Friday, April 29, 2016

It's That Simple

Just yesterday I posted about Texas attorney fees and the debate in that state about adequacy.

And I previously I opined that 2016 was the year of Comp versus Constitution.

The Florida Supreme Court yesterday blended the two, finding that state's reformed attorney fee provisions, a product of changes made in 2003, to be unconstitutional under both the Florida state constitution and the US Constitution in the Castellano v. Next Door case.

In Castellano, the ultimate hourly fee attributable the work of Castellano's attorney amounted to $1.53 per hour because Florida Statutes Section 440.34 limits attorney’s fees to a sliding scale based on the amount of benefits obtained.

Even I made more than that as a law clerk in my first legal job during my second year of law school ($4.25 per hour...).

Strictly adhering to statutory law, Castellano had no ability to challenge the reasonableness of the $1.53 hourly rate, and both the judge of compensation claims and the 1st District Court of Appeals were precluded by Section 440.34 from assessing whether the fee award—calculated in strict compliance with the statutory fee schedule—was reasonable.

While the court acknowledged that the statutory fee schedule could, in some cases, result in a constitutionally adequate fee, it concluded that the irrebuttable statutory presumption of adequacy was unconstitutional because the fee cap applied to all injured workers regardless of circumstances, consequences or reasonableness: "the statute presumes that the ultimate fee will always be reasonable to compensate the attorney, without providing any mechanism for refutation."

EVERY injured worker is precluded from challenging the reasonableness of a fee is what irked the court.

The Castellano Supreme Court addressed only attorney fees, but dicta in the court's 55 page opinion suggests that, given the right set of facts, it would find other provisions unconstitutional (the court declined to entertain a facial challenge to the entirety of Chapter 440, revoking its grant of review and discharging its jurisdiction by way of a two-paragraph order in Stahl v. Hialeah Hospital yesterday as well).

"Yet, while the Legislature has continued to enunciate this purpose [expediency delivering benefits]," reads the opinion, "in reality, the workers’ compensation system has become increasingly complex to the detriment of the claimant, who depends on the assistance of a competent attorney to navigate the thicket. Indeed, as this Court long ago observed, allowing a claimant to 'engage competent legal assistance' actually 'discourages the carrier from unnecessarily resisting claims' and encourages attorneys to undertake representation in non-frivolous claims, 'realizing that a reasonable fee will be paid for [their] labor.'”

This theme is restated by the court several times in the opinion:

"The statute prevents every injured worker from challenging the reasonableness of the fee award in his or her individual case—an issue of serious constitutional concern given the critical importance, as a key feature of the workers’ compensation statutory scheme, of a reasonable attorney’s fee for the successful claimant."

And, "Stated another way, the statute establishes a conclusive irrebuttable presumption that the formula will produce an adequate fee in every case. This is clearly not true, and the inability of any injured worker to challenge the reasonableness of the fee award in his or her individual case is a facial constitutional due process issue."

Whenever someone has something that someone else wants, there's going to be disputes. Workers' compensation is no different.

The way we handle disputes in our civilization is through litigation. In workers' compensation, most of the time, it is an administrative court system. But there are still rules of procedure. And the substantive law isn't simple any longer either. Reading, interpreting and communicating a legal position takes particular skill - that's what lawyers are for.

When one is injured or ill the faculties for reading, interpreting and communicating, even if it is one's own fate, and even if one is a lawyer, are all compromised.

The payer side of the bargaining table knows this - defense attorney fees in key states have grown exponentially, particularly as compared to those representing injured workers.

I know, I know, I know - everyone hates lawyers.

Until one needs a lawyer.

The big concern from the Castellano opposition is that the ruling will cause insurance rates to increase significantly by encouraging legal participation. But there's a flaw to that logic.

Lawyers are only needed if there's a dispute.

So, either stop creating disputes or concede when a dispute arises.

Some will say it's not that simple.

Um, yes it is.

Thursday, April 28, 2016

Can O' Worms

As much as many like to denigrate the legal profession, attorneys are an important component to our society, in particular regarding the complex world of workers' compensation.

Sometimes lawyers are called upon to protect the legal interests of an injured worker, sometimes it's just to explain the process and answer questions about the law and regulations. Sometimes claimant lawyers can actually smooth the dispute by realigning the expectations of the injured worker.

And sometimes obtuse positions are taken that could be construed as against the interests of the injured worker.

Regardless, when one is hurting, in pain, and confused, dealing with the intricacies of workers' compensation is overwhelming, and legal representation can make a difference between a lifetime of impoverished living and return to normal lifestyle.

