Tuesday, October 28, 2014

Pension Offset is available to the Post-Merger Corporation

Section 204(a) Offsets to Pension, Severance and "Old Age" Social Security benefits.

In 1996 the Pennsylvania Workers' Compensation Act was amended to allow an Employer to offset its workers' compensation benefit payment liability by the amount of pension benefits paid to the injured Employee.  There were several requirements.

The Pension offset was available, to the extent the pension was funded by the Employer.
This is the Employer directly responsible for work comp benefit payments.
The Employer can be insured or self-insured.
The Employee must receive the pension benefits, not just be entitled to receive them.

The vast majority of appellate litigation of pension offset issues address the pension funding question.
In Governmental body defined benefit plans, the question is: What is the amount funded by the employer, where amounts are paid into the plan on a "group" basis.

When a Corporation is bought/sold/merged, similar pension funding issues arise.

Stepp v. WCAB (FairPoint Communications, Inc.) No. 2270 C.D. 2013, a published panel decision of the Commonwealth Court of Pennsylvania, authored by Judge Leavitt on September 10, 2014, addressed this pension funding issue.

Factual and Procedural Background

Employee began work with Marianna Scenery Hill Telephone Company in 1973.
In 2000 FairPoint Communications Inc. acquired Marianna,
Employee sustained a back injury in 2008 and received total disability benefits via Notice of Compensation Payable (LIBC 495).

October 2010,Employee began receiving pension benefits.
January 2011, FairPoint filed a Notice of Workers' Compensation Benefit Offset (LIBC-761).
Employee filed a Petition for Review of the Pension Offset.

[Employer also filed a Petition for Suspension/Modification in July 2010 based upon medical examination and work availability. The WCJ accepted this evidence and modified total disability of $733.67 per week to a partial disability benefit rate of $123.01 per week.

This decision does not directly impact the pension funding issue, as a pension offset is available against total or partial disability benefits.].

WCJ Decision

Employee Petition for Review was denied.
FairPoint was entitled to the pension offset against the workers' compensation benefits paid.

WCJ found Marianna and FairPoint were the same entity for the purpose of determining whether Employee's work comp benefits were subject to an offset.
WCJ (mis-) calculated a net Employee work comp benefit rate as $310.40 per week.

WCAB Appeal by Employee

WCAB affirmed WCJ conclusion FairPoint was entitled to a pension offset.
WCAB "corrected" WCJ calculations.

Pension offset of $423.27 per week, applied against Employee modified indemnity wage loss benefit of $123.01 per week, resulted in $0 due and a suspension of work comp benefit payments.

Commonwealth Court Appeal of Employee

Employee argued FairPoint was not entitled to a pension offset as his pension plan was funded by Marianna, a different, still existing corporation.

Court referred to its prior statement of the legislative intent of the Section 204(a) amendment, in Pennsylvania State University v. WCAB (Hensal), 911 A.2d 225 (Pa. Cmwlth. 2006).

"In 1996, the legislature, attempting to combat the increasing costs of workers' compensation in Pennsylvania, amended Section 204(a) of the Act to allow employers an offset against workers' compensation benefits for social security, severance and pension benefits simultaneously received by an employee. 
...Amended Section 204(a) serves the legislative intent of reducing the cost of workers' compensation by allowing an employer to avoid paying duplicate benefits for the same loss of earnings. Similarly, Section 204(a) implicitly recognizes that public policy bars an employer from utilizing an employee's own retirement funds to satisfy its workers' compensation obligation."

In a Petition for Review of a Pension Offset, the burden of proof remains upon the Employer, as it is the party seeking to change the benefit status of the employee.The employer bears the burden to prove the extent to which it funded the pension plan.

In Stepp, the percentage of funding by Marianna was not challenged by Employee.
Employee asserted error in allowing FairPoint any offset for the amounts funded by Marianna.

Court cited LTV Steel Corporation Inc. v WCAB (Mozena) 754 A.2d 666 (Pa. 2000) for the proposition, when corporations merge " the surviving corporation succeeds to both the rights and liabilities of the constituent corporation".

Mozena were hearing loss claim,s where the Supreme Court decision allowed consideration of all time periods and occupational noise exposure, in assessing the liability of LTV. This was based upon the authority of the Business Corporation Law of 1988, Section 1929.
"The mergers acquisitions or other changes in corporate structure from 1974 to 1984 did not constitute the creation of a new employer for determining the amount of hearing loss caused by any one employer.  The totality of circumstances reflected that the new owner was a successor-in-interest and not a new employer.

