... Are the correct Parties "Joined" to the Litigation? Joinder Practice in PA Work Comp

A Lesson on "Joinder" Practice in Workers' Compensation Litigation

An Employer is responsible to an injured employee for the payment of wage loss benefits and medical expense reimbursement for a compensable injury, occurring within the course of ones employment.

At times, a question may arise as to the identity of the "employer" for purposes of liability for workers' compensation benefit payments. In Construction-Site injuries, the disputed facts may include: the identity of the "employer;  the existence of an employer-employer relationship;  and/or the existence of a statutory employer relationship.

In these circumstances, it is essential to have all of the necessary parties joined in the claim petition litigation.
What happens when all of the necessary parties are not present? ...

Pennsylvania Uninsured Employers Guaranty Fund v. WCAB (Dudkiewicz, deceased, Builders Prime Window and TH Properties) a reported decision of a panel of the Commonwealth Court of Pennsylvania, authored by Judge McCullough on April 7, 2014 addressed the legal issues raised by an improper joinder.

Factual and Procedural Background
The multiple parties named in this construction-site injury can give rise to some confusion.
Dudkiewicz is the injured employee.
He was employed by Rossini Construction, when he fell from a 2nd story roof.
Builders Prime contracted with Rossini.
THP was the owner of the construction site.
Apparently Rossini did not have workers compensation insurance, therefore the claim was filed against the Uninsured Employers Guaranty Fund (UEGF).

UEGF denied the averments of the claim petition and denied the existence of a Rossini -  Dudkiewicz, employer-employee relationship.

The chronology of events, bears emphasis as the Workers Compensation Judge stressed the importance of adhering to established deadlines throughout this litigation ... and non-compliance may lead to an adverse result!

October 9, 2009 date of injury

February 9, 2010 First Hearing  Employee appeared and testified

• The Parties requested bifurcation of the claim litigation, to first determine the employment relationship issue, however, employee testified as to the entire case
• WCJ would set case for a 2nd hearing 
• WCJ set October 1, 2010 as a deadline for presentation of all evidence on the employment relationship issue

March 30, 2010 Second Hearing, scheduled for testimony on the employment relationship issue

•  No evidence was presented regarding the employment relationship, 
•  Rossini had not secured legal counsel, separate from UEGF counsel
• Case was continued, Deadline for evidence was extended to October 15, 2010.

April 29, 2010 Third Hearing, postponed by WCJ

May 18, 2010 Fourth Hearing rescheduled to May 20, Employer Rossini appeared and testified

• Rossini stated he worked as a subcontractor for Builders Prime.
• Rossini said THP was owner of the construction site.
• UEGF said they would join Builders Prime and SWIF as a necessary party
• WCJ advised a prompt joinder was necessary ... as he would be issuing a decision on the employment issue that could nullify the Joinder!
• had the WCJ heard enough to decide?
• Did WCJ believe there was no merit to the Joinder?

May 27, 2010 UEGF filed joinder of Builders Prime (BP) as an additional employer.

No Reason was provided in the joinder petition. 

BP filed a motion to strike the joinder as it did not state a sufficient case against BP.

August 24, 2010 Fifth Hearing, BP announced it would not join THP.

September 3, 2010, UEGF filed a 2nd joinder petition of THP as an additional employer.

THP was alleged to be the general contractor on the construction site where the injury occurred. 

Recall, Rossini said THP was the owner of the site ... This raises a question of Statutory Employer status.

WCJ Interlocutory Order

September 28, 2010, WCJ issued a decision and interlocutory order dismissing both joinder petitions, as untimely and in the alternative, the BP joinder was not in compliance with the regulations. 

• Employee was questioned about BP at February 9 hearing.
• A subpoena of BP records was provided February 25.
• UEGF did not file a joinder within 20 days of the February 9 hearing.
• UEGF did not request an extension of time to file a joinder.
• UEGF joinder document did not set forth the rationale for the petition , as required by the regulations
• UEGF joinder of THP on September 3, was not timely filed, as the last hearing where any party presented evidence on the employment issues was May 20.

WCJ Final Decision of Claim Petition

February 15, 2011 WCJ decision and order found Claimant was an Employee of Rossini. 

Employee was awarded total disability benefits.

No Employer Rossini Appeal. Recall Rossini was an uninsured employer.

UEGF Appeal dismissal of Joinder Petitions

Dismissal of Joinder petitions denied UEGF the opportunity to: (1) establish Builders Prime as an employer or (2) establish THP as a statutory employer.

Commonwealth Court AFFIRMS WCJ

The Practice and Procedure governing Petitions for Joinder are set forth at 34 Pa. Code 131.36, more commonly known as "Special Rules of Administrative Practice and Procedure before Workers' Compensation Judges".

Regulation 136.36 requires a Petition for Joinder,

• set forth the reasons for the proposed joinder of a particular employer or insurer,
• be filed no later than 20 days after the first hearing at which evidence is received regarding the reason for which joinder is sought,
• unless this time is extended by the WCJ, for good cause shown! 131.36(d).

