Some Thoughts on Liability and Compensation Systems - A Jeu D'Esprit for David DePaolo

James Johnson v. PPI Technology et al. On appeal from The United States District Court For The Eastern District Of Louisiana, No. 2:11-Cv-2773. Fifth Circuit case number 14-30423.

David DePaolo of WorkComp Central brings this case to our attention and writes: -

“Regular workers' compensation cases sometimes involve disputes about who is the employer, so this case isn't really all that different in that regard.

But I think it's interesting to us in the regular work comp field to see what life would be like if there were no "no fault" provision in our laws - an additional element of dispute to be resolved adds one more very big layer to the liability picture.

And that disputes go before a jury is what life was like before the administrative proceedings of nearly all work comp litigation now.

Perhaps to a maritime/Jones Act regular, this set of facts and this case isn't all that interesting or important, but those of us in the traditional work comp field should remind employers and workers that this is what life is like without comp's attempt to deliver quick and expedient benefits: four years just to find out who the correct employer is, and still there is the need to prove negligence before any benefit liability is due...”

In answer to the challenge here a few thoughts about the two systems, with special reference to the Longshore and Harbor Workers' Compensation Act.  This a very general piece, and people should be warned that it is not legal advice,  and you believe it at your own risk.

For most people involved with workers’ compensation, the first place to look for a comparison with employers’ liability would be the Railroads.  A railroad worker in intrastate commerce is covered by the workers’ compensation law of that state.   A worker in interstate commerce is covered by the Federal Employers’ Liability Act, (“FELA”), codified at 45 U.S.C. § 51 et seq. (1908).  This very old statute allows an employee to sue in either federal or state court for damages.  It effectively abolishes the old terrible triad of defenses, contributory negligence, assumption of risk and fellow servant negligence.  Damages are reduced in proportion to the employee’s own negligence. 

Congress passed the Merchant Marine Act, the “Jones Act”, in early June 1920.  The short part related to seamen is codified as 46 U.S.C. § 30104: "Any sailor who shall suffer personal injury in the course of his employment may, at his election, maintain an action for damages at law, with the right to trial by jury, and in such action all statutes of the United States modifying or extending the common-law right or remedy in cases of personal injury to railway employees shall apply..."  Thus, the provision operates simply by extending FELA to seamen.

Both these statutes are alive and well and living among us, not just on the Ocean but throughout the US, and its rivers and lakes.  Several railroads also own or operate docks, and ships or barges to transport their product.  Such companies may have employees covered by state compensation law, FELA, US Longshore and Harbor Workers' Compensation Act, (“LHWCA”), and the Jones Act, and thus two workers’ compensation statutes and two liability statutes.

I went to a Railroad claims conference, (a great experience), where I found that there were four basic claims they faced.  First, passenger injuries; second, collisions at crossings; third, trespassers on the line and fourth, employee injuries.

The claims people I spoke with preferred liability claims, all of which had roughly the same rules, without having to mess with the complexity of workers’ compensation laws and their differences.  The director preferred workers’ compensation because it was not necessarily nor always confrontational or adversarial.  A defense attorney preferred Jones Act to Longshore, because “you can win a Jones Act case”.  A shipowner preferred Jones Act because you can handle the cases without interference from the government, and if you mess up, you’ve always got your insurance to cover it.

So what are the differences between the pacific world of compensation and the wild west of employers’ liability?  Actually, the latter is like any normal liability claim, except it’s against your employer. 

Given the alacrity with which employers accept compensation claims, and do try to push them onto private medical systems, there probably isn’t much difference.   Some state statutes have threshold requirements for accepting or rejecting claims.  LHWCA, reflecting its date, (1927 and 1972), does not, so that an employer can deny a claim with impunity. Prompt payment is far from unusual but it is not enforceable. 

How quickly is payment enforceable?   Under LHWCA, you need to set an Informal Conference – which can be done relatively quickly, but realistically not for a couple of weeks.  Then there has to be a recommendation, which may be rejected.  Then the case will be assigned to the Office of Administrative Law Judges.  The time between referral and trial depends on where the claimant lives, since the Judges will often have to travel to the area, so cases will be tried at the same time, and also on the parties.  A trial date shorter than 90 days will usually be met with a request for a continuance.  Once the case is tried there may be delays before the record is closed.  Once the record is closed the decision will take some time, often as much as a year.  So realistically, an LHWC case that is disputed can take about two years before a decision can be expected.  This is probably shorter than most liability cases could be expected to be decided.

A decision awarding benefits must be paid before an appeal can be made to the

Benefits Review Board.  This is a benefit to the injured worker, because if the worker wins a liability case, the defense can appeal without first paying the award.

To get an award the worker must prevail.  Under LHWCA the worker must prove:

1.     An injury

2.     Conditions at work that could have caused the injury.

The employer can rebut the presumed link between the two, by substantial evidence.  The employee must then prove on the balance of probability that there was a link.  In other systems the employee must always prove the link.  In FELA and Jones Act cases the employee must prove:

1.     A duty owed by the employer;

2.     Breach of that duty;

3.     Which caused the accident.

Under FELA and Jones Act the burden of proving negligence is “feather weight” and causation is not judged under the “proximate cause” standard.  In this sense a critic might say that these statutes are so favorable to the employee as to be “compensation without limit of benefits”.  But an important difference is not so much the proving of negligence by the employer, but that an injury in the course and scope of employment with the employer but caused by a negligent third party is compensable under a compensation act, with a subrogation right of recovery from the responsible party, but under a liability statute, only the responsible party is liable.

