COLORADO BALLOT PROPOSED AMENDMENT #69 – POTENTIAL IMPACT ON WORKERS’ COMPENSATION MEDICAL BENEFITS

Amendment 69 Colorado

Colorado State Health Care Initiative 20 (Amendment 69)

 
Background

Initiative 20 got on the 2016 Ballot as Amendment 69.  It was authored by Irene Aguilar, M.D. who is a Democratic member of the Colorado Senate and a primary care physician.  A similar attempt to migrate a state to a single payer system was tried recently in Vermont.  Vermont’s Bill went through the State House and Senate.  It was signed by the Governor in May 2011.  In December 2014, Vermont’s Governor retracted his backing of the single payer program due to a lack of clear funding and the negative effect of the taxes on businesses.  Vermont’s single payer healthcare law, although passed and enacted, has essentially been abandoned.  Similar to Amendment 69, Vermont’s Act 48 purported to integrate workers’ compensation medical benefits into a universal healthcare system.

 

Overview

 Section 1332 of the Affordable Care Act (ACA) allows a state to obtain a waiver from the ACA, if the state sets up a system that provides the same level of coverage.  Amendment 69 creates a single-payer system for health care in Colorado known as ColoradoCare.

 

Funding

ColoradoCare would be funded by a 6.67% payroll tax upon employers and a 3.33% tax on employee income.  Other income sources would also be subject to the premium tax including rents, interest, dividends, capital gains, pensions and annuities.  Certain income would not be subject to the premium tax.  Maintenance and unemployment are not subject to the tax.  In addition, the first $33,000 of Social Security or pension payments are not subject to the premium tax and the same is true for the first $60,000 for those filing jointly.  Those who are self-employed or whose income is from investments would be subject to a flat 10% of that income as a premium tax.  ColoradoCare would not be subject to TABOR (Colorado’s Taxpayer Bill of Rights) limits on new tax increases.  The premium tax would be deductible from income taxes.  The premium taxes are capped at $350,000 for individuals and $450,000 for those filing jointly.  Increased funding, if necessary, would come from members.  A “member” is someone who is 18 years old and has lived in Colorado for a continuous year.

 

Amendment 69 purports to raise 21 billion dollars by 2019.  For comparison, the 2016 total state budget is approximately 25 billion dollars.  The Amendment would nearly double State tax collection.  The projected savings to businesses and individual is supposed to come from the removed need for employer and individual contributions to private plans, reduced administrative costs from private plans and general fraud prevention.  Figures offered in support of Amendment 69 place current premium estimates for private health plans at a monthly contribution of $278 (employer) and $139 (employee) for an employee making $50,000 a year.  These figures go up to $556 and $278 monthly for an individual making $100,000 a year.  There are other ancillary purported savings from various sources based on no required co-pays or deductibles.

 

Governed

ColoradoCare would be operated by an interim board of 15 members appointed by the Governor and legislative leaders.  This board would then develop an election process to create a new Board of Trustees and to formulate rules to ensure the board’s operation.  It would also apply for the exemption from the ACA.

The interim Board would be replaced within three years with an elected 21-member Board of Trustees.  The trustees would be elected from seven state districts of comparable size.  The trustees would be charged with establishing purchasing authority for medications and medical equipment and with establishing an ombudsman’s office for beneficiaries and providers.

 

Coverage

ColoradoCare would provide a comprehensive benefit package.  It includes emergency and trauma services; primary and specialty care; hospitalization; prescription drugs; medical equipment, mental health and substance use services; chronic disease management; rehabilitative and habilitative services and devices; pediatric care, including oral, vision, and hearing services; laboratory services; maturity and newborn care; and palliative and end of life care.  There are no deductibles, or co-payments and any potential co-pay requirements would have to be approved by the Board of Trustees.  The “member” would choose a primary care provider.  A beneficiary traveling or living temporarily out of state is still covered.

ColoradoCare would serve as a supplement to Medicare.  For any other healthcare plan in effect ColoradoCare would be a secondary payer.

 

Delivery of Services

ColoradoCare will assume payment of health services.  The interim Board and the Board of Trustees are charged with implementing payment and billing systems, handling quality and value concerns and any cost saving mechanisms.

 

AMENDMENT 69 AND INTEGRATION OF WORKERS’ COMPENSATION MEDICAL COVERAGE

Amendment 69 integrates workers’ compensation medical coverage into ColoradoCare.  ColoradoCare offers this as an overall cost savings, citing statistical data affixing a 59% medical cost component for benefits paid under the workers’ compensation system.

 

General Considerations

Colorado Workers’ Compensation

Under Colorado workers’ compensation laws, an employer must obtain coverage for workers’ compensation insurance by becoming self-insured, obtaining coverage through a commercial insurer, or through the quasi-governmental entity, residual market insurer, Pinnacol Assurance.  Medical benefits are part of the benefit package provided under Colorado’s workers’ compensation system. Medical benefits are the most expensive component of the benefit package, accounting for over 50% of the total workers’ compensation costs to employers and carriers.  Workers’ compensation is an exclusive remedy to an injured worker.  The injured worker cannot pursue the case in District Court against an employer so long as the employer has complied with the Colorado Workers’ Compensation Act.

 

Medical Care in Workers’ Compensation vs. ColoradoCare

There is no coordination between the proposed Amendment 69 and the Colorado Workers’ Compensation Act.  ColoradoCare simply steps in as a payer for work injuries.  By the same token, there is no coordination between recovery for injuries from a third party.  ColoradoCare simply has recovery rights against third parties, presumably for amounts paid as a result of injury.  Therefore, workers’ compensation third party recovery rights remain intact for benefits not covered under ColoradoCare.

Medical benefits under workers’ compensation are different than those provided under ordinary health insurance.  Workers’ compensation is an event-based coverage, meaning that coverage is dependent on the event of a work injury and extends first so long as treatment continues to cure and relieve the effects of the injury to a point that treatment plateaus.  Medical coverage is then extended for modalities to maintain claimant’s level of function.  The goal of medical treatment under workers’ compensation is to get the worker back to work as quickly as possible and at an optimal level of function. The injured worker has no payment obligation for medical care.  Under the circumstances, the employer and carrier are the primary stakeholders in the workers’ compensation system.  Colorado allows the employer to maintain a degree of medical management of workers’ compensation claims that includes selecting the authorized treating physician in the first instance.  Barring a change of physician that same physician serves as a gatekeeper, making necessary referrals and medically managing the claim to a point of maximum medical improvement and, in certain circumstances, determining a medical impairment for claimant’s injury or condition.  Providers under the Colorado Worker’s Compensation Act generally follow medical treatment guidelines established for most injuries or conditions and are reimbursed under a medical fee schedule aligned with the services provided.

