In the President's Fiscal Year 2014 Budget is a proposal to replace the Defense Base Act. The new statute, (not yet published), would create a Government wide fund to replace the patchwork of contract coverage now in effect under the DBA. The program would pay benefits directly from the Federal fund administered by the DOL and agencies would be billed only for their share of benefits and administrative costs.
The proposal appears on page 772 of the Budget proposal, under Office of Workers' Compensation Programs.
The link is attached:
Wednesday, April 10, 2013
Monday, March 25, 2013
Awards and the Supreme Court – Roberts on its first anniversary. The history of disfigurement.
On March 20, 2012, Justice Sotomayor delivered the opinion of the Court in Roberts v. Sea-Land Services, Inc. Whatever we may think of the result of the case, the reasoning – to which eight justices gave their assent – is hardly what one might have hoped. The question is the meaning of a word: “awarded”, as in “newly awarded compensation”. The opinion decides that in section 6(c) of the Longshore and Harbor Workers' Compensation Act, at least, it means: “first becomes disabled”. One of the Court’s examples seems to me historically inaccurate, and indeed, seems to suggest the opposite of its views.
Lord Mansfield once remarked: “Most of the disputes of the world arise from words.” Morgan v. Jones (1773). An older adage, “Radix malorum est cupiditas” reminds us that most cases are about money. And so it is with this case.
Injured workers under the Longshore and Harbor Workers' Compensation Act are entitled to two thirds of their average weekly wage until they reach maximum medical improvement. The average weekly wage is calculated at the time of their disability – which is the time they can no longer earn wages. This compensation rate is limited further, for successful workers, who earn high wages. The Act discriminates against high wage earners by limiting their compensation rate, (“shall not exceed”), to a maximum of two hundred per cent of the national average weekly wage for the fiscal year in which the worker is “newly awarded compensation”. Mr. Roberts’s average weekly wage was $2,853.08. His compensation rate would be $1,902.05. The maximum rate in 2002, the fiscal year of his disability, was $966.08. That is, his compensation was statutorily reduced to the level of a worker earning $1,494.12 a week. For the privilege of being a successful worker, he takes a notional pay cut of $1,358.96 resulting in an actual compensation cut of $935.97, nearly 50%. However, the statute does not apply the national average weekly at the time of disability. It applies it at the time the worker is “newly awarded compensation”. Mr. Roberts was duly paid compensation at the $966.08 rate by his employer “without an award”, to use the language of the statute, §914(a). The employer later contested the case, and after it lost at trial before an Administrative Law Judge, Mr. Roberts was awarded compensation in fiscal year 2007, (when the maximum rate was $1,114.44), at the rate of fiscal year 2002.
Mr. Roberts felt that since he was newly awarded compensation in fiscal year 2007, he was entitled to the maximum rate of that year. But the Administrative Law Judge did not agree, and nor did the Benefits Review Board. The Administrative Law Judge and the Board were bound by the Board’s previous decision in Reposky. So the case went to the Ninth Circuit, which affirmed the Board’s decision. The Supreme Court granted certiorari to resolve a split in the Circuits, a split that became a little wider when the Eleventh Circuit decided the Boroski case.
One of the arguments that “award” does not mean “formal order” derived from section 8(c)(20) of the Act as amended. The Ninth Circuit wrote:
“In other sections, however, the LHWCA uses the terms “award” and “awarded” to refer to an employee’s entitlement to compensation under the Act, even in the absence of a formal order. Section 8, for example, defines “awards” for specific types of injuries. See, e.g., id. § 908(c)(22) (defining the “award” for loss of certain body parts). Section 8(c)(20) also provides that “[p]roper and equitable compensation not to exceed $7,500 shall be awarded for serious disfigurement of the face, head, or neck or of other normally exposed areas likely to handicap the employee in securing or maintaining employment.” Id. § 908(c)(20) (emphasis added). By use of the term “awarded,” Congress could not have meant “assigned by formal order in the course of adjudication,” given that employers are obligated to pay such compensation regardless of whether an employee files an administrative claim. Section 908 thus uses the terms “award” and “awarded” to refer to an employee’s entitlement to compensation under the Act generally, separate and apart from any formal order of compensation.”
