SETTLEMENTS POST ENGLAND

The Colorado Supreme Court issued an opinion on May 30, 2017 in England v. Amerigas Propane, 395 P.3d 766 (Colo. 2017).  This case involved settlement of workers’ compensation matters and may even affect settlement of liability matters in a personal injury case.  The case has significant ramifications for employers and carriers moving forward.

 

BACKGROUND

Mr. England was a truck driver for the employer. He injured his shoulder at work in December 2012 and filed a workers’ compensation claim.  He had two surgeries in the first half of 2013 to address the shoulder injury.  Respondents conducted an IME in July 2013 and the physician offered an opinion that the claimant was approaching MMI and would likely reach MMI in about two months.  Claimant agreed to settle his workers’ compensation case in September 2013, despite still having some pain, for $35,000.  The current standard settlement form from the Division was used to settle the claim pursuant to W.C.R.P. 9-9(A). The form contains standard language that cannot be altered per the Rule. Paragraph 4 incorporates the statutory right to reopen for a mutual mistake of material fact under Section 8-43-204(1), C.R.S., and paragraph 6 contains claimant’s waiver of any “unknown injuries.”  Mr. England attempted to reopen his settlement, after it was approved in October 2013, when diagnostic testing revealed a scapular fracture.  It was undisputed that the parties did not know a fracture existed at the time of settlement and there was no evidence that the fracture definitively existed at the time of settlement.  Instead, there was testimony that the fracture could have existed at the time of settlement or could have developed later.  Mr. England’s basis for trying to reopen the settlement was that the scapular fracture was a mutual mistake of material fact and he would not have settled had he known it existed.

At hearing, the ALJ found that the scapular fracture existed at the time of settlement, but reopened the claim on the mutual mistake of fact that the parties believed claimant was approaching MMI when the case was settled.  She further found that, had claimant known that he had a scapular fracture, he would not have settled.  The ALJ’s Order was affirmed at the ICAO level and was appealed further to the Colorado Court of Appeals.  The Colorado Court of Appeals reversed the ICAO and the ALJ’s decisions, finding that the scapular fracture fell into the category of unknown injuries that claimant waived in paragraph 6 of the settlement agreement; ignoring that the mutual mistake relied upon by the ALJ to reopen was that claimant was approaching MMI.

The Colorado Supreme Court took the case and reversed the Colorado Court of Appeals.  The Supreme Court held that the paragraph 6 waiver does not apply to conditions unknown, but existing at the time of settlement.  In this instance, the Supreme Court held that the mutual mistake of fact between the parties was the existence of claimant’s scapular fracture.

 

ANALYSIS

The Colorado Supreme Court has effectively taken two categories of facts existing at the time of settlement, known and unknown, and carved-out a third type of fact that can serve as a basis to reopen settlement, “unknown, but existing facts.”   The logic of this is confusing.  For a fact to be mutually mistaken between the parties, it requires the fact to be known, rather than unknown.  Notwithstanding this logical conundrum, the question remains how to proceed with settlements moving forward.

 

AFTER ENGLAND

The Division settlement form allows for additions in paragraph 9.  9(A) can contain settlement language that is both specific to the settlement agreement and involves an issue that falls within the Workers’ Compensation Act.  Paragraph 9(B) can reference exhibits attached to the settlement agreement related to the workers’ compensation claim, such as Medicare set-aside arrangements.  Paragraph 9(C) can reference other attached written agreements that include matters outside of the Workers’ Compensation Act, such as employment releases, or bad-faith waivers.  Material referenced in paragraphs 9(B) and 9(C) are outside of the enforcement parameters of a Division or Office of Administrative Courts.

Recent attempts have been made to build-around the England decision by including language in paragraph 9(A), and having claimant expressly waive any ability to reopen a claim based on an unknown condition resulting from the work injury.  In some instances, this has been met with objection and a motion to strike this language under 9(A).  At least one pre-hearing conference order has been issued striking this type of language as contrary to the England holding that the paragraph 6 waiver cannot limit the right to reopen under paragraph 4.

Other recent attempts have been made to protect against the effects of the England decision by including terms requiring repayment by claimant of any settlement amounts if the claim is reopened based on a mutually mistaken existing, but unknown, condition.  This has also been met with resistance but Lee + Kinder LLC is unaware of any prehearing conference order striking this type of language.

 

BOTTOM LINE

The England decision certainly disrupts settlements of workers’ compensation claims.  It calls into question the one reason to settle the case, which is finality.  While there is potential for a legislative fix to this problem, settlements need to be negotiated and properly documented until this type of fix can be accomplished.  The England decision can still be built-around.  Agreements under paragraph 9(A) waving the right to reopen based on an unknown, but existing, condition may not work in that location; however, as a separate agreement exhibited under 9(B) and/or 9(C), they should be independently enforceable outside of the workers’ compensation system.  Further, repayment of settlement money in the event of a reopening should be enforceable under 9(A) in the workers’ compensation system or independently under 9(B) and 9(C).  If repayment is not made, whether as a lump or in some other arrangement, there’s also the possibility for stipulated judgment to enter to allow collection of settlement proceeds through civil procedure rules.

Settlements are contracts and there is a freedom of contract issue raised by England.  The Division has limited enforcement capacity and is holding itself by the England decision; however, the parties can agree to terms that can be enforced as contracts, attached as exhibits under 9(B) and 9(C).  Lee + Kinder LLC is using specific language on all settlements that the Firm believes is an enforceable contractual agreement.  If you have questions regarding settlements, please contact us and we will happy to answer those questions.

