Ohio Workers' Compensation – Statute of Limitations – Exercise of Subrogation Right

Ohio's most recent statutes creating the right of subrogation for the Bureau of Workers' Compensation (BWC) and self-insured employers have recently been interpreted by the Supreme Court of Ohio in Bur.  Of  Workers' Comp.  v. McKinley, 130 Ohio St.3d 156. In this case, these parties were found to have six years from the date of injury to exercise their subrogation interest in a workers' compensation claim. This statute of limitations was challenged by the claimant as the claimant has only a two-year statute of limitations to file a workers' compensation claim as well any action against any third parties who may have been responsible for the injuries or disease involved in their industrial claim. 

The claimant asserted that Ohio Revised Code (ORC) 4123.93 and 4123.931 do not create a right of subrogation separate from the claimant's right to pursue his or her actions. As the claimant by law had only a two-year statute of limitations, it argued that the BWC or self-insured employer was given only a “typical” or traditional subrogation right of recovery. Under this theory, if one applies a typical derivative subrogation right, the party exercising its subrogation right “stands in the shoes” of the claimant and has no extended time to exercise this right.

The Supreme Court performed an extensive review of ORC 4123.93 and 4123.931. The legislature placed language in these statutes that  creates a right of recovery in favor of the statutory subrogee (BWC or self insured employer) against a third party.” This right of recovery is “automatic” and is an “affirmative grant of a right and not a limitation.” A statutory subrogee's interest arises from the Workers' Compensation Act itself. It is an independent right created by the legislature that permits the pursuit of reimbursement for the workers' compensation benefits that have been paid out by the statutory subrogee. The right of recovery created by these statutes is governed by ORC 2307.05 – which provides a six-year statute of limitations for a liability created by statute.



Sixth Circuit Court of Appeals Rules that Medicare is Entitled to Complete Reimbursement of Any Conditional Payments

In a recent decision by the United States Court of Appeals for the Sixth Circuit, the court ruled that the Center for Medicare Services (CMS or Medicare) is entitled to the complete reimbursement of any conditional payment regardless of the negligence attributed to a tortfeasor. Hadden v. U.S., 661 F.3d 298 (6th Cir. Nov. 21, 2011).
Plaintiff Vernon Hadden was injured in August 2004 when he was struck by a utility truck that was run off the road by the driver of another car that ran a stop sign. The driver of the car, who was responsible for the accident, was never identified. Medicare paid for plaintiff’s medical expenses related to the accident. Plaintiff settled his claims against the owner of the truck and agreed to pay and satisfy all expenses, liens, and claims related to the incident. The settlement reflected the fault that could be attributed to the settling defendant only (approximately 10%).  However, plaintiff was ordered to pay Medicare its full reimbursement even though the primarily liable tortfeasor was never found, and no payments were made on the tortfeasor’s behalf.
The Medicare Secondary Payer Act (MSP) provides:
A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service. . . .
42 U.S.C. § 1395y(b)(2)(B)(ii).
According to the decision, the use of the term “responsibility” clearly and unambiguously dictates that a Medicare beneficiary’s tort recovery from a tortfeasor/primary plan is subject to Medicare’s claim for reimbursement for the entire amount of Medicare’s conditional payments without regard to whether the tort recovery included full payment for the items and services paid for by Medicare. The court found that the amount the beneficiary is obligated to reimburse remains unchanged even if the settlement reflects a reduced amount because of the alleged tortfeasor’s share of liability.
While the Hadden decision arises out of a negligence case, there is no doubt that CMS will attempt to use the court’s interpretation of the statute in other areas, most notably in workers’ compensation. The likelihood that CMS will abide by amounts parties set aside in settlement agreements has always been in question, but the Hadden decision gives Medicare less incentive to negotiate and more incentive to recover the full amount of benefits paid.  As a result, settlement in workers’ compensation cases will be more difficult and less likely overall when involving a Medicare beneficiary.
Roetzel & Andress will continue to provide further information and guidance on this issue to assist you as developments arise.  If you should have any questions, please contact any of our offices to discuss this matter further with one of our workers’ compensation attorneys.



Fa La La La La La La La Lawsuit! Ring in the New Year by Keeping Employment Liability at Bay.

With the new year approaching, it may be time to review some of your old employment handbook policies. One policy of frequent concern to our clients relates to discrimination and harassment. Anti-harassment and anti-discrimination policies are crucial because they put employees on notice that you are an equal opportunity employer and will not allow unlawful discrimination and harassment in the workplace. These are important policies to include in your handbooks, but in your effort to treat all your employees fairly, you want to take care not to create new causes of action for discrimination that are not otherwise available under the law.

A general discrimination policy should list the legally protected classifications (race, sex, national origin, religion, age, disability, and genetic information). While some states add sexual orientation, height, weight, and/or marital status as protected classifications, unless you are operating in one of those states, inclusion of those protections in your anti-discrimination policy could subject your business to a potential lawsuit where the employee would otherwise not be entitled to make such a claim for discrimination. If you are operating in multiple states, a simple addition such as “discrimination is also prohibited based on any other protected classification under federal, state, or local law” should cover your obligations.

