Sunday, December 11, 2016

Legislative Seismic Shift in Florida?

Florida was late to the party, adopting workers' compensation eighty one years ago, in 1935 (several states have already celebrated centennials). The statute, the concept of workers' compensation, was voluntary in Florida through 1967, with Sections 440.03 and 440.05 describing the ability and process of electing not be covered. The statute has been through a variety of changes over the decades, but a very significant change was the Legislative decision to make workers' compensation mandatory for most employers by 1971.  These links are to the statutes, which are available on, on the "resources" tab. 

There has been much prognosticating and opinionating in Florida over the last several months. Many conversation have revolved around "what will the Legislature do about ___________?" That sentence began with "Miles" in the blank, and then it was "Castellanos," and then "Westphal," by which time it seems it was often filled with an amalgamation of the "those cases" or "the Supreme Court cases" (which specificity might have perhaps intentionally excluded Miles, or perhaps illustrated lack of understanding that Miles' was a First DCA decision). 

Teeth have been collectively gnashed, and speeches delivered. Sound bites have been drafted and regurgitated. Articles have been written and blogs posted. There are a great many opinions out there about what will or can happen to change to workers' compensation in Florida. There are those who believe that 2017 will be a significant year, to rival broad systemic reforms of 1979, 1991, 1993 or 2003. There are others who caution that "any change" in 2017 will be a "focused change." Still others feel that 2017 will not see Florida reform or amend workers' compensation at all. 

Positions, and opinions have been diverse. Emotions have sometimes run high (one system expert took to poking me in the chest at a recent event to punctuate points of disagreement with my opinions). And, the market has followed the litigious resulting roller coaster of one attorney, in the role of "an employer," challenging the Florida workers' compensation rate-making process. That coaster ride led through a Circuit Court injunction, an Office of Insurance Regulation appeal, an appellate stay of the injunction and eventual implementation of a significant rate increase December 1, 2016 (which may or may not hold, proceeds of which might or might not be disgorged, all depending upon the First District Court). Illustrating the beauty of different perspectives, when I recently referenced "the roller coaster" in conversation, one person suggested instead a "hall of mirrors" and yet another a "hall of horrors." There are many perspectives. 

With the opening day of the Legislative session still months away, a newly-elected Florida Representative has taken the discussions to a new level last week with the publication of "an act relating to workers' compensation." It is a "new level" because it takes us beyond the "what ifs" and the "maybe we cans" to an actual bill that would amend the Florida workers' compensation statute. Thus, there is now an actual proposal whose merits can be discussed. 

It is at least a conversation starter, providing the first concrete public proposal for change. It is important to note that many bills are drafted each year. Not all of those are actually filed. Of the bills filed, not all will get a hearing, and of those, not all will pass. Of those that pass, not all will become law. I learned long ago that the Legislative process is never certain, and almost always intriguing. Florida is certainly no exception to that. And, some assert that Florida workers' compensation legislation in Florida is perhaps even more unpredictable than other policy areas. 

This proposed bill crashed into our consciousness the first week of December 2016, somewhat like a UFO sighting. Cellphones erupted with the inevitable "did you see it" calls that also often accompany other significant workers' compensation documents like judicial orders, appellate briefs, and court decisions. According to WorkCompCentral, "none of the stakeholders contacted Wednesday or Thursday said they knew about" this bill before it became public. It was therefore a bit of a shock to the marketplace, leaving us to review, interpret and comprehend potential implications. 

The biggest impact of this bill would be an end to Florida's (over 46 year) history of "mandatory" participation in workers' compensation. Most states, like Florida, require employers to participate in workers' compensation. I qualify the "mandatory" by noting the treatment of very small employers. For most of Florida's history, those employers with three or fewer employees have generally not been so required. This "four or more" employee constriction has been reasonably consistent, although it is currently further constricted to "one employee" for those in the construction industry. Florida's election of significantly mandatory coverage is consistent with workers' compensation mainstream across the continent.

This mandate is in Section 440.02(17)(b)(2016), which defines employment, as (italics are direct quote):

All private employments in which four or more employees are employed by the same employer or, with respect to the construction industry, all private employment in which one or more employees are employed by the same employer.

The statute also defines "employer," "employee," and "independent contractor." There are broad inclusion definitions, parameters, limitations, and even specifically excluded examples. It can be a complex and difficult analysis to determine whether a person was an "employee," or what entity in a given situation was the "employer." But once those determinations are concluded, it is clear that "every employer and employee as defined in s. 440.02 shall be bound by the provisions of this chapter." Section 440.03, Fla. Stat. (2016). 