The Supreme Court wrote:
“For example, §908(c)(20) provides that “[p]roper and equitable compensation not to exceed $7,500 shall be awarded for serious disfigurement.” Roberts argues that§908(c)(20) “necessarily contemplates administrative action to fix the amount of the liability and direct its payment.” Reply Brief for Petitioner 11. In Roberts’ view, no disfigured employee may receive benefits without invoking the administrative claims process. That argument, however, runs counter to §908’s preface, which directs that “[c]ompensation for disability shall be paid to the employee,” and to §914(a), which requires the payment of compensation “without an award.” It is also belied by employers’ practice of paying §908(c)(20) benefits voluntarily. See, e.g., Williams-McDowell v. Newport News Shipbuilding & Dry Dock Co., No. 99–0627 etc., 2000 WL 35928576, *1 (BRB, Mar. 15, 2000) (per curiam); Evans v. Bergeron Barges, Inc., No. 98–1641, 1999 WL 35135283, *1 (BRB, Sept. 3, 1999) (per curiam). In light of the LHWCA’s interest in prompt payment and settled practice, “awarded” in §908(c)(20) can only be better read, as in§906(c), to refer to a disfigured employee’s entitlement to benefits.”
This is most interesting. The provision for disfigurement goes back to the 1927 Act, which read, “Disfigurement: The deputy commissioner shall award proper and equitable compensation for serious facial or head disfigurement, not to exceed $3,500.”
The section was amended in 1972. The House Report No. 92-1441 of September 25, 1972 reads in part: “This section amends paragraph (20) of section 8(c) of the Act, which directs that an award be made for serious facial or head disfigurement. Such an award cannot exceed $3,500. The amendment directs that such compensation shall be awarded also for serious disfigurement of the neck, or other normally exposed areas likely to handicap the employee in securing or maintaining employment.”
With the greatest respect to the Ninth Circuit, it appears that in 1927 the term “awarded” as used in §8(c)(20) did indeed mean a formal order. Quite possibly it was because the Deputy Commissioner had to exercise discretion in setting the amount. Quite possibly the amendment removed the Deputy Commissioner from the section in 1972 because “Hearing Officers” were to replace Deputy Commissioners. Certainly the House Report does not suggest that they are changing the meaning of word they had used since 1927 by moving the section to the passive voice.
The Supreme Courts remarked that: “In Roberts’ view, no disfigured employee may receive benefits without invoking the administrative claims process. That argument, however, runs counter to §908’s preface, which directs that “[c]ompensation for disability shall be paid to the employee,” and to §914(a), which requires the payment of compensation “without an award” .” It appears to have been the view of Congress as well.
The Court continues: “It is also belied by employers’ practice of paying §908(c)(20) benefits voluntarily”. I search in vain for a canon of statutory construction that a word means what one party decides it will mean.
Thursday, March 21, 2013
Proposed Changes To The Federal Acquisition Regulations
Defense Base Act
It’s Spring, officially at least, though the snow in Connecticut still lies roundabout and we are still collecting logs, (not pine logs), hither for the evening fire. And suddenly among the snowdrops, crocuses and daffodils, up pops a regulation that affects the Longshore and Harbor Workers' Compensation Act, and from an unlikely source, the Federal Acquisition Regulations, embedded in the Federal Register, Vol. 78, No. 54, March 20, 2013, pages 17176 to 17178. Your comments are due on or before May 20th. Go to http://www.regulations.gov, “FAR case 2012-016”.
The change is not at first sight either revolutionary or problematic. It simply requires contractors to arrange insurance or self-insurance before commencing performance under the contract, and to file the required reports, including the LS-202, and pay compensation timely as required, and to “insert the substance of this clause in all subcontracts to which the Defense Base Act applies”. The proposal states: “The objective of the rule is to amend FAR clause 52.228-3, Workers’ Compensation Insurance (Defense Base Act) to clarify the responsibilities of contractors under the Defense Base Act, including the requirement to include flow down of this clause to all subcontractors to which the Defense Base Act applies.” And, we might add, there’s nothing wrong with that particularly for contractors who are domiciled overseas and probably need some guidance.
However, paragraph (b) reads: “The actions set forth under paragraphs (a)(2) through (a)(8) may be performed by the contractor’s agent or insurance carrier”. Paragraph (a)(2) reads: “Within 10 days of an employee’s injury or death or from the date the Contractor has knowledge of the injury or death, submit form LS-202 (Employee’s First Report of Injury or Occupational Illness) to the Department of Labor…” But this particular form is one that the Employer has to file, not the carrier. Indeed, at least one major insurer makes this clear in CAPITAL LETTERS on their policies. The regulation, whether by accident or on purpose, makes a major change, which affects both the Defense Base Act and the Longshore and Harbor Workers' Compensation Act.
