Synopsis: All Sides in a WC Settlement Need to Make MSA Settlement Language Crystal-Clear or It May Be “Unsettling.”
Editor’s comment: We consider this article required reading for all claims adjusters, risk managers, defense lawyers, WC hearing officers across the country. In Paluch v. United Parcel Service, Inc., the IL Appellate Court reversed and remanded a claim finding the workers' compensation settlement agreement was ambiguous as to total amount employer owed to employee. The unanimous Appellate Court remanded the case for an evidentiary hearing as to what the settlement might actually be. It appears the six-figure settlementagreement was unclear, ambiguous, contained conflicting clauses and was open to more than one interpretation.
Following contract approval, the employer and its carrier interpreted the agreement as requiring a single lump-sum payment of $400,000 for both the WC settlement and Medicare Set-Aside amount. In contrast, the employee and his attorney interpreted the agreement as requiring a lump-sum payment of $400,000, in addition to separate payment of a Medicare Set-Aside, in annuity form. The amount in dispute is an additional $181,580.96. Ouch.
The agreement states:
Respondent agrees to pay and Petitioner agrees to accept $400,000.00 in a lump sum plus payment of a Medicare Set-Aside (MSA), in annuity form, in full and final settlement of all claims for benefits past, present and future based on injuries arising out of an accident on or about July 11, 2006. This settlement represents as a compromise of wage differential benefits in the amount of $218,419.04 under Section 8(d)(1) of the Workers' Compensation Act, plus funding of an MSA in the amount of $148,790.00, direct reimbursement of BCBS lien in the amount of $31,135.82 and direct reimbursement of AETNA lien in the amount of $1,655.14. Respondent will pay all necessary and related medical expenses pursuant to the fee schedule or negotiated rate, whichever is less, that have been submitted to Respondent prior to contract approval and that contain all the required data elements necessary to adjudicate the bills pursuant to Section 8.2(d). Petitioner is responsible for payment of any and all medical expenses not submitted prior to contract approval. Petitioner hereby foregoes any right to review or reopen the settlement and agrees that all rights under Section 8(a) and 19(h) are expressly waived unless otherwise retained under the terms of this contract. The parties have taken Medicare’s interests into consideration and included with this settlement is a proposed MSA with initial funding of $106,650.00 and an annuity providing $3,329.87 per year continuing for life for a total proposed MSA of $148,790.00. The MSA shall be submitted to CMS for approval. Should CMS determine the MSA to be insufficient, the Respondent reserves the right to appeal the decision, and Respondent agrees to either modify the MSA consistent with CMS recommendations or elect to allow Petitioner to retain his medical rights under Section 8(a). If the MSA is approved, then petitioner’s rights under section 8(a) will cease upon funding of the MSA and the matter will be finalized with no futher [sic] activity necessary at the Commission.
The next paragraph states:
· Total Amount of Settlement
· Deduction: Attorney's Fees
$43,600.00 reduced from $80,000.00
· Deduction: Medical reports, X-rays
· Deduction: Other (explain)
· Amount employee will receive
There were arguments going in both directions outlined in the Appellate Court’s well-reasoned ruling. We note it is unusual but not impossible for a Plaintiff-Petitioner attorney to take a legal fee on the Medicare Set-Aside value—stating the attorney fee was reduced from $80K should indicate the employee was intended to receive $400K as a compromise of permanency. We also note there was Social Security spread language calculated on the amount the “employee will receive”—we agree with the trial court, it would be inconsistent to consider the MSA value as part of the spread language. We have no idea what the eventual facts will bear out or what the outcome will be. We are certain the defense side is expending legal fees they didn’t plan on expending and Petitioner/Plaintiff counsel is spending legal time they aren’t going to get any more money for. While we don’t know for sure, we can’t imagine Petitioner Paluch is happy about any of it.
Our message to our readers and clients who are handling such claims is patent—we have several MSCC certified attorneys at Keefe, Campbell, Biery & Associates, including our name-partner Shawn R. Biery. As you can see from this ruling, it is crucially important to have settlement language be crystal clear or you won’t have a settlement and may continue to waste time and money to litigate such “unsettling” claims moving forward. Before you go ahead with a workers’ comp claim settlement involving an MSA consider having us take a rapid look at it to insure you are doing precisely what you intend to do.
We appreciate your thoughts and comments. Please post them on our award-winning blog. For MSA issues, you can reach our experts Shawn R. Biery at email@example.com and Matt Ignoffo at firstname.lastname@example.org.
Synopsis: Recent Federal Ruling Points the Way Toward Testing for Alcohol, Opioid and Medical Marijuana Issues in Your Workplace.
Editor’s comment: U.S. employers can demand drug and alcohol testing and win dismissal of retaliatory discharge claims when your drug and alcohol-free policy is applied in a non-discriminatory fashion. In Phillips v. Continental Tire The Americas, LLC, the United States Court of Appeals for the Seventh Circuit reviewed the following facts. Plaintiff Phillips sued Continental Tire alleging the employer retaliated against him for seeking workers’ compensation benefits. The employer has a tire manufacturing facility in Mt. Vernon, Illinois where Petitioner worked for 22 years. The employer also had a local medical facility to provide medical services to sick or injured workers.
Continental Tire had a comprehensive written drug and alcohol-free policy that covered:
• Drug testing for pre-employment testing,
• Random drug testing for the first 12 months of employment,
• For-cause drug and alcohol testing,
• OSHA recordable accidents,
• Transportable injuries,
• Serious equipment/property damage incidents; and
• Mandatory testing whenever a workers’ compensation claim was reported.