This bill proposed the first week of December, 2016 (which as yet is not filed and so has no bill number) would change this foundational element of workers' compensation, making participation voluntary. Employers would not be presumed to participate in workers' compensation, regardless of their size. The proposed bill would make Florida workers' compensation voluntary by adding a new section, 440.001:

Section 1. Effective upon this act becoming a law, section 440.001 is created to read: 

440.001 Coverage generally elective. 
(1) Except as may otherwise be provided by law, an employer may elect to obtain workers' compensation insurance coverage. 
(2) An employer who elects to obtain coverage is subject to this Chapter. 
(3) An employee, employed by an employer who elected not to obtain workers’ compensation insurance coverage, has no rights and may obtain no benefits under this Chapter, but retains all common-law tort remedies.

This would make Florida similar to Texas. Some will reminisce that Florida's 1993 statutory amendments similarly took significant guidance from the Texas workers' compensation laws. In recent years, Texas has received its fair share of press regarding workers' compensation. Too often, that press came in association with the Oklahoma statutory reforms that created an "opt-out." Too often, the press and pundits have applied the term "opt-out" collectively to both Oklahoma and Texas. 

This is an incorrect amalgamation. Oklahoma, with a mandatory participation workers' compensation system, offered employers an opportunity to "opt-out." Those that did so would enjoy the employer benefits of workers' compensation (exclusive remedy, etc.) while also enjoying a spectrum of other benefits like their own definitions and adjudication processes. It was "win/win." The Oklahoma Court also determined in 2016 that it was not constitutional. 

Texas offers no such "opt-out." Texas merely has a voluntary participation system in place. Employers that wish the protections and benefits of workers' compensation "opt-in" by electing to participate. By their participation, they become liable for the benefits that law dictates for injured workers, and they enjoy the protections of exclusive remedy, the predictability of defined benefits, the absence of certain liabilities (loss of consortium, pain and suffering, punitive damages, etc.). Texas is not a system which provides the protections of exclusive remedy to employers who remove themselves from a mandatory system. Texas is not an "opt-out" state. 

This confusion stood front and center in early December as the Florida proposal made the news. The coverage was interlaced with discussion of "opt-out," its proponents, and recent legislative efforts therefore in Tennessee and South Carolina. The confusion is distracting as this Florida proposal is not an "opt-out" like Oklahoma's failed reform, but a statutory "opt-in" similar to Texas. Referring to it in relation to Oklahoma, Tennessee, or South Carolina is inaccurate and distracting. 

The Florida proposal also has extensive requirements regarding notice. Another new statutory provision, section 440.002, Fla. Stat. would require employers to inform their new employees regarding whether the employer did or did not participate in workers' compensation. Notices regarding participation status would have to be posted in the workplace. A participating employer that later elected to leave the voluntary system would have "take reasonable steps to notify each employee" of that change. This would be critical. Regardless of the substantive provisions of workers' compensation, most will likely agree that it is imperative that knowledge of it is readily available and easily understandable. 

The proposed bill would make clear changes to claimant attorney fees. In this regard, many perceive its motivation is in a relation to Castellanos and Miles. The proposal would make significant changes including (1) fees would no longer be seen or approved by Judges of Compensation Claims (by altering Section 440.105); (2) all Claimant fees would be payable by the injured worker, with none from the employer/carrier (by altering Section 440.34(1) and (7). 

Stricken from 440.105:
(c) It is unlawful for any attorney or other person, in his or her individual capacity or in his or her capacity as a public or private employee, or for any firm, corporation, partnership, or association to receive any fee or other consideration or any gratuity from a person on account of services rendered for a person in connection with any proceedings arising under this chapter, unless such fee, consideration, or gratuity is approved by a judge of compensation claims or by the Deputy Chief Judge of Compensation Claims.

Added to 440.34:
(1) A claimant is responsible for the payment of her or his own attorney’s fees in any proceeding arising under this Chapter.

Stricken from 440.34
(7) If an attorney’s fee is owed under paragraph (3)(a), the judge of compensation claims may approve an alternative attorney’s fee not to exceed $1,500 only once per accident, based on a maximum hourly rate of $150 per hour, if the judge of 666 compensation claims expressly finds that the attorney’s fee  amount provided for in subsection (1), based on benefits secured, fails to fairly compensate the attorney for disputed medical-only claims as provided in paragraph (3)(a) and the circumstances of the particular case warrant such action.

