The Conflict Between NAFTA and Comp

It's the long arm of the law.

When the North American Free Trade Agreement was signed into law conservatives applauded that it would open up the forces of economic powers from Mexico that were previously running underground.

Liberals said that NAFTA spelled the end of domestic work for Americans.

Of course, neither of the extreme views became reality.

What did become reality, however, is that Mexican firms sending employees into the United States became subject to the same workers' compensation laws that domestic employers are subject to - a real leveling of the playing field - at least according to a unanimous Arizona Court of Appeals panel opinion.

The court's decision in Porteadores Del Noroeste S.A. v. Industrial Commission of Arizona, No. 1 CA-IC 12-0038 held that the North American Free Trade Agreement did not pre-empt Arizona's workers' compensation statutes and that Porteadores del Noroeste could face liability in Arizona for the additional compensation that one of its workers, Adan Valenzuela, claimed he was due.

Valenzuela worked for Porteadores as a driver, hauling diesel fuel from Phoenix, Ariz., to Nogales, Mexico.

He suffered injuries in a wreck on April 30, 2010, after falling asleep behind the wheel. Valenzuela was ejected from the cab of his truck before his fuel tanker exploded. Valenzuela injuries were, amazingly enough, not substantial.

Valenzuela received treatment at a Nogales hospital and was then transferred to University Medical Center in Tuscon, Ariz. After being discharged from the hospital, Valenzuela returned to his home in Mexico and requested a determination of disability and benefits from the Instituto Mexicano del Seguro Social.

The IMSS, established in 1943, describes itself as the largest social security institution in Latin America. It provides disability benefits, health care, and life insurance coverage to some 49.1 million Mexicans.

If an employee of a Mexico-based employer suffers an on-the-job injury, IMSS will compensate that employee for 100% of his lost daily wages. IMSS also covers medical expenses arising from work-related injuries if the care is obtained from within the IMSS network of doctors.

Valenzuela, however, sought treatment from outside the IMSS network. Then, when IMSS refused to pay for all of his bills, he filed a claim under the Arizona comp system seeking payment of $17,000 for his care from Dr. Miguel Millan Ramirez and additional compensation.

In September 2010, Valenzuela filed an injury report with the Industrial Commission of Arizona naming Porteadores as his employer. Because Porteadores did not have Arizona workers' compensation coverage for its employees at the time of his accident, the ICA claims division referred the matter to the Special Fund/No Insurance Section.

At the time Valenzuela filed his injury report, the only medical bills presented to the Special Fund for payment were those related to the emergency visit to UMC, which the Special Fund paid. Valenzuela later asked the Special Fund to pay Dr. Ramirez's bills, but the Special Fund declined his request, determining he had already received "full compensation benefits" from the IMSS.

Valenzuela objected and requested a hearing on the Special Fund's decision. Porteadores argued that the ICA did not have jurisdiction over the dispute because it was a foreign company and because its corporate activities in the United States were governed by the North American Free Trade Agreement, not Arizona comp law.

The Administrative Law Judge decided that subject matter jurisdiction over Valenzuela's claim existed, and he went on to determine that Valenzuela's 2010 accident was compensable under Arizona law.

The ALJ determined that Porteadores and/or the Special Fund therefore had to pay for all of Valenzuela's care, including the care from Dr. Ramirez, subject to an offset for the benefits that Valenzuela had received from IMSS.

Porteadores sought judicial review, but not long after the parties had the oral argument before the Court of Appeals last March, the Arizona legislature amended the state's workers' compensation laws.

As of Sept. 13, 2013, the law in Arizona is that a worker who has a claim in Arizona and a claim in a foreign country based on the same injury, is entitled to the full amount of compensation to which the worker is due under Arizona law. If the worker receives compensation on the claim in the other country, then the employer or carrier will be required to pay the worker additional compensation to the worker, up to the amount that the worker would be entitled to receive under Arizona law.

Though the new law doesn't apply to the case, the opinion is in line with the new law.

The court said that the unambiguous language of NAFTA provides that only the United States may challenge a state law as conflicting with the terms of the agreement between it, Mexico and Canada.

"Given this express limitation, Porteadores is precluded from asserting that Arizona's workers' compensation statutes, or any application thereof, are preempted by NAFTA ," the court said.

What's interesting to me is that it doesn't appear that the court considered that Arizona 10 years ago passed laws to deny undocumented workers benefits - seems the same logic however does not apply in a reverse situation!

Porteadores is seeking a rehearing.