Along with your review of your anti-harassment and anti-discrimination policies, take a moment to review your complaint procedure as well. Your handbook should state a specific procedure for employees to make a formal complaint if they believe any of the policies were violated, but beware of establishing a policy that forces an employee to complain to the harassing party. It is wise to provide reporting options, including someone outside of an employee's chain of command. Finally, don't forget to assure your employees that their complaints or participation in an investigation will not result in retaliation. 



Make Sure Your Employee Background Checks Comply With Federal Law

Many employers do background checks on current employees and job applicants. Background checks are a simple and effective screening tool in a labor market flooded with employees looking for work. But far too few employers know that they must comply with the Fair Credit Reporting Act (FCRA) whenever they obtain a background report prepared by reporting agency.
FCRA requires that an employer make certain disclosures to an employee or job applicant whenever the employer obtains a report concerning the individual’s credit, character, reputation, personal characteristics, or mode of living. Common examples of background reports include criminal and civil records, credit reports, and driving records.
Below is an outline of key steps the employer must take to comply with FCRA.
  • The employer must disclose to the employee that he or she will be the subject of a background report as part of the employment process. This disclosure must be in writing within a stand-alone document.
  • The employer must obtain the employee’s signed authorization to prepare the background report. FCRA permits this authorization to be combined with the written disclosure.
  • After the reporting agency provides the background report to the employer, the employer must review the report and determine whether it will take an “adverse action” based on the report. An adverse action includes not hiring an applicant, not promoting an employee, not retaining an employee, or any other action which has a negative impact on an individual’s employment. If the employer decides not to take an adverse action based upon the report, it may skip the steps below.
  • If the employer considers taking an adverse action based on the background report, the employer must provide a “pre-adverse action notice” informing the employee that the employer is considering adverse action based on the background report.
  • The employer must also provide the employee with a copy of the background report, a copy of the FCRA document entitled “A Summary of Your Rights under the Fair Credit Reporting Act,” and a reasonable period of time to dispute the information in the report.
  • The employee may contact the reporting agency to dispute any information in the background report. The reporting agency is responsible for re-investigating any disputed items and issuing an updated report to both the employer and employee.
  • The employer must review the updated report and make a final employment decision. If the decision is adverse, the employer must send a notice of adverse action to the employee. The notice must: (1) state that the adverse action is based on information in the background report; (2) state that the reporting agency did not make the adverse decision and does not know the basis for the decision; (3) include the name, address, and toll free number of the reporting agency; and (4) state that the employee has the right to obtain another free copy of her background report within the next 60 days.
FCRA’s rules apply only when the employer obtains the report from a reporting agency. It does not affect an employer that uses its own employees to search public records for information.

The list above is a simply a brief summary of FCRA’s rules governing employee background reports. For more information, employers may consult the Federal Trade Commission’s website (http://www.ftc.gov/) or contact one of Roetzel’s employment services attorneys.



Workers' Compensation Trends for 2012

As 2011 rapidly draws to a close, businesses looking ahead to 2012 should be mindful of the following workers' compensation trends as they may increase a company’s operating costs:

(1)   An older work force. In the last decade or so, the life expectancy of the average U.S. citizen has increased every year. As a direct result, companies are seeing their employment populations develop more and more age-related disabilities. The major chronic conditions of an aging society include: cardiovascular diseases; hypertension; stroke; diabetes; cancer; chronic obstructive pulmonary disease; muscular-skeletal conditions including arthritis and osteoporosis; mental health conditions such as dementia and depression; and blindness and visual impairment. Accordingly, there is a greater risk that an injured worker’s recovery may be delayed by any one of these conditions, thus increasing the costs of a claim.

(2)   A rise in medical costs. With medical bills increasing each year across the board, the amount paid to treat injured workers has gone up as well. 

(3)   Increased risk exposure for employers due to off-site workers. With advances in technology and a drive to be more efficient, more and more companies have adopted programs which allow employees to work from satellite or home-based offices. While giving employees flexibility, companies are potentially incurring more exposure to work-related injuries due to less control over off-site offices.

On a more positive note, there has been a decline in workplace fatalities. The number of workplace deaths has been decreasing almost every year in the last decade. This may be due, at least in part, to the adoption of more stringent health and safety programs.

Roetzel & Andress is committed to assisting businesses in dealing with these and other employment related issues. If you should have any questions, please contact any of our offices to discuss these matters with one of our attorneys.



Superior Court of Pennsylvania Holds That Dual Persona Doctrine Did Not Constitute a Valid Exception to Exclusivity Provision of Workers' Compensation Act

In Soto v Nabisco, Inc., et al., 2011 WL 5831369 (Pa.Super.), 2011 PA Super 249, released on November 21, 2011, the Superior Court of Pennsylvania upheld the decision of the Court of Common Pleas, Philadelphia County which dismissed Roque Soto’s third-party liability claim based upon the employer statutory immunity under the Pennsylvania Workers’ Compensation Act (WCA).

Mr. Soto began his employment with Nabisco at its Philadelphia Bakery sometime around 1999-2000. In July 2001, Nabisco merged into Kraft and ceased to exist as a separate company. Due to the merger, Soto became an employee of Kraft. On November 1, 2007, Soto injured his arm and hands while operating a Ritz Cracker Cutting Machine designed and built by Nabisco, but used exclusively by Kraft employees since the merger. There was no dispute between the parties that the accident occurred within the course and scope of Soto’s employment and caused amputation of his left arm and a de-gloving wound and avulsion injuries to his right hand.