I would respectfully suggest that it is inappropriate to redefine the statutory provision other than by an amendment to the Act or the regulations issued thereunder by the Department of Labor. Paragraph (b) should be amended allow only actions under (a)(3) through (8) to be performed by the insurance carrier. If the Department of Labor wishes to amend its regulations, it should do so. Employers and carriers under the Longshore and Harbor Workers' Compensation Act, the Nonappropriated Fund Instrumentalities Act and the Outer Continental Shelf Lands Act should not have to seek the meaning of the Act under the FAR.
Sunday, July 29, 2012
A BAD PRECEDENT
The Ninth Circuit, in what can only be described in acceptable words as an “unfortunate” decision, determined that surgery many years after maximum medical improvement changes a “permanent disability” to a “temporary disability” under the Longshore and Harbor Workers' Compensation Act.
Since the employer had been granted second injury fund relief, the change to temporary disability required the employer to pay compensation until the claimant was fully recovered from the surgery. Thereafter, permanent disability payments were resumed by the fund.
The court noted that its review dealt only with the nature of the disability, temporary or permanent. It affirmed the Benefits Review Board’s affirmance of the Administrative Law Judge’s decision to this effect, and endorsed as “reasonable” the Director’s longstanding decision supporting the result.
What the court, and evidently the Director, (smarting no doubt from the whipping he received from the Supreme Court in the Harcum case, and so confining himself to “protecting the Special Fund), failed to consider was the effect this case had on the claimant.
The claimant was injured on June 15, 1999. Her average weekly wage was determined (on remand from the BRB) to be $681.85. From October 20, 1999, she had a residual wage earning capacity of $539.00. She reached maximum medical improvement on January 6, 2000. The employer was ordered to pay 104 weeks of compensation with the Special Fund paying thereafter.
Thus the claimant was awarded:
Temporary Total Disability 06/16/1999 – 10/19/1999 @ $454.57
Temporary Partial Disability 10/20/1999 – 01/06/2000 @ $ 95.23
Permanent Partial Disability 01/07/2000 and continuing @ $ 95.23
So far so good.
On October 7, 2007 the claimant had surgery, from which she recovered on June 30, 2008. After that she had no wage earning capacity. She petitioned for modification of the prior award. The Judge awarded:
Temporary Total Disability 10/07/2007 – 06/30/2008 @ $454.57
Permanent Total Disability 07/01/2006 and continuing @ $454.57
A claimant who is permanently totally disabled is entitled to an annual increase in compensation at the same rate as the increase in the National Average Weekly Wage. A claimant with a permanent partial disability is not, because all jobs are assumed to increase at the same rate. The difference between average weekly wage and the residual earning capacity from which the permanent partial rate is calculated would therefore remain constant. In computing the residual earning capacity determined at the time of maximum medical improvement is discounted downward using the same method, to ensure that the difference is computed using numbers valid at the time of disability.
When the Administrative Law Judge interrupted the flow of permanent partial disability payments on October 7, 2007, reinterpreting “permanent” to mean “temporary” temporarily, he awarded benefits based on the compensation rate established in June 1999. Once the case reverted to the Special Fund on July 1, 2007 permanent total disability payments continued at that rate.
If the claimant had been permanently totally disabled from January 2000, her rate at the time of surgery would have been $605, since she would have received the annual increases. Clearly this is the rate she should have received when her earning capacity dropped to zero. Neither the court nor the Director addresses this point. The court states in its second paragraph: “The label we affix does not affect whether the disabled employee is entitled to disability benefits; instead it determines who pays the benefits – either the employer or the special workers’ compensation fund”.
This formulation allows the court to ignore the amount due to the claimant. To the claimant’s detriment. The claimant is now set to receive as total disability only 75% of her real disability. Let us hope that someone with standing sets about remedying this anomaly. Immediately.
Saturday, February 18, 2012
Section 14(f) of the Longshore and Harbor Workers' Compensation Act provides that “If any compensation provided under the terms of an award is not paid within 10 days after it becomes due, there shall be added to such unpaid compensation an amount equal to 20 per cent thereof.”
This provision dates back to the original statute of 1927.
In Knox v ManTech International, USDC New Jersey, Civil No. 11-4974, a Petition For The Entry Of Judgment Pursuant To Section 18(A) Of The Longshore And Harbor Workers' Compensation Act was denied.