The immediate criticism of this change will be twofold, and parallel to the twofold purpose of employer/carrier fees recognized by the Court over the years. Attorney fees, according to the Court serve two purposes. One is to compensate counsel and thus afford their representation and resulting meaningful access to courts. The second is to effect a detriment to the defense of entitlement to claimed benefits. Without such a detriment, the Court has postulated, there is no disincentive to an employer/carrier assuming a firm defensive posture.

But, the bill creatively accounted for both with a new penalty provision added to Section 440.34(2). This penalty would be awarded to workers who successfully litigate entitlement to claimed benefits. The penalty awarded would be calculated very similarly to the calculation previous used to calculate the "statutory" attorney fee under the current version of Section 440.34. The calculation and amount is the same, but the payee is the injured worker in the form of penalty, rather than the attorney in the form of fee. 

Section 440.34(2):
(2) In cases where the claimant successfully prevails when the employer or carrier files a response to a petition denying benefits with the Office of the Judges of Compensation Claims; or denies that an accident occurred for which compensation benefits are payable, in proceedings filed under s. 440.192, and 30 days have elapsed since service of the petition on the carrier or employer, if self-insured; or in any case filed under s. 440.24 or s. 440.28 the claimant shall be entitled to additional compensation equal to 20 percent of the first $5,000 of the amount of the benefits secured, 15 percent of the next $5,000 of the amount of the benefits secured, 10 percent of the remaining amount of the benefits secured to be provided during the first 10 years after the date the claim is filed, and 5 percent of the benefits secured after 10 years. The employer, if self-insured, or the carrier avoids additional compensation liability on any benefits or compensation accepted as ripe, due, and owing within 30 days of receipt of service of the petition for benefits.

This methodology answers some potential criticisms of a system in which all fees would be paid by the injured worker. It leaves the injured worker completely free to contract with counsel as the worker wishes (Miles). It also provides a funding source for the payment of fees, through this penalty. 

What this penalty provision does not answer is the criticism that statutory fees are not sufficient to appropriately pay an attorney in smaller claims, that is claims of limited or perhaps insignificant monetary value. Under the current version of Section 440.34 (before the Castellanos interpretation) a seemingly significant exception to the statutory fee was in paragraph (7), providing an alternative hourly fee once during each case. Though it was decried by many as insufficient and by other as "deminimis," it was nonetheless a "safety valve" of sorts. 

But in some cases, because paragraph (7) was inapplicable or insufficient, the absence of other hourly fees was seen as creating constitutional infirmity. This was the interpretation of the Supreme Court in Castellanos. The Court concluded that a statutory formula fee yielding an effective hourly rate of less than $2.00 was an unconstitutional denial of "the linchpin" of Florida workers' compensation. 

In a hypothetical case similar to Castellanos, under this proposed bill, the penalty payable to the injured worker would have been the same $164.54 that was awarded in Castellanos as employer/carrier paid fees. If the attorney in this hypothetical case (post enactment of this new bill) entered a contract through which she/he would be paid a "reasonable attorney fee" at a rate of (for argument's/mathematics's sake only) $200 per hour for obtaining this benefit, then the 107.2 hours invested by counsel in this similar (to Castellanos) case might result in a hypothetical alleged "reasonable" fee of $21,440.00 (107.2 x $200). So, the injured worker, under this proposed bill, would owe counsel a significant fee for obtaining a substantively meaningful benefit of less significant financial value.

Thus, in this hypothetical, the worker receives a penalty of $164.54 and owes $21,440.00 in attorney fees pursuant to the agreement. The worker must come up with the additional $21,275.46 for fees on his or her own. This example is for math illustration purposes only; there is no conclusion here regarding what an appropriate or reasonable hourly rate would be in any particular case. That determination must be made in each case before a judge, based upon the evidence in that particular case. 

Some may argue that this proposed bill logically puts the burden of sound economic decisions upon the claimant hiring the attorney. In other words, the injured worker, informed of the potential costs and benefits of seeking particular benefits, can assess the value of those benefits and make an informed decision about the retention of counsel, the filing of the claim, and the volume of attorney hours invested in pursuit of the particular benefit. The Court in Miles made clear that the State has failed to demonstrate any compelling interest in overseeing contracts that injured workers wish to enter. The Court has also essentially stated that such workers are capable of making their own decisions about the propriety of such contracts.  