The Commonwealth Court reviewed the above requirements for a joinder petition and further noted that the grant/denial of a joinder is within the discretion of the WCJ. 

Citing: Stratton Homes, Inc. v. WCAB Hollis, (Pa. Cmwlth. 1993). (slip opinion page 8).

UEGF argued the "deadline" for filing the joinder did not begin to run until the May 20 hearing. 

BUT, Rossini testified regarding his "subcontractor" role with Builders Prime at the February 9 hearing. 

As noted by the Court, this line of questioning was initiated by UEGF. 

UEGF argued the February 9 hearing testimony (recited in the opinion)  was not "substantial evidence" on the issue of the employer or statutory employer issues.

The Court disagreed. It would not apply a "substantial" evidence" requirement on the Joinder requirements.

The February 9 hearing testimony was sufficient to alert UEGF as to the existence of other parties, who may have been in a contractual relationship with Rossini.

The WCJ did not abuse his discretion in denial of the Builders Prime joinder and determination that the February 9 hearing testimony constituted "evidence ... regarding the reason for which joinder is sought".

UEGF argued the THP joinder was delayed as it was anticipated that BP would joining THP.

When BP announced at the August 24, 2010 hearing that it would not be joining THP as a party, UEGF acted promptly and filed to join THP only 6 days layer! 

The Court noted this joinder was more than 90 days after the May 20 hearing. The dismissal of this joinder was proper.

Practice Pointers:

1.   The lesson learned is that the WCJ has significant discretion in grant/denial of a Joinder Petition. To my review of this decision, there are a few "judgment calls" presented. Bottom line, err on the side of "action". 

2.   The  "anticipated" joinder of THP by Builders Prime counsel is a reasonable expectation.

However, we learn that one cannot (should not) rely upon the expected actions of other counsel.  

BP may have an unrelated "business reason" for not joining THP. BP may not want to "point the finger" at another party. BP may believe that is the role of claimant, not defendant counsel, to file a petition. Lesson learned, if you believe another party must be involved, to protect the interests of your client, then file for any available joinder. 

3.   In my past experience, I do not recall stringent application of the 20 day joinder time requirement. Often, in the early stages of claim petition litigation, there is insufficient evidence available to support the filing of a joinder ... or more precisely, a well-plead  joinder with "specific facts and the legal basis" for the joinder. 

This lack of information can be readily apparent to the parties and to the WCJ. In these circumstances the time for joinder may be extended by the WCJ ... if requested in a timely fashion.

This is one of those judgement calls. Lesson learned ... file a written request for an extension of the joinder time limit, and state the reasons in support of your position.

4.   This is another example of the Defense Attorney mantra, "File it", you can always reconsider your position as the evidence develops. You want to avoid the circumstance where your available remedies become limited. 

[ Yes, unfortunately, there are times when measured, thoughtful reflection and consideration may actually work against you and  limit your remedies].

 

The "Absolute Right" of Pennsylvania Workers' Compensation Subrogation Recovery

The Pennsylvania Workers' Compensation applies to all injuries occurring within the Commonwealth. See: (Section 101).

Additionally, pursuant to the extra-territorial provisions,  the WCA applies if an employee suffers an injury, while working outside of the territorial boundaries of the Commonwealth, if:

          (1) the employment is principally localized in Pennsylvania, or;

          (2) he/she is working under a contract of hire made in Pennsylvania, in employment not principally localized in any state, or;

          (3) he/she is working under a contract of hire made in Pennsylvania, in employment principally localized in another state, whose work comp law is not applicable, or;

          (4) he/she is working under a contract of hire made in Pennsylvania, for employment outside the USA or Canada.

(See: Section 305.2)

When a Pennsylvania resident is injured in a motor vehicle accident in Delaware, while in the course of her employment, She is entitled to PA Workers' Compensation benefit payments and the Employer is entitled to assert a subrogation right against any civil action recovery from the third party responsible for the accident.


... but what happens when the Employee civil action recovery is limited by Delaware law? ... does the Pennsylvania Act still provide the Employer with an absolute right of recovery?
...YES.

Young v. WCAB (Chubb Corporation and Federal Insurance Company), No. 1432 C.D. 2013,
 a reported decision of a panel of the Commonwealth Court of Pennsylvania, authored by Judge Cohn-Jubelirer on March 10, 2014, addressed these issues.

Factual and Procedural Background

Employer accepted responsibility for the December 2003 motor vehicle accident and commenced payment of indemnity wage loss benefits and medical expense reimbursement via a Notice of Compensation Payable (LIBC-495).

In the course of subsequent litigation of petitions for Suspension, Termination and Utilization Review, the parties negotiated a settlement via a Compromise & Release Stipulation (LIBC-755). In May 2006, Employee settled future work comp benefits for a lump sum of $85,000. The Employer maintained it's right of subrogation, as per paragraph 11 of the LIBC form.