After his injury, Soto filed a third-party tort claim against Kraft and various other entities claiming that under the “dual persona” doctrine, Pennsylvania's WCA allows third-party tort recovery – although the employer is the ultimate payor – if the employer has a distinct and separate role that could subject it to liability for injuries to an employee. Soto defined Kraft's “dual persona” nature as (1) his employer and (2) the successor in interest to Nabisco, the manufacturer of the defective machine that caused his injuries at work. Soto also maintained that Kraft's position as successor in interest to Nabisco exposed Kraft to third-party liability in this context.

In its analysis of the case, the Superior Court noted that the only thing that changed in Soto’s employment situation was that his paycheck now came from Kraft instead of Nabisco. He continued to work in the same capacity at the same location. The Court found that the Ritz Cracker Cutting Machine was equipment Nabisco had manufactured specially for cutting Ritz crackers, it was used solely by Nabisco employees, and later used solely by Kraft employees; it was not available to the public at large. At no time was the special equipment sold to an outside company or put in the stream of commerce; it was merely transferred from Nabisco to Kraft by virtue of the merger.

Ultimately, in affirming the decision of the Court of Common Pleas, the Superior Court held as follows:
Were Pennsylvania courts to accept the “dual persona” doctrine as a valid exception to the exclusivity of the WCA, the doctrine would not apply in this case for the following reasons. If [Soto] had been injured while working for Nabisco, workers compensation would be his sole remedy; any third-party claim against Nabisco as the manufacturer of the equipment would fail. To allow [Soto] to sue Kraft, solely as the successor in interest to Nabisco, for third-party damages effectively enlarges [Soto’s] remedies as a result of the merger, in contravention of the “dual persona” doctrine, which was designed to preserve but not expand liability. If Nabisco as the employer would have no third-party liability beyond workers compensation, then Kraft as the successor employer should have no third-party liability under the circumstances of this case. Declining to apply the “dual persona” doctrine as an exception to the exclusivity of Pennsylvania's WCA in the present context, we ensure the preservation but prevent the expansion of liabilities or remedies.
The Superior Court’s holding that the dual persona doctrine is inapplicable in cases where the plaintiff would not have been able to bring suit against the predecessor company even if a merger had never occurred is in accord with decisions by courts from Florida, Massachusetts, Michigan, and Washington, all of which are cited in the Court’s decision.

Roetzel & Andress will continue to provide further information and guidance to assist you as developments arise in this matter. If you should have any questions, please contact any of our offices to discuss this matter further with one of our workers’ compensation attorneys.


EEOC Permitted to Subpoena Documents Showing Workers Forbidden From Discussing Pay

The United States District Court for the Western District of New York in EEOC v. Sterling Jewelers Inc., W.D.N.Y., No. 1:11-mc-00028, 2011 WL 5282622, recently enforced a subpoena issued by the Equal Employment Opportunity Commission (EEOC) to Sterling Jewelers Inc. (doing business as Jared the Galleria of Jewelry) requesting information on the company’s policies barring employees from discussing their pay, as well as information on employees disciplined under such policies.

Diane Thielker, a former employee of Sterling, filed a charge of discrimination with the EEOC alleging that she was discriminated against in pay and promotions because of her age and gender. The EEOC sued Sterling on behalf of Ms. Thielker, alleging that Sterling engaged in unfair employment practices nationwide by maintaining a system for making promotions and compensation decisions that is excessively subjective and has a disparate impact on female sales employees.

As part of the investigation into her charge, Ms. Thielker provided the EEOC with a copy of a counseling report issued to her by Sterling. This counseling report stated in part as follows:

Any discussion regarding payroll need only to be made between said employee and mgr. Having inappropriate discussions only contribute to and fosters ill will amongst team members as well as being a direct violation of Sterlings [sic] code of conduct. 
The report also included Ms. Thielker’s comments that she believed that she was being discriminated against based upon her gender due to the fact that the company paid male employees more than it paid female employees.

A few months after receiving a copy of the report, the EEOC served a subpoena upon Sterling requesting information on (1) the code of conduct referred to in the counseling report and any other policies prohibiting employees from discussing pay; (2) all disciplinary notices, reports, or warnings reflecting enforcement of Sterling’s policy prohibiting discussions of pay; and (3) information related to the individuals disciplined under such policy.

In upholding the EEOC’s right to enforcement of the subpoena, the court held that the nationwide scope of the information requested was relevant to the EEOC’s pattern or practice claims against Sterling, and legitimately arose from statements on the counseling report indicating that Sterling had a company-wide policy prohibiting discussions about pay. Significantly, the court further concluded that, even without the counseling report referencing such a policy, information regarding Sterling’s nationwide policies prohibiting discussions of pay is relevant to Thielker’s individual charge.

