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