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Employers eye less favorable legal landscape

Ohio court house

Recent legal developments in workers compensation have not been favorable for businesses, with supreme courts in Ohio, Texas, Pennsylvania and New Jersey handing down decisions against employers on issues such as medical reimbursements, the suspension of benefits, and compensability for volunteer activities.


Self-insured employers in the Buckeye State had little to be thankful for from the Ohio Supreme Court’s decision in State ex rel. Manor Care Inc. v. Bureau of Workers’ Compensation, published the day before Thanksgiving.

The court ruled that a self-insured employer that was overpaying the Disabled Workers’ Relief Fund could not obtain a writ of mandamus compelling the Bureau of Workers’ Compensation to reimburse it or award a credit against its future liabilities.

In Ohio, self-insured employers pay permanent total disability compensation directly to injured workers, and the BWC pays relief fund benefits. The bureau then levies assessments on self-insured employers for the exact amount paid to their respective workers.

After an audit revealed Manor Care Inc. had been underpaying PTD benefits to two employees for several years, the BWC ordered the self-insured employer to make lump-sum payments to the workers to correct the underpayments.

The workers had never been undercompensated despite the underpayment of their PTD benefits because they received more from the relief fund than they should have. Manor Care had also paid the total amount of benefits the workers were due because the Disabled Workers’ Relief Fund assessments were equal to the amount the fund paid the workers.

Manor Care, therefore, objected to making the lump-sum payments, contending that if it were making up the PTD shortage, it was entitled to a refund of the overpayments to the DWRF in the same amount.

The BWC refused the reimbursement, and the Ohio Supreme Court found that Manor Care was not entitled to mandamus relief.

Attorneys Preston J. Garvin and Michael J. Hickey represented the Ohio Chamber of Commerce and Ohio Self-Insurers Association as amici in the case.

Mr. Garvin said their argument had been based on the equitable idea that, “if you underpay one fund, and overpay the other, you should get a credit for what was overpaid.”

He said the court agreed with that, but “we lost … because there was no statute or rule that had been violated.”

Robert “Buz” Minor, a retired Ohio attorney who serves as the executive director of the National Council of Self-Insurers, said the Supreme Court’s ruling was “not an equitable result,” as the workers were “double compensated” and the “employer paid twice what it should have.”

The Supreme Court acknowledged that its conclusion “offends notions of fairness,” and it specifically advised that its decision did not foreclose Manor Care from seeking an equitable remedy by other means.

Mr. Garvin said he thought it was clear “the court felt something should be done,” but that he would defer to Manor Care’s attorneys — David M. McCarty, Randall W. Mikes and Jane K. Gleaves — as to what that should be.


In late January, the Texas Supreme Court ruled that an employer or insurer aggrieved by a decision in a medical fee dispute resolution proceeding has the burden of proving that a service provider is not entitled to the requested payment.

The decision in Patients Medical Center v. Facility Insurance Corp. overturned a ruling from the Court of Appeals for the 3rd District of Texas that held the provider has the burden of proof at every level of review if it initiated the dispute resolution process.

Attorney T. Daniel Hollaway, who represented Patients Medical Center in the case, said the Texas Supreme Court decision reinstated the status quo that had existed before the Court of Appeals “turned it upside down.”

Had the Court of Appeals decision stood, Mr. Hollaway said, the medical fee dispute resolution process would become “completely futile” for providers seeking relief, since there are five levels of review available, and the provider would have the burden of proof each step of the way.

The Texas Supreme Court’s decision restores what had been the norm of placing the burden of proof on whichever party is seeking review.

While Mr. Hollaway said the medical fee dispute resolution process “is not perfect,” the Court of Appeals almost took the system “from having some semblance of reasonableness and fairness to having none whatsoever,” and the Supreme Court prevented that from happening.


The Pennsylvania Supreme Court in January ruled in Sadler v. WCAB that an injured worker must be incarcerated after a conviction before Keystone State employers can avail themselves of a statutory right to unilaterally terminate benefits.

Attorney Richard Jaffe, who represented injured worker Carl Sadler, a production manager for Philadelphia Coca-Cola Bottling Co. Inc., said the appropriate interpretation of the law — Pennsylvania Statutes Section 306(a.1) — was definitely not a “run of the mill” issue, but it was “something that has and continues to come up.”

The court said the statute means what it says: An employer can suspend a payment of benefits “for any period during which the employee is incarcerated after a conviction.”

Mr. Sadler was incarcerated before trial because he was not able to make bail. Court documents do not describe the criminal charges against Mr. Sadler. He was sentenced to time served, so he didn’t spend time in jail after his conviction. The court said his employer couldn’t suspend his benefits during his period of incarceration.

“By its express terms, the statute authorizes the termination of benefit payments only during periods of incarceration served after conviction,” the court said. “Conversely, the provision makes no reference to the termination of benefit payments during periods of incarceration served prior to conviction.”

Mr. Jaffee said the decision will be “very helpful to those who are similarly situated” and has “hopefully settled the issue so we don’t have to deal with it in the future.”

New Jersey

In February, the New Jersey Supreme Court ruled in Goulding v. NJ Friendship House Inc. that a worker was entitled to benefits for injuries suffered while volunteering at an employer-sponsored event.

Kim Goulding worked as a cook for a nonprofit organization that helps individuals with developmental disabilities. She injured her ankle while volunteering at a family event her employer hosted for the organization’s clients.

The New Jersey Workers’ Compensation Act excludes coverage for injuries suffered during “recreational or social activities,” but the court determined that the Family Fun Day was not a recreational activity for Ms. Goulding, since she was there to work as a cook.

“The question I asked was, how does the character of her work change just because it is not paid?” said Ms. Goulding’s attorney, Richard A. Grodeck. “It doesn’t.”

Even if the event could be deemed a recreational activity, the court said Ms. Goulding’s injury was still compensable because injuries that occur at a recreational event that is a “regular incident” of employment, for the benefit of the employer, are compensable. The court said the family day satisfied both criteria, since it was intended to be an annual event and it helped generate goodwill for the employer.

Mr. Grodeck said he expected the second part of the court’s analysis to be the more “useful” portion for practitioners, because it has application to other nonprofits that hold events to benefit the community and elevate the visibility of the host organization.

Sherri Okamoto is a legal reporter at Work Comp Central, a sister publication of Business Insurance.

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