The facts in Stepp bear repeating, as they made be important to assess their significance when discussing this decision, in regards to its application to other "merger" circumstances.

Employer presented the deposition of its benefits manager, J. Coan.
FairPoint's acquisition of Marianna was described as a "merger and fast purchase".
FairPoint held the stock of Marianna.
Marianna became a wholly owned second tier subsidiary of FairPoint in 2001.
Fairpoint acquired and maintains all human resources and employee benefit books and records of Marianna, including those before 2001.
After 2001 Marianna remained an active Company and all Marianna employees continued as Marianna employees, even though the had a new Parent Company and were part of the FairPoint family of subsidiaries.

The Court noted in Stepp, all employees in the FairPoint "family of subsidiaries" were covered by the same workers compensation plan. (slip opinion page 2).

Employee argues the "merger" of Mariana and FairPoint was not a true merger of the type described in the Section 1929 of the BCL of 1988.
On this point, the Commonwealth Court seems to return to its review of the legislation intent of the 1996 Amendments, in concluding, that Employee's position would effectively erase consideration of Marianna's pension plan contributions and result in a windfall to Employee.

Practice Pointers:

1. Employers should be diligent in review and monitoring the pension status of all employees receiving workers compensation benefits. 

2. The availability and application of the benefit offset provisions may be significant.
 In the above case, the work comp liability for partial disability was reduced from $123.01 per week to "0".

3. Equally significant is the Employer's success in reducing its total disability benefit from $733.67 per week to a partial rate of $123.01 per week. 

This significant change in benefit liability was based upon the "old fashion" remedy of medical examination and establishing work available within the employee's limitations!

Kudo's, to Employer for the foresight to pursue of 2 different remedies for reduction of work comp liability, as available by the Act. 

Friday, October 24, 2014

Work Injury AFTER a Voluntary Quit ... Work Comp or Civil Liability?

Is the Injured Employee always limited to the Workers Compensation Remedy?
Can an Employee sue the Employer?
If he/she sues ... is the work comp act a "defense" to the civil action?
... is that an Admission in a work comp claim?
 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

It has been said that remedies of the Workers' Compensation Act may be considered a "shield" or protection to the Employer from the financial exposure of Civil Litigation. In Workers' Compensation claims, an injured employee has a "limited" remedy against the Employer for wage loss and medical expense. There is no payment for "pain and suffering" or the "loss of consortium" of one's spouse.

At times the injured employee may attempt a civil action remedy. In one reported instance, the employee was on a sidewalk, when a trip and fall injury occurred. The employee desires the civil action remedy available to "a member of the general public". The employer wants the "protection" of the workers compensation act, with the avoidance of additional damages.
See: Gertz v. Temple University, 661 A.2d 13 (Pa. Super. 1995), where the sidewalk was considered part of the Employer's business premises and Employer avoided civil action damages. 

Does the Employer assertion of factual and legal arguments in that civil action, bind the Employer in the subsequent work comp claim?

... They may.

Marazas v. WCAB (Vitas Healthcare Corporation), No. 337 C.D. 2014, a reported decision of a panel of the Commonwealth Court of Pennsylvania, authored by Judge Simpson on August 11, 2014 addressed these issues. 

Factual and Procedural Background

Employee filed a civil action, seeking damages for injuries sustained when he was on the Employer business premises, allegedly as a "business invitee".

Employee worked with Vitas as a driver technician.
He delivered and picked up medical equipment and furniture.
He quit his job as a driver technician.

After he told his boss "he quit", his manager told him to remove his personal belongings from the work truck. His manager escorted him, as per company policy.
After removing his personal items, he tripped over a pallet jack.
Injuries involved the upper, middle and lower back, with the left ankle and knee.
His manager observed this trip and fall.

In the civil action, Employer asserted plaintiff was in the scope of his employment at the time of his injury. The Work Comp Act was his exclusive remedy.

Employee withdrew the civil action and filed a Work Comp Claim Petition!

WCJ Decision

WCJ awarded Employee temporary total disability benefits for a closed period.

WCAB Appeal of Employer

Employer argued Employee terminated the employment relationship prior to his injury, such that his injury was not covered by the Work Comp Act.

WCAB vacated and remanded, to assess whether Employee was within the scope of his employment at the time of his injury.

WCJ Remand Decision

WCJ admitted additional documents, including the Court of Common Pleas civil action documents.
In these pleadings, employer denied Plaintiff was a business invitee and admitted Plaintiff was its employee. 

