Category Archives: Government

Portability, The Gig Economy And Workers Compensation

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

Changing employment laws to encourage so-called “portable benefits” is an idea that goes hand in hand with finding new ways to classify gig economy workers. These proposals are being pushed in a  growing number of states. These proposals also enjoy support from Democrats and Republicans in Congress. These proposals could also radically alter workers’ compensation in the United States.

The idea of third classification of worker between employee and independent contractor is to give so-called “gig economy” workers some protections and benefits without employers having to bear the full costs of employment – including unemployment, workers’ compensation and health insurance. Sometimes this third class of workers is described as “dependent contractors.

Portable benefits are usually discussed in the context of contractors because traditionally benefits such as unemployment, workers’ compensation and health insurance have been provided by employers. So-called portable benefits, are detached from employers. The Affordable Care Act increased portability of health insurance benefits through the use of exchanges Portability of health insurance was touted as a way to help create new businesses because potential entrepreneurs were not tied to an employer for health insurance.

The idea of portable benefits and a new classification for gig employers is also touted as a way to reduce litigation against companies such as Uber for how they classify employees. But former National Labor Relations Board member Craig Becker pointed out that creating a new class of workers may actually create more litigation when employers try to re-classify employee as dependent contractors. Becker and others pointed out that this is what happened in Italy when Italy created a third class of worker that was neither employee nor independent contractor.

Becker and others point out that the drive to create a new class of workers is being driven by tech companies such as Uber as a way of reducing labor costs. The real risks of creating a new classification of workers is shared even by some who promote the sharing or gig economy. Gene Zaino, founder and CEO of MBO Partners, a firm that provides services to independent workers, stated that any new classification of independent workers should only include workers who earn more than $50 per hour. Under such a scheme lower-paid workers would still retain the benefits and protections of the employment relationship.

Though states are pondering portability and dependent contractor laws, there is a push for federal legislation so that laws can remain uniform across the country. Any federal push for portable benefits for so-called independent workers would clash with state-based workers’ compensation laws. Workers’ compensation is traditionally a state law concern because when workers’ compensation laws were enacted the power of the federal government to implement laws regarding workplace safety were limited. During the New Deal-era, that interpretation of the interstate commerce clause changed to allow broad regulation of the workplace.

Advocates for state-based workers’ compensation laws likely have little constitutional grounds to overturn any federal legislation that would substitute “portable benefits” for so-called “independent workers” for state-based workers’ compensation benefits. Some critics who argue, correctly, that many state-based laws inadequately compensate injured workers could also be open to or even welcome a federal substitute for  insufficient state workers’ compensation laws.

Alabama Court Strikes Down Anti-Worker Provisions Of State Workers’ Compensation Law

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

An Alabama trial-court level judge ruled the Alabama Workers Compensation Act was unconstitutional in a recent decision. Though the decision isn’t binding on a state level and it was recently stayed or delayed indefinitely, it is an important and interesting decision for many reasons.

The Alabama workers’ compensation statute was found to be unconstitutional because it capped benefits at $220 per week for permanent injuries and it limited attorney fees for plaintiff attorneys to 15 percent. Jefferson County Circuit Court Judge Pat Ballard found that Alabama’s cap on permanent damages violated equal protection of the laws because it created two classes of workers without any rational basis because some workers were fairly compensated for permanent disability while others were not. Ballard also found that the attorney fee cap violated constitutional due process rights.

Ballard’s reasoning about equal protection and due process mirror recent state supreme court decisions in Oklahoma and Florida striking down anti-worker reforms to the workers’ compensation laws in those states. Florida struck down attorney fee caps for plaintiff’s attorney because they impaired the ability of injured workers to find counsel. Oklahoma struck down the so-called Oklahoma option because it impermissibly created two separate systems for workers’ compensation, one of which could make it almost impossible for workers to collect benefits.

While it is encouraging that courts are protecting the rights of injured workers, the decisions in Oklahoma, Florida and Alabama have all been driven by anti-worker legislation in those states. Unfortunately, that trend is continuing in 2017.  Possible Democratic presidential candidate and New York Governor Andrew Cuomo pushed through anti-worker reforms to New York’s workers’ compensation act.

The recent attack on workers’ compensation has been bi-partisan. A newly- elected Republican legislature in Iowa passed anti-worker workers’ compensation reforms which were signed into law by that state’s Republican governor. The Iowa reforms include a cruel measure that caps benefits for senior citizens who are injured on the job. That provision may be ripe for an equal protection challenge.