How to pay for that legal representation has been a vexing question from the very beginning.

The traditional mode is to base fees on the amount of recovery obtained on behalf of the client - a contingency fee.

Contingency fees have positive and negative attributes, of course, some of which are inconsistent and conflicting.

For instance, if the job of the attorney is to get as much money as possible for the client, then a contingency fee is highly motivating. But the inverse is that the goal in any medical care system is to return the injured to as good of relative health as pre-injury status, not a high level of disability.

And if a case doesn't appear to have an attendant high level of disability, ergo a small fee, then the injured worker may not find any representation - after all the business of law in most attorney practices still overrides charity. There are staff members to pay, electricity and phone bills, and rent...

Texas has a unique system for paying claimant attorneys. There is a maximum hourly rate on fees, a cap based on the value of recovery, and time spent on certain processes is regulated as well.

The hourly rate hasn't changed since 1991 and has been set at $150 per hour since then.

As far as I know, Texas has one of the lowest litigation rates of any workers' compensation system. Many that I have talked to have said this is because it is impossible to make a living representing injured workers based on the fee constrictions, so injured workers go without legal representation.

The Division of Workers' Compensation is now proposing an increase in the hourly rate to $200. While welcomed by the claimant bar, the proposed rate increase is criticized nonetheless as inadequate because it is still short of what it would be based on inflation.

That viewpoint, of course, is based on the assumption that back in 1991, $150 per hour was reasonable - it might not have been...

I'm an old guy, and one should not rely upon my memory, but in 1991 I recall my hourly defense rate was less than $100 per hour. And that was in metropolitan Los Angeles, which has, generally, a much high cost of living than in Texas. Based on the Bureau of Labor Statistics calculator, that rate would be $174.84 today.

That same calculator returns a value of $262 per hour, noted attorney John Pringle in written criticism about the proposed change to the TX DWC.

Nirvana for everyone except those in the business of law would be to devise a workers' compensation system devoid of dispute. That isn't going to happen, and in fact, we tend to do otherwise and introduce all sorts of procedural hurdles and qualifying rules that seem to provoke disputes.

I don't have a realistic solution. As long as someone has something that someone else wants, there's going to be disputes and rather than resolve those disputes via duels or fisticuffs society has declared it is more civil to air grievances before a tribunal with rules, regulations and ... lawyers.

Just like any dispute, there are going to be winners and losers. That's just the nature of conflict. The key is getting the equation right so that most of the time, most of the disputes get just representation for just results.

Most of the time.

It's the proverbial can of worms and complete satisfaction is unattainable, at least in the current configuration of workers' compensation.

Wednesday, April 27, 2016

Figure It Out

If you're an engineer, like my son, then you see everything as black and white, one or zero, on or off.

There's not much room in an engineer's mind for imprecision, which is why the vagaries of the law can be frustrating.

Which is why a recent Pennsylvania case on the going and coming rule is interesting.

Most states generally (one of those vague terms engineers hate) don't recognize as compensable worker injuries that occur "off the clock" even if it occurs on an employer's premises.

Other states — including Maryland, New Jersey, New York, North Carolina, Georgia, Kentucky, California, Missouri and Ohio — recognize a "premises exception" to the going-and-coming rule: an employee's commute doesn't begin until the employee leaves his employer's premises, which might include the parking lot depending upon the amount of control the employer has over that property.

Pennsylvania treats a worker's off-the-clock injury as compensable if it occurs on an employer's premises within a reasonable time before or after the employee's work shift, and it is attributable to a "condition of the premises or by the operation of the employer’s business or affairs thereon," the Commonwealth Court said on Monday in reversing a Workers' Compensation Appeals Board decision.

In Quality Bicycle Products vs. WCAB, 1570 C.D. 2015 (4/25/2016), James Shaw had been at work in the warehouse on Nov. 13, 2013, when he got a frantic call from his fiancée telling him that their 9-year-old daughter was missing from school. He told his manager he needed to leave right away, then ran to his locker and got his coat and car keys. Shaw tried to clock out, but his manager told him to just go.

Shaw raced out of the building, but he would later testify that he felt a popping sensation in his knee before he got more than 10 to 12 feet across the parking lot.

He said this sensation was followed by excruciating pain, which left him unable to bear any weight on his right leg, causing him to fall to the ground.

A coworker came to his aid, along with Shaw's manager. They called for an ambulance, and while they were waiting for the paramedics to arrive, they learned Shaw's daughter had been found.

Doctors later determined Shaw had cracked his patella, and he underwent surgery on Nov. 20, 2013.