A FIRST! FDA REQUESTS WITHDRAWAL OF OPANA® ER FROM THE MARKET; MANUFACTURER ACQUIESCES

Amid the nation’s ongoing and “unprecedented opioid epidemic”, (per the U.S. Department of Health and Human Services), on June 8, 2017, the U.S. Food and Drug Administration requested Endo Pharmaceuticals to voluntarily remove its opioid pain medication, reformulated Opana ER (oxymorphone hydrochloride), from the market. The request was based on concerns that the benefits of the drug no longer outweigh its risks related to abuse. This is the first time the FDA has taken steps to remove a currently marketed opioid pain medication due to the public health consequence of abuse.

Opana ER is an opioid first approved in 2006 for the treatment of moderate to severe pain when a continuous, around-the-clock opioid analgesic is deemed necessary. In 2012, Opana ER was reformulated to deter snorting and injecting. While the new product met the FDA’s standards for approval, based on new information about the risks associated with the reformulated product, the agency is now taking steps to remove Opana ER from the market.

Janet Woodcock, M.D., Director of the FDA’s Center for Drug Evaluation and Research, indicated, “The abuse and manipulation of reformulated Opana ER by injection has resulted in serious disease outbreak. When we determined the product had dangerous unintended consequences, we made a decision to request its withdrawal from the market. This action will protect the public from further potential misuse and abuse of this product.”

The FDA requested the manufacturer, Endo International, voluntarily remove reformulated Opana ER from the market. In another first, Endo has announced its plan to voluntarily comply with the FDA’s request. In a July 6, 2017 press release, Endo announced plans to work with the FDA to coordinate the orderly removal of the pain medication, “in a manner that looks to minimize treatment disruption and allows patients sufficient time to seek guidance from the health care professionals.”

The FDA has indicated it will continue to examine the risk-benefit profile of all approved opioid analgesic products and take further actions as appropriate as part of its response to the opioid public health crisis. For further information, read the FDA News Release.

 

What can you do to help manage the chronic prescription of opioids or narcotics on your claims?

• Obtain an independent medical evaluation if:
1. Opioids are prescribed for complaints of pain and there are inconsistencies in the diagnosis and objective findings;
2. There is no reported reduction in pain levels with ongoing prescription of opioids or narcotics;
3. There is no demonstrable improvement in function, including return to work, with ongoing prescription of opioids or narcotics;
4. Abuse, addiction, or deviation is suspected.

 

• Colorado’s Medical Treatment Guidelines address the appropriate use of Narcotics/Opioids in workers’ compensation claims including the following recommendations:
1. Screening for potential alcohol and drug abuse problems, as well as co-morbid psychiatric conditions, to identify those claimants who may be prone to dependence or abuse;
2. Long-term narcotics or opioids should only be offered after other therapies have failed to improve function;
3. Narcotics or opioids should result in demonstrable improvements in function, not just reported pain relief;
4. Random urine drug screens are required by the Guidelines for the chronic prescription of opioids or narcotics;
5. A narcotic pain contract, and compliance therewith, is required by the Guidelines for long term prescription of opioids or narcotics;
6. Periodic re-evaluation of function and side-effects is required for ongoing narcotic or opioid prescriptions;
7. Tapering and discontinuance of opioid or narcotic prescriptions are required when patient goals are not being met.

 

• Medical Utilization Review:
Provides a statutory, tiered, neutral medical review of the reasonableness and necessity of an authorized treating provider’s care, including the prescription of narcotic and opioid medications.
If you have any questions about challenging the ongoing prescription of narcotics or opioid pain medications, or any claim-related medical treatment, please contact us. We are always glad to discuss the facts of your case and work towards the most efficient way to end unreasonable, unnecessary, and/or unrelated medical treatment.

To File or Not to File? That is the Question

An incident takes place within the course and scope of claimant’s employment.  Claimant is confirmed to have sustained an injury but does not miss any time from work.  No permanent impairment is anticipated.  What the adjuster has is characterized as what most of us refer to as a “med-only claim.”   Throughout the course of the claim, claimant receives conservative treatment without any recommendation for surgery.  The claimant is eventually placed at MMI with no impairment.  There is no reason to challenge the claim as you believe the injury is legitimate.  You’re home free!   All you have to do is file the Final Admission of Liability (FAL), wait the statutory 30-day period, and when claimant fails to object, you can close your claim and move on to the next one.  Right?  Not exactly.

 

Most workers’ compensation claims are med-only claims.  In fact, more than two-thirds of claims in Colorado are med-only claims that are never reported to the Division.  When most carriers file a FAL due to claimant reaching MMI on a med-only claim, they do so because they are seeking finality.  Perhaps the employer wants to admit in good faith and make sure that it is noted with the Division that the claimant was taken care of and that there is no challenge to the claim.  Perhaps the carrier requires that a FAL be filed on all admitted claims when a claimant reaches MMI.  Oftentimes, a FAL is filed on a med-only claim to avoid confusion later should something happen.  Whatever the reasoning may be, the adjuster may want to think twice about filing the Final Admission of Liability on a med-only claim due to a recent Industrial Claims Appeals Office opinion and a prior Court of Appeals decision.