Health insurance is treatment based and extends for the length of the coverage without regard to the cause of the injury, or condition. Health insurance coverage is significantly less structured in approach to care and providers are reimbursed under different systems and rates. Further, there is less emphasis on treatment directed at an individual’s level of function.

Medical providers under the workers’ compensation system generally have accreditation as level I or level II.  This training emphasizes treatment for functional gain and returning the injured worker to work within safe parameters.  Many of these medical care providers are experts in occupational medicine and\or are board certified in physical medicine and rehabilitation.  These providers have a working familiarity with medical treatment guidelines that are designed to foster the goals of treatment directed at functional improvement and returning an injured worker back to work.  Further, only level II providers can provide a medical impairment rating for work injury or occupational disease.  Treatment by a non-level II primary care physician would require a referral to a level II physician to provide a medical impairment rating.  Given the circumstances, integrating medical care under ColoradoCare, with less emphasis on functional improvement and returning an injured worker back to work, will likely extend and increase the cost of this care.

The cost and duration of medical care is also directly tied to increased indemnity cost per claim.  Without emphasis on returning to work within restrictions potential entitlement to wage replacement benefits will increase. In addition, an injured worker’s eligibility for indemnity benefits is capped depending on the amount of medical impairment assigned for an injury or occupational disease.  To the extent an injured worker uses amounts under the applicable cap as wage replacement benefits, it may prevent the injured worker from receiving a full award of medical impairment benefits.  It is likely that incorporating medical care for work injuries or occupational diseases under ColoradoCare will have the indirect effect of creating increased exposure for indemnity benefits on these claims.  There is evidence of this from Vermont where private carriers were either unable, or unwilling, to offer an insurance product to cover indemnity benefits for Vermont’s workers’ compensation system without having medical benefits controlled under that system.

 

Safety Incentives in Workers’ Compensation vs. ColoradoCare

Workers’ compensation insurance premiums are a function of gross wages paid under specific job classifications and factored by an experience modifier.  Therefore, there is strong incentive for employers to maintain a safe workplace, reducing work injuries and occupational diseases.  This, in turn, reduces premiums by lowering the experience modifier.  Integration of workers’ compensation medical benefits into a universal health care system reduces or eliminates employer incentive to ensure a safe workplace as there is no financial ramification tied to a higher experience modifier.

 

Indemnity Obligations Under the Colorado Workers’ Compensation Act

Notwithstanding Amendment 69’s integration of medical benefits into ColoradoCare, other benefits under the Colorado Workers’ Compensation Act are still required to be covered by employers.  These benefits include wage replacement, medical impairment, disfigurement and dependent benefits. ColoradoCare does not integrate or eliminate these other benefits.  Therefore, passage of Amendment 69 would require a mixed model benefit package, with publicly funded medical benefits provided under a different regulatory structure combined with privately funded benefits through a different insurance product.  In an official report to the Vermont Legislature from Vermont’s Director of Healthcare Reform dated January 15, 2016, this type of mixed model is discussed.  Private carriers in Vermont determined that private indemnity coverage required a new insurance product to cover indemnity portions of workers’ compensation claims.  Private carriers operating in Vermont were not interested in offering this product due to the connection between the lost ability to manage the medical component of the work injury or occupational disease and the resulting indemnity obligations.  Removing medical management of the claim would likely increase the amount of indemnity owed on that same claim.

 

Legal Issues Regarding Integration of Workers’ Compensation Medical Benefits into ColoradoCare

 

HIPPA

In general, the HIPPA privacy rules do not apply to workers’ compensation insurers, administrative providers or employers.  These entities are allowed access to otherwise private records to coordinate medical care and to deal with work-related issues, like restrictions and return to work options.  In Colorado, there are close connections between medical care providers, employers and workers’ compensation carriers and/or self-insured employers.  The employer selects the authorized providers for work injuries in the first instance and forms are generated for return to work options.  In addition, there are specific provisions for a change in medical care provider and authorization to treat for a work injury or occupational disease.  Amendment 69 does not address these matters.  Presumably, the entities involved in workers’ compensation matters would remain immune from HIPPA privacy issues, particularly in light of medical treatment and return to work issues connected to wage replacement benefits and permanent total disability benefits.

 

Exclusive Remedy

Colorado has a very strong exclusivity provision that immunizes employers from a lawsuit filed by an employee for a work injury or occupational disease.  This is part of the trade-off under the workers’ compensation no-fault system.  Removal of medical benefits as part of the benefit package under the workers’ compensation system could, through other legislation or interpretation of the exclusivity provision, erode or eliminate workers’ compensation as an exclusive remedy.  Amendment 69 does not address exclusive remedy concerns.

 

ERISA

The Employee Retirement Income Security Act (ERISA) is a federal statute that regulates private-sector, employer-sponsored benefit plans, including health care coverage.  ERISA protections specifically supersede any and all state laws in so far as they may now or hereafter relate to any employee benefit plan.  29 U.S.C. 1144(a).  Workers’ compensation is an exception to this preemption clause, meaning that states have the right to regulate workers’ compensation.  Once medical benefits under workers’ compensation are integrated into a single payer system, medical benefits may no longer be offered for the purpose of complying with the workers’ compensation benefit package and may now be preempted by ERISA laws.  There is no clear precedent over this issue and Amendment 69 is silent on this issue.

 

Treatment and Medical Impairment Under the Colorado Workers’ Compensation Act

Section 8-42-101, C.R.S. of the Colorado Workers’ Compensation Act requires every employer to supply certain medical benefits, including certain conditions for supplying those benefits given the nature of employment and the condition.  Further, it identifies accreditation process as a requirement for a physician to provide primary care and to provide an evaluation for potential impairment of an injured worker.  ColoradoCare would be the payer for work injuries.  Amendment 69 is silent as to its overall effect on the Colorado Workers’ Compensation Act.  Therefore, integration of the medical benefit component in the workers’ compensation system into ColoradoCare would likely require large-scale revision of the Colorado Worker’s Compensation Act, including revision of statutes and rules regarding physicians and determination of medical impairment.