Contact: Emily Ciecka Wilcheck


Ohio Workers’ Compensation Update

A couple of issues that have a direct impact on Ohio employers have made news recently. Here’s a quick review of both: 
·         First, the Ohio Bureau of Workers’ Compensation (BWC) has introduced a new rating plan that encourages employers to maintain safe workplaces and to work with injured workers to speed their return to work.
According to the BWC, the new rating plan, Destination: Excellence, aims to improve return-to-work rates by offering employers more choice in building a risk management plan that focuses on safety, prevention and returning injured workers to their jobs more quickly. The plan allows employers to select from seven new and existing program options to customize a plan that addresses their specific needs. The programs address workplace safety and stress transitional work and vocational rehabilitation programs while providing opportunities to reduce premiums through adoption of best practices and meeting certain performance requirements. Additional savings are also possible for effective policy maintenance, such as doing business online and keeping current on premiums.
The proposal, introduced to the BWC Board of Directors during its meetings on November 17 and November 18, will be up for approval at the next meeting on December 16.
·         Second, major reform of Ohio's workers' compensation system is apparently no longer a top priority for the Kasich Administration, even though it was one of the things the governor named as a top priority upon taking office in January of this year. 
Governor John Kasich, in comments over the past few weeks, insisted that the reform proposal wasn't being shelved because of the contentious fight over Senate Bill 5/Issue 2. 
"We've already done significant workers' comp reform, and we're focusing internally," he said. "To get major workers' comp reform, you're going to need both labor and management to sit down. But we've made progress. We've reduced the base rate. We've just reset rates again. There's a lot of things that we can continue to do to improve the system without having to go to the legislature. But some of the other things that have to be done have to be done with the cooperation of other folks."
Among the ideas discussed was the injection of a private insurance element to compete with the state-run insurance fund for injured workers and overall benefit cuts, changes in workers’ compensation that would most certainly garner the opposition of organized labor.
Roetzel & Andress will continue to provide guidance to employers as these issues continue to develop. If you should have any questions, please contact any of our offices to discuss these matters further with one of our workers’ compensation attorneys.



It’s the Most Wonderful Time of the Year…for a Lawsuit: The Perils of Holiday Parties

Holiday parties offer employees an opportunity to celebrate with co-workers and provide employers an opportunity to show appreciation for a year of hard work. They can also offer many opportunities for employers to be named as defendants in lawsuits.
Consider the scenario where an employee falls and injures himself at the holiday party. Whether or not the injury is compensable under workers’ compensation statutes depends on a number of factors, such as where the party was held and whether attendance was mandatory.
Holiday parties are notorious for spawning sexual harassment lawsuits, so think twice before hanging the mistletoe. A supervisor is still a supervisor and in a position of power, even at a holiday party. Further, unwelcome conduct at a holiday party is not analyzed under a different standard simply because the conduct occurred outside work hours or off the employer’s premises.
Liability does not necessarily end when the party ends. Alcohol is a significant contributing factor in conduct resulting in employee injuries and sexual harassment claims, but it is also a cause for concern when employees leave the party. An employee who causes an automobile accident on the way home from the holiday party may also result in liability for the employer.
Fortunately, there are a few things an employer can do to limit its potential liability:
  • Hold holiday parties away from the employer’s place of business;
  • Use third-party vendors to serve alcohol;
  • Stress that attendance at the party is voluntary, and make sure no subtle suggestions are made that attendance would be beneficial to an employee’s career or continued employment. Additionally, make sure employees are aware that time spent attending a holiday party will not be considered hours worked;
  • Don’t hand out bonuses or service awards at the holiday party because doing so increases the perception the party is a work function rather than a social event;
  • Invite employees’ spouses or guests. Not surprisingly, the presence of these guests is likely to limit cases of sexual harassment and will help monitor employees’ consumption of alcohol;
  • If serving alcohol, serve food;
  • Stop serving alcohol a couple of hours before the party ends;
  • Make alternative transportation available or provide hotel rooms to employees who have consumed too much alcohol. Even a simple offer to pay for taxis can limit an employer’s liability;
  • Ensure the venue for the party is accessible for individuals with disabilities;
  • If the party is being held at a private club, make sure it is not one with restricted memberships that may give rise to a discrimination claim; and
  • If an incident does occur at a holiday party, such as an employee injury or a report of sexual harassment, follow your policies and procedures related to investigations.
Holiday parties are supposed to be fun, and they still can be while also limiting the potential for liability.

Contact: Jon Secrest

Ohio Turns to New Means to Stem Unemployment Fraud

Facing a $32 million figure for unemployment theft over the last 12 months, the Ohio Department of Job and Family Services announced a new initiative to combat the rising tide. It has introduced a new website where anonymous tips may be left by those who suspect unemployment fraud, such as an individual continuing to collect benefits while working.

ODJFS already has a fraud unit dedicated to investigating allegations of fraud. Those caught receiving fraudulent benefits are subject to criminal penalties as well as penalties against any future unemployment claims. ODJFS’s fraud website is located at: https://unemployment.ohio.gov/fraud.

Contact: Karen Adinolfi


Guilty as Charged? Consider a Different Approach.

As an employer, what do you do when an employee receives a traffic citation while driving in the course of his or her employment?  If you are like most employers, you require the employee to handle the ticket and to pay any fines associated with it. It’s a good policy. The employer should not have to pay for the employee’s bad driving habits.

However, when an employee receives a traffic citation associated with a motor vehicle accident, the employer should consider a different approach. This is because an accident could give rise to claims for personal injury or property damage from the other parties involved in the collision. If those claims cannot be resolved, a lawsuit will likely be filed against both the employee and the employer. Depending upon how it is handled, the traffic citation – although a minor misdemeanor – could play a major role in that lawsuit.

