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No widespread implications yet in Alabama workers comp law ruling

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A recent ruling in Alabama that declared the state’s Workers’ Compensation Act unconstitutional will have no effect on the overall system but bears watching, as it drew from a Florida Supreme Court ruling that upended that state’s workers comp system, according to experts. 

“When you read the decision, the implications are not widespread; this case has very narrow applicability,” said Mark Walls, Chicago-based vice president of communications and strategic analysis at Safety National, of the May 8 ruling written by Jefferson County Circuit Court Judge Pat Ballard, who is based in Birmingham, Alabama. “It doesn’t have presumptive weight because it’s a lower level court. Now if (the) defendants appeal it to a higher court and they lose, then it will have wider implications. We will wait and see if it gets appealed.” 

The ruling stems from Nora Clower v. CVS Caremark Corp., in which the plaintiff suffered a back injury while working at a CVS store, according to media reports. A CVS spokesperson could not be immediately reached for comment. 

At issue is the state’s $220-per-week cap on workers comp benefits, which Judge Ballard found to be below the poverty level and equal to about 26.4% of the state’s average weekly earnings, calculated to be $833. Specifically, the ruling points out that “$220 has fallen from its genesis of 164% of 40 hours worked for minimum wage in 1985 to 76% of 40 hours worked for minimum wage, and from 105% in 1985 to 46.4% of the poverty level for a family of four.”

The poverty level is typically set by the federal government, with a family of four making $24,300 or less considered poor. 

Judge Ballard also found the statute’s 15% cap on attorneys’ fees unconstitutional because the cap “fails to afford due process of the law,” according to the ruling. He also concluded that a cap on attorneys’ fees is a function of the judiciary, not the legislative, branch. Since he found these statutes to be unconstitutional, he declared the entire Workers’ Compensation Act unconstitutional despite the implications of his ruling. 

“This court is not blind to the magnitude nor the consequence of its holding,” he said in his ruling. “There will be impact on medical providers, who presumably draw great income from the provision of medical care billed to workers’ compensation insurers, employers, and self-insurance funds. There will be impact to insurers, given that the sales of, and premiums collected for, workers’ compensation insurance in Alabama will halt in the absence of workers’ compensation laws. Self-insurance funds will cease function as anything other than vessels paying out claims that existed prior to the declaration of the act’s unconstitutionality. 

“Employers will face tort lawsuits upon the occurrence of industrial actions, subjecting them and co-workers of the injured victim to lawsuits for compensatory and punitive damages available within the confines of the common law,” he continued. “And workers will have to turn to other sources — or none at all — for the provision of medical care or subsistence compensation upon suffering the misfortune of workplace accidents; inevitably, this will mean that Alabama’s taxpayers will shoulder a large measure of the burden. These crises are the direct result of a problem created and allowed to persist by the legislature.” 

Meghan Cox, a Birmingham, Alabama-based associate at Burr & Forman L.L.P., said employers — whom she advises to conduct “business as usual” — are watching closely. 

“It’s gotten a lot of attention (and) it still leaves a lot of uncertainty,” she said. “They don’t know if other pending … court cases (whether) a judge will come to the same conclusion. That’s what employers are concerned about, the uncertainty of the situation. Right now, it’s a wait-and-see game.”

Mr. Walls said he wouldn’t be surprised to see more, similar cases addressing the issue of constitutionality in the next few years — and not only in Alabama. 

Judge Ballard’s ruling follows cases in Florida and Oklahoma, where aspects of the state workers comp systems have been declared unconstitutional. Judge Ballard’s ruling specifically discusses the Florida Supreme Court’s 2016 decision in Marvin Castellanos v. Next Door Co. et al. that the state's attorney fee schedule violated due process under state and federal law as it hindered an injured worker's ability to obtain legal representation.

“The law in Castellanos was declared unconstitutional as violating state and federal
constitutional due process guarantees,” Judge Ballard wrote in his ruling. Alabama’s statute “will be declared to fall for the same reason. The fee cap establishing that no more than 15% is enough, regardless of a myriad of potential attendant circumstances, fails to afford due process of the law.”

Although Judge’s Ballard’s ruling is unlikely to affect anyone beyond the specific case, it bears watching in light of the Florida and Oklahoma decisions, Elizabeth Connellan Smith, a Portland, Maine-based attorney for Verrill Dana L.L.P., wrote in a blog post on Friday. 

“It is a signal of a trend that began to gain momentum about a year and a half ago of various stakeholders calling for strict examination of the benefit and legal access provisions of state workers’ compensation laws,” she said.