 

In Kazazian v. Vail Resorts, W.C. No. 4-915-969 (April 24, 2017), the Industrial Claims Appeals Office reversed the findings of an ALJ that found a med-only claim was closed because the Claimant failed to object to the FAL.  The facts of the claim were simple:  Claimant sustained an injury when she slipped and fell at work and sustained a concussion, she didn’t miss any time from work while treatment took place, and she was eventually placed at MMI without impairment by the authorized treating physician.  The Employer filed a FAL based on the authorized treating physicians’ findings and the Claimant didn’t object within the statutory 30-day requirement.  A significant time later, Claimant began to experience hearing loss. She went to an audiologist for treatment.  The Claimant suspected that her hearing loss was due to the work-related event from a couple of years prior.  The Claimant contacted the adjuster and asked that certain medical apparatuses prescribed by the audiologist be covered under the workers’ compensation claim.  The adjuster refused, citing the FAL and noting that the claimant did not timely object.  The claim was presumed closed.

 

At the hearing, the ALJ agreed with Respondents that the Claimant failed to timely object to the Final Admission and request a DIME.  However, on appeal, the Panel reversed the decision and noted that a FAL that does not admit for indemnity benefits cannot serve to “close” a claim since there was nothing triggering any statutory provisions in the Act for which reopening due to a worsening of condition or requesting a DIME can be sought.  Simply put, a Final Admission of Liability on a med-only claim raises no implications of closure.  You cannot close something that was not significant to begin with.  Citing from a Court of Appeals prior decision, “the statutory consequences of a finding of “maximum medical improvement” can apply only to injuries as to which disability indemnity is payable.”  Given this caveat in the law, the ultimate question is how does an employer or insurance carrier seek closure on a med-only claim?   The answer may be simpler than first thought.

 

By its very nature, a med-only claim is usually not an impactful claim of such severity to require reporting.  In fact, the Act carves out an exception to med-only claims making it easy for employers and carriers to deal with them without being bogged down in paperwork.  Section 8-43-101(1) states, “Every employer shall keep a record of all injuries that result in fatality to, or permanent physical impairment of, or lost time from work for the injured employee in excess of three shifts or calendar days and the contraction by an employee of an occupational disease that has been listed by the director by rule.  Within ten days after notice or knowledge that an employee has contracted such an occupational disease, or the occurrence of a permanently physically impairing injury, or lost-time injury to an employee, or immediately in the case of a fatality, the employer shall, upon forms prescribed by the division for that purpose, report said occupational disease, permanently physically impairing injury, lost-time injury, or fatality to the division. The report shall contain such information as shall be required by the director.”

 

The key portion of the statute deals with lost time and permanent impairment.  If neither of the requirements is met, nothing has to be reported.   If one of the criteria is met, the Act requires that the insurance carrier take a position on the claim within 20 days.  You may even receive a letter from the Division with big bold letters emblazoned on it indicating the insurance carrier has 20 days to file either a Notice of Contest or a General Admission or else Respondents could be sanctioned in the form of monetary penalties.   When the claimant reaches MMI in a med-only claim, most carriers file a FAL; however, it may be good practice to not file anything UNLESS you receive the letter in question from the Division.   Most med-only claims are closed within a few weeks or months.   When a claimant comes back months, or sometimes years later, to seek additional treatment, how does one know if the problem that is allegedly occurring is due to the original event?  A significant amount of time may have passed.  Claimant may be working for another Employer.  Should the adjuster just voluntarily admit and pay benefits?  Typically, the answer is no.

 

Given the caveat in the law that is becoming commonplace among the courts, it is recommended not to file anything in response to a treating physicians’ placement of a claimant at MMI.  This is because the carrier can always challenge the claim on causation grounds later down the road should the claimant return and want to seek additional treatment or claim that indemnity is owed.  Recall that payment of medical benefits is neither an admission nor a denial under the Act.  Even if the Respondents pay for treatment and characterize a claim as a med-only claim for purposes of payment, if no pleadings are ever filed with the Division, Respondents retain the right to file a Notice of Contest should a claimant return in the future seeking additional benefits.  At that time, Respondents can further investigate the causation of the claimant’s ongoing complaints either through a medical records review, IME, or other means such as surveillance.  Oftentimes, the mere passage of time and questioning of the claimant will give rise to answers which would allow the adjuster to deny the claim outright, even though at first the claim was payable in good faith.  The overall thought is that it is much easier to challenge causation and be cautious with a Notice of Contest for further investigation than it is to go back in time and withdraw a previously filed admission, regardless of the type of admission that it is.

 

If you have any questions regarding what next steps to take when dealing with med-only claims, please contact us.   If you get a phone call from a claimant wanting more benefits from a claim you thought was closed, please contact any of the attorneys at our firm.  We will be more than happy to chat about the facts of the particular case and devise the best strategy which will hopefully avoid the reopening of a “closed” claim.

AMA Guides to the Evaluation of Permanent Impairment, Third Edition, Revised: What Are You Doing Colorado?

One of the questions I hear frequently about the Colorado workers’ compensation system from risk managers,AMAguides3rd insurance adjusters, and even some medical professionals is: “Why does Colorado still use the AMA Guides Third Edition, Revised, when calculating impairment?” In other words, why do Division Level II accredited physicians providing impairment ratings to injured workers use the AMA Guides to the Evaluation of Permanent Impairment, Third Edition, Revised (December 1990)? As of 2002, Colorado was, and still is, the only jurisdiction to use the Third Edition in the workers’ compensation system.[1]

The Third Revised Edition’s history in the Colorado workers’ compensation system is simple. The Colorado Workers’ Compensation Act underwent an extensive remodel in 1991. In the 1991 Amendments to the Act, the legislature inserted in section 8-42-107(A)(c), C.R.S., the methods to calculate impairment. In order to establish the medical impairment value for purposes of a permanent partial disability award, the legislature adopted the Third Edition, Revised (December 1990), which, at the time, was state of the art.  Since 1991, the legislature has not altered the statutory language.