An example will help illustrate the point. Employee Emily is involved in an intersection collision with another vehicle while driving in the scope of her employment. Emily believes she had a green light, while the other driver, Dave, believes he had a green light. The police arrive, conduct an investigation, and issue a traffic citation to Emily for running a red light.

Emily’s employer tells her to handle the traffic citation and that she will have to pay any fines associated with it. Not wanting to fight the charges, or not believing she has any other recourse, Emily pays the fine, which she is able to do online.

Several months later, Dave brings a personal injury lawsuit against Emily and her employer arising out of the intersection collision. Because Emily was in the course and scope of her employment at the time of the accident, if the jury finds that Emily was at fault, the employer will be liable as well.

At trial, the employer’s attorney argues that Emily was not negligent and presents evidence that Dave ran a red light, not Emily. However, Dave’s attorney presents a copy of the traffic citation issued to Emily by the responding police officer. He also presents evidence that Emily paid the traffic citation, which is legally considered a Guilty plea, i.e. an admission of guilt by Emily. Emily was advised of this in fine print when she paid the ticket online, but, like most people, did not read it before clicking the “Pay Now” button. Over objection from the employer’s attorney, the Court permits the jury to consider Emily’s Guilty plea. The jury returns a verdict for Dave, requiring the employer to pay because it interpreted Emily’s Guilty plea as her admission that she ran a red light.

By taking a slightly different approach with the traffic citation, an employer can avoid this scenario. For instance, instead of paying the ticket online, Emily could appear in Court at the date and time designated on the ticket and plead No Contest. A No Contest plea is similar to a Guilty plea, with one important exception: a No Contest plea is not an admission of guilt. Emily will still have to pay the fine, and any points that would attach to the citation will still attach. However, any evidence concerning the traffic citation or how Emily plead is not admissible in a civil lawsuit such as the personal injury suit brought by Dave. The jury will never know about it.

Employers can still require the employee to handle the ticket and pay the fine. However, the employer should play a more supportive role in informing and guiding the employee in how to respond to the ticket. Depending on the employee, a supervisor or the employer’s counsel may need to take a more active role in resolving the citation in a way that will not be harmful to the employer.

Bear in mind that there is more than one way to handle a traffic citation. Another option is to call the prosecutor ahead of time, present any arguments in the employee’s favor and ask to work out a deal that avoids entering a Guilty plea. Indeed, one of the purposes of excluding No Contest pleas in related civil lawsuits is to encourage plea bargaining as a means of resolving criminal matters. Elevators Mut. Ins. Co. v. J. Patrick O'Flaherty's, Inc. (2010), 125 Ohio St.3d 362, 365.

Whatever the employer’s policy on handling traffic citations received by employees while in the course of employment, the danger lies in the Guilty plea. When an employee is involved in an accident that could give rise to a lawsuit for personal injury or property damage by a third party, the employer and employee should understand the ramifications of simply paying the fine and develop a strategy to avoid entering a Guilty plea that can come back to bite them later.

Contact: Chris Cotter


Reminder: Ohio's Workers' Compensation Intoxication/Drug Use Statute

Ohio Revised Code Section 4123.54 provides that if, at the time of an on-the-job injury, an employee is intoxicated or under the influence of a controlled substance not prescribed by a physician, an injury can be declared to be not compensable. Every employer must post a written notice to employees that the results of post-accident drug/alcohol testing, or the refusal to submit to this testing, creates a rebuttable presumption that the intoxication or influence of a controlled substance not prescribed by a physician is the proximate cause of the injury. If this occurs, the employee then has the burden of proving that the injury was not caused by these circumstances.

This written notice requirement is addressed in multiple portions of this statute and in great detail. The notice must be the same size or larger than the employer's certificate of coverage, and must be posted in the same location as this certificate. One method of reinforcing the posting of this notice is by addressing it in the company’s employee handbook. A strong intoxication/drug use policy can give employees additional notice of the consequences of this conduct, warning them of potential termination as well as informing them that this wrongful conduct may leave them without the coverage of a Workers' Compensation claim should they be injured.

Roetzel’s Workers’ Compensation attorneys can assist employers in defending this type of claim and can help companies update their employee handbooks to ensure that appropriate policies are in place to support the defense of potential claims.



Employee v. Independent Contractor: A Domestic Dispute

“Can I pay my nanny or housekeeper as an independent contractor rather than an employee?” This is a frequently asked question. The simple answer is, it depends, but probably not. It is often advantageous to hire an independent contractor rather than an employee. After all, with an independent contractor, you are not responsible for getting an employer ID number, checking immigration documents, getting unemployment and workers’ comp insurance, and most of all – paying taxes.
However, you may not legally be able to call your nanny or housekeeper an independent contractor, regardless of the contract or terms you and your worker agree upon. For example, if you are in charge of what work is done, how it is done, the equipment that is used, and if you are the only family she works for, you have an employee. It does not matter whether she works full time or part time or whether she is paid hourly, weekly or in a lump sum.
On the other hand, if your worker controls how and when the work is done, provides her own supplies and works for multiple families, she is probably an independent contractor. For example, your weekly window washer is probably not your employee, but your Monday – Friday babysitter probably is. There is an exception: If you pay an agency to provide a worker, such as a home healthcare nurse, and that agency determines her pay rate, scope of work and controls payment of her salary, your home healthcare nurse is probably not your employee.
Now here’s the hard part: There is no single definition for who is considered to be an “employee.” The IRS, unemployment bureaus, workers’ compensation bureaus, and state and federal labor departments each have different guidelines for identifying an employee. However, all of these agencies consider the amount of control the worker has over the job she is doing. As a result of the numerous agency guidelines, beware of the many tax, insurance and wage implications that are determined by the distinction between independent contractor and employee. Keep in mind, also, that you must pay at least the state minimum wage to your domestic employee, and she may even qualify for overtime.