 

Multi-Jurisdictional Employers

Workers’ compensation laws differ from state to state.  Currently, different state requirements and interpretations of when an injury or occupational disease is work-related creates risk for liability for uninsured loss for employers doing business in multiple jurisdictions.  Integration of medical benefits into ColoradoCare compounds this problem.  By its terms, a “member” is someone at least 18 years old, who has lived in Colorado as a primary resident for one continuous year.  Colorado has one of the fastest-growing populations of any state in the country and many of those individuals are moving to Colorado for employment.  If one of these individuals, 18 years old or older, is hurt at work but not a “member” of Colorado Care, that individual would not be eligible for medical coverage for a work injury.  This would leave the employer obligated to fill the gap in coverage or be subject to penalties as an uninsured employer.

 

Existing Claims

There is no provision in Amendment 69 for how existing claims would be integrated into ColoradoCare.  ColoradoCare would simply assume responsibility for payment of medical benefits for injuries arising out of or within the course and scope of employment.  This is a substantive change in the law and would be given prospective application.  Therefore, integration of medical benefits into ColoradoCare creates a different payer, but is unclear as to what it does to the status of any existing medical care provider for any existing workers’ compensation claim.

 

Litigation

Passage of Amendment 69 and the integration of medical benefits into ColoradoCare will spawn significant litigation over the issues identified above.  This litigation would not be limited to hearings in the Office of Administrative Courts, but would involve District Court actions in both the state and federal systems over a myriad of potential situations.  This litigation will be a significant cost to employers in Colorado and will potentially disrupt “… the quick and efficient delivery of disability and medical benefits to injured workers at a reasonable cost to employers.”  Section 8-40-102, C.R.S.

 

ELECTION LANDSCAPE

The Initiative vs. Legislative Process

Initiative 20, (appearing on the 2016 Ballot as Amendment 69), is an example of Colorado’s flawed initiative process.  Initiative 20 needed only 86,492 signatures to get on the Ballot, but received 158,831 signatures.  This demonstrates the ease with which it got on the Ballot and a level of support for Amendment 69.

Amendment 69 is really in the form of a new statutory act.  Ordinarily, such legislative proposals take the form of a bill with a legislative sponsor, committee assignment, public comment and discussion and debate that allows for amendment, etc., before it is passed and potentially enacted by signature of the Governor.  Amendment 69 would never have appeared in ordinary legislative process as it appears on the Ballot.  Instead, as an initiative, Amendment 69 is non-legislation that alters the Colorado Constitution through a simple popular vote.

Outlook

The proponents of Amendment 69 spent a great deal of money getting it on the Ballot and may not have the resources to advocate further for its passage.  Virtually all business organizations oppose Amendment 69 for reasons identified above.  Further, former Democratic Governor Bill Ritter, and current Democratic Governor John Hickenlooper do not support Amendment 69.  Very limited polling data shows stronger than expected support for this Amendment.  In this unique election cycle, it is difficult to forecast whether or not this will pass since it is connected to the demographics of the people coming out to vote.

Sexual Orientation Discrimination: EEOC Initiates its Next Title VII Challenge

A new era of discrimination lawsuits is upon employers nationwide.  Last month, the U.S. Equal Employment Opportunity Commission (“EEOC”) filed its first lawsuits alleging sexual orientation discrimination under Title VII against employers in Pennsylvania and Maryland.  The lawsuits are the latest step by the Commission to confirm its view that “sex” discrimination under Title VII encompasses discrimination based on sexual orientation. As with most discrimination cases filed by the EEOC, it seeks compensatory and punitive damages, as well as injunctive relief in both lawsuits.

Furthermore, with these lawsuits currently pending, the EEOC has also recently issued guidance on gender identity and sexual orientation discrimination.

What You Should Know About EEOC and the Enforcement Protections for LGBT Workers and

Addressing Sexual Orientation and Gender Identity Discrimination in Federal Civilian Employment

This guidance is all stemming from last year’s EEOC decision in Baldwin v. Department of Transportation where the Commission held for the first time that a claim of discrimination, on the basis of sexual orientation, necessarily involved sex-based considerations under Title VII because sexual orientation discrimination: (1) inevitably involves treating employees differently because of their sex; (2) is associational discrimination on the basis of sex; and (3) necessarily involves discrimination based on gender stereotypes, including employer beliefs about the person to whom the employee should be attracted.

As such, with the filing of the two recent lawsuits in Pennsylvania and Maryland, the EEOC is seeking to have two separate courts agree with its guidance on sex-based considerations. In the first challenge, the Commission alleges that a Pennsylvania-based health care company subjected a gay male employee to harassment because of his sexual orientation.  The lawsuit alleges that employee’s manager repeatedly referred to him using various anti-gay epithets and made other highly offensive comments about his sexuality and sex life.  The employee complained to the clinic director, but the director allegedly refused to take any action to stop the harassment.  The employee eventually quit.

In the second challenge, the EEOC alleges that a lesbian employee at a recycling company was harassed by her supervisor because of her sexual orientation.  The supervisor purportedly made comments about the employee’s sexual orientation and appearance on a weekly basis.  The employee purportedly complained to the general manager and called the company’s hotline about the harassment.  She was fired just a few days after she raised complaints.

Take Away: Plaintiff firms are taking notice and it is expected that sexual orientation based discrimination suits will increase over the next year or so, particularly pending the outcome of the recent lawsuits.  Consequently, employers should prepare for the EEOC to continue its focus on investigating sexual orientation and gender identity claims and should address these types of discrimination in training materials and handbooks.  In the end, employers should treat any such complaints of discrimination just as it would for other Title VII based discrimination complaint raised internally.

Legislative Mid-Session Update 2016

The 2016 legislative session is half over. The deadline for introduction of bills has come and gone; however, late bill introduction is very common. This is a brief summary of some of the introduced legislation of interest to clients:

Workers Compensation

Right now there are no pending bills regarding workers’ compensation. It is anticipated that there will be a bill introduced regarding first responders and compensability of posttraumatic stress disorder. A joint bill arising from discussions between Pinnacol Assurance, WCEA and CSIA is also a possibility, along with a bill from Pinnacol Assurance to allow it to establish a separate corporate entity that could write policies outside of Colorado.

Other Bills of Interest 

Senate Bill 16–056

This bill broadens the protections of the state whistleblower laws by including state employees disclosing information that is not subject to public inspection under the Colorado Open Records Act, when the disclosure is made to state entities that are designated as whistleblower review agencies. This bill is in the Judiciary Committee.

Senate Bill 16–070

This bill prohibits an employer from requiring any person, as a condition of employment, to become or remain a member of a labor organization, or to pay dues, fees or other assessments to a labor organization or to a charity organization or other third-party in lieu of a labor organization. Further, any such agreement violates these prohibited activities and are deemed void. This bill was originally assigned to the Business, Labor & Technology committee. After several amendments, the bill passed out of Senate and was sent to the House where it is assigned to State, Veterans & Military Affairs and will likely die.