Quality (the insurance company is not identified by the court, a stylistic application which I contend is incorrect because the actual parties are obscured thus mischaracterizing the "employer's actions) contested the claim filed by Shaw for benefits.

The Workers' Compensation awarded benefits to Shaw, and the Workers' Compensation Appeals Board upheld this decision.

Quality sought judicial review, although it settled Shaw's claim while its appeal was still pending. Thus, Shaw did not respond to Quality's petition for review.

The court said that Shaw's injury "was caused by his own act of running, which was not a condition of (his) employer’s premises."

But what about "the operation of the employer’s business or affairs thereon"? The injury occurred on the employer's parking lot where all employees parked under the direction of Quality, and Shaw fell only 10-12 feet from the exit door.

The court noted that, according to Shaw's testimony at trial, his knee had popped before his right foot made contact with the parking lot surface and he collapsed. The parking lot, therefore, "did not cause or contribute to the causative chain to claimant’s injury," the court said.

The courts' job is to deal with the vague and opaque. The law can not precisely define all circumstances all of the time.

The Commonwealth Court may seem to be "splitting hairs" in the Shaw case. But actually they worked in an engineer-like fashion. They dissected the facts and applied the rule systematically - it was black and white, one and zero, on and off...

My son called me from jail one a Sunday evening after getting into trouble during his freshman year of engineering school, looking for bail money.

"How old are you Tony?" I asked.

"Eighteen," was his reply.

"Right," I affirmed. "What does that make you?"

"An adult."

"Correct," I again affirmed. "What are you studying in school?"


"Right again," I said. "And what do engineers do?"

He was silent, then said, "I dunno..."

"They figure it out!"

And I hung up the phone.

He figured it out.

Tuesday, April 26, 2016

$15 to Underground

Los Angeles Times reporter Don Lee extrapolated on four consequences of the new $15/hour minimum wage laws that were rolled out in California and New York - the most interesting to me relative to workers' compensation, and one that I think will come to fruition, unfortunately, is an increase in the underground labor market.

"A lot more are going to get hired off the books," especially immigrant workers, Harry Holzer, a public policy professor at Georgetown University and the Labor Department's top economist in the second term of the Clinton administration, is quoted in the article.

Holzer thinks heavy job losses will occur mostly in the low-skilled, less-educated work force, and consequently those people would feel pressure to accept cash under the table or cut other "underground" deals to keep their jobs.

Just the class of workers most impacted by the lack of work injury protection systems...

So not only will payrolls rise, as will workers' compensation insurance premiums likewise due to increased payroll, costs that employers will have to eventually pass on to consumers, but the impact on uninsured employers funds, and the related enforcement mechanisms, will also feel pressure.

In addition, costs that should be born by workers' compensation, particularly medical care, may get pushed on to the general health care system, particularly those health systems that provide service to the uninsured.

Lest anyone think I'm against the minimum wage increase, that's not necessarily true. Benefits to increasing minimum wage include greater consumer spending power (relative of course, and perhaps not for the long term) and greater tax revenues for government, which should translate to improved services for all citizens.

I just don't believe the consequences were well thought out, in particular relative to the overall work injury protection and safety schema - which can barely stay abreast of current demands. Certainly strategies for these consequences were not part of the bargains.

A rise in informal work translates into more tax avoidance and fewer worker benefits and protections, like unemployment insurance (and work comp) notes Lee.

So, in addition to a significantly greater gap between the normal living wage and the permanently disabled on an indemnity scheme that isn't tied to the wage inflation, the work comp industry will also be grappling with an increase in the underground economic effluent.

Workers' compensation has been down this road before. It just wasn't as bumpy and the potholes weren't as large.

Monday, April 25, 2016

Just Bad Law

There's only so much abuse that people will tolerate. Then, after too many people take too much advantage of a situation, hammers are brought out to not just quell the abuse, but to kill it.

Thirteen years ago the chiropractic community had too many unreasonable people taking advantage of workers' compensation liberality. That abuse had been going on for twenty years. It frankly wasn't uncommon to see workers' comp patients getting chiropractic adjustment, consultation, naturopathy and all sorts of other "treatments" for years on end on a weekly basis - treatment protocol that went way beyond any measure of reasonableness.

Not all chiropractors were engaging in such nonsense, of course. Likely it was just a minority that were out of control. But because neither the professional association that governed chiropractic care, nor the professionals themselves, could seem to supervise that group of carrion, an insurance-charged legislature came along and implemented an artificial limitation on chiropractic and physical therapy care.

In 2003, then California Gov. Gray Davis signed into law SB 228 limiting workers to 24 chiropractic and physical therapy visits per injury unless a carrier authorized additional treatment.