Relying on appellate courts to protect the rights of injured workers’ is a risky strategy. Workers compensation laws were passed by state legislatures in response to pressure from unions and other workers advocates during the early 20th century when appellate courts were generally hostile to employees. While it seems that trend may have reversed in the early 21st century, appellate judges certainly can’t be accused of pro-worker bias.

Good legislation also prevents the need for worker advocates to look to the judiciary to protect the rights of workers. Part of the reason, Judge Ballard ruled against the Alabama Workers Compensation Act was because the maximum benefit rate had not increased in 30 years. In Nebraska, our maximum benefit rate increases automatically under a formula determined by the Department of Labor. Nebraska’s current maximum rate is $817 per week for temporary and permanent disability.

Attorney Fees and Incentives in Workers’ Compensation

Today’s post comes from guest author Charlie Domer, from The Domer Law Firm.

Abe Lincoln said it best “The matter of fees is important far beyond the mere question of bread and butter involved.  Properly attended to, justice is done to both lawyer and client. . . when you lack interest in the case, the job will very likely lack the skill and diligence in the performance.”

Three states have recently addressed the issue of attorney fees in workers’ compensation cases, most recently in Alabama, where an attorney fee cap of 15% on already-low benefits was found unconstitutional. It took a judge in Alabama who had been a carpenter for 15 years and then a lawyer before he took the bench, to recognize that an attorney fee cap at 15% of a $220 weekly Permanent Partial Disability benefit would not provide sufficient incentive for attorneys to be involved in workers’ compensation claims for Permanent Partial Disability in Alabama, depriving injured workers of their constitutional rights.  Judge Pat Ballard gave the legislature in Alabama four months to cure the deficiencies in the Alabama Code.

Judge Ballard found persuasive the Florida Supreme Courts reasoning in Castellanos v. Next Door Company where the Court indicated the inflexible nature of Florida attorney fee statute made that law unconstitutional.  He also agreed with the reasoning of the Utah Supreme Court, which found its workers’ compensation attorney fee caps unconstitutional.

An attorney’s determination to take a workers’ compensation case has to do with both the merits of the case and potential for recovery of attorney fees.  In Wisconsin attorneys are not paid on any portion of the medical expenses and fees are capped at 20% of the Temporary Total and Permanent Partial Disability benefits obtained for the injured worker.  In Permanent and Total Disability claims, fees are capped at ten years of benefits.  (Routinely benefits that are further offset by the injured worker’s receipt of Social Security Disability and Long Term Disability benefits.)  As Abe Lincoln indicated long ago, “When you feel you are working for something, you are sure to do your work faithfully, and well.”  (Notes to the Ohio State Law School Graduating Class of 1858.)

Theodore Roosevelt Pushed For Protection Of Workers

Today’s post comes from guest author Brody Ockander, from Rehm, Bennett & Moore.

Workers’ Compensation benefits are often confusing and seemingly unfair at first glance to many of my clients. As a result, I often find myself explaining to these clients how we, as a country, got to where we are with workers’ compensation laws and why the benefits are more limited than other civil lawsuits.

In explaining work comp laws, I usually give a brief description of the work comp system that was first developed in the early 20th century and a description of the “Grand Bargain”, the premise that employers pay for some benefits of their injured employees in exchange that the employee cannot sue that employer for negligence in civil court.

I, and many scholars, could go on and on about the history of the Grand Bargain and how it was strengthened/reworked in the 1970’s. Also, scholars can (and have), go on about the recent “reform” to workers’ compensation laws that have eroded workers’ rights in domino-fashion in many states by anti-worker legislation.

Nevertheless, I think the most poignant description of why we need to protect workers, and continue to protect workers, is this quote from our 26th president, Theodore Roosevelt, in calling for further reform of laws that Congress passed for employers’ liability laws:

In spite of all precautions exercised by employers there are unavoidable accidents and even deaths involved in nearly every line of business connected with the mechanic arts. This inevitable sacrifice of life may be reduced to a minimum, but it can not be completely eliminated. It is a great social injustice to compel the employee, or rather the family of the killed or disabled victim, to bear the entire burden of such an inevitable sacrifice. In other words, society shirks its duty by laying the whole cost on the victim, whereas the injury comes from what may be called the legitimate risks of the trade. Compensation for accidents or deaths due in any line of industry to the actual conditions under which that industry is carried on, should be paid by that portion of the community for the benefit of which the industry is carried on–that is, by those who profit by the industry. If the entire trade risk is placed upon the employer he will promptly and properly add it to the legitimate cost of production and assess it proportionately upon the consumers of his commodity. It is therefore clear to my mind that the law should place this entire “risk of a trade” upon the employer. Neither the Federal law, nor, as far as I am informed, the State laws dealing with the question of employers’ liability are sufficiently thorogoing.