Employee subsequently settled her third-party action against the Delaware driver for $160,000.
There was no indication in the record, that Employee or her legal counsel advised Employer of this third-party settlement. There was no indication that Employee asked Employer to compromise its lien. (slip opinion page 3).
Employee counsel placed 1/3 of the settlement ($53,333) in an escrow account to "resolve" Employer's work comp lien. Counsel indicated this was the "customary" way of handling a work comp lien.
 [... maybe in Delaware].

Employer filed a Petition for Review to assert the work comp subrogation lien, as Employee settled the third-party action without adequately protecting the Employer's lien. The Employer's lien totaled $219,101.
Employer asserted is was entitled to recover a net lien of $101,381.

WCJ Decision in Employer Review Petition

Employer was entitled to a subrogation lien recovery.
Employer did not agree to compromise its lien.
PA law applied, not Delaware law.
Employee and Employee counsel were not jointly and severally liable for repayment to Employer.

WCAB affirmed and denied Employee appeal.

Commonwealth Court affirmed and denied employee appeal.

Commonwealth Court Reasoning:

1. Pennsylvania law applies to determine the Employer subrogation rights ... which apply to the Delaware civil action recovery.

Employee argued Delaware law should apply to the assessment of the subrogation lien of Employer. They argued in Delaware they could not include certain expenses in the third-party action, but these items were included in the subrogation lien. Delaware law precluded employers from being reimbursed for expenses that were precluded from evidence at trial.

Employee argued a "Conflict of Laws" analysis would show that Delaware had more significant contacts to this litigation than Pennsylvania,  therefore Delaware law should apply.

This argument was rejected. Just as in the Allstate Insurance Co. v. McFadden (Pa. Super. 1991),
Pennsylvania has a significant interest in this litigation,as this Employer made payments under the PA WCA and this employer has a right to monies paid to its employee by a third party.

Similarly in Byard F. Brogan Inc. v. WCAB (Morrissey) (Pa. Cmwlth. 1994), after a conflicts of law analysis,  Pennsylvania law applied, which had the effect to preclude a subrogation recovery  (at that time the Motor Vehicle Insurance law did not provide a right of subrogation). [an earlier MDS appellate case].

In the instant case, the substantial contacts of Pennsylvania to the Delaware civil  ligation were that:
 the employee was a Pennsylvania resident; she availed herself of benefits pursuant to the PA WCA; the employer was a NJ corporation, doing business in Pa;  under a PA insurance policy.
When Employee entered into the Compromise and Release Settlement, she affirmed the Employer's subrogation lien. [slip opinion page 10].

2. Employee argument that it was inequitable for Employer to be fully reimbursed for its subrogation lien ... this argument was rejected by the Court.
The Court explained, the statutory language at Section 319 has been interpreted to provide a right of subrogation to the Employer which is "statutorily absolute and can be abrogated only by choice".

Employee's equity arguments are contrary to established case law holding that there are no equitable exceptions to subrogation. citing Thompson v. WCAB (USF&G) (Pa. 2001).

3. Employer satisfied its burden of proof to establish its entitlement to subrogation and the amount of its lien. The WCJ accepted Employers documentation of payments made to employee. The WCJ appropriately subtracted duplicate entries and items not subject of recovery. The WCJ appropriately included the prior underlying 20%  attorney fee payments. The Employer payment detail evidence supported the WCJ findings of fact on his point.

Practice Pointers:

1. Cudos to Attorney Lee Fiederer of Chartwell Law Offices for a successful result. 

2. Too often, the Employer's right of subrogation lien recovery comes under attack, with the same old arguments. Some sort of "equity"is alleged in the denial of  reimbursement to the Employer for the vast amounts of wage loss and medical expense advanced to an injured employee ... where a third party is actually responsible for creating this obligation upon the Employer.

 When the Employer seeks reimbursement of its advanced payments ..."its not fair".
As often noted in appellate decisions, the injured employee has no right to a double recovery for wage loss and medical expense. 

3. In this instance the underlying third-party civil litigation in Delaware was concluded . When the third-party litigation is concluded in Pennsylvania, I believe it is a best practice to file a Workers Compensation Petition to assert one's subrogation rights, in lieu of pursuing a remedy in the Court of Common Pleas. 
WCJ are familiar with the "absolute" right of subrogation and the calculation of the Employer's net lien recovery.

4.  When the civil action is pending, I believe it is essential for the Employer to assert its right to subrogation lien recovery via intervention and participation in the civil action OR protect the Employer's rights via written agreement with the Plaintiff-Employee counsel. 

5. I believe it is a conflict of interest for the Plaintiff-Employee to "represent" the subrogation rights of the Employer and simultaneously represent the rights of the injured Employee. One attorney cannot serve Two divergent interests ... particularly when there is a finite amount of Settlement dollars... the interests of the parties must be compromised ...
who is compromised in this scenario?
Retain separate, experienced Work Comp Defense Counsel.




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