House Bill 16-1002

In 2009 a bill passed known as the Parental Involvement in K-12 Education Act. This allowed an employee subject to the Family Medical Leave Act to take leave from work to attend various academic activities with, or for, the employee’s child. The leave was limited to 6 hours per month and 18 hours in any academic year. The employer was allowed to restrict the use of the leave in cases of emergency for the employer, or where the employment situation could endanger a person’s health or safety if the employee were absent. Further, the leave was limited to 3 hour increments at any time and required the employee to submit written verification from the school of the activity. The bill had a sunset provision repealing it effective September 1, 2015. This bill re-creates the 2009 bill with a couple of changes. It expands the type of academic activities to include attendance with school counselors. It also requires school districts and charter schools to post information about this statute on their websites. This bill was assigned to the Education committee in the House and eventually passed through the House without amendment. When introduced into the Senate it was assigned to State, Veterans & Military Affairs where it was postponed indefinitely.

House Bill 16 – 1078

This bill concerns whistleblowing protection for public employees not employed directly by the state. The bill prohibits county, municipality or local education providers from imposing disciplinary action against an employee for statements made by the employee about the local government that the employee believes shows a violation of state or federal law, a local ordinance or resolution, or a local education policy provider regarding waste, misuse of public funds, fraud, abuse of authority, mismanagement or danger to the health or safety of students, employees or the public. The bill would allow the employee to file a written complaint with the Office of Administrative Courts alleging some form of disciplinary action that the employee believes violates the whistleblower protection and would allow the employee to seek injunctive relief and damages. If the employee loses at the administrative hearing level, the employee would still have the ability to file a civil suit District Court. This bill was introduced and assigned to the local government committee in the House where an amended version was referred to appropriations. As there will be a fiscal note attached to the bill and given the Office of Administrative Courts involvement, the bill stands virtually no chance of passing.

House Bill 16 1114

This bill eliminates current employment verification standards requiring an employer to attest that it verified the legal work status of an employee and has not knowingly hired an unauthorized alien. It additionally eliminates the requirement for an employer in Colorado to submit documentation to the director of the Division of Labor in the Department of Labor and Employment that demonstrates the employer complied with federal employment verification requirements. This bill was assigned to Business Affairs and Labor where no activity has been taken and it will likely die.

House Bill 16 – 1154

This bill purports to clarify the definition of “employer” to only include a person that possesses the authority to control an employee’s terms and conditions of employment and has the ability to actually exercise that authority directly. The bill eliminates a franchisor from being considered an employer of a franchisee’s direct employees unless the franchisor has control over those employees. This bill was assigned to Local Government where no activity has been taken and it will likely die.

House Bill 16 – 1202

Current law requires employers to examine the legal work status of any newly hired employee within 20 days by using paper-based forms for identification. This bill would require employers to participate in the Federal e-verification program to determine work eligibility for newly hired employees. It then requires the employer to maintain documentation of this practice and submit it to the director of the Department of Labor and Employment. If an employer fails to do this it would be subject to a fine of up to $5000 for the first offense and up to $25,000 for the second offense, along with suspension of the employer’s business license for up to 6 months for continued offenses. This bill was assigned to the State, Veterans & Military Affairs where it was postponed indefinitely and will likely die.

History of Workers’ Compensation, Part III, Emergence of the Modern-Day System

This is the final piece of a three-part series surveying the history of workers’ compensation. Prior to 1911, an individual residing in the United States, regardless of their state residency, who suffered a workplace injury could only recover damages by utilizing traditional tort based law. In other words, an injured worker would need to sue their employer and claim the employer’s negligence or intentional conduct caused the subsequent injury. The employer could raise defenses such as contributory negligence or assumption of risk to bar the receipt of monetary damages. This system was often cumbersome, time-consuming, unpredictable, and expensive for both the employer and employee.

In 1911, the State of Wisconsin passed the first statutory law specifically addressing workers’ compensation entitlement benefits. The goal ofWisconsinAct the act was to create an efficient system to adjudicate claims while reducing legal hurdles for the injured worker thus creating a predictable system where the employer could foresee limited monetary risks. The Wisconsin system created a “no-fault” legal system in which the injured worker would no longer need to prove that the employer engaged in some type of culpable negligent or intentional conduct. According to the Wisconsin Department of Workforce Development, “the intent of the law was to require an employer to promptly and accurately compensate a worker for any injury suffered on the job, regardless of the existence of any fault or whose it might be.” The legislation provided for wage loss benefits, cost of medical treatment, disability payments, and payment for vocational rehabilitation training.

The legislation also eliminated an injured workers’ right to seek damages historically available through the tort system. As discussed in part two of the series, by 1911 the general public had become more concerned about the deplorable and often unsafe working conditions in factories across the nation. The Wisconsin Workers’ Compensation Act barred the injured worker from pursuing non-economic damages awarded by juries, including pain and suffering and loss and enjoyment of life. Similar to today’s ubiquitous state-based worker’s compensation acts, the Wisconsin Act enumerated the specific type of damages an injured worker could receive, thereby duly preventing the injured worker from requesting a jury to adjudicate damages. The judge adjudicating workers’ compensation claims, as a finder of fact, could not award benefits beyond the provided benefits in each respective act. The Wisconsin Act, while providing for specific benefits and shifting liability to the employer under the no-fault system, also provided employer’s with protection by limiting the scope of damages and removing the question of damages from unpredictable juries.

In the decade following the Wisconsin Act, nearly every state in the union promulgated some form of a workers’ compensation act. Mississippi was the last state to pass an act, but did so by 1948. Interestingly, as Gregory Guyton points out in his “Brief History of Workers’ Compensation,” the medical profession did not receive the worker’s compensation system with open arms. Medical professionals generally viewed worker’s compensation as a form of socialized medicine. According to Guyton, when the Social Security disability insurance act was created in the 1930s, disability based medicine expanded becoming lucrative for medical professionals. On the heels of the respective disability acts, the American Medical Association published the first guides to the evaluation of permanent impairment in order to develop a method to provide compensation evaluations. In Colorado, the legislature has decided to continue using the third edition of the AMA Guides to permanent impairment. The guide is currently available in six editions.