— Theodore Roosevelt: Sixth Annual Message, December 3, 1996.

No Accident: How To Protect Yourself Against An Uninsured (Or Underinsured) Driver

Today’s post comes from guest author Catherine Stanton, from Pasternack Tilker Ziegler Walsh Stanton & Romano.

As an attorney who has been practicing law for more than 27 years, I always try to keep myself updated on issues that affect not only my practice, but more importantly, my clients. In order to fully understand the numerous changes, I belong to a number of bar associations that offer continuing legal education programs, as well as the opportunity to lobby at both the state and federal level on issues that impact many New Yorkers.

During my last round of lobbying in Albany, one of the bills being proposed was the New York Driver and Family Protection Act. It deals with Supplementary Uninsured/Underinsured Motorists insurance (SUM Insurance) and it is likely that many of you have very little idea of what this is. I didn’t either until it was brought to my attention.

While every driver in New York State is required to have auto insurance, some opt for the minimum coverage required under the law, which is $25,000. Others purchase more than the minimum coverage so that in the event of an accident resulting in serious injuries, there will be a better chance that their policy will cover the medical expenses and injuries of the other driver. We do this to protect our personal assets in the event we are sued as result of an accident. What many do not realize is that if you are seriously injured by another driver who only has minimum coverage, you can only collect up to the $25,000 policy maximum, regardless of the extent of your injuries.  

SUM Insurance provides coverage to New Yorkers who are injured in an accident with a driver who is not insured or is underinsured. Unfortunately, many New Yorkers are unaware of their ability to purchase this additional insurance. Since I had not been advised of this insurance by my broker and had no idea it was available, I was one of those drivers who didn’t know it was an option. Once I found out about this, however, I immediately added it to my policy and was surprised to see how relatively inexpensive it was.

The bill would require insurers to provide information to consumers about this type of coverage at the time they are purchasing insurance, which would enable them to make a fully informed decision. Once consumers are aware of the coverage, they could decide to opt out of purchasing it but at least they would know that it’s even an option to begin with. Additionally, this bill would protect motorists by amending the Insurance Law to establish that drivers’ underinsurance (SUM Insurance) equal their liability coverage. If drivers opt to decline the additional SUM Insurance coverage, they may waive it only after they fully understand what type of coverage is available – and then they must do so in writing. 

This bill makes sense because if anyone is injured by a driver who only has the minimum coverage, the injured party will still need treatment. Oftentimes this will fall onto Medicaid and other programs that are essentially taxpayer funded. Once people are fully informed, it makes sense that those who take more than the minimum coverage would opt to take some amount of coverage for SUM Insurance.        

For those who are concerned about rising insurance rates due to this bill, you shouldn’t worry. SUM Insurance is low cost and according to insurance experts, will not raise insurance rates.

As of this writing, the SUM bill passed both the Senate and the Assembly in Albany, and now is waiting to be called up by Governor Andrew Cuomo for his review and hopefully his signature into law. It seems clear that this bill would help all New Yorkers make informed decisions on issues that impact them in their day-to-day lives. While we all hope we never have to use it, if anyone of us or a loved one is involved in a serious accident, it would be nice to know that we at least don’t have to worry about proper coverage.

 

Catherine M. Stanton is a senior partner in the law firm of Pasternack Tilker Ziegler Walsh Stanton & Romano, LLP. She focuses on the area of Workers’ Compensation, having helped thousands of injured workers navigate a highly complex system and obtain all the benefits to which they were entitled. Ms. Stanton has been honored as a New York Super Lawyer, is the past president of the New York Workers’ Compensation Bar Association, the immediate past president of the Workers’ Injury Law and Advocacy Group, and is an officer in several organizations dedicated to injured workers and their families. She can be reached at 800.692.3717.

Law Promoting Openness Regarding Pharmacy Benefit Managers Meets Industry Resistance

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

A North Dakota law attempting to promote openness about fees and prevent conflicts of interests with so-called pharmacy benefit managers (PBM) would seem non-controversial.

Non-controversial to everyone besides lobbyists for the PBMs who have sued the State of North Dakota in federal court claiming this commonsense legislation harms patient safety and is unconstitutional.