The State of Colorado has arguably been cognizant of the fact it is the only state in the nation to hold onto this antiquated edition. In fact, the Colorado Department of Labor and Employment commissioned a study in 2002, concluding that “spinal impairment evaluations are the most frequent type of evaluations performed.”[2] The study stated that, amongst the guides, there are significant differences in spinal impairment. The author pointed out “the impairment estimate for a spinal injury may be quite different depending on which edition is used to rate the condition.” The author concluded “Values were significantly less with both the Fourth and Fifth Editions, although more dramatically with the Fourth Edition.” The study pointed to different range of motion calculations between the guides to explain the discrepancy.

Per its own commissioned study that the use of the Third Edition Revised results in higher impairment ratings, and, therefore, higher permanent partial disability awards, Colorado has held strong to the Third Revised Edition.  In 2007 the AMA Guides Sixth Edition was published. The more recent studies show a decrease in impairment ratings with the Sixth Edition when compared to ratings under the Fifth Edition.[3] The State of Colorado utilizes the medical impairment rating system that on average provides the highest degree of impairment, including spinal impairments, to injured workers. It does not appear that there is any legislative progress to bring Colorado into alignment with any other state anytime soon.  Which begs the final question: Colorado, what are you doing?

________________________________________________________________________________

[1] Study of the Impact on Changing from the American Medical Association (AMA) Guides to the Evaluation of Permanent Impairment, Third Edition Revised to the Fourth or Fifth Editions in Determining Workers’ Compensation Impairment Ratings, Christopher Brigham, M.D. (June 30, 2002).

[2] Id. 58.

[3] Impact on Impairment Ratings from the American Medical Association’s Sixth Edition of the Guides to the Evaluation of Permanent Impairment, Robert Moss, et. al. (July 2012) at 25.

COLORADO UNINSURED EMPLOYERS AND A POSSIBLE NEW FUND

BACKGROUND

There has been growing governmental concern in the State of Colorado over uninsured employers. Changes to the Workers’ Compensation Act in 2005 created stiffer fines for employers who fail to comply with mandated coverage for workers’ compensation benefits. The Division of Workers’ Compensation Director is required to impose a fine of $250 per day for an initial offense. The 2005 changes to Colo. Rev. Stat. § 8-43-409 included an increased fine range for companies that were non-compliant for a second time. Those companies now face up to a $500 per day fine. This statute specifically states that the ‘fine’ levied under the statute shall be the ‘penalty’ within the meaning of Colo. Rev. Stat. § 8-43-304, but is in addition to the increase in benefits owed under Colo. Rev. Stat. § 8-43-408.

Colo. Rev. Stat. § 8-43-409 governs the procedures for non-compliant employers. First, the Director is empowered to investigate and notify the non-compliant employer of their right to request a prehearing conference over the coverage issue. Second, if the Director determines that the employer is non-compliant, then the Director must take at least one of the following actions: (1) order the non-compliant employer to cease and desist its business operations while it is non-compliant; and/or (2) assess fines. After a cease and desist order is entered, the Attorney General immediately starts proceedings against the non-compliant employer to stop doing business. Further imposition of any fine under this statute, after appeal time frames have run, can be lodged with the District Court as a judgment. 25% of any fine collected would be directed to the workers’ compensation cash fund under Colo. Rev. Stat. § 8-44-112, with the balance going to the state general fund. Finally, any fine under the statute is in addition to the increased benefits owed by the non-compliant employer under the preceding statute, Colo. Rev. Stat. § 8-43-408. This statute increases ordinary benefit exposure by 50% for non-compliant employers and puts in place a bonding requirement for the non-compliant employer.

 

BALANCING INTERESTS

Significant fines handed down to non-compliant employers have received press attention in the past. As reported in the Denver Post on August 29, 2016, a student run café at the University of Colorado was shut down after it was fined more than $224,000 for not having workers’ compensation coverage. The Complete Colorado, a blog run by local political commenter Todd Shepard, documented a $271,000 fine against a Longmont garden business for failing to comply with coverage requirements, as well as a $516,700 fine levied against fast food restaurant, El Trompito Taqueria. These fine amounts increased quickly as the result of the daily multiplier. The time frames of noncompliance were largely assumed by the Director because the employer could not prove coverage during these intervals. For a small employer to receive such a large fine can effectively put the employer out of business, leaving the injured worker with no practical recourse for benefits.

There are mitigating circumstances that may reduce fines levied against non-compliant employers. For instance, if the employer can show compliance once it has become aware of a lapse in coverage, this will mitigate the fine amount. A non-compliant employer paying benefits, essentially stepping into the shoes of a would-be insurer, also helps mitigate the fine.

The Director is obligated to try to ensure compliance while not effectively forcing employers out of business. This should be done with an eye toward trying to keep injured employees from having no benefit flow or treatment. When an injured worker has no coverage, it forces the injured worker to seek medical treatment through personal healthcare insurance or, or if no health care coverage exists, through self-pay methods, emergency room visits, treatment write-offs and/or charity. Many healthcare insurers reject coverage for treatment of a work injury since that liability should fall on a workers’ compensation carrier or employer. Further losses from unpaid and unreimbursed medical treatment through emergency rooms, write-offs or charity are ultimately passed on to employers and employees at large, who bear the burden of increasing insurance premiums as the result of uninsured employers and their injured employees.

 

LEGISLATIVE CHANGES

Proposed House Bill 17-1119 attempts to address payment for injured workers who do not have coverage through their non-compliant employer. HB 17-1119 is currently a proposed Bill, but is likely to be approved later this year. The Bill was introduced on January 20, 2017, and must still pass the State House and Senate, as well as be signed into law by the Governor.