The underlying Defense Base Act case was resolved through an 8(i) settlement filed with the Administrative Law Judge on Thursday January 20, and approved by him on Monday January 24, 2011 and the approval filed by the District Director on Wednesday, January 27, 2011. Payment was required no later than Sunday, February 6, 2011. The claims adjuster, who submitted an affidavit to the court, stated that the office was closed on February 1, due to snow. The adjuster therefore first saw the approval to the settlement on Wednesday February 2, 2011. The adjuster requested that the settlement check be ordered immediately, so that the check could be timely mailed via Federal Express to Mr. Knox on Friday, February 4. “Unfortunately, on Friday, February 4th, ice storms and serious weather conditions once again swept through Dallas. This storm prevented [the adjuster] from reaching [the] office. In addition, on February 4, [the adjuster’s] office was closed.” The next two days were the weekend. On Monday, February 7, the insurer reopened for business, and the check was sent via Federal Express. The check was delivered on February 8. It was two days late. The District Director, on April 11, 2011, issued the award required by §14(f). The Director noted that neither the statute nor regulations make exceptions for the weather. “Given the nature of the weather and the potential for more of the same in addition to the amount of possible additional compensation, your client should have been more diligent in its effort to process this payment.” The amount went unpaid, (evidently not due to weather problems). This enforcement action followed.
The judge noted that indeed there was no force majeure clause provision to lengthen the 10 days. He cited Sea-land Service v James Barry, a 1994 decision of the Third Circuit, saying that employers are exposed “through absolutely no-fault of their own to additional liability”. The Circuit “hoped that Congress would address the problems built into this statute”. The judge remarked: “Unfortunately, nothing has happened.” He went to say:
“Under the very limited circumstances presented herein, wherein an office is closed and traffic accidents are numerous due to ongoing snow conditions, the rigid statutory language must give some leeway. Congress could not have intended that under such limited circumstances, a surcharge such as the $60,000 would be imposed upon the employer. See, Connecticut National Bank v. Germain, 503 U.S. 249, 253 (1992). Moreover, as a judge, it is imprudent to establish a precedent where employers would require employees imperil themselves by requiring them to travel to work on a snowy day to issue a check when the length of delay (two days) and monetary loss is minimal. As noted, courts have found that time frames cannot be extended; but this provision has not been analyzed through the due process clause. That is whether the imposition of a $60,000 surcharge "is arbitrary and unreasonable and not proportionate to the actual damages sustained." St. Louis Ry Co. versus Williams, 251 U.S. 63, 64 (1919). See, Exxon Shipping Co. versus Baker, 554 U.S. 471, 501 (2008); Browning-Ferris Industries versus Kelco Disposal, 492 U.S. 257 (1989). In my view it is an unreasonable levy. Therefore, the motion to dismiss the petition for collection of the supplemental award is granted.”
I am told that A Rule 59 Motion has been filed. A judgment based on the unconstitutionality of §14(f) issued without notification to the Attorney General is reversible for that procedural error alone. The judgment should be vacated, the Attorney General notified and given opportunity to defend the constitutionality of the statute.
Carriers normally favor strict interpretation of the statue. “Thus the whirly-gig of time brings in his revenges”, and as with the recently argued Roberts case, (also about an “award”), this time they want some “leeway”. That is flat out wrong. The statute means what it says. Further, “No fault” is not a defense and §4(b) specifically provides “Compensation is payable irrespective of fault as a cause for the injury”. Of course, §4(b) is addressing the underlying injury; however, §14(f) deals with the “injury” of non-payment of an award.
The Connecticut National Bank case states:
“In any event, canons of construction are no more than rules of thumb that help courts determine the meaning of legislation, and in interpreting a statute, a court should always turn first to one cardinal canon before all others. We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then this first canon is also the last: "judicial inquiry is complete." This does not support the judge’s desire for “leeway”.
The St. Louis Ry Co. case dealt with a penalty clause in a railroad case. A 66-cent overcharge was subject to a penalty of $75 plus costs and attorney fee of $25. The court stated:
“The ultimate question is whether a penalty of not less than fifty dollars and not more than three hundred dollars for the offense in question can be said to bring the provision prescribing it into conflict with the due process of law clause of the Fourteenth Amendment…Of this penalty and the need for it the Supreme Court of the State says: 'It is commonly known that carriers are not prone to adhere uniformly to rates lawfully prescribed and it is necessary that deviation from such rates be discouraged and prohibited by adequate liabilities and penalties, and we regard the penalties prescribed as no more than reasonable and adequate to accomplish the purpose of the law and remedy the evil intended to be reached.' When the penalty is contrasted with the overcharge possible in any instance it of course seems large, but, as we have said, its validity is not to be tested in that way. When it is considered with due regard for the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to established passenger rates, we think it properly cannot be said to be so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable. Judgment affirmed.”
