions by employers or employees. One of these makes it illegal to provide false information in the process of obtaining employment. That is really all the section says; it does not state the purpose for this prohibition.

Both Mr. Brock and Mr. Hector successfully applied for work. A health insurance company noticed several employees at this business had used the same social security number. An investigation led to Brock and Hector being prosecuted for providing false information.

The trial court determined that since neither had sought Worker’s Compensation benefits, the prosecution was inappropriate and dismissed the charges. The State Attorney appealed and Florida’s 4th District Court of Appeal reversed.

The two critical points are that this statute precludes falsehood in seeking employment even when no workers’ compensation benefits are ever claimed or provided. Second, the prohibition on falsehood is not a violation of the preemption doctrine.

Some see these cases as similar to, or indistinguishable from, Martinez. However, the Tennessee statute is patently intended to impact immigration and immigrant employment. There is no such specific intent in the Florida law. The Florida Supreme Court declined to review the case and a petition for U.S. Supreme Court review by certiorari was also denied.

Attorney fee challenges have been a staple of Florida workers’ compensation litigation for most of this century. The Florida statute precludes injured workers from paying their attorney as they wish; fees since 2009 have been set by a specific formula based on the value of benefits obtained by the attorney. Florida attorneys contend this violates equal protection (14th Amendment), inhibits access to courts (14th Amendment), the right to contract, and the right to compensation for labor. The First Amendment has been raised in this argument. 

Until 2001 our statute had a formula that produced a presumptive attorney’s fee. The value of benefits obtained, through this formula, equated to a presumptively fair fee. It was a “floor” not a “ceiling.” So if that fee was adequate (or excessive) the attorney would stipulate to it; if that fee was not believed adequate the attorney could ask the judge of compensation claims to award an attorney’s fee on an hourly basis. So in cases in which the formula yielded a high fee, with an effective hourly rate of $1,000 or more, the presumption generally required that fee to be paid; instances in which the presumptively fair fee was lowered were rare, compared to instances in which it was increased. Alternatively, when the formulary yielded a lower fee, the presumption was often set aside and a “reasonable fee” was awarded or agreed.

In 2001 that formula was changed from a presumption to a near absolute. However, there was some language left in the statute describing the fees as “reasonable.” Various cases were litigated on the constitutional challenges. In 2008, the Florida Supreme Court sidestepped those constitutional issues. In Murray v. Mariner, 994 So.2d 1051 (Fla. 2008), the Court concluded that the word “reasonable” in this statute precluded the absolute application of the formula, and ordered the continued awarding of hourly attorney fees when required by reasonableness.

The Florida Legislature acted rapidly in 2009 and removed “reasonable” from the statute. We now watch for the Supreme Court to rule in the case of Castellanos v. Next Door Company, 124 So. 3d 392 (Fla. 1st DCA 2013), essentially the same access to courts, due process, equal protection arguments previously raised in Murray. It has been back before the Supreme Court now for almost 2 years.

A good example of due process challenges is found in Florida Workers Advocates v. The State of Florida. Here, and employee sued his employer in a tort claim and the employer asserted the protection of workers’ compensation exclusive remedy.

After the employer raise that defense, interest groups Florida Workers Advocates (FWA) and the Worker’s Injury Liability Group (WILG) intervened. The original parties (employer and employee) resolved their differences and FWA/WILG were left alone in the case. They therefore obtained the court’s permission to involve another injured worker, Ms. Padgett, as plaintiff and substitute The State of Florida as the defendant for consideration of legal questions regarding constitutionality of exclusive remedy.

Substantively, the plaintiffs argued that the value of benefits afforded injured workers has declined so markedly in recent decades that the “Grand Bargain” is no longer “grand” or even sufficient to support the corresponding employer benefit of tort immunity.

The plaintiffs added The State of Florida to the case, and sent a notification that this case would challenge the constitutionality of a statute. They contended that this notification was sufficient to put the state on notice. The plaintiffs did not serve notice and a complaint on the state, or on Ms. Padgett’s employer (who could ultimately be sued in tort if the plaintiff’s had prevailed on their constitutionality argument).

As the state and employer were never served, neither showed up in the trial court to defend the constitutionality allegations. The trial judge, having heard from one side, signed a lengthy order siding with the plaintiffs and concluding that Florida exclusive remedy is unconstitutional. Some conjectured that the lengthy order was not written by the judge, but supplied to him as a "proposed order." As an aside, not knowing if this is true or not, I stress again that drafting orders is the judge's job and should never be delegated to any attorney in any case. 

The state sought review by the 3rd District Court of Appeal, which reversed the trial judge. The Court concluded that failure to serve the state was problematic, and that the issue of constitutionality of exclusive remedy was no longer relevant to that case after the original employee and employer in the case withdrew.

The Florida Supreme Court declined to review that decision in December. However, it accepted Stahl v. Hialeah Hospital, a case which raises similar issues, and will hold oral arguments in April.

There has been a great deal said about Oklahoma’s recent reforms. Oklahoma is about 3 years into a major revision of its Worker’s Compensation statute. As soon as it was passed a constitutional challenge was taken, and we hear a lot about Coates v. Fallin, 316 P.3d 924 (OK 2013)(December 16, 2013). Too many people cite Coates for the proposition that the Oklahoma reform law is “constitutional.” That is not the substance of that decision. The only constitutional issue raised in Coates was whether bill that resulted in the new statute contained too many various different subjects (Logrolling).

The challengers contended that the breadth of topics in the bill was a violation of the Oklahoma Constitution, which limits bills to a “single subject.” The Coates court concluded that “workers compensation” is a single subject, and thus the bill was procedurally appropriate. This does not mean that the Oklahoma reforms are constitutional, or not. It means that those questions are left for another day. A variety of substantive challenges remain pending at this time.

More recently, the Oklahoma Workers' Compensation Commission concluded that one reform, the "Oklahoma Opt Out" is unconstitutional. Within a week of that decision, the Oklahoma Courts found Constitutional fault with provisions of the statute limiting repetitive trauma claims, according to WorkCompCentral

Delegation has been an issue in 2015. Delegation occurs when a government agency asks some other body to act on its behalf. The existence of workers’ compensation is a legislative delegation of authority to executive agencies in the various states. We see a multitude of situations in Worker’s Compensation where states adopt the disability guidelines, treatment guidelines, drug formularies, or other benchmarks. Some see these as the Executive Branch re-delegating the authority given by the legislature. 

These “adoptions” are not “delegation.” But, when Pennsylvania adopted the AMA Guides, the 4th Edition was contemporary. In its statute adopting the Guides, Pennsylvania included language that that the “most current edition” would be thereafter be used. Thereafter, the AMA published the Fifth Edition and later the Sixth Edition. The law suggested that with each such AMA action, the legally adopted Guides changed. This would be more than adoption, because this allowed someone other than government, the AMA, to change impairment standards after adoption. 

Similar language has been used in other states. The New Mexico Supreme Court concluded that this language meant the “most recent” edition of the Guides at the time that the statute was passed.

Asked to interpret the meaning, the Pennsylvania appellate court declined the New Mexico interpretation in 2015 and instead concluded that this language delegated authority for the process and substance of the official Guides to the AMA. This, it concluded, was unconstitutional delegation of state power to a private organization. It therefore held the "most recent" language unconstitutional. 

These and other intriguing questions are before courts across the country. Constitutional challenges are popular at this time as statutory changes alter the perceptions of the employers and employees for which workers’ compensation was created.

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