Coverage:  The fund would cover claims occurring on or after January 1, 2019 that have been adjudicated compensable, where the employer has been determined uninsured and has failed to pay the full amount of benefits ordered. The fund does not cover a partner in a partnership or owner of a sole proprietorship, the director or officer of a corporation, a member of an LLC, the person who is responsible for obtaining workers’ compensation coverage and failed to do so, someone who is eligible for coverage but elected to opt out, or anyone who is not an “employee” under the terms of the Act.

Funding:  The fund is made up of the fines and other revenue collected by the Division that is specifically allocated to the fund, along with any gifts, grants, donations or appropriations. There is also a separate 25% paid to the fund based on benefit amounts owed by non-compliant employers.

Governance:  The fund is run by a board that includes the Director and four individuals representing each of the following: employers, labor organizations, insurers and a claimant attorney.  The board serves for a term of 3 years and may be reappointed with the exception of the initial board members. With regards to the initial board, one member shall serve for an initial term of three years, two members for a two-year term and one member for a one year term.  No one can serve more than three consecutive terms.  Benefits are to be paid at the ordinary rates. If the fund does not have enough money in the fund, the board can reduce the rates.  The board is unpaid.

Powers:  The fund has ordinary powers attendant to handling workers’ compensation claims.  Of interest, the fund has the power to intervene as a party in a case involving an uninsured employer, or other potentially responsible entity. Upon acceptance of the claim into the fund, a lien is created against any assets of the employer and its principles for the amount due as compensation. This lien has priority over all other liens except delinquent tax payment liens.  The lien can be perfected by filing in the appropriate court. Further, the fund becomes something akin to a secured creditor of any insolvent employer for amounts the fund determines may be needed to pay uninsured losses. Payment by the fund does not relieve the uninsured employer of payment obligations for benefits and the fund has the power to pursue any employer who defaults on those payments in District Court.

 

BOTTOM LINE

The proposed legislation creates a small safety net for injured workers of uninsured employers.  Given the ever-increasing costs of medical care, there is a valid question as to whether funding would be adequate to cover workers’ compensation benefits claimed by the injured workers.  Further, it will be interesting to see if respondents may be required to give notice to the fund in cases where liability is being adjudicated on a statutory employer issue. The fund may have a recognizable interest in such litigation, as the burden of paying workers’ compensation benefits would fall on the fund should there be a determination of no coverage. It is not unusual for a carrier or employer to settle potential statutory employer liability on a “denied” basis as opposed to proceeding to litigation, where adjudication might make statutory employer liability clear. The fund intervening in this type of case may prevent pre-adjudication settlement from occurring without some consideration being paid to the fund in the “denied” settlement as well.

EMPLOYEE OR INDEPENDENT CONTRACTOR?

Why is it important to know if the person working for you is an employee or an independent contractor?  Because the answer determines if he or she must be covered by your workers’ compensation insurance policy. An incorrect guess exposes you to substantial penalties under Colorado’s Workers’ Compensation Act.employeeVSic

 

A worker’s status as an “employee” versus an “independent contractor” has been one of the most heavily litigated areas of workers’ compensation since the enactment of Colorado’s Workers’ Compensation Act in 1915.  Fortunately, after decades of appellate decisions addressing the independent contractor versus employee issue, in 1993, the General Assembly enacted section 8-40-202(2), C.R.S.  According to section 8-40-202(2), C.R.S., anyone performing work for you is an employee, unless such individual is:

 

  • Free from control and direction in the performance of the service, and
  • Customarily engaged in an independent trade, occupation, profession, or business related to the service performed.

 

The statute sets forth nine factors which give rise to a presumption that a worker is an independent contractor as opposed to an employee.  The statute contains various factors the courts will consider in determining whether a worker is, based on the totality of the circumstances, “engaged in an independent trade, occupation, profession or business”.  For example, if the worker has a separate business name, carries his or her own business insurance, has business cards, carries workers’ compensation insurance on any employees, is paid at a contracted rate, submits invoices for the work being performed, with payments being made to the named business, is performing services for other companies at the same time he or she is working for you, the facts suggest the worker is independent and you may not be required to cover him or her under your workers’ compensation policy.

 

The statute also requires the worker to be “free from control and direction in the performance of their services”.  If the worker provides their own tools and necessary supplies, performs the services being contracted on their own schedule, exercises independent judgment in performing the services and how they choose to perform them, again these facts suggest the worker is free from control and independent.  Unfortunately, the courts have repeatedly held there is no single dispositive factor, or series of factors, resulting in proof of an employer-employee relationship or independent contractor status under section 8-40-202(2), C.R.S.

 

The statute does provide for the use of a document to satisfy its requirements by a preponderance of the evidence.  If the parties use a written document to establish an independent contractor relationship, it must be signed by both parties and contain a disclosure, in type which is larger than the other provisions in the document or in bold-faced or underlined type, that the independent contractor is not entitled to workers’ compensation benefits and is obligated to pay federal and state income tax on any moneys earned pursuant to the contract relationship.  All signatures on the document must be notarized.  Such a document creates only a rebuttable presumption of an independent contractor relationship between the parties.

 

Still confused or unsure?  Please contact us to discuss the facts of your situation.

NEW OVERTIME RULES

The Department of Labor’s (“DOL”) new overtime rules take effect December 1, 2016,usdol_seal and employers should be reviewing and modifying their compensation and payroll practices in response. Here is a link to the new regulations adopted by the Department of Labor:

http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=28355

As part of this preparation, employers must consider whether and how any changes to their compensation structures will affect their employee benefit plans.