WCJ found Employee quit before his injury BUT he remained in the scope of employment as he was "furthering Employer's business interests". He was injured where his employer directed him to go, to perform the requested task, when he was removing his personal belongings.

WCAB Remand Decision
Reversed WCJ award.

WCAB relied upon Little v. WCAB (B&L Ford/Chevrolet) 23 A.3d 637 (Pa. Cmwlth. 2011).
Employee quit before his injury. Injury occurred as a consequence of the final act of employment, therefore it was not compensable.

Commonwealth Court Arguments and Decision

1. Employer admitted Employee status in civil action pleadings. 
Employer is estopped from denying that fact in work comp proceedings. 
Did Employee waive this argument?

WCJ did not err in admission of civil action documents on remand. WCAB remand order did not preclude acceptance of additional evidence. This evidence was relevant to determining the remand topic - employment status.

Court rejected Employer argument that Employee waived estoppel argument by not raising it before the WCJ and WCAB in the first instance...
"we discern no merit in the waiver argument" slip opinion page 7.
[hmmm... so its OK to raise argument for the first time after remand].

The Court explained the doctrine of judicial estoppel:

"as a general rule, a party to an action is estopped from assuming a position inconsistent with his or her assertion in a previous action, if his or her contention was successfully maintained. Accordingly, judicial estoppel is properly applied only if the court concludes the following: (1) that the appellant assumed an inconsistent position in an earlier action; and (2) that the appellant's contention was "successfully maintained" in that action."
 citing Canot v. City of Easton, 37 A.3d 53, 60 (Pa. Cmwlth. 2012).

As for the first element, the Court believed Employer position in civil action pleadings was inconsistent with work comp litigation. In the civil action proceedings, Employer admitted plaintiff was an employee "within the course and scope of employment" at the time of his injury.

Is there the second element of Judicial Estoppel, a "successfully maintained" position, where the civil action was withdrawn?
No. This element looks to the action of the decision-maker, not the action of the parties.  A statement of a prior inconsistent statement, in an adjudicated matter is not sufficient.
Judicial Estoppel did not apply to Employer's arguments.

2. Scope of Employment Arguments
Scope of Employment is a legal conclusion, to be made based upon a WCJ's factual determinations.

Here, the WCJ found Employee quit before his injury.
It was undisputed he remained on Employer's premises.
Employee was acting at Employer's direction, when he performed the removal of his personal belongings.

The term "arising in the course of employment" is a necessary element of the Employee proof of a compensable work injury.
This term has been construed to include injury:
- sustained in the furtherance of the business or affairs of the employer,
- sustained on premises occupied or controlled by Employer.

The act of going to or leaving the employee's work station is a necessary part of one's employment, thus furthering the employers interest. citing: Allegheny Ludlum Corp. v. WCAB (Hines), 913 A.2d 345 (Pa. Cmwlth. 2006).

The Court noted, more important than the temporal proximity of the injury to the claimant's shift, is the claimant's purpose or activity at the time of injury. citing: Ace Wire Spring & Form Co. v. WCAB (Walshesky) (Pa. Cmwlth. June 10, 2014).

Employer argued that Employee cannot be considered to be "within the scope of employment" after that employment has ended! [remember that voluntary quit thing...].

The Court distinguished the denial of benefits in Little v. WCAB (B&L Ford/Chevrolet), where a claimant had a heart attack at his residence, days after his last day of work.

Practice Pointers:

A.   This case highlights the necessity of the Employer team determining a litigation plan. Do we want to defend a civil action or a work comp claim? Can we defend both?

B.   Is claimant an "employee", who is no longer within the scope of any employment?

Logically I have difficulty with the concept that this Employee voluntarily quit, he terminated the employment relationship, BUT it furthers the Employer interest for him to remove his personal belongings? 

No, it is for the convenience of the former employee that he was allowed to collect his belongings and not wait to receive them later!

The fact that claimant sustained his injury in temporal proximity to the end of his work shift, is equally unpersuasive. Those cases deal with an individual who maintains a work relationship, not terminates a work relationship, at the end of the work shift. 

C.   ... in the end, if you do not want the individual to pursue a civil action remedy ... you are stuck in the work comp process ... I just have difficulty with the twisting, bending, contorting case precedents to justify the conclusion reached in this case. I guess I envision future claims of terminated workers alleging injury and pointing to this decision.

D.    EMPLOYER'S NEW RULE ... when an employer QUITS or is terminated ... immediately escort them from the building ... send their stuff to them in a box!