Employer Law Report : Employment and Labor Relations Lawyer & Attorney : Porter Wright's Employer Law Report : Employment Litigation, Non-Compete, Trade Secrets

Ohio’s Third District Court of Appeals recently held that the family of an injured worker whose accidental death was caused by a lethal concentration of OxyContin is not entitled to death benefits under Ohio Workers’ Compensation Act.

In Parker v. Honda of America Mfg., the decedent suffered a severe back injury in 1988. Mr. Parker underwent several surgical procedures in an unsuccessful attempt to alleviate his back pain. Eventually, Mr. Parker was prescribed and began using OxyContin in 1999 and subsequently became addicted. He sought treatment for his addiction in August 2004 and again in March 2005. In March 2006, he was discovered dead with a syringe in his arm, along with a lighter and spoon and 37 OxyContin pills. Cocaine and OxyContin were found on both the syringe and spoon.

The decedent’s surviving spouse filed a claim for death benefits under the workers’ compensation law. After the request for benefits was denied administratively by the Industrial Commission of Ohio, Ms. Parker filed a complaint in common pleas court asserting that the decedent’s death was the result of an OxyContin overdose which was the direct and proximate result of his work injury. Finding that Mr. Parker’s death was “self-inflicted,” the trial court granted Honda’s summary judgment motion. Ms. Parker then appealed to the Third Appellate District.

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CBC News in Canada is reporting that a Canadian long-term disability insurance carrier recently terminated the long-term disability benefits a Quebec woman was receiving for "major depression" after photos she posted on her Facebook page showed her "having a good time at a Chippendales bar show, at her birthday party and on a sun holiday." According to the CBC, the woman, 29-year-old Nathalie Blanchard, contends that her doctor recommended that she try "to have fun, including nights out at her local bar with friends and short getaways to sun destinations, as a way to forget her problems." Nevertheless, Manulife, the insurance carrier, which acknowledges that it uses Facebook for investigation purposes, terminated her long-term disability benefits.

Though anecdotal news flashes like this one may embolden employers to use Facebook and other social media to investigate employee activity while they are on a medical leave of absence or workers' compensation leave, caution is still necessary. For instance, Manulife confirmed that ít "would not deny or terminate a valid claim solely based on information published on websites such as Facebook." Presumably, Manulife forwarded Ms. Blanchard's Facebook photos and perhaps other evidence to a medical professional for an opinion as to whether the photos evidenced Ms. Blanchard's ability to return to work. Similarly, employers should resist the urge to make their own medical judgments as to an employee's ability to work when they obtain this kind of photographic or video evidence.

In addition, Ms. Blanchard apparently contends that she kept her Facebook photos private and does not understand how the insurance carrier obtained them. As I have preached before on this blog, employers should not circumvent an employee's Facebook privacy settings in order to investigate alleged misconduct. In this instance, a co-worker or other Facebook "friend" of Ms. Blanchard likely dropped the dime on her. When faced with this kind of evidence, employers and their insurance carriers would be wise to consider the motivations of the person providing the evidence and to conduct its own investigation. If employers avoid the temptation to immediately jump to conclusions, they will find that Facebook can be their "friend" when conducting investigations of workers' compensation or medical leave fraud.

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As concerns about the potential scope of the H1N1 flu continue to grow, one question we keep hearing from clients is whether employees who believe they have contracted H1N1 in the workplace may have compensable workers' compensation claims. In the vast majority of cases, we believe the answer will be a resounding "No."

Ohio defines an occupational disease as:

"a disease contracted in the course of employment, which by its causes and the characteristics of its manifestation or the condition of the employment results in a hazard which distinguishes the employment in character from employment generally, and the employment creates a risk of contracting the disease in greater degree and in a different manner from the public in general."

Therefore, for instance, the office worker who contracts H1N1 because somebody in the next cubicle had it does not have a compensable claim. The situation is no different than the seasonal flu from year to year.

One likely exception to my general proposition come to mind:  healthcare workers, who by the nature of their work may be exposed to H1N1 in a greater and different manner than members of the general public. Childcare workers also may have an outside chance at establishing a viable claim. Even then, however, most healthcare and childcare workers will still have a difficult time proving actual causation; that is, that they actually contracted H1N1 as a result of their work rather than from a sick family member, at a restaurant or some other public place.

The H1N1 vaccine may also pose a potential risk if it ever becomes widely available. Workers who experience side effects from getting an H1N1 vaccine may claim they are entitled to workers' compensation benefits. In the absence of evidence that the employer actually required its employees to get vaccinated and demonstrated illness based on any known side effects, these claims should be rejected.