Others may argue that this proposal will have an undeniable and predictable effect of stifling pursuit of minor claims. They will ague that a large proportion of injured workers simply lack resources to make payment of such $21,275.46 (and similar) attorney fees. As such, they will argue that this penalty-in-lieu-of-fees proposal will deny access to courts as clearly as the strict application of percentage attorneys fees did before Castellanos

In this discussion, there may be comparison to other fields of the law. There are those who believe that meaningful access to America's courts is already similarly economically impaired. They allege lack of access in such fundamental areas as divorce, child custody, child support, criminal law, probate law, and more. Some even assert that relatively low-damage personal injury claims are turned away because of the inability to afford legal representation for such litigation. 

It may be worth noting that the Florida Supreme Court has determined that attorney fees are "the linchpin" of the Florida wworkers' compensation system. This means "one that serves to hold together parts or elements that exist or function as a unit." There may be those who argue that there is no Legislative path to a constitutional constraint on attorney fees in light of the Court's very broad and sweeping pronouncement in Castellanos of attorney fee importance or primacy. Can Florida have a constitutional workers' compensation system without employer/carrier paid fees?

Finally, the proposed bill affords a nod to Westphal v. City of St. Petersburg. In Westphal, the Court concluded that a 104 week constraint on temporary total disability (TTD) benefits is unconstitutional. The effect of that decision is a revival of Florida's previous TTD limitation of 260 weeks. Some contend that the 260 week limitation, though previously held to be constitutional, would likewise fall if challenged, and that therefore the next previous limitation of 350 weeks is a likely next step in the judicial deconstruction of Chapter 440. Others have expressed doubt of this potentiality and contend instead that even the current Florida Supreme Court would respect the prior decision of constitutionality of the 260 week limitation.

Westphal left unaddressed the limitation on Temporary Partial Disability (TPD). The Florida First District Court of Appeal clarified that some in November 2016, rendering Jones v. Food Lion. Despite the known conclusions regarding limitations on entitlement to both TTD and TPD, the market continues to wonder whether the effect is individual and independent limitations of each to 260 weeks, or an overall total of 520 week (ten years), or whether the limitation is 260 weeks of any combination of TTD and TPD. That question awaits judicial clarification.

In this legislative proposal, temporary disability would decrease from 260/520 weeks to 208:
440.15(2) (d) If the injured employee suffers totally disability for a period of time that exceeds, or reasonably will exceed, the 104 weeks of eligibility for benefits set forth under paragraph (a) the injured employee may allow be entitled to an additional 104 weeks of benefits providing the Judge of Compensation Claims finds: 1. The injured employee has been undergoing continuous medical  treatment, not including palliative care, for the entire 104 weeks, and 2. That within a reasonable degree of medical certainty the treatment was necessary in order for the injured employee to reach maximum medical improvement.

Thus, this legislative proposal reacts to 2016's judicial criticisms of the Florida law, in Miles, Castellanos, and Westphal. In some measure, it might arguable be seen as reaction even to the failed constitutional challenges in Stahl and similar cases, with a reversion to a non-mandatory process, and a measure of benefit increase compared to the judicially rejected 2003 statute (which continued the 104 week limitation on temporary indemnity, originally enacted in 1993). Some would argue against that characterization ("increase") as this legislative reaction would bring temporary benefits to 208 weeks (4 years) from the 260 to 520 weeks (5-10 years) to which Westphal and its progeny (Jones v. Food Lion) have led. 

Points to remember include: (1) many bills are drafted, far fewer become law; (2) bills rarely reach the Governor's desk without changes and amendments; (3) it is very early in Florida's legislative year; (4) the Legislature will have many challenges and projects in 2017; (5) workers' compensation may not get much attention; and (6) there are many different perspectives on where Florida workers' compensation is today, and where it should go.

With all of this in mind, this legislative proposal is undeniably interesting and intriguing. It is likely the first of several proposals that will eventually face scrutiny and discussion in 2017. It evidences imagination and thoughtfulness, and is likely to lead to many conversations in days to come. As other ideas enter the Sunshine and are discussed, hopefully they will likewise evidence thoughtfulness. The combination of many ideas and perspectives will perhaps bring legislative change in 2017, or may lead nowhere. But, Florida may nonetheless benefit from a thoughtful and diverse conversation about workers' compensation. 

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