The new overtime rules increase the salary levels at which executive, administrative, and professional workers may be considered “exempt” under the Fair Labor Standard Act (“FLSA”) from overtime pay when a work week exceeds 40 hours. Initially, the standard salary level will increase from $455 to $913 per week and the total annual compensation requirement for highly compensated employee exemption will increase from $100,000 to $134,004 per year.  In addition to these initial compensation level bumps, additional upward adjustments are scheduled to occur every three years thereafter.

The immediate impact on this change is that currently classified “exempt” employees under the lower salary level, will no longer qualify for this status.  As a result, if an employee is no longer exempt under the FLSA, overtime must be paid for work performed beyond the 40-hour work week.

Employers need to respond to these changes in a number of ways.  Some are raising base salaries in order to classify additional employees as “exempt.”  Others are planning to simply pay overtime where necessary.  Others are planning to cap hours at 40 so that no overtime need be paid, or to meet their needs with part-time workers.

Regardless of the planned changes, effects on the employer’s benefit plans must be considered.  The DOL’s new overtime rules will require many employers to make sweeping and expensive changes to their compensation practices.  These changes may impact employee benefit plans in both intended and unintended ways.  Employers are urged to conduct a thorough benefit plan analysis before making any sweeping compensation changes.

If you have questions about the rule, or how it may affect your company, please contact us.

DEPARTMENT OF LABOR REPORT

BACKGROUND

In October 2015, National Public Radio (NPR) and ProPublica did a report over the differences between the states npr_propublicaworkers’ compensation laws.  The report found significant differences in the amount and type of benefits in each states workers’ compensation system.  The report focused heavily on recent attempts by states to allow employers to opt-out of workers’ compensation.  These plans generally allow an employer to set-up a benefit system for injured workers themselves.    In particular, it focused on Oklahoma’s opt-out law – a law that was recently struck down by the Oklahoma Supreme Court as unconstitutional.  The report was very damning of these differences and deficiencies between the states’ systems.

The NPR and ProPublica report led to a letter from 10 prominent national legislators to the Secretary of the Department of Labor.  The letter was itself very critical and condemning of the deficiencies reported by NPR and ProPublica.  As a result, on October 5, 2016 the Department of Labor issued a 43-page report over the state of the patchwork of workers’ compensation laws across the country.

THE REPORT

The Department of Labor report outlines the history of the ‘grand bargain’ that is the workers’ compensation system outlining the reasons behind workers’ compensation and how we ended-up with a patchwork system of laws.  In particular, the report focuses on a national commission report from 1972 that identified 5 basic objectives for workers’ compensation programs:

  1. broad coverage of employees and work-related injuries and diseases,
  2. substantial protection against interruption of income,
  3. provision of sufficient medical care and rehabilitation services,
  4. encouragement of safety and
  5. an effective system of delivery of the benefits and services.

This national commission agreed on 19 essential recommendations to accomplish these goals.  The 19 recommendations themselves focused on six specific areas:

  1. compulsory rather than elective coverage with no exemptions for various employers or types of labor,
  2. broadening employee choice for filing claims interstate, either where the injury occurred, or where the employment was originated,
  3. full coverage for work related diseases,
  4. adequate weekly wage replacement benefits and death benefits of no less than 100% of the states average weekly wage,
  5. no arbitrary limits on the duration of benefits and
  6. full medical and rehabilitation benefits without limit or duration.

The report considers the history since 1972, recognizing that employers’ costs and insurance rates grew from 1984 to 1990.  This cost increase created political pressure to change the benefit packages.  The report cites that per $100 of payroll, costs rose to as high as $1.65, but have since dropped to $.98 per $100 of payroll in 2013.  The report goes on and attributes the decreased cost to states passing legislation to reduce the benefit packages to injured workers. In particular, the report cites to various states that have created ‘proof barriers’ to certain types of claims, such as mental impairment claims, and cites to a reduction in benefits for workers with pre-existing injuries or conditions.  The report mentions mechanisms within each state for reduction of indemnity benefit eligibility through application of apportionment, or other fault-based benefit penalties.  There is also reference to disincentives to workers to report a claim, such as drug screening after an accident or injury.  The report is also critical of restricted medical care for injured workers, through either limited medical care provider choices, or reduced reimbursement keeping medical care providers from accepting work injuries.  Finally, the report is critical of the elimination of second injury funds and other ways in which liability for certain injuries or conditions are accepted.

Overall, the Department of Labor report recognizes that some liability for benefits in the workers’ compensation system is being passed on to other programs, including Medicare, Medicaid and Social Security.  This cost shifting to other public aid programs is a primary concern for the Department of Labor.  The report provides a road-map for Federal action in the future in the form of oversight of state workers’ compensation systems, including mandatory minimums of benefits within each system to halt what the report describes as a ‘race to the bottom.’

Of interest, the report tracks each states progress in complying with the 19 core recommendations from the original national commission.  The report shows how each state was doing in 1972, 1980 and 2004.  In 1972 Colorado had complied with 10 of the 19 recommendations and had increased that to 16 of the 19 recommendations by 1980. By 2004, Colorado compliance had dropped, as is the case with most states, to 12.75.  In 2004 no state had met all 19 recommendations.

BOTTOM LINE

The report tacitly recognizes that the Obama administration is on its way out.  Regardless, the Department of Labor is clearly interested in the functioning of state workers’ compensation systems and it is doubtful that the upcoming election will change that dynamic.  Further, state interest in an opt-out structure only increases this negative attention.  Several states that have considered opt-out arrangements have dropped these proposals.  Under any circumstance, it is to be expected that there will be continued call for increased Federal oversight over workers’ compensation.