Given the volume of claims in any one state for benefits, each state may elect to create administrative agencies to adjudicate workers’ compensation claims. Colorado, for example created the Office of Administrative Courts in 1976 to hear an array of limited subject matter cases, including workers’ compensation. Prior to that time, the District Court handled worker’s compensation claims. Any individual working in workers’ compensation is familiar with the respective administrative system and ministering the claims. As the American workforce changes in age, and disability laws, including the ADA, become more pervasive in the work environment, there are open questions as to whether disability acts or managed health care administered by the federal government will substitute various aspects of workers’ compensation. For now, the workers’ compensation model most are familiar with will remain stable, subject to changes made by each respective legislation.

Personnel Files in Colorado: Who owns the file and what privacy interests are involved?

This is a question that I repeatedly see throughout the year and it comes in a variety of contexts. Often times, personnel-file-28116_960_720employers who may have recently terminated an employee, are suddenly posed with a request from that former employee for his/her personnel file. Sometimes, within a workers’ compensation or other employment related claim, the worker is seeking copies of the personnel file in an effort to bolster his or her claims. Additionally, employers receive requests from plaintiffs or third-parties seeking copies of personnel files concerning witnesses or company representatives. Consequently, employers are often placed in a decision whether or not to disclose this information and if there are any privacy issues with disclosing the information.

While the Colorado Supreme Court and Court of Appeals have not definitively addressed this issue head on, there is support for the conclusion that personnel files are property belonging to the employers and not the employees. In Corbetta v. Albertson’s Inc., it was the first time the Colorado Supreme Court addressed the issues of personnel files and privacy interests. The case involved a suit by a customer of Albertson’s alleging a variety of claims arising out of the plaintiff cracking several teeth on a pebble in a spinach salad she purchased. As part of discovery, plaintiff requested the entire employment files of the store manager, all assistant managers and all deli employees. Albertsons objected to the disclosure of these files invoking a right to privacy argument of the employees. The trial court ordered production of the files and concluded that while the personnel files were the property of Albertsons, disclosure was appropriate under the circumstances.

The Supreme Court overturned the trial court’s decision noting primarily that it did not appropriately balance the privacy interests involved and make appropriate factual findings and conclusions in addressing those privacy interests. However, the Supreme Court, in this decision, did not overturn the conclusion of the trial court that the personnel files were the property of the company. Accordingly, employers can rely on this decision for the conclusion that personal files are company property and not the property of the specific employee. Furthermore, while the Supreme Court did provide a right to privacy balancing test for determination of whether a personal file can be disclosed, the Court later in In re District Court, Cty and County of Denver revised this test, which now is the current law.

The case of In re District Court, Cty and County of Denver involved a former client of a law firm suing for legal malpractice and breach of fiduciary duties. As part of discovery, the former client requested financial information of the law firm members. The Supreme Court determined that when discovery requests implicate right to privacy interests:

  • The requesting party must first prove that the information requested is relevant to the subject of the action;
  • If shown relevant, then the party opposing the request must show that it has a reasonable expectation that the requested information or materials is confidential and will not be disclosed;
  • If the trial court finds that there is a legitimate expectation of privacy in the materials, the burden then shifts back to the requesting party to prove either that disclosure serves a compelling state interest or that there is a compelling need for the information AND that the information is not available from other sources.

There are other issues that implicate personnel files. First, employers are not required to give employees access to their personnel records. Access to personnel files and the information they contain should be restricted. Only authorized employees, supervisors or managers should be permitted to access personnel records on a “need to know” basis. Second, records regarding confidential, sensitive information unrelated to job performance, such as regarding citizenship, garnishments and any medical condition that could cause someone else to conclude the employee has a communicable disease (e.g., HIV), should be maintained in separate, confidential files. For example, if an employee suffers a workers’ compensation claim, it is highly recommended that a separate file be created to avoid confidential and private information being contained within his or her personnel file, such as medical reports.

Take Away

Personnel files are the property of the employers and thus, it is recommended that outside the scope of litigation, any such request for disclosure be denied. When requests are made as part of litigation or insurance claims, it is imperative that the right to privacy issue be properly considered and that the litigants requesting the information properly meet their burdens before a trial court.

EXTRA EXTRA! RULE 16 CHANGES COMING SOON!

 
One of Lee + Kinder LLC’s primary goals is to educate our clients and keep them apprised of changes in Colorado law.

 


 

There are changes coming to Workers’ Compensation Rule of Procedure 16 that will be effective January 1, 2016.
The changes to the rule are noted in RED below.

WCRP 16-9(B) requires a provider to submit a written request for prior authorization with supporting medical documentation when:

(1) The service exceeds recommended limitations under the medical treatment guidelines,
(2) The medical treatment guidelines require prior authorization,
(3) The services identified within the medical fee schedule is requiring prior authorization, or
(4) The prescribed service is not identified in the medical fee schedule.

WCRP 16-10(A) requires the payer notify the provider and the parties in writing of any contest to the prior authorization within seven business days from the date of receipt of the request, including a certificate of mailing.

If the prior authorization request is from an authorized treating provider and includes reasoning and relevant documentation that the treatment is related to the work injury, the payer cannot deny based on relatedness without a medical review of the request.

 

WCRP 16-10(B)(1) now requires the following for a seven-day medical records review:

  • The medical records review must be done by a physician or healthcare professional LICENSED IN COLORADO, and

  • The medical records review must be done by a provider in the SAME OR SIMILAR SPECIALTY, who would typically manage the medical condition, procedures or treatment being reviewed, and

  • The medical reviewer must be LEVEL I OR LEVEL II ACCREDITED by the State of Colorado.

 

WCRP 16(10)(E) provides that failure to timely comply with the denial requirements results in automatic authorization for payment unless:

  1. A hearing is requested within the seven business day time frame; and
  2. The provider is notified about that the request for prior authorization is being contested and the matter is going to hearing.

 

SHOW CAUSE ORDERS AND POTENTIAL PENALTIES ON RULE 16 MEDICAL RECORD REVIEWS:

WCRP 16-10(F) provides, “Unreasonable delay or denial of prior authorization, as determined by the Director or an administrative law judge, may subject the payer to penalties under the Workers’ Compensation Act.”

Recently, the Director has issued show cause orders to payers as a result of complaints by injured workers over disputes regarding medical care. The Director has issued orders requiring payers to show cause as to why a request for prior authorization was denied, when the procedure/treatment in question fell within the Colorado Medical Treatment Guidelines. The Director stated that a response that the matter is set for hearing will not suffice as “good cause” or provide a competent response to a show cause order. The Director expects a substantive response to any show cause order he issues.

Potential changes to Rule 16 that are still under consideration by the Director include: a medical review panel whose opinion regarding authorization would need to be overcome by clear and convincing evidence, and a requirement that payment be made subject to potential reimbursement in the event that a denial is upheld.