The employer’s policy provided refusal to submit to drug and alcohol testing was cause for immediate suspension pending termination. According to their policy, an injured employee could receive needed medical treatment in the medical services facility and return to work without taking a drug test if the employee did not seek to initiate a workers’ compensation claim and if the situation causing the need for medical care did not fall within one of the other categories listed above.
In Phillips v. Continental Tire, Plaintiff presented to the company’s medical services facility complaining his fingers were going numb at work and outlined his intention to make a workers’ compensation claim for that problem. Consistent with company policy, Petitioner was advised he had to submit to a drug test before he could initiate a workers’ compensation claim. Petitioner was also advised if he failed to submit to a test, his employment would be terminated. Petitioner refused and was terminated. Petitioner filed a workers’ compensation claim which appears to have been later settled for 20% of the left arm, based on our research. We consider it odd to see such a settlement that didn’t incorporate closure of the expensive Federal litigation, as we would have recommended.
The Federal Appellate Court acknowledged Illinois substantive law recognizes a cause of action for retaliatory discharge where an employee is terminated because of actual or anticipated exercise of workers’ compensation rights. In order to establish a retaliatory discharge claim, Plaintiff in such a case must prove they exercised a right pursuant to the Workers’ Compensation Act and was discharged for reasons related to the filing/prosecution of the workers’ compensation claim. The Federal Appeals Court found Plaintiff failed to show his discharge was causally related to the exercise of a protected right as causation requires more than a coincidental discharge in connection with filing a workers’ compensation claim.
In this record, it appears the parties stipulated the employer terminated Plaintiff solely because he refused to take a drug test upon initiation of a workers’ compensation claim. It was also established the employer consistently applied its drug and alcohol testing policy. They were able to demonstrate they had discharged other employees who refused to submit to drug testing. The Court also noted other employees had initiated workers’ compensation claims in the past, had participated in testing and had not been similarly discharged. The decision also confirms Plaintiff admitted if he had taken the drug test and passed, he would not have been terminated.
The Federal Appellate Court also noted the recent enactment in year 2011 of Section 11 of the Illinois Workers’ Compensation Act which created a rebuttable presumption the employee was intoxicated and intoxication was the proximate cause of the employee’s injury if the employee refused to submit to drug or alcohol testing. The Court’s august members noted this recent legislation further demonstrated an IL employer was not out of step with public policy by requiring drug testing under certain circumstances.
The Federal Appellate Court was also confirmed drug and alcohol testing in employment was not against Illinois public policy. The Court confirmed this position by referencing the Compassionate Use of Medical Cannabis Pilot Program Act which provides nothing shall prohibit an employer from enforcing a policy concerning drug testing provided the policy is applied in a nondiscriminatory manner.
This important federal decision affirms U.S. employers’ rights to drug and alcohol testing and confirms such on-the-job testing is not against public policy. Based on this decision and recent legislation, employers in Illinois should implement drug and alcohol testing assuming it is applied across-the-board and in a nondiscriminatory manner. Our concern about medical marijuana and the use of any opioid or alcohol in the workplace is simple—don’t wait for the first “Denver Brownie” user to cross your threshold before starting a drug and alcohol-free workplace program. If you wait, there is a much higher chance that person might sue you. Keefe, Campbell, Biery & Associates has a draft drug and alcohol-free program you can start with—we have great lawyers who can help you finalize it. All you need to do is send a reply and ask and we will send it right back!
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Synopsis: We Retract One Sentence from Last Week’s KCB&A Update and Give Our Readers Some Additional Thoughts.
Editor’s comment: Last week, we reviewed an IL WC Arbitrator’s ruling in Perkins v. Turner Industries Group #09 WC 44791. We included this sentence: “If he isn’t finding work, it is because he is being coached on how to avoid work.” We have to retract and apologize for that comment, as we have no true idea if Petitioner was coached on how to avoid work. Please accept this as our apology and retraction of the statement.
As to the rest of this ruling we provide these opinions based on the facts we reviewed in the decision:
• Petitioner is a union carpenter who had shoulder surgery;
• He was released some time ago with a 50lb. or 53lb. lifting restriction;
• In our view, there is ample work in the larger labor market around his home for a person with that background and training—as we indicated last week, “there is work at hardware stores, retail, coffee shops, gas stations, car lots etc. and we find there to be something wrong with a system that can find such an individual truly unemployable.”
• The Americans with Disabilities Act requires almost any U.S. employer to reasonably accommodate such a worker in returning them to the workforce;
• Petitioner was provided job placement assistance from April 2011 to January 2013—in our view, no claims adjuster should allow voc rehab to continue that long. To do so actually is contrary to your needs/interests and tends to prove unemployability. We are happy to consult with risk managers and adjusters on optimal use of voc rehab providers;
• The Arbitrator assigned to the matter is one of the top veteran Arbitrators in Illinois and, in our view, is honest, fair and beyond reproach—that said, we respectfully disagree with his finding this man suffered life-changing injuries, is unemployable and is entitled to lifetime benefits as if he were;
• The term “odd lot” total and permanent disability was created by the Illinois Courts and is legally indefinable because the term “odd lot” doesn’t appear in our IL WC Act. The “odd lot” can be whatever you want it to be—in short, if this man were required by the Arbitrator to return to work, it is our reasoned legal view he would do so and Respondent wouldn’t have to pay an otherwise healthy man several million dollars if this ruling isn’t reversed;
• One nagging issue about the lack of new construction in Illinois is many construction workers with less-than-life-changing injuries are uniformly seeking very expensive wage loss differential and total-and-permanent disability awards. We have one construction client where literally every claimant is making such a claim.
We appreciate your thoughts and comments. Please post them on our award-winning blog.