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.

Groch centered around an employee/workers’ compensation claimant’s state court lawsuit alleging both an intentional tort against his employer and a product liability claim against the manufacturer of a trim press involved in his workplace injury The employer asserted a subrogation interest in any money the employee recovered from the manufacturer to offset the workers’ compensation benefits the employer paid to the employee. In response, the employee challenged the constitutionality of Ohio’s latest subrogation statutes, and the Ohio Supreme Court agreed to resolve the issue.

In recent years, the Ohio Supreme Court has found two prior versions of the workers’ compensation subrogation statute to be unconstitutional. The Court concluded that the 1995 version of R.C. 4123.931 was unconstitutional in Holeton v. Crouse Cartage Co. (2001), 92 Ohio St.3d 115, 748 N.E.2d 1111. Three years later, the Court held that another version of that statute also failed to survive constitutional scrutiny. Modzelewski v. Yellow Freight Sys., Inc., 102 Ohio St.3d 192, 2004-Ohio-2365, 808 N.E.2d 381.

Fortunately, the current workers’ compensation subrogation statute did not suffer the same fate. Unlike prior versions of the statute, the current version, the Court held, does not violate the Takings Clause by requiring claimants to pay money up front for estimated future workers’ compensation benefits that may or may not be paid. The Court explained that a settlement procedure and establishment of an interest-bearing trust account resolved concerns about the Takings Clause because, for instance, they allow for return of unpaid benefit money to the claimant. 

Moreover, the Court held that the current version of the statute combats other possible constitutional violations inherent in the former versions by including procedures that provide all claimants with a way to reduce the subrogation amount. The Court determined that those procedures adequately reduce the risk that employers and others who pay workers’ compensation benefits will recover more money from claimants than is appropriate. The new statute contains a specific formula for calculating the employer’s or the BWC’s subrogation interest.

Despite the complexity of the Court’s analysis, the bottom line for employers is simple: Self-insured employers should be mindful that they can recoup workers’ compensation benefits in accordance with the statutory formula when an employee later recovers damages from a third party for a workplace injury; state fund employers may receive a credit on their premiums for subrogated amounts recovered by the BWC. All employers should be on the look-out for possible subrogation opportunities.