The LHWCA has a provision in §905(b) allowing recovery from a vessel responsible for the injury.  However, there are rules relating to the duties of the vessel owner and the stevedore employer that limit the circumstances in which the worker can recover from the vessel.  This a frequently litigated field, often unpopular with employers who feel they are providing an income stream to support the worker while he sues their customer.

Under the Jones Act, if the case brought in the Federal Court under the Admiralty rules, the Judge, not the jury, decides the case. This old procedure was the reason that the Longshore Act does not violate the constitutional requirement for a jury – there never was such a right in Admiralty, and LHWCA is a reform of admiralty, not common, law.  Since there is a right to a jury in the employee’s option, this is perhaps a benefit.  However, I recall many years ago a case which the defense asked for a jury trial.  The Judge to whom it had been assigned rejoiced in the nickname ”Santa Claus”.  The question of who decides the cases is a lottery, since not all juries are the same, nor are all Judges.  An inexperienced Longshore Judge may very well be a good judge, finding facts based on good reasoning and making good credibility determinations.  Lack of experience with the arcane recesses of the law is not so important as having a clear, comprehensive and well-explained finding of facts.  Because there is a high degree of deference given to the trier of fact by the appellate process, a good first instance decision is essential.  The 1972 amendments moved the formal hearing proceedings from the District Directors to the Administrative Law Judges, with Congress noting the need for the Department of Labor to swiftly install judges skilled in this field.  This leads to a reasonably predictable result, based on the individual quirks of individual judges.  In many ports there are Judges very familiar with maritime affairs, leading to the same reliably predictable results.  Of course, predictability does not mean desirability from both sides point of view.

Which brings us to the extent of benefits.  One advantage of a liability system for a claimant is the control of the medical; a compensation system allows a greater involvement by the employer both as to utilization and price.  In both system there are likely to be “dueling doctors”.

A major difference in monetary amounts is, obviously, the way lost wages are calculated.  Compensation systems work on a notional average weekly wage, often subject to a limit, with a reduction to reflect tax; liability systems work on actual wages, on an individual basis, requiring evidence from an economist.

The liability system will predict lost wages over work life expectancy.  A compensation system typically limits many accidents to a number of weeks compensation based on a schedule.  The LHWCA limits such cases to injuries to extremities.  All other injuries require two thirds of the difference between the assumed to last until death, not a notional work life.  Permanent total disability is special case where the post accident wage is zero.  In these cases an annual wage, (not cost of living), increase replaces the post accident wage.

The liability systems of course, allow for non-pecuniary damages, which typically would make the full recovery higher than under compensation acts.  The liability systems also then reduce the damages to a lump sum reduced by a present value factor based on life expectancy.

The third difference, of course, is that a liability system allows a reduction, as a percentage, to reflect the comparative fault of the worker.  Thus for the same accident a worker may get a very large sum of money, nothing, or something in between.  Compensation provides a fixed sum regardless of fault.  The benefits of one system or the other depend on the case.  A typical example would be an accident occurring in a car park.  If the injury is catastrophic and the fault of the employer, the employer will argue that it is covered by compensation.  If it is the fault of the worker, the employer will argue that it is not covered by compensation.  And the worker will argue the reverse.  A similar calculus allows for arguments as whether a worker is a Jones Act seaman or a Longshoreman.

Once the benefits have been awarded, the question of payment of legal fees arises.  The LHWCA is a fee shifting statute and of late years has been a huge bone of contention.  The employers have carefully parsed the act to ensure the minimum possibility of the shifting to occur, and if it does to limit the amount of fee payable as to both rate and utilization.  Under liability statutes, the “American Rule” applies and the fee is deductible from the recovery.  The combination of a reduction for comparative fault and for fees may in individual cases make a compensation recovery more beneficial to workers.

The biggest problem seems to me that the compensation system has been kidnapped by the legal system, and we may compare it with the difference between for example a safety inquiry in a hospital seeking to find cause, with a legal inquiry into the same incident to find blame, or an accident analysis like that into the TWA crash off Long Island, where the FBI and National Transportation Safety Board had entirely different ways of proceeding.  If we wish to make a determination that work accidents are societal matter, and that industry rather than either the individual or society as a whole should bear the cost, then we should ensure that the procedure really does ensure the continuation of money to the worker, and appropriate medical is promptly delivered and paid for.  In many cases, a compensation case looks like a liability case, with legalese sprinkled through the pleadings, instead of using plain language.  I’m sorry, but starting a pleading “Comes now..” in the twentieth century is just plain idiotic.  Many of the issues that arise could be sorted out singly.  The biggest source of immediate concern is often the calculation of the average weekly wage.  Why do you need a hearing about it?  If you can’t explain your position in writing, an oral hearing isn’t going to help you.  Both sides should simply send their calculations and arguments to the District Director who can then transmit them to the OALJ.  A Judge can be assigned with twenty-four hours, and start working on the problem right away.  In the meantime, the rest of the case can continue until another issue arises.