Other states also reacted - Texas and Florida to name a couple. The chiropractic professional community simply could not control members whose primary mission was easy money...

I heard tale after tale of chiropractors shutting their doors after these reforms. Some just scaled down their businesses. Others moved on to other pastures.

In the meantime the frequency for back surgeries escalated and the subsequent opiate crisis is well documented.

The lesson - abuse a system too much for too long, and then watch the door slam shut. Worse, the reputation, credibility and reliability of members who were not part of the billing feast were also cast into aspersion. And even worse yet, the ultimate consumer of workers' compensation goods and services, the injured worker, had even fewer options for care and treatment.

Cris Forsyth, government affairs director for the California Chiropractic Association, told WorkCompCentral that chiropractors have long been pariahs in California’s workers’ compensation industry - and there's good historical reason: this is a group of professionals that were particularly and unreasonably abusive, medical guidelines be damned.

Chiropractors can't be completely blamed for SB 228. The trial level courts shared the responsibility. Judges routinely were granting bills and lien claims of chiropractors over the objections of payers, despite treatment impotence and care that went against medical science.

Frankly, California's workers' compensation judges condoned bad behavior.

So we get artificial limitations that we should not otherwise have.

Now the chiropractors want those limitations lifted and have proposed legislation to do so, but in the wrong way.

Assembly Bill 2407, by Assemblyman Rocky Chavez, R-Oceanside, would amend the Labor Code to require the physician treating a worker with a back injury to perform an assessment of the “level of risk for chronic back pain” and determine whether that worker meets the criteria for a surgical consultation. Surgery could be recommended, but only in a limited number of conditions and if there is sufficient evidence to indicate surgery is more effective than other treatment options.

Alternative “covered treatments” that could be deemed appropriate after the assessment under AB 2407 include:
  • Acupuncture.
  • Chiropractic manipulation.
  • Cognitive behavioral therapy.
  • Medications, including opiates for short-term prescriptions only.
  • Office visits.
  • Osteopathic manipulation.
  • Physical therapy.
  • Occupational therapy.
That's all well and good, but the proposed bill goes beyond amending Labor Code section 4600 in the above particulars by including a slight, though despicable, alteration to the "reasonable" standard of medical care and employer liability.

The existing standard is, "[i]n the case of his or her neglect or refusal reasonably to" provide medical care, then "the employer is liable for the reasonable expense incurred by or on behalf of the employee in providing treatment."

The proposed standard would be, "If the employer neglects or reasonably refuses to provide that treatment...".

Astute legal interpreters should pick up on that instantly: "reasonably refuses...".

So, even if the payer is in the right, by following the Medical Treatment Utilization Schedule or any other treatment guideline, scientific evidence, or other protocol that refutes the services supplied, the payer is STILL liable, because it "reasonably refuses" to pay for the services or goods.

Nice try guys. I'm certain that most don't object to alternative modes of treatment that will provide the best path for return to health of the worker who has a back injury.

But inputting a back door for required payment of services or goods that have no scientific or medical validity is dirty pool.

Listen, we don't really need any artificial limitation on chiropractic, or any other care now. We have guidelines, utilization review and independent medical review. AB 2407 just needs to remove the artificial limitations imposed back in 2003.

As it stands, I'm calling BS on AB 2407. This is just bad law.

Twelve years of experience on the receiving end of denigration, and they still don't learn...

Friday, April 22, 2016

Open Rating Rant

I was talking with Michael Standing, CEO and president of AIM Mutual Insurance Company out of Massachusetts - preparing a guest spot for the Seismic Shifts presentations last year.

("Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers' Comp," was a special WorkCompCentral report prepared by Peter Rousmaniere last year that investigates commercial opportunities in a shrinking workers' comp industry.)

Standing and I were making some small talk about the market and he floored me when he told me that Massachusetts, a state of about 6.75 million people, and only $1 billion in workers' compensation premium, had 290 workers' compensation insurance companies competing for business.

California, by contrast, has almost 39 million people, a gross written premium of nearly $16.5 billion, but only 218 carriers, many of them sub-carriers or affiliates of larger companies, so the real number of carriers is even smaller.

What's wrong with this picture?

In 1993 "open rating" became the new business model in California. Before the open rating law, all workers' compensation insurance had to meet a minimum pricing standard. In other words, there was a floor on rates - insurance companies could not quote or charge less than what the Department of Insurance said could be charged.

I've ranted before about this.

