Thursday, January 3, 2013

If You Want to Play You Must Pay

I'm glad to see that the 9th Circuit Court of Appeals has some common sense in the handling of civilian war time contract workers - people put on the front lines of combat in a civilian capacity but who are just as at risk for injury as the military servicemen in similar locations.

The 9th Circuit Court of Appeals rejected an administrative law judge's attempt to reduce a Blackwater security specialist's permanent partial disability rate from $1,114 a week to $1 a week, based upon the date the worker planned on returning to a lower-paying job in the United States.

Daniel Raymond, a Blackwater private security officer assigned to the U.S. Ambassador for Afghanistan, injured his back while jogging during work-related physical training in May 2007. He received treatment and completed the rest of his one-year contract with Blackwater, before returning to the United States in August 2007. Raymond filed a claim for workers' compensation benefits under the Longshore and Harbor Workers' Compensation Act and the Defense Base Act.

Judge Gerald Etchingham awarded Raymond PPD benefits at the maximum rate of $1,114 a week from 2008 through August 2011, as Raymond had been earning $153,400 a year in Afghanistan. However, Raymond testified that he planned to continue serving one-year contracts in Afghanistan until August 2011, when he would return to the states to take a job in Arizona that paid $50,000 a year. He explained that he did not want to permanently relocate to Afghanistan, because his wife and five children in Yuma, Ariz., needed him. Working until August 2011 would allow him to pay off his family's home, Raymond said.

Citing Raymond's testimony about his plans for the future, Etchingham set Raymond's PPD rate after August 2011 at the minimum rate of $1 per week. (The judge based the $1 per week rate upon the fact that Raymond's post-injury wage in the United States was "remarkably similar" to his wages earned before leaving for Afghanistan.)

On appeal by Raymond, the Benefits Review Board (BRB) reversed, concluding that the judge should not have reduced the claimant's PPD after August 2011 because of "speculative" evidence about when Raymond might retire.

The BRB said, "It is well-settled that there is only one average weekly wage per injury on which disability benefits will be based and post-injury events generally are not relevant to determining average weekly wage."

Blackwater (notoriously in past news for unflattering management of its civilian war time employees) appealed. Blackwater's argument is that Raymond is in no different position than had he not been injured.

"Today, Daniel Raymond is exactly where he would be had he not been injured," Blackwater wrote in its appellate brief to the 9th Circuit. "He is in Yuma, Ariz., working in his usual and customary domestic employment. He is earning the same wages he would have had he not been injured. However, there is one big difference: In addition to the check he receives for that domestic employment, he also receives a weekly amount of $1,114.44, tax-free. Under the interpretation of the Longshore Act adopted herein by the Benefits Review Board, he will receive these payments for the rest of his life. At 46 years old, he has a remaining 32-year life expectancy, according to the Social Security Administration. This means that between August 2011, when he would have returned to the United States, regardless of whether he had been injured, through the remainder of his expected lifetime, he will receive a staggering total of $1,854,428.16. This is in addition to his domestic wages, which the Administrative Law Judge held are the same that he would have received regardless of injury."

A "staggering total"?! Blackwater doesn't mention in its brief that the inflation adjusted total of $1,114.44 per week is next to nothing over the course of 32 years. Even assuming a modest 3% rate of inflation, at the end of 32 years this sum has the equivalent of about $325 in purchasing power...

In the meantime Blackwater's government contracts increased from just $736,906 in 2001 to over a billion dollars from 2003 through 2006.

Since then Blackwater has changed owners after the 2007 shooting in Nisoor Square, Baghdad. The company now reportedly is doing about a third of the business it was doing at its height, or about $300 million annually. Out of that $300 million per year it must now pay Raymond about $58,000 per year, or .0019% (i.e. 0.00019) of its annual earnings.

The 9th Circuit did its job - upholding the law.

"We have repeatedly held that the LHWCA does not grant an ALJ any discretion to re-calibrate a claimant's average weekly wages at the time of injury based on future events that would have changed that wage regardless of injury," the court wrote.

It doesn't matter if the law produces an "absurd" result. That's the risk of being in business and of being subject to the laws of the land.

"Finally, Blackwater's argument that applying the plain language of the LHWCA to overseas contractors creates 'absurd' results misapprehends the role of the judiciary. The LHWCA and the Defense Base Act embody legislative choices that we have no authority to disregard. Accordingly, we must interpret and apply the LHWCA and the Defense Base Act as written," the court said.