OSHA Injury and Illness Reporting Requirements

The Occupational Safety and Health Administration (OSHA) requires many employers with ten or oshalogomore employees to keep a record of serious work related injuries and illnesses (certain low risk industries are exempted).  Employers must report any worker fatality within 8 hours and any amputation, loss of an eye, or hospitalization of any worker within 24 hours.  Minor injuries requiring only first aid do not need to be recorded.   This information helps employers, workers and OSHA evaluate the safety of a workplace, understand workplace hazards and prevent future workplace injuries and illnesses.

OSHA recently announced it is expanding its “Injury and Illness Record-keeping Rule” to encourage greater transparency of employer injury and illness data.  Starting in 2017, the Rule will also require some employers to disclose occupational injury and illness information to OSHA electronically.  Some of the electronically submitted data will then be posted to OSHA’s website.  OSHA believes that this public disclosure of employer information will “nudge” employers to improve workplace safety and provide valuable information to workers, job seekers, customers, researchers and the general public.  The amount of data submitted and publically posted will vary depending on the size of the company and the type of the industry.

The expanded Rule prohibits employers from “discouraging” workers from reporting an injury or illness.  The final Rule requires employers to inform employees of their right to report work-related injuries and illnesses free from retaliation; implement procedures for reporting injuries and illnesses that are reasonable and do not deter workers from reporting; and incorporate the existing statutory prohibition on retaliating against workers for reporting injuries and illnesses.   Originally slated to take effect August 10, 2016, OSHA is delaying enforcement of the anti-retaliation provisions in its new Injury and Illness Record-keeping Rule to provide education and outreach to employers.  Enforcement of the anti-retaliation provisions of the Rule will now begin November 1, 2016 and the record-keeping rule takes effect on January 1, 2017.

You might feel confident that your workplace is already in compliance with the “anti-retaliation” provisions of OSHA’s Injury and Illness Recordkeeping Rule.  You may even be asking yourself, “How is this a change in the law?  Isn’t it already against the law to retaliate against an employee for reporting a workplace injury or illness?”  While section 11(c) of the Occupational Safety and Health Act prohibits any person from discharging or discriminating against an employee for reporting an injury, illness or fatality, OSHA may not act under that section unless the employee files a complaint within 30 days of the retaliation.  OSHA believes the new Rule is vital as it gives OSHA the “ability to protect workers who have been subject to retaliation, even when they cannot speak up for themselves”. Further, the issues under the expanded rule are more complicated than they first appear. You could be inadvertently violating provisions of the rule and unexpectedly land yourself in hot water with OSHA.

Here are some common workplace safety policies that could result in violations of OSHA’s new anti-retaliation provisions:

  1. Mandatory post-accident drug testing programs: The OSHA rule specifically recommends against “blanket post-injury” drug testing policies. However, OSHA also specifically indicates the rule does not prohibit post-injury drug testing of employees.  It only prohibits employers from using drug testing, or the threat of drug testing, as a form of retaliation against employees who report injuries or illnesses.  That being said, in connection with the rule, OSHA stated, “OSHA believes the evidence in the rulemaking record shows that blanket post-injury drug testing policies deter proper reporting.”  Therefore, OSHA’s position on blanket post-injury drug testing appears to be equivocal and leaves employers without clear direction.  OSHA’s recommendation against blanket post-injury drug testing may prove particularly problematic, given that Colorado’s Worker’s Compensation Act clearly contemplates post-accident drug and alcohol screening in light of C.R.S. sections 8-42-112, (“safety rule violation”), 8-42-112.5, (the “intoxication defense”), 8-42-103(1)(g) and 8-42-105(4)(a), (the “termination statutes”).  For employers with “zero tolerance” policies, a positive post-accident drug or alcohol test could result in the termination of an injured employee’s employment, reducing their temporary indemnity benefits to zero.  If the employer proves either an intoxication defense or safety rule violation, the injured employee’s indemnity benefits, temporary and permanent, would be reduced by 50 percent.  While these concerns may not directly impact the course of worker’s compensation litigation, they could give rise to employment litigation outside the workers’ compensation system, particularly in light of OSHA’s independent ability to raise the retaliation issue under the expanded rule, without the need for the worker to file a complaint.

 

  1. Providing incentives exclusively to employees that have not been involved in workplace incidents or accidents: While OSHA indicates the rule does not prohibit incentive programs, it does state employers must not create incentive programs that deter or discourage an employee from reporting an injury or illness. For example, if you are trying to minimize injury by providing cash bonuses, paid time-off, employer-sponsored parties, or other compensation, for a certain number of “injury-free” days, or “no lost time”, you could be in violation of the rule. Unfortunately, OSHA’s alternative direction is vague at best.    OSHA recommends incentive programs that “encourage safe work practices” and “promote safety-related activities”.

 

  1. If injured, off-work employees are excluded from workplace events, which could be considered a benefit of employment, such as luncheons, parties, football pools, birthday celebrations, or other work-related events or functions.

OSHA’s new Injury or Illness and Record-keeping Rule is complicated and could result in a quagmire of retaliation and perceived retaliation claims.  Your current safety policy and procedures should be reviewed for compliance with the expanded rule.  If you have questions about the rule, or whether your policies are in compliance, please contact us.