Before open rating, there were well over 350 insurance companies. They competed on quality of service, the experience rating modification factor (aka "ex mod") being the determining distinction between carriers - the better serviced claims, the lower the ex mod, the less expensive the insurance.

This promoted safety, prompt claims handling, and frankly BETTER claims handling.

Since 1993, however, the standard has deteriorated to least expensive claims handling (which is ironic given the cost of claims has increased exponentially since then, in particular the cost containment component of claims handling).

Open rating was supposed to increase competition.

The opposite has occurred - it has, to the great detriment of the policy purchasing employer population completely stifled competition.

And worse, has focused the industry incorrectly on cost containment rather than quality performance.

At least that's MY opinion.

Ought to be yours...

Thursday, April 21, 2016

Dismantling By Courts

ProPublica declared that corporate America was dismantling workers' compensation piece by piece, state by state.

But 2016 is going to be known as the year that state supreme courts are the ones dismantling workers' compensation piece by piece.

We have seen a very active Oklahoma Supreme Court declare various provisions of that state's 2013 reform law unconstitutional. California courts haven't gone in that direction, yet, though there are still various challenges to the 2012 reform law.

Florida courts have been asked to review various elements of its workers' compensation laws, and yesterday the First District Court of Appeals, in what I think was a surprising decision to many, said that the state's statutory limits on the payment of attorneys for injured workers was unconstitutional.

Florida Statutes Section 440.34 provides that a claimant attorney is entitled to a fee equal to 20% of the first $5,000 in benefits secured for a client, 15% of the next $5,000 secured and 10% of any amount secured in excess of $10,000.

The statute further provides that a judge of compensation claims cannot approve any other payment arrangement, and Section 440.105(3)(c) criminalizes an attorney's receipt of any payment that has not been approved by a JCC.

Many states have similar statutes or regulations limiting fees for attorneys representing injured workers in litigation. These rules not only assume that the only compensation schema applicable to this group of service providers is contingency based upon disability, they essentially perpetuate it thus perpetuating the disability of America.

I'm not sure that the 1st DCA is cognizant of this hypocrisy, but the justices at least acknowledge that an injured person's right to representation in a highly complex, life altering, legal system should not be castrated by a fee regulation that discourages any representation.

That's what occurred in Martha Miles vs. City of Edgewater Police Department, 1D15-0165, 4/20/2016.

Miles was a police officer for City of Edgewater. She alleged exposure from toxic chemicals used to make crystal methamphetamine on two occasions in 2011, and she claims these events aggravated her asthma to the point it became disabling.

She filed a comp claim, but after she voluntarily withdrew it, the city filed a motion to recover the $3,860.82 it said it had expended in preparation to defend itself.

Miles then went to her union for help. The Fraternal Order of Police Lodge 40 said it was willing to pay a law firm for Miles $1,500 for the first 10 hours of work, and Miles agreed to pay the firm $150 per hour thereafter.

But Judge Mark Massey found Sections 440.105(3)(c) and 440.34 prohibited the payment arrangement being proposed by the union and Miles.

Miles refiled her claim and wound up going to trial without an attorney, where she told the JCC that she hadn't been able to find anyone who "works for free." She failed to introduce any evidence to support her claim at the trial, so the JCC denied it.

Miles then hired attorneys Michael Winer and Geoff Bichler to appeal the judge's decision (though it is not clear how these attorneys got paid to make the appeal, but not the trial...). Their argument on appeal was that Sections 440.105(3)(c) and 440.34 violated Miles' free speech right guaranteed under the First Amendment to the U.S. Constitution.

The theory is that free speech is abrogated if an unskilled litigant cannot get adequate representation if no attorney would take the case because of inadequate pay; ergo an individual's right to contract freely (subject of course to legality) is compromised.

In addition the court noted that individuals can waive their constitutional rights, so they certainly should be able to waive a lower standard law, i.e. a fee constriction statute.

But by far the most interesting point made by the court was its overall criticism of legislative attempts to limit litigation: "[In] a free society which attempts to allow individuals the intellectual prerogative to personally weigh the benefits and risk of exercising their statutory right to obtain redress for their injury, we hold that the rational intent to minimize workplace litigation cannot ultimately trump the benefits the public obtains by allowing an injured worker, or one who personally thinks she is injured, to seek redress under law."

Perhaps the Miles case will go up to the Supreme Court, which would make it the fourth case pending before Florida's highest court on constitutional issues, perhaps not.

The wheels of justice, it is said, turn very slowly. While ProPublica observed that state work comp protections have been dismantled over the past decade, perhaps what we are now observing is that those very laws are now in the process of being dismantled by the courts.

Who said work comp wasn't fascinating?