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The Ohio workers' compensation successor-in-interest rules frequently catch even the most seasoned corporate M&A attorney off guard. Most M&A attorneys reasonably expect that a straight asset purchase will not result in the assumption of any workers' compensation liability in Ohio. As it relates to companies that pay premiums directly into the Ohio state workers' compensation fund, that expectation more often than not will turn out to be wrong. In short, Ohio's courts have long held that the workers' compensation statute authorizes the BWC to find successorship whenever "any employer transfers a business in whole or in part or otherwise reorganizes the business."

Frequently deferring to BWC determinations that successorship justifies a transfer of the seller's experience to the purchaser, the courts simply have defined a successor in interest as a "transferee of a business in whole or in part." This broad definition generally has resulted in the asset purchaser being held to have succeeded to the experience rating of the selling company even when the asset purchase agreement expressly states that the purchaser assumes none of the liabilities of the selling company. (Indeed, it has even resulted in a finding of successorship when a company retained another company's employees as it took over a lease of that company.)

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In a controversial decision issued yesterday, the Ohio Bureau of Workers' Compensation Board of Directors voted to eliminate the Drug-Free Workplace Program (DFWP) discounts for group-rated employers. Instead, only non-group-rated employers will be eligible for the DFWP discount The elimination of the DFWP discount for group rated employers, combined with the reduction of the maximum available discount under the BWC's group rating program from 85%-77% effective July 1, 2009, may deal a significant financial blow to many Ohio employers. These changes are consistent with the BWC's previously stated belief that the group rating program was actuarially unsound and its intent to reduce the premium rates for employers that did not qualify for group rating. The elimination of the DFWP program for group-rated employers is likely to raise a fair bit of concern that the group-rated employers will no longer be incentivized to adopt, maintain and enforce drug and alcohol testing programs. Hopefully, these employers will recognize the value these programs have on the overall safety of their workplaces and that the potential reduction in industrial injuries will provide sufficient incentive to keep their workplaces drug and alcohol free. Only time will tell.

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Back in February, Ohio Attorney General Richard Cordray announced a collaboration between his office and the Ohio Department of Job and Family Services, Ohio Department of Taxation, and Ohio Bureau of Workers’ Compensation to release and exchange confidential information to reduce the number of employers that are misclassifying workers as independent contractors. A report issued at the same time by the Attorney General's office estimated that the extent of annual costs to the state from worker misclassification totals $100 million in payments for unemployment compensation, more than $510 million in BWC premiums and almost $180 million in forgone state income tax revenues.

With the Ohio Attorney General's enforcement eye now focused on the costs of misclassification, it is important for Ohio employers to understand the potential consequences if they are found to have misclassified workers as independent contractors. First and foremost, they risk potential federal, state, and local taxes, fines, and penalties and workers compensation premiums and penalties. In addition, several multi-million dollar lawsuits have been brought against employers for failing to pay proper wages, including overtime, under the FLSA. Finally, employers with ERISA retirement and welfare benefit plans that do not contain "fail safe" provisions run the risk that misclassified workers will be found to be employees who are retroactively entitled to benefits under those plans. Alternatively, as to plans that do contain fail safe provisions, employers may need to redo the non-discrimination testing to make sure that each plan's tax-qualified status is not jeopardized by the omission of those employees. 

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In response to the recent San Allen case in which the Cuyahoga County Common Pleas Court issued an order enjoining the Ohio BWC’s group rating program, the Ohio legislature has enacted House Bill 79, which became law on January 6, 2009. House Bill 79 allows the group rating program to continue by simply changing one word in Ohio Revised Code §4123.29, which creates and implements the program. By changing the word “retrospective” to “group,” the legislature avoids the problem identified by the court; that is, that the group rating program was actually a prospective program that permits employers to be dropped from the group following a particularly expensive claim that would increase the group’s overall workers’ compensation premiums. 

As we wrote previously, the BWC is no fan of the large discounts currently provided to employers under the group rating program and has been working to gradually reduce those discounts in favor of base rate reductions. Those who favor the current group rating program point to the incentive – and reward – those discounts provide to employers that maintain a safe workplace. In addition, enforcement of the San Allen decision likely would have resulted in tremendous increases in workers’ compensation premiums for those employers that had previously benefited from the group rating program at a time when they could ill afford them due to current economic challenges.

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On November 18th, the Cuyahoga County Common Pleas Court in San Allen v. Ohio BWC issued an injunction prohibiting the Ohio Bureau of Workers' Compensation from enacting its current group rating plan and requiring it to enact a retrospective rating plan for the policy year starting July 1, 2009. At its core, the decision requires the BWC to set premiums retrospectively, as requested by the plaintiffs, who were a collection of employers that had seen their premiums increase as a result of having been excluded from a group based on claim experience. Historically, the rates have been set prospectively by the BWC despite statutory language that the court said requires the retrospective rating. In reaching its conclusion, the court noted its expectation that its decision would result in lowering base rates for state-funded employers at the expense of the significant discounts that group-rated employers have been receiving.