Investigation of Outstanding Medicaid Liens in Workers’ Compensation Claims

The Colorado Department of Health Care Policy and Financing, through its Medicaid program, is responsible hcpffor collection of outstanding liens for the state.   This department is in charge of disbursement of state funds to indigent citizens in need of medical benefits.  Oftentimes, a claimant will pursue medical benefits through the department if they qualify.   This may be true even when a claimant has a current workers’ compensation claim on file with the Division of Labor.  Qualification for a particular program, through the state funded Medicaid partnerships, involves several criteria.  If a citizen qualifies, benefits may be paid regardless of the current status of a workers’ compensation claim.   The Medicaid department will assert its lien, (referred to as a “recovery right”), against the claimant and the workers’ compensation claim.

A lien usually arises at one of two points in the workers’ compensation litigation.  The first such instance occurs when a claim is denied by the carrier and the claimant chooses to pursue medical benefits through the applicable Medicaid programs.   These claims usually involve substantial forms of medical treatment, (i.e. surgeries), in which time is of the essence and a claimant cannot wait for resolution of compensability and causation issues in their workers’ compensation claims.  The claimant may choose to obtain the surgery through the authorized treating physicians or through their own personal care physician.  Should the claim be found compensable by an ALJ, it is important to distinguish between the benefits provided and through which physicians the claimant received treatment.   Regardless of the legal arguments to be made, Medicaid will assert its right of recovery against the benefits paid and will await resolution of the claim before doing so.

The second such instance occurs when a claimant has received medical benefits through the state funded Medicaid program and the treating physician finds a particular treatment to either be related to the claim, (or not related to the claim). The benefits are disputed through the workers’ compensation process, and the claimant obtains treatment without waiting for resolution of the workers’ compensation issues.   In this example, the opinions from the treating physicians will be important in determining liability for the outstanding lien.  If a treating physician deems the medical benefits to be related to the claim, and the claim is resolved through a settlement or other means, the carrier will be liable for payment of the lien.   Recovery of the lien cannot be shifted by the parties in the workers’ compensation claim.  However, if the treating physicians deemed the treatment to be non-work related, the carrier may be able to dismiss any causes of action by providing the opinions of the physicians to the proper investigative authorities within the department.

 

Legislative Authority

Colorado’s Medicaid programs derive their authority from one main portion of section 25.5 of the Department of Health Care Policy and Financing Act.  Section 25.5-4-301(5)(a), C.R.S. states, “When the state department has furnished medical assistance to or on behalf of a recipient pursuant to the provisions of this article, and articles 5 and 6 of this title, for which a third party is liable, the state department shall have an automatic statutory lien for all such medical assistance. The state department’s lien shall be against any judgment, award, or settlement in a suit or claim against such third party and shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.”

Additionally, section 25.5-4-301, C.R.S. states, “When the applicant or recipient, or his or her guardian, executor, administrator, or other appropriate representative, brings an action or asserts a claim against any third party, such person shall give to the state department written notice of the action or claim by personal service or certified mail within fifteen days after filing the action or asserting the claim. Failure to comply with this subsection (6) shall make the recipient, legal guardian, executor, administrator, attorney, or other representative liable for the entire amount of medical assistance furnished to or on behalf of the recipient for the injuries that gave rise to the action or claim. The state department may, after thirty days’ written notice to such person, enforce its rights under subsection (5) of this section and this subsection (6) in the district court of the city and county of Denver; except that liability of a person other than the recipient shall exist only if such person had knowledge that the recipient had received medical assistance or if excusable neglect is found by the court. The court shall award the state department its costs and attorney fees incurred in the prosecution of any such action.”   (Emphasis added)

Lastly, section 25.5-4-301(5)(b) states, “No judgment, award, or settlement in any action or claim by a recipient to recover damages for injuries, where the state department has a lien, shall be satisfied without first satisfying the state department’s lien. Failure by any party to the judgment, award, or settlement to comply with this section shall make each such party liable for the full amount of medical assistance furnished to or on behalf of the recipient for the injuries that are the subject of the judgment, award, or settlement.”

These three portions of the statute are important to remember prior to resolving any workers’ compensation claim.  Specifically, if the carrier or the insured has any knowledge that Medicaid paid for any potential treatment in connection with the workers’ compensation claim, the carrier must investigate and contact the Department of Health Care Policy and Financing to inquire about any potential liens.  The duty to investigate is not on Medicaid or the State of Colorado, but rather the duty rests with each party to the workers’ compensation claim.   Failure to notify Medicaid prior to resolution of the workers’ compensation claims will cause the outstanding balance to become due and owing in full unless a separate argument can be made regarding the medical benefits provided to the claimant recipient.  This is the case regardless of any language placed into any agreements, stipulations, settlements, or the like that are agreed upon between the parties.

 

Recommendations

The carrier and the Employer, (either through counsel or individually), should always investigate whether any Medicaid liens exist at the state level.   Outstanding Medicaid liens differ from other liens due to the duty imposed on the carrier through statute.  Failure to investigate any outstanding liens could lead to potential reopening of claims long after they have been resolved.  Investigation could happen in a number of ways.  The simplest way involves contacting the department in writing and providing the identifying information of the claimant to search for any liens.  The department will usually respond within a few days notifying the carrier of any issues.    However, this manner may be problematic for adjusters especially in light of the volume of claims at any given time.  If counsel is assigned, the inquiry can be made by email or through general discovery pending on a litigated claim.  Discovery responses from the claimant can reveal receipt of any benefits through Medicaid or otherwise.

For more information about specific Medicaid issues on any workers’ compensation claims and recovery of liens, please feel free to contact us.   References about the Colorado Medicaid programs can be found here.