This article is intended to provide information only and not as a substitute for legal advice. If you have specific questions or cases that you would like to discuss, please contact the attorneys of Lee + Kinder, LLC for further guidance.

SUBROGATION – SALE OF THE LIEN

BACKGROUND

Colorado’s workers’ compensation subrogation statute, located at S 8–41–203, C.R.S., is poorly worded and has become more complex through legislative revisions over the years. At its heart, the statute allows payment of compensation under the Colorado Workers’ Compensation Act to operate as an assignment of a cause of action against another person or entity “not in the same employ” whose negligence or wrong produced injury or death for which benefits are paid. The right of subrogation applies to all compensation including medical, hospital, dental, funeral and other benefits. The assigned and subrogated case includes the right to recover future benefits. It extends to money collected from the third party that produced injury for all economic damages, physical impairment and disfigurement. The assigned and subrogated cause of action does not extend to money collected for non-economic damages awarded to the injured worker for pain and suffering, inconvenience, emotional stress or impairment of quality of life.

People familiar with workers’ compensation subrogation are aware of judicial apportionment between the injured worker and the carrier. Further, the carrier is responsible for any prorated share of fees and costs the injured worker incurred in obtaining a settlement or judgment from the third-party, should the carrier elect to not pursue the matter on its own. This can lead to significant uncertainty for the carrier in trying to determine whether to pursue the third-party on its own or come to an agreement with the injured worker for a percentage of gross or net recovery. In most circumstances the workers’ compensation case is open and moving forward while the third-party case is pending, whether filed or not. What to do with the third-party case is a complicated, multifaceted decision-making process; however, at least in some circumstances, the decision can be simplified by selling the recovery rights (although not technically a lien, I will refer to it as a lien in this article) to the defendant in the third-party case.

LIEN SALE EXAMPLE

I recently had a case where sale of the lien made sense. The injured worker’s claim had been closed by settlement. Therefore, the total amount of potential recovery was known. The case involved a car accident where the injured worker was hurt in a rear-end collision. The total amount of insurance to cover the loss and liability of the negligent driver was also clear. The injured worker was pursuing the negligent driver in the third-party case and the workers’ compensation carrier elected to not bring its own cause of action. In settlement discussions in the third party case, it was clear that the negligent driver’s carrier would offer little or nothing to settle the case despite clear liability. The third-party carrier was willing to go to trial over causation of injuries that were largely compensated under the workers’ compensation system. Given these circumstances, I spoke directly to counsel for the injured worker to try to broker a deal on a percentage of potential recovery. We could not come to an agreeable percentage. I advised counsel for the injured worker that I was in discussions with the negligent driver’s carrier to have it buy my carrier’s lien. Since I could not come to an agreement with the injured worker’s attorney, I simply sold my client’s subrogation lien to the defendant in the third-party case. This guaranteed recovery for my client. The third-party case went to trial and the injured worker recovered no damages. The defendant in the third-party case submitted trial briefs asserting some set-off against potential damages based on the lien it purchased. The trial court held off any determination of a set-off. In the workers’ compensation case we had paid approximately $100,000, split evenly between medical and indemnity benefits. We sold the lien for $30,000. At issue before the trial court in the trial briefs was the value of the purchased lien. Was the purchased lien worth $100,000 set-off against billed medical, lost wages and permanent impairment claimed as damages in the third-party case? In the alternative, was the lien worth $30,000 as some undivided lump sum that can be set-off against all awarded damages? It is clear why the trial judge elected to not answer these questions, but let the jury come back with a decision on damages. The trial judge would have a difficult time figuring out what the defendant purchased from the workers’ compensation carrier and what it was worth. The jury saved the trial judge that headache since they found liability, but no damages. Regardless of the trial judge’s ultimate conclusion, my client’s had successfully recouped 30% of their lien and halted their exposure for on-going litigation expenses.

RAMIFICATIONS OF THE SALE

Counsel for the injured worker tried mightily to argue that respondents should reimburse the injured worker out of the $30,000 sale proceeds to account for its share of attorney fees and costs in the unsuccessful attempt to recover against third-party. Counsel for the injured worker was unsuccessful in all of his attempts. There was simply no legal basis to require the workers’ compensation carrier to pay for a share of unsuccessful litigation by the injured worker. That stated there is an appeal to the argument that it is unfair for the workers’ compensation carrier that did not actively participate in the negligent third-party case, to derive benefit from selling its lien without paying for the work done in the third-party case, even though it was unsuccessful.

BOTTOM LINE

Sale of the workers’ compensation lien is a viable option of recovery for respondents holding a subrogation lien; nevertheless, sale of the lien should only be done in certain circumstances. Sale of the lien when the workers’ compensation case is still open would not be recommended. Sale of the lien, for practical purposes, reduces any amount that could be used to settle the third-party case. This makes it more likely that that case will go to trial where the lien value will be used against the injured worker. This is not a good position for the workers’ compensation carrier. The workers’ compensation carrier still has obligations to claimant under the workers compensation system and in an open workers’ compensation case it should probably not sell its lien to the defendant in the third party case.

As a result of the lien sale in my specific case, there are rumblings in the claimant/plaintiff bar that they may try legislatively to prevent the sale of liens generated from workers’ compensation cases. As of now, no such legislation has been introduced.

We always recommend discussing this legal strategy with your counsel prior to embarking on this path. Whether the sale of a subrogation lien is viable depends largely on the specific facts of each case.

The History of Workers’ Compensation Part II: The Rise of Workers’ Compensation Coverage

This second segment, of the three part series on the history of workers’ compensation law, briefly summarizes how the industrial revolution fueled the workers’ compensation system. The first resemblances of workers’ compensation insurance coverage primarily arose because of increased revolutionized industrial practices and socialist schisms in European political ideals. Around the 1860s, the industrial revolution was beginning to take hold in Europe; the American Industrial Revolution area would steam forward in the later part of the 1800s. Industrial imperial countries, specifically Germany, wrestled with growing the economics of their respective country while continuing to expand their empires. To achieve these goals, political leaders were required to balance the progressive social worker-centered ideals and traditional conservative business goals.

 

Observers credit Chancellor Otto von Bismarck of Germany as establishing Otto_von_Bismarckthe benchmark standards for workers’ rights in Germany in the early 1870s. Gregory Guyton explained that, although Bismarck was not a benevolent leader, the legislation passed under his tenure resulted from a compromise between traditional views on industry and the increasing pressures from the growing Marxist movement.  Bismarck spearheaded the Employer’s Liability Law of 1871 extending legal protection to workers in specific labor areas including mines and railroads. In 1884, Germany adopted the Workers’ Accident Insurance Act. It provided pensions to those unable to work because of non-occupational causes. The subsequent Public Aid Act provided disability benefits for workers unable to work as a result of an on-the-job injury.