Often citing its belief that the discounts given to group-rated employers are excessive and actuarially unsound, the BWC has been working to reduce the level of discounts provided to group-rated employers for more than a year. It is therefore unclear at this time whether the BWC will appeal this decision. In addition, it is important to note that the BWC argued that, despite the statutory language indicating that the group rating program should be retrospective in nature, the legislature, in fact, intended a prospective rating plan. If that is the case (and recognizing, of course, the changes to the legislature since enactment of the group rating program), the Bureau conceivably could seek a legislative fix. As of now, however, state funded employers should anticipate no changes in their December 2008 or July 2009 premium bills.

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News confirming that the engineer of the Los Angeles commuter train that crashed last week, killing more than 20 people, engaged in text messaging while on the job underscores the need for employers to consider policies banning employee use of cell phones while driving on company business. Though it remains to be seen whether the engineer was texting at the time of the crash, the proliferation of electronic devices, such as Blackberries, and their potentially addictive use is helping to make "distracted driving" an increasing problem on the road. Simply put, distracted drivers are becoming more dangerous to themselves, their passengers and other motorists. Although distracted driving is a public problem that is not unique to employers, employers must recognize that they likely will be the "deep pockets" should a distracted employee cause a car accident. In fact, if the distracted employee also is injured in the accident, a workers’ compensation claim is also a strong possibility.

Some states have enacted laws restricting cell phone use while driving. Ohio is not one of them. As a result, Ohio law enforcement presumably is not obliged to police distracted driving (except in obvious cases of erratic driving). Therefore, to help manage their potential liability from distracted driving, Ohio employers should strongly consider banning the use of cell phones, Blackberries and similar devices while driving on company business as well as from conducting company business on such devices at anytime while driving. Otherwise, whether as a result of employees texting friends while driving on company business or responding to an urgent e-mail from the boss while driving, employers risk potentially significant liability.

For such policies to work, however, employers and employees will need to work together to ensure that the electronic device policy is enforced in a way that respects the fact that the employee may not be able to instantaneously respond to work issues while they are driving.

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Effective September 11, 2008, Ohio has amended its Workers’ Compensation Act to provide coverage for out-of-state employees who are injured while temporarily working in Ohio. The new law will allow an out-of-state employee to receive compensation and/or benefits under Ohio’s workers’ compensation laws if the employee is a resident of a state that does not preclude the employee from receiving Ohio workers’ compensation benefits.

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Ohio’s workers’ compensation statute requires that all settlements be reviewed and approved by the BWC. Ohio law further states that all settlement applications “shall . . . clearly set forth the circumstances by reason of which the proposed settlement is deemed desirable.” R.C. § 4123.65. The employer in Wise v. Ryan learned these lessons the hard way.

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In a case alleging intentional tort and negligent hiring and retention, the Ohio Tenth District Court of Appeals held that the  employer was not liable when one employee attacked and assaulted a fellow employee at work. Weimerskirch v. Coakley, Case No. 07AP-952, (10th Dist. Franklin County, April 8, 2008). 

David Coakley worked as a mechanic for AMF Bowling Inc. On June 6, 2004, Gary Weimerskirch, an assistant manager at AMF, walked in on Coakley and his girlfriend just after they, apparently, had sexual relations. Unexpectedly, Coakley told Weimerskirch that he quit and  began to collect his personal effects from the work area. As Coakley took his belongings to his vehicle, which was parked behind the building, he spontaneously grabbed a two-by-four, ran toward Weimerskirch, and struck him on the head with the board. Weimerskirch filed a lawsuit against Coakley personally, and also against AMF for employer intentional tort and negligent hiring and retention. The trial court granted summary judgment for AMF, and Weimerskirch filed an appeal.

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On March 18, 2008, the Court of Appeals for the Seventh Appellate District struck down the portion of Ohio’s Tort Reform Act that created a heightened standard for employees bringing intentional tort claims against their employers. Specifically, Kaminski v. Metal & Wire Prods. Co., Case No. 07-CO-15 (7th Dist. March 18, 2008), was the first appellate decision addressing the constitutionality of this heightened standard, and it found the standard improper.

Normally, an employee who suffers a workplace injury cannot file a lawsuit but must, instead, seek compensation under Ohio’s workers’ compensation system. Proof that the employer’s conduct was intentional, however, allows the employee to go around the workers’ compensation system and file a lawsuit for damages. 