Is Your Disabled Employee Requesting ADA Accommodation? You May be Entitled to a Doctor’s Note.

One issue that often puzzles employers is whether they may require medical documentation, such as a doctor’s note, before providing an accommodation to a disabled employee. As most employers know, the Americans with Disabilities Act (ADA) requires them to provide reasonable accommodations to disabled employees. But this obligation extends only to the physical or mental limitations of the disabled employee that the employer knows about. The ADA does not expect an employer to accommodate disabilities of which the employer is unaware.
When the employee’s disability or need for accommodation is not obvious, the employer may ask the employee for documentation about her disability and functional limitations. The employer may require that this documentation come from a health care professional such as a doctor, nurse or physical therapist.
For example, suppose an employee informs her employer that she is having trouble bending over and picking up her tools due to a back injury. If the employee requests an accommodation, the employer may require medical documentation regarding whether the employee has a disability. This documentation might address the nature, severity, and duration of the impairment, and the extent to which the impairment limits the employee’s ability to perform certain activities.
There are limitations on the employer’s right to request medical documentation, however. The employer may only require documentation needed to show that the employee has a disability and that this disability requires accommodation. Generally, the employer cannot request the employee’s complete medical records because these records are likely to contain information unrelated to determining the existence of a disability and the need for accommodation.
Additionally, the employer cannot ask for any documentation when both the employee’s disability and the need for accommodation are obvious. For example, an employee who uses a wheelchair may ask her employer to elevate her desk on blocks so that the arms of her wheelchair fit underneath her desktop. If the employer demanded a doctor’s note before elevating the desk, it would likely violate the ADA.
Often, however, the employee’s disability or need for accommodation will not be obvious to the employer. In these instances, an employee who refuses to provide the documentation requested by the employer is not entitled to reasonable accommodation.



Ohio Supreme Court Gives Further Guidance Regarding Voluntariness of Retirement and Its Effect on Workers’ Compensation Benefits

In an October 4, 2011 decision, the Supreme Court of Ohio addressed the character of an injured workers' retirement as it related to his eligibility for permanent total disability (PTD) compensation. The case, State ex rel. Cinergy Corp./Duke Energy v. Heber, 2011-Ohio-5027, involved a company's long-time employee who was injured in 1970, retired in 1989, and then applied for PTD compensation in 2008. The injured worker's application was granted administratively, and the employer filed a complaint in mandamus in the court of appeals, alleging that the Industrial Commission had abused its discretion in granting the injured worker's PTD application without first ruling on the voluntariness of his retirement.

In its decision, the Supreme Court of Ohio reflected on prior holdings which substantiated the premise that the "character" (i.e., voluntary versus involuntary) of an injured worker's retirement was critical to a PTD analysis. The Court cited State ex rel. Rockwell International v. Industrial Commission (1988), 40 Ohio St.3d 44, for its holding that a retirement initiated by an injured worker for reasons unrelated to the industrial injury is considered voluntary and State ex rel. Baker Material Handling Corp. v. Industrial Commission (1994), 69 Ohio St.3d 202, for its holding that a voluntary retirement from the work force prior to asserting PTD precludes the payment of compensation for that disability.

Regarding the case at hand, the Court stated that, even though the issue of the injured worker's retirement was raised at the hearing, the hearing officer's order granting PTD gave only brief reference to the injured worker’s assertion that he retired because of his injury. The Court said that the hearing officer did not rule on the credibility of the assertion or the voluntariness of the injured worker's retirement. The Court stated that it agreed with the court of appeals that further consideration by the Industrial Commission was merited. The Court, though, disagreed with the court of appeal's implication that the only way an injured worker could substantiate that a retirement was injury induced was through the submission of medical evidence prepared at the time of retirement. The Court stated that Ohio Adm. Code 4121-3-34(D)(1)(d) does not say this but, in fact, says "if" such evidence is submitted, the Industrial Commission must consider it. The Court reinforced the premise that the Industrial Commission is the "exclusive evaluator of the weight and credibility of the evidence presented" and stated that there may be other evidence that substantiates the connection between injury and retirement which the Industrial Commission should be able to consider.

For more information on voluntary retirement and its effect on workers’ compensation benefits, contact one of Roetzel’s workers’ compensation attorneys.