No one likes the impact of war, either in military or civilian service. But war has a price. If a civilian company wants to play war, it has to pay the price.

And just as a company that wants to play war must pay the price, so too must a religious sect if it wants to engage in commercial activity regardless of whether it pays wages to its member workers or not - at least that's what the Montana Supreme Court ruled.

In Big Sky Colony et al. v. Department of Labor and Industry, No. 11-0572, the center of controversy was the effect of a 2009 amendment to the Montana workers' compensation laws which expanded the statutory definition of "employer" to include religious organizations for workers' compensation purposes.

Big Sky filed a constitutional challenge to HB 119, by Rep. Chuck Hunter. The commune argued that lawmakers unfairly targeted the law at it because the construction industry and the Department of Labor and Industry were under the mistaken impression that Hutterites have a competitive advantage because they can offer lower bids for projects because they don't pay their members wages or pay for worker's compensation coverage.

The Hutterites are Anabaptist Protestants who center their lives on their religion, and share a common ancestry with the Amish and the Mennonites, according to

They believe in sharing their possessions and reside in German-speaking communes scattered across northern United States and Canada. There are about 50 colonies in Montana, with an average of about 100 people in each colony, according to a 2010 state report.

The colony provides all the necessities of life for its members, including food, housing, clothing and medical care. Property ownership is forbidden by church doctrine, and members voluntarily provide their labor and support to the colony as an exercise of their religious faith and without expectation of payment.

The Hutterites are primarily farmers, but in recent years have also begun competing with private companies in the areas of construction and manufacturing.

The state argued that HB 119 was concerned only with the commune's commercial activities in these areas, and that requiring workers' compensation coverage for Hutterite workers would only affect the colony's external relationship with the state, not the relationship between the Hutterite church and its members.

The trial court disagreed and exempted Big Sky from HB 119, but the Supreme Court in a split decision reversed and held that Big Sky was subject to workers' compensation requirements.

Supreme Court Justice Brian Morris, writing for the majority, concluded that HB 119 was facially neutral and placed only an incidental burden on the Hutterites' religion.

"HB 119 regulates the colony's engagement in commercial activities in the same manner that the workers' compensation system regulates the commercial activities of other employers in Montana," he reasoned. "The colony, like all other employers in Montana, simply will make less money on these commercial endeavors once it pays the workers' compensation premiums."

The dissent argued that HB 119 "interferes with the internal relationship between the colony and its members under the central tenets of the Hutterite faith."

I disagree with this argument and agree with the majority - if an organization, regardless of its religious affiliation, desires to compete commercially against other commercial interests, and not just within its own religious community, then it must be on equal footing with its competition within the bounds of the laws applicable to all people.

Mandating workers' compensation insurance is not an interference with the internal relationship between the colony and its members, it is reinforcing the interests of the state to ensure that its citizens are protected from work injury or illness. Should a member of the colony decide to cease his or her relationship or affiliation with the colony then the consequences of that person's well being fall upon the state.

If Big Sky did not with to engage in commercial activities then there would be no argument - no workers' compensation needed for its internal projects staffed by its members, much like most volunteer work. Step into the world of commercial competition, then its a matter of state interests.

Like Blackwater, if you want to play you must pay.


  1. David,

    I regularly read and recommend your blog. I nearly always agree with your take on workers' comp issues. I have even commented from time to time. This time I have to disagree with at least part of this one. While I am no fan of Blackwater I sensed a flavor of they deserved to lose because they are Blackwater. I particularly disliked the point "It doesn't matter if the law produces an "absurd" result. That's the risk of being in business and of being subject to the laws of the land." I think it does matter. Absurd results damage the credibility of the law and encourage gameing of the system. While I agree we have to abide by current law, even if we have to do so while grinding our teeth, accepting bad law is not a good idea. California and Texas as well as several other jurisdicitons have changed their laws over the past few years. Sometimes for the better and sometimes with mixed results. The last time I looked none of them were carved in stone. Maybe it is time to review how many "absurd results" are coming out of the Federal system.
    Thanks for a thought provoking blog. I look forward to reading them all this year.


  2. Thanks for your comments Sam and I appreciate your point about absurd results encouraging gaming of the system. But changing the law is not the purview of the courts - they are there simply to interpret the law, and the law in the Blackwater case is very well settled. Unless Congress changes the law, these absurd results will continue, but that's the cost of being in business. Regardless, I'm glad that this blog gets the mental lubrication going and some dialogue moving! Thanks for the support.