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The Ohio Supreme Court just paved the way for employers to recoup workers’ compensation benefits paid to employees who later recover money damages for their injuries from other sources. By endorsing such so-called subrogation rights, the Court provides employers with an important cost-control tool. Employers should, therefore, keep their eyes open for subrogation opportunities and act quickly to take advantage of them.

In its latest review of the Ohio legislature’s effort to provide subrogation rights to those who pay workers’ compensation benefits, the Ohio Supreme Court held that the subrogation statute finally passes constitutional muster. The Court reached its finding in Groch v. Gen. Motors Corp., after questions about the constitutionality of R.C. 4123.93 and 4123.931 were raised. The Groch Court held that the statutorily-authorized right of recovery by the administrator of workers’ compensation (in a state fund claim),  a self-insuring employer or a direct-payor employer for payments to workers’ compensation claimants does not violate the Takings, Due Process, Remedies, or Equal Protection Clauses of the Ohio Constitution.

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A recent appellate decision demonstrates the necessity for state-fund employers to retain legal counsel to protect their interests when a workers’ compensation claim is appealed to state court. In Smith v. Kaleal, 2007-Ohio-6560, (11th Dist. Lake County), the claimant, Christopher Smith, filed a workers’ compensation claim against his employer, Dan Kaleal, owner of All Occasion Limousine, Inc. Smith’s claim was denied administratively by the Industrial Commission of Ohio, and he filed a notice of appeal and complaint in the Lake County Court of Common Pleas naming both the Bureau of Workers’ Compensation (BWC) and Kaleal as defendants.  

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The Ohio Supreme Court recently decided State ex rel. Nerlinger v. AJR Enterp., Inc., 116 Ohio St. 3d 314, 2007-Ohio-6438, a potentially significant new workers’ compensation opinion that addresses the Industrial Commission’s ability to accept or reject affidavit testimony. The injured employee failed to appear for his allowance hearing before the IC, and his claim was denied. Fourteen months later, the employee – now represented by counsel – filed a motion for reconsideration, attaching an affidavit saying that he did not receive the hearing notice. The IC, without making any express findings about the credibility of the employee’s affidavit, found that the notices were “properly mailed to the correct address of the injured worker.” On review, the Ohio Supreme Court held that the IC was exclusively responsible for evaluating the weight and credibility of evidence and did not need to explain why an affidavit was unpersuasive. 

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In its Sunday, February 4, 2008, edition, the Columbus Dispatch reported that the Industrial Commission, "a forgotten corner of the state bureaucracy that deals with injured workers' claims," was experiencing an unusually large number of grievances filed by its OCSEA-represented employees. According to the article, the grievances cover a wide range of issues including personal ones, such as the denial of bereavement leave, to issues that more fundamentally address the Commission's claims handling process. As for the latter category, the article quotes a grievance from a union steward that suggests that the Commission has established "arbitrary quota[s]" that "sacrifice the quality of [Commission employees’] work product." The Commission's Executive Director, Patrick Gannon, is quoted in the article as stating that "labor-management issues everywhere do have an effect on productivity." The article, which does not suggest that hearing officer decisions have been impacted, notes that the OCSEA will meet with Mr. Gannon and Commission Chairman, Gary DiCeglio, on February 13th.   We will keep our eyes and ears open for any additional information that may become public.

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Even in the chaotic world of Ohio workers’ compensation, crime still doesn’t pay – at least not for one enterprising Ohio claimant. Finding that the sale of crack cocaine over a three-year timeframe amounted to an exchange of labor for pay over a sustained period, the Ohio Supreme Court upheld the Industrial Commission’s determination that an injured worker was not entitled to permanent total disability compensation.   In reaching this rather obvious conclusion in State ex rel. Lynch v. Indus. Comm., 2007-Ohio-6668, the Ohio Supreme Court rejected the injured worker’s inspired argument that his activity could not be considered sustained remunerative employment because it was illegal.  

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On December 20, 2007, the Supreme Court of Ohio released its decision in Bickers v. Western & Southern Life Insurance Company, which expressly limits the Court’s previous holding in Coolidge v. Riverdale Local School District. In Coolidge, the Supreme Court held that an employer could not terminate an employee who was receiving temporary total disability compensation on the basis of absenteeism or inability to work, when the absence or inability to work is directly related to an allowed medical condition in his or her workers’ compensation claim. 

As a result of the Coolidge decision, many Ohio employers were frustrated in their efforts to manage production needs because they could not terminate and replace employees who had been off work for significant periods of time. In addition, Ohio employers complained that the Coolidge decision created an incentive for employees to delay their return to work following injuries since their jobs were protected while they were out. The Bickers decision, which for the vast majority of situations overrules Coolidge, represents a key victory for Ohio employers.

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