IRS Offers Amnesty for Employers who Voluntarily Reclassify Workers

It’s no secret that the United States Federal Government has devoted significant resources to combat worker misclassification (i.e., classifying workers as independent contractors when they are really employees). Last year, Roetzel & Andress highlighted developments in this area. (See Employment Services Newsletter, June 2010, available at: http://www.ralaw.com/event.cfm?sp=publication&id=308.) On September 21, 2011, the IRS announced a program that permits employers to reclassify workers without penalty. In effect, an employer may reclassify independent contractors as employees without the fear of being held liable for significant back taxes and penalties. The program is called the Voluntary Classification Settlement Program (VCSP). Importantly, employers who take advantage of the program will not be subject to audits related to worker classification for their past actions. To be eligible for the program, an employer must:
  1. Have consistently treated their workers as nonemployees;
  2. Have filed all required Forms 1099 for the workers to be reclassified for the previous three (3) years; and
  3. Not currently be under an IRS, Department of Labor or state agency audit related to worker classification.
Although the usual statute of limitations period is three years, it is important to note that employers must agree to a six-year statute of limitations during their first three years in the program. Additionally, an employer must make a minimal payment of 10% of the employment tax liability due on compensation paid to the reclassified workers in the past tax year. No interest or penalties will be due.
Employers can take advantage of the VCSP by completing Form 8952 (available here: http://www.irs.gov/formspubs/article/0,,id=242970,00.html) at least 60 days prior to treating the workers as employees. Employers must then enter into an agreement with the IRS to finalize the terms of any payment due.
On its face, the VCSP provides employers the opportunity to avoid significant tax liability for misclassifying workers. Appearances may be deceiving, however, as the IRS previously entered into a Memorandum of Understanding with the Department of Labor to share information related to worker misclassification. While the goal of the VCSP is to obtain voluntary compliance and encourage employers to properly classify their workforce, these goals will not be achieved if the IRS shares information with the Department of Labor. The practical effect would be that an employer enters into the VCSP and discloses that it improperly classified workers as independent contractors. The IRS then provides this information to the Department of Labor which institutes an enforcement action to recover overtime wages due to these workers. Unfortunately, the IRS has not stated whether it will share information obtained from the VCSP with the Department of Labor. Presumably, the IRS will provide employers with assurances that it will not share information submitted in the contact of the VCSP, but for now that issue is not clear. Accordingly, employers should consider all the ramifications of entering into the VCSP and be cognizant that entering into the VCSP does not make employers immune from local taxing authorities.

Contact: Jon Secrest


NLRB Judge Upholds Facebook Firing

A National Labor Relations Board (“NLRB”) administrative law judge upheld the firing of a car salesman for posting embarrassing photographs and caustic comments about an auto accident on his Facebook account. The case, Karl Knauz Motors, Inc., NLRB ALJ, No. 13-CA-46452, 9/28/11, involved an unfair labor practice complaint against Karl Knauz Motors, which operates a BMW and Land Rover dealership.
The complaint concerned two incidents that took place in June 2010. In the first incident, the salesman posted photographs on his Facebook account ridiculing management at the BMW dealership where he worked for its decision to offer hot dogs, bags of chips, and discount cookies as the food selection at a prestigious sales event to introduce a redesigned BMW 5 Series automobile, which was described as the dealership’s “bread and butter” product.
In the second incident, the salesman posted pictures of an accident that occurred at the adjacent Land Rover dealership which was also owned by the defendant employer. The accident was caused by a 13-year-old boy who accidentally pressed the gas pedal and drove a truck into a pond, causing a saleswoman who was sitting in the front passenger seat to be thrown from the vehicle. The salesman posted a series of caustic comments along with photographs of the accident on Facebook, including “this is your car; this is your car on drugs,” and “the kid drives over his father’s foot and into the pond in all of about 4 seconds and destroys a $50,000 truck. OOOPS!” 
The dealership learned of the salesman’s Facebook postings relating to both events and fired him a week later.
In reviewing the termination, the administrative law judge determined that the salesman’s comments regarding the marketing event to introduce the redesign of the BMW 5 Series constituted protected concerted activity under the National Labor Relations Act because the marketing event could have had an effect upon his compensation due to his commission structure. However, the judge found that the salesman’s conduct in posting photographs and comments about the accident at the Land Rover dealership was not protected conduct because it had no connection to an employees’ terms and conditions of employment. Therefore, because the salesman’s termination arose from his unprotected conduct in posting comments and photographs on Facebook about the accident, the judge found that the dealership did not violate federal labor law in firing the salesman for that Facebook posting.



Workers’ Compensation Claims: Where Should They Be Filed? Where Should They Be Allowed?

Ohio, like many other states, has a number of its major metropolitan areas on or within commuting distance of its border with another state. Therefore, residents of Ohio may engage in employment in a state other than the one in which they live (or vice versa), and, indeed, may suffer a workers’ compensation injury in that different state. This can be problematic for employers when deciding in which state their employees should be covered for workers’ compensation purposes, where a claim will be filed, and, more importantly, where the claim should be allowed.
In order to determine whether employment is sufficiently localized to Ohio (or any other state), Ohio courts generally consider the following factors:
(1) the place of contract of employment, supposedly carrying with it, as a part of the contract, the law of the state in which the contract was made; (2) the specific provisions of the [Workers’] Compensation Act of the state of the employer with reference to its extraterritor[i]al operation; (3) the state in which the employee’s name and pay are included in payroll reports submitted by the employer; (4) the place of accident; (5) the residence or domicile of the employee; (6) the place of the employee’s activities or performance of the work assigned; (7) the right of recovery outside of the state of employment; (8) the relation of the employee’s activities or performance of assigned work to the employer’s place of business, or situs of the industry; and (9) the place or state having supreme governmental interest in the employee, as affecting his social, business and political life.
(Prendergast v. Industrial Comm. of Ohio (1940), 136 Ohio St. 535, 543.)
The claim should be filed and allowed in whichever state has the most contacts. If the factors between Ohio and the other state are equal, Ohio courts will generally find for the employee and a filing in Ohio, as Ohio Revised Code § 4123.95 demands liberal construction of workers’ compensation laws in favor of employees and the dependents of deceased employees.
Ohio Revised Code § 4123.54(H)(1) does provide a means for an employer to avoid the issue of localized contacts by specifying which state’s workers’ compensation system is applicable for employees whose contracts were entered into outside the State of Ohio. (See Ohio BWC Forms C-110 and C-112.) This mechanism is useful to provide a measure of cost and containment certainty for an employer with employees in many different states.
As the nation’s workforce continues to diversify, become more mobile and, indeed, have the capability to telecommute to any state in the union, Roetzel & Andress will continue to provide guidance to employers on this topic. If you should have any questions with regard to the location of coverage of your employees or the location of a claim, please contact any of our offices to discuss this matter further with one of our workers’ compensation attorneys.