The North Dakota suit matters in the world of workers’ compensation because PBMs are an essential component of drug formularies which are popular with workers compensation insurers and have been touted as a way to prevent opioid abuse and control drug costs. Formularies are a list of approved drugs and dosages. Formularies are administered by the PBMs who buy the drugs, allegedly at a discount, from drug companies and pass along those savings onto users.

Drug formularies have come under criticism for issues addressed by the North Dakota legislation. First, a PBM may have a relationship with a particular drug maker which means that drugs are picked on for business reasons rather than medical reasons. Formularies also may not control drug costs as advertised.  In response to a drug formulary bill in Nebraska last session, the City of Omaha was concerned that formularies might increase drug costs because of the inability to use generic drugs.

Related to that concern, PBMs have been criticized for their role in helping drug companies pass along higher drug costs to consumers. PBMs are paid on what the discount they can negotiate, so drug companies have an incentive to inflate drug costs which benefits PBMs.

Lawmakers on a state or federal level are correct in having concerns about PBMs if they want to address drug costs and opioid use. The PBM industry has argue that state laws are “pre-empted” by federal laws regulating prescription drugs, so state laws are unconstitutional. Pre-emption is premised on the fact that federal laws are superior to state laws if there are federal and state laws on both subject matters.  Recently the U.S. Supreme Court has used pre-emption to strike down state-based consumer protection laws in favor of corporate defendants. The threat of successful litigation may scare states, especially smaller states, from passing laws to regulate PBMs.

But state laws regulating the use of PBMs in the context of workers’ compensation may be easier to defend from a legal standpoint. Workers compensation laws are enacted under a state’s police powers under the 10th Amendment. The constitutional basis of workers’ compensation laws is arguably a fluke of legal history but workers’ compensation is traditionally seen as a state law concern so federal courts may be less to strike down laws regulating PBMs in the context of workers’ compensation.

Major Employer Questions Use Of Drug Formularies In Workers’ Compensation

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

Drug formularies are touted as a way to fight prescription drug abuse and contain prescription drug cost. But one major Nebraska employer appears to be questioning whether drug formularies really contain prescription costs.

In a fiscal note for LB 408, a bill introduced in the Nebraska legislature to create drug formularies for opioid pain medications in workers’ compensation claims, the City of Omaha expressed concern that the inability to substitute for generic medication in a drug formulary could lead to higher prescription costs.

The City of Omaha was echoing widespread concerns about the possibility of conflict of interests in drug formularies. Those concerns were explained by me in a blog post published last December. In short, drug formularies are administered by pharmacy benefit managers. Pharmacy benefit managers make money by negotiating discounts from drug manufacturers. This gives pharmacy benefit managers incentive to put more expensive drugs on drug formularies because they can negotiate a more lucrative discount than they could for a less expensive generic drug.

LB 408 was held in committee by the Business and Labor committee so it is unlikely it will be considered in this legislative session. Opioids abuse is a topic of high interest for political leaders so drug formularies as a way to reduce opioid use will likely be discussed further in Nebraska.

The City of Omaha has a workforce this is more heavily unionized than most other workplaces in Nebraska.  In some instances, labor and management will collectively bargain how some aspects of a workers’ compensation program is to be administered. Supporters of organized labor originated the idea of “labor pluralism” during the New Deal and Post-War era. (4) Labor pluralism means that government should minimize interference between the labor-management relationship.   In a unionized workplace, labor and management have a complicated relationship that is both cooperative and confrontational depending on the circumstances. A mandate from the state requiring the use of drug formularies could be as undermining labor-management relations when a labor and management have bargained about the administration of workers’ compensation benefits.

Tax Day For Independent Contractors: More Paperwork, More Taxes

Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.

The issue of whether Uber drivers and other so-called “Gig Economy” workers are employees or independent contractors is a hot topic among lawyers and policy makers. But last week independent contractors in the Gig Economy and beyond had a more mundane but no less serious dilemma:

Filing their taxes

Independent contractors are required to pay their full FICA and Medicare taxes. These higher taxes can be offset by more liberal deductions but that assumes a contractor has more expenses to deduct.

Deductions also require paperwork.  Filing your taxes as an IRS Form 1099 independent contractor is more complicated than filing your taxes as an IRS W-2 employee.

Independent contractor status can be helpful for someone who wants to be an entrepreneur. But for those who just want to support themselves and family, involuntary independent contractor status can mean higher taxes, more paperwork and more risk of trouble with the IRS and state revenue agencies.  Future tax days could be even more stressful if more workers are forced into independent contractor status in order to support themselves and families.