So the penalty was upheld as to the amount.
The Exxon and the Browning-Ferris cases each deal with jury awards of punitive damages. Since restrictions on punitive damages are generally reckoned in multiples rather than factors of the original award. They hardly support the view that a 20% addition to an award is “unreasonable”.
The Judge does no more than announce that a provision that has stood for over 70 years is “an unreasonable levy”, with no reasoning. As we shall see, his assumption that the failure was due to force majeure was mistaken also.
An Ithacan lawyer tells me that the provision in the Act is “Draconian”. This man of many devices knows, of course, that Draco was an Athenian, who prescribed death for even minor offenses. (The Athenians soon adopted the less rigorous laws of Solon.) Carriers need not fear; they have not been condemned to death, nor even to punitive damages, merely to a modest percentage, for failure to do the right thing.
The “Oh Dear, Its snowing in Dallas” Defense
The judge remarked: “Moreover, as a judge, it is imprudent to establish a precedent where employers would require employees imperil themselves by requiring them to travel to work on a snowy day to issue a check when the length of delay (two days) and monetary loss is minimal.” This is, of course, quite correct. But, the judge would be setting no such precedent. The cause of the failure to deliver the check was not the bad weather, but the failure of the employer to set up a system for the delivery of payments on time without imperiling their employees, given the possibility even in Dallas, of bad weather. The District Director pointed out in his award that the employer “should have been more diligent” in its efforts to process this payment. His mastery of understatement is to be admired; but he correctly identified the problem. The Judge did not address it.
The Insurance Company of the State of Pennsylvania was founded in 1794. It is no novice in the handling of claims. It was authorized to write business under the Longshore and Harbor Workers' Compensation Act and its extensions on May 16, 1957. Chartis handled the claim on behalf of its subsidiary or affiliate. Chartis, if not the largest insurer in the world, is certainly up there. They have a worldwide presence. They created a “center of excellence” in Dallas to handle their claims. Under the Defense Base Act, Chartis covers workers from all over the globe, from the foothills of Everest in Nepal, the war torn deserts of Iraq, to the remote snowy hills of Afghanistan. The problems of delivery in those countries are of a different order of magnitude from getting a payment sent out from a multi-office corporation in the continental United States. That they cannot get a payment from their own chosen center because bad weather shut down the office on two separate days would seem to be something they would wish to hush up as fast as possible. “Tell it not in Chicago, publish it not in the streets of Philadelphia” lest competitors rejoice.
It is known to every competent carrier that there is a deadline of ten calendar days for payment of settlements. It is known that once the settlement application is delivered, the Administrative Law Judge or District Director has thirty days to approve or deny the claim. In this case, the settlement application includes an agreement as to the address to which payment must be sent, obviously to avoid any mistake in delivery. The carrier had clearly covered that possibility. It might have also tried for an electronic transfer or direct debit, which is quick and avoids the risks of traffic accidents, destruction of checks in transit and so forth. Assuming the claimant would not agree to that procedure, the obvious course of action is to requisition the check when the settlement agreement is sent to the judge. It is highly unlikely that the judge will reject a settlement supported by counsel. If he does, void the check. If not, mail it at once. In this case, the check should have been sent via Federal Express on Wednesday evening, February 2. It could then have been delivered on February 3, well in time to beat the deadline.
It is therefore clear that this is not a case of a misfortune for a single adjuster, whose workplace was rendered suddenly inaccessible. It is a case of the failure of an authorized insurance company, over two hundred years old, with over forty years experience of the statute, whose obligation is to pay claims within the dates prescribed by statute, failing to implement a system to ensure that this happens; and failing to provide for an emergency plan if it doesn’t.
Had they spent half the additional compensation implement a system that worked, it would have been well spent. The administration of claims under the Defense Base Act by AIG, as it then was, was subject to severe criticism at a congressional hearing, not least because of the high premiums charged. And the accounts of lavish spending on entertainment were widely circulated at the time that the financial crisis broke. The problem is not lack of money. In this case, elementary precautions were simply not in place. No force majeure, no isolated event caused this failure to pay on time, and to put a front line adjuster up to present a sob story irrelevant to the matter in hand, simply adds to the managerial failure to take responsibility for its procedures or lack of them.
As you will recognize, the above is not a legal opinion, but my own take on a situation. If you want legal advice you should hire an attorney licensed to practice law.