 

By virtue of creating a monetary distribution system for injured workers, Otto von Bismarck’s movement also created immunity for employers from civil lawsuits. This was a divergent political and legal shift from the ideals of the popular socialist political camp. Hence, the early workers’ compensation laws contained the exclusivity of remedies similar to what can be found in today’s statutes. Alan Pierce, Workers’ Compensation in the United States: The First 100 Years (Lexis Nexis 2011).

 

As the industrial revolution grew in America in the 1880s, so did public awareness of the unsafe work conditions faced by the daily laborer. In 1906, a socialist political activist, Upton Sinclair, published the graphic novel expose’ The Jungle. The novel, which followed a family of immigrants working the Chicago slaughter houses and exposed the horrific working conditions, gained ubiquitous attention amongst progressives. In the wake of The Jungle, the U.S. Congress passed several federal laws aimed to protect the public working class and general consumers, including the Food and Drug Act of 1906.

 

Still, little was done in terms of workers’ compensation insurance coverage in America. Common law tort liability in civil courts was the only remedy available to a worker injured in the course of employment. The American legal system posed challenges to immigrant workers such as procedural and language barriers. An employer could still raise the defense of assumption of risk or contributory negligence as a bar to any momentary recovery an injured worker could be entitled to. In his article, Guyton points out that the federal Congress acted by passing laws such as the Employer’s Liability Act in 1906 and 1907. The Acts respectively mitigated the harsh contributory negligence laws.

 

Following this Congressional intervention into an otherwise laissez-faire American capitalism culture, several states including New York and Massachusetts attempted to pass state based workers’ compensation reform laws. These reformations ultimately failed. However, President, later Supreme Court Justice, Howard Taft acted upon entering office. Taft signed into law the Employer’s Liability Act of 1908. The purpose of the act was to protect railroad workers’ engaged in interstate commerce. Each state developed independent commissions on how to address the liability for an injury. Private agreements between employers and workers lead to contractual obligations for employers to pay medical expenses for on the job injuries while workers’ waived their right to sue in civil tort. It was in this climate that the workers’ compensation system based in state law arose in 1911, which will be the subject of the next article.

The Ongoing Dilemma of Intermittent FMLA Leave

Intermittent FMLA leave is a giant thorn in the side of human resource professionals Familyacross the country. The struggle is that not all intermittent leave requests are equal. Here’s a look at some of the most common scenarios, and how to handle them. The FMLA allows employers some flexibility in granting different kinds of intermittent leave. Employees are entitled to take it for serious health conditions, either their own or those of immediate family members. The law also allows use of intermittent leave for child care after the birth or placement of an adopted child, but only if the employer agrees to it. It’s the company’s call. It’s not always simple, however. If the mother develops complications from childbirth, or the infant is born premature and suffers from health problems, the “serious health condition” qualifier would likely kick in. As always, it pays to know the medical details before making a decision.

Eligibility Is Not Automatic

Companies can successfully dispute bogus employee claims to FMLA eligibility. Consider this real-life example:

A female employee in Maine said she suffered from a chronic condition that made it difficult to make it to work on time. After she racked up a number of late arrivals – and refused an offer to work on another shift – she was fired. She sued, saying her tardiness should have been considered intermittent leave. Her medical condition caused her lateness, she claimed, so each instance should have counted as a block of FMLA leave. Problem was, she’d never been out of work for medical treatment, or on account of a flare-up of her condition. The only time it affected her was when it was time to go to work.

The Court denied her claim for FMLA eligibility and indicated that intermittent leave is granted when an employee needs to miss work for a specific period of time, such as a doctor’s appointment or when a condition suddenly becomes incapacitating. That wasn’t the case here, the judge said – and giving the employee FMLA protection would simply have given the woman a blanket excuse to break company rules.
Cite: Brown v. Eastern Maine Medical Center.

Designating Leave Retroactively
In order to maximize workers’ using up their allotted FMLA leave, employers can sometimes classify an absence retroactively. For example, an employee’s out on two weeks of vacation, but she spends the second week in a hospital recovering from pneumonia. Her employer doesn’t learn of the hospital stay until she returns to work. But she tells her supervisor about it, who then informs HR. Within two days, HR contacts the woman and says, “That week you were in the hospital should be covered by the FMLA. Here’s the paperwork.” The key here is that the company acted quickly – within two days of being notified of the qualifying leave. The tactic’s perfectly legal, and it could make a difference in the impact FMLA leave time could have on the firm’s overall operation. It’s also an excellent example of the key role managers play in helping companies deal with the negative effects of FMLA.

Using Employees’ Paid Time Off
Employers should never tell workers they can’t take FMLA leave until they’ve used up all their vacation, sick and other paid time off (PTO). Instead, companies can require employees to use their accrued PTO concurrently with their intermittent leave time. Employers can also count workers’ comp or short-term disability leave as part of their FMLA time – but in that case, employees can’t be asked to use their accrued PTO.

The Transfer Position
Companies can temporarily transfer an employee on intermittent leave, to minimize the effect of that person’s absence on the overall operation. The temporary position doesn’t need to be equivalent to the original job – but the pay and benefits must remain the same. And, of course, the employee must be given his old job – or its equivalent – when the intermittent leave period’s over.

There is one large restriction – the move can’t be made if the transfer “adversely affects” the individual. An example would be if the new position would lengthen or increase the cost of the employee’s commute. This would adversely affect the employee. Instead, such transfers need to be handled in such a way as to avoid looking like the employer is trying to discourage the employee from taking intermittent leave – or worse yet, is being punished for having done so.

Cooperation
Although FMLA is certainly an employee-friendly statute, employers do have some rights when it comes to scheduling intermittent leave. For instance, employees are required to consult with their employers about setting up medical treatments on a schedule that minimizes impact on operations. Of course, the arrangement has to be approved by the healthcare provider. But if an employee fails to consult with HR before scheduling treatment, the law allows employers to require the worker to go back to the provider and discuss alternate arrangements.

The Firing Question
Yes, companies can fire an employee who’s on intermittent FMLA leave. Despite the fears of many employers, FMLA doesn’t confer some kind of special dispensation for workers who exercise their leave rights. Obviously, workers can’t be fired for taking leave, but employers can layoff, discipline and terminate those employees who violate company policies or perform poorly. When an employee on FMLA leave is terminated, the DOL decrees that the burden’s on the employer to prove the worker would have been laid off, disciplined or terminated regardless of the leave request or usage.