Fifth Circuit Rules that Tip Pooling Arrangement is in Violation of the FLSA

As a general rule, the Fair Labor Standards Act (FLSA) requires employers to pay a minimum wage of $7.25 per hour to employees, but that amount is reduced to $2.13 per hour for tipped employees, so long as the tips earned cover the differential. Furthermore, employers may not pay the $2.13 per hour unless “all tips received by [the] employee have been retained by the employee” with the exception of “pooling of tips among employees who customarily and regularly receive tips.” (29 U.S.C. § 203(m).)
On September 14, 2011, the Fifth Circuit addressed the issue of whether food “expediters” or “quality assurance” workers at Chili’s Restaurants fall within the category of employees who customarily and regularly receive tips so as to permit them to take advantage of the tip pooling practice. (Roussell v. Brinker Int’l Inc., No. 09-20561 (5th Cir. September 14, 2011).)
In Roussell, waiters and waitresses claimed that they were coerced into sharing tips with the “expediters” and “quality assurance” workers—employees who inspect completed food orders from the kitchen, garnish plates and delegate to servers and bussers the delivery of the food to the customers—in violation of the FLSA. Notably, the Department of Labor’s Field Operations Handbook provides:
[I]t does not appear that the Congress, even in requiring as a general principle that tipped employees retain all their tips, intended to prevent tipped employees from deciding, free from any coercion whatever and outside of any formalized arrangement or as a condition of employment, what to do with their tips, including sharing them with whichever co-workers they please.
(Department of Labor Field Operations Handbook § 30d04(c) (Dec. 9, 1988) (emphasis added).)
Thus, the relevant inquiry became whether Chili’s Restaurants operated a legal tip pool—the determination of which hinges upon: (1) whether the “expediters” and “quality assurance” workers were tip eligible; and (2) whether the managers coerced the servers to share their tips with the “expediters” and “quality assurance” workers. The Fifth Circuit held that Chili’s Restaurants violated the FLSA on both grounds because the workers at issue were not regularly or customarily tipped, and the “decision” to share tips with the “expediters” and “quality assurance” workers was not free from coercion.
It is highly recommended that employers review their tip pooling policies to ensure compliance with the relevant provisions of the FLSA.



Supreme Court of Ohio Sets Guidelines for Wrongful Discharge Based on a Violation of Public Policy

Since 1994, Ohio law has recognized a claim for wrongful discharge in violation of a public policy. This is a judicially created cause of action that is ever evolving. In 1994, the Supreme Court of Ohio stated that in order to state such a claim, the plaintiff must be able to point to a clear public policy articulated in the Ohio or United States Constitutions, federal or state statutes, administrative rules and regulations, or the common law. Frequently, plaintiffs with no clear claim under federal or Ohio discrimination laws have couched their claims as ones for wrongful discharge in violation of a public policy. The alleged public policy has varied greatly.
On September 15, 2011, the Supreme Court of Ohio issued its decision in Dohme v. Eurand Am., Inc. (Case No. 2010-1621). In Dohme, the plaintiff alleged he was terminated for raising questions and issues related to plant safety. The typical wrongful discharge in violation of public policy claim will cite to similar public concerns, such as preventing criminal activity, ensuring accurate accounting practice, etc. In Dohme, the Supreme Court determined it was not enough to simply state a general policy exists. Instead, a plaintiff must identify a specific public policy and identify “federal or state constitutional provisions, statutes, regulations, or common law that supports the policy … .” The Supreme Court further explained:
Based on the foregoing, we conclude that to satisfy the clarity element of a claim of wrongful discharge in violation of public policy, a terminated employee must articulate a clear public policy by citation to specific provisions in the federal or state constitution, federal or state statutes, administrative rules and regulations, or common law. A general reference to workplace safety is insufficient to meet the clarity requirement.
The Supreme Court made it clear that it is an employee’s burden to articulate a specific public policy, and courts are not permitted to identify a source of public policy for plaintiffs.
This ruling is good news for employers. In the past, employers have been forced to defend actions that alleged an employee was terminated for conduct such as complaining about the manner in which an employer treats customers. Plaintiffs then typically cite some nebulous public policy. The Supreme Court made clear that such general allegations will not suffice.  

Contact: Jon Secrest