Reductions in Force
When an employer has a valid reason for reducing its workforce, the company can lay off an employee on FMLA leave – as long as the firm can prove the person would have been let go regardless of the leave. However, companies again should be prepared not only to prove the business necessity of the move, but to show an objective, nondiscriminatory plan for choosing which employees would be laid off.

Misconduct or Poor Performance
Employees on FMLA leave – of any type – are just as responsible for following performance and behavior rules as those not on leave. However, companies that fire an employee out on FMLA will be under increased pressure to prove that the decision was based on factors other than the worker’s absence. As such, courts might well pose employers a key question: Why didn’t you fire this person before he/she took leave? This is not an easy answer to explain before a jury if liability is threatened at trial. The good news is that a number of courts have upheld employers’ rights to fire employees on FMLA leave, even when the employee’s problems were first discovered when the employee went off the job. Nevertheless, companies should move cautiously if they are to terminate an employee currently out on leave due to misconduct or poor performance existing prior to the leave, but discovered after the leave begins.

History of Workers’ Compensation Law: Part 1, Ancient Beginnings

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The modern day workers’ compensation system has a long, and often dark, history. The concept of an individual’s right to recover monetary compensation for sustaining an injury caused by another is one of the oldest legal concepts in recorded human history. One observer has pointed out that “the history of workers’ compensation begins shortly after the advent of written history itself.” Gregory Guyton, “A Brief History of Workers’ Compensation,” Iowa Orthop. J, 1999, 19: 106-110. Guyton argues that, regardless of how professionals involved in the system “lament the difficulty” of its administration, understanding the history of the workers’ compensation system lends valuable perspective to its critical importance in the work place. This three part series, Ancient Beginnings, Industrial Revolution, and Modern America, will deliver the basic historical framework underpinning the workers’ compensation profession.

The first historical recording of law requiring payment of monetary compensation for bodily injury dates back to the Code of Ur-Nammu, which is the oldest surviving set of written laws. The Code of Ur-Nammu, which is written on stone tablets and currently on exhibit inHammurabi_Code Istanbul, originated in Mesopotamia sometime between 2100-2050 B.C, while under the reign of King Namma of Ur. The overarching goal of the code was to establish “equity in the land.” In doing so, King Ur dictated laws such as “if a man knocks out the eye of another man, he shall weigh out ½ of mina in silver” or 30 silver shekels. The code itself implies that the payment of compensatory awards applied to all aspects of daily life. The code also reflects the ubiquitous use of labor slaves, as it only provided for and only awarded monetary compensation awards to the slave owner, rather than the laborer, if the slave in the case sustained the injury.

The Code of Hammurabi, famously known for the harsh eye-for-an-eye decree, adopted the compensation-for-disability concept when instituted sometime between 1795-1750 B.C. Neither the codes of Kings Ur or Hammurabi appear to give an employer special exempt privileges. According to the Code of Hammurabi, if a man committed an unintentional assault or bodily harm against another free man, he need only be charged the value of doctor’s fees as a penalty. Rev. Claude Johns, “Babylonian Law”, 11th Ed. of Encyclopedia Britannic, (1910-1911). There were harsh penalties for careless and neglectful behavior on the part of those providing public services. For example, if an unskilled surgeon caused loss of life or limb, the surgeon’s hands were cut off. Scholars point out that the code also contained instances when compensation could be awarded based upon a schedule if the underlining injury was a result of neglect conduct. One can use their own imagination to lament on how this code was applied to individuals who engaged in careless actions that caused harm to their employees. The monetary compensation and respective legal codes only applied to free citizens. One explanation for the lack of specific work-place laws certainly is that the workers’ in the high intensity jobs, such as construction, were not entitled to legal protections due to their social position as property slaves.

Contemporary observers are part to turn of the century Greek, Roman, Arabic, and Chinese legal codes as the next step in the evolution of workers’ compensation law. Gregory Guyton notes that the ancient legal systems provided for compensation schedules for the loss of a specific body part based upon the schedule on compensation for the injury itself. The compensation given to an individual for loss of a body part was only based upon the scheduled award. The value of an impairment disability did not exist in antiquity. See Geerts, Achille, et. al., Compensation for Bodily Harm: A Comparative Study, (1977). For example, in Ancient Rome, the civil liability for causing physical impairment to another citizen was contained in the civil law delict codes. Whether one was held liable for damages, based upon the schedule, depended on the degree of fault of the offending party. The Roman delict provided the early foundations for negligence based personal injury compensation systems. By all accounts, these legal systems did not include remuneration for physical impairments (disability affecting an individual’s ability to perform a task or job), but only provided compensation for an actual injury.

Payment for an actual impairment, equivalent to modern impairment benefits, subtly arose in the pre-Renaissance feudal system. The payment of quasi-impairment compensation occurred when landlords would provide impaired feudal serfs compensation for disabling physical conditions. See Gayton, Supra. One not need think too hard on whether a serf was providing services to a lord at the time of the injury. The arbitrary award to a loyal serf stemmed from the feudal lords’ culturally imposed sense of honor and benevolent obligation to care for his servants. There is no definitive evidence to suggest that the royal elites in the time of Kings Ur or Hammurabi engaged in similar practices.

The Middle Ages and pre-industrial Renaissance Europe gave way to the birth of the English common law system. The slow reduction of enslaved and indentured laborers correlated to an increased number of persons (protected under the laws) entering into more labor-intensive jobs. The law needed to respond in turn. Guyton notes that early English Common law established three principles known as the “unholy trinity of defenses” to determine whether work place injury was compensable. First, the contributory negligent principle held that if a worker was in “anyway” responsible for an injury, the employer was not liable. Second, the “fellow servant” rule exempted an employer from liability when the workers’ injury arose out of the negligent conduct of a co-worker. Third, the “assumption of risk” rule permitted employers to enter into contracts with workers whereby the worker would waive the right to sue the employer for damages. Since employers would often enter into these agreements with workers when a job required exceptionally dangerous work, the waiver agreements became known as “death contracts.”

Hundreds of years later, the modern American workers’ compensation system eviscerated the three early English compensability laws. The lessons gleaned from antiquity reflect the slow growth of the compensation for injury system, which was born out of necessity to address growing disputes amongst those protected under the respective legal system. The next edition of Cup O’ Joe will discuss Part II, how the industrial revolution shaped the modern workers’ compensation system.

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