Six major changes to the Workers Comp laws signed

Governor Corzine just signed six new laws yesterday which attempt to “reform” certain aspects of the New Jersey Workers’ Compensation system. The “reforms” were passed by the Legislature in response to the series of newspaper articles in the Star Ledger which focused on the long wait some New jersey claimant have had to obtain their benefits.

Three of the new laws (S-1914/A-2962, S-1915/A-3059 and S-1918/A-2970) create new reporting requirements, create a new prosecutorial power, and increase penalties on employers who fail to provide workers comp coverage for all their own employees (or see that it’s provided for their subcontractors’ workers). These laws can be said to address the situations where an employer has no coverage or issues of coverage are in doubt. These laws are in direct response to the Star Ledger series of articles which focused on cases where benefits were delayed because the claimant’s employment status and coverage issues were questioned.

(1) S-1915 requires that “every corporation, limited partnership, LLP, or other employer” must submit proof of workers’ compensation coverage with their annual reports filed with the state of new Jersey. According to the new law, a “valid proof” is one of the following: (a) documentation of a current order from the Commissioner of Banking and Insurance authorizing the employer to be a self-insured employer pursuant to N.J.S.A. 34:15-77; or (b) a letter from an insurance carrier which includes the name of the carrier, insurance policy number, and date of commencement under the policy. This new law takes effect January 1, 2009.

(2) S-1915 gives the Office of the Insurance Fraud Prosecutor the power to investigate cases where an employer failed to provide workers’ compensation coverage “after being given a reasonable opportunity to obtain that coverage.”

(3) S-1914 raises the criminal penalties for not carrying workers’ compensation insurance to a crime of the fourth degree and expands liability to “any officer who is actively engaged in the corporate business.” Most troubling, the new law creates a “rebuttable presumption” that an employer has established a successor firm (under certain conditions) and allows the Uninsured employers Fund a right to pursue subrogation against any successor firm, corporation, or partnership. This law also creates a power whereby the Division of Workers’ Compensation can request proof of coverage at the time of trial. If no coverage s found the Division may issue a penalty of $5,000 for every ten days of no coverage (a 500% increase in penalties over the prior law).

Three of the new laws deal with the speed at which benefits are provided. S-1913 will permit workers comp judges to penalize parties who drag their feet in processing cases. S-1916 holds benefit payments to a time line based on a medical diagnosis. And S-1917 adds representatives of labor and taxpayers to the insurance industry-dominated Compensation Ratings and Inspection Bureau, which sets insurance premiums for workers compensation.

(1) A Judge of Compensation always had the power to enforce Orders under N.J.A.C. 12:235-3.14 (administrative code rules). The new law (S-1913) raises the amounts of penalties (from $1,000 to $5,000) for “unreasonable delays” by an insurer in issuing payments. In addition, a Judge of Compensation may now hold contempt proceedings, issues judgments for contempt, and then directly file a motion with the Superior court for enforcement of the contempt proceeding. Legal fees for such proceeding may be awarded by the Judge up to 20% of the award.

(2) S-1916 now requires that “emergent” requests for medical treatment be heard within 10 days of the request being filed with the court. What classifies as an ‘emergent’ motion for medical and temporary benefits? One where a doctor states that a worker is in need of emergent medical care and that “delay in treatment will result in irreparable harm and damage.” The respondent will have five days to file an answer to such a motion and the matter will be listed for hearing “within five calendar days of the filing of an answer.” A penalty of $2,500 will be assessed for each employer or insurance carrier who fails to designate a ‘contact person’ for such motions.

(3) S-1917 changes the makeup of the ‘Compensation Rating and Inspection Bureau’ (CRIB) to include union representatives (among others). This is an important change because CRIB has the power to institute proceedings against employers and to audit payrolls and set rates.

New labor figures released

According to the U.S. Bureau of Labor Statistics, the median weekly earnings of all full-time workers in the United States is $695.00 per week. In New Jersey, the maximum rate of temporary disability for 2008 is $742.00 per week.

We have blogged before on this topic (here and here)- the way the Feds and the State calculate ‘average weekly wage’ is different with the net effect that the NJ State Temporary Total disability rates are artificially high.

How high? Well the state of New Jersey just released figures showing a state average weekly wage of of $1,031.28. (Figures released August 22, 2008).

Appellate Division weigh in on Greg Lois' case

The Appellate Division affirmed the trial court in ‘Cucciniello v. The Sports Authority.’ Greg Lois wrote the Appellate Brief.

The Appellate Court found that a subsequent aggravating incident was not a “new injury” sufficient to break the chain of causation. This unpublished decision departs from the prior case law and basically holds that a superseding, new incident will not break the causal chains unless a doctor directly told the claimant not to engage in a specific activity.

Adjusters and risk managers are warned NOT to apply the reasoning of the Appellate Panel in reviewing specific cases; the poor reasoning employed by the Appellate courts basically serves to annihilate the ‘superceding/intervening’ defense which is one of the most well-settled tenets of western law/civil law.

Citation: Cucciniello v. The Sports Authority, App. Div. A-1235-07T3 (Decided September 24, 2008).

Defining 'Employment'

Who is a “volunteer” and who is an “employee”? The defense of “non-employment” is one of the few affirmative defenses left under the New Jersey Workers’ Compensation Act. This case explores the distinction between and ‘employee’ (whose injuries are compensable) and a ‘volunteer’ (for whom there is no workers’ compensation liability.)

The salient facts of the Flores v. Paragon case are as follows:

•Flores was an undocumented (illegal) worker who was employed by general contractor Bredbenner from April to November of each year. Bredbenner’s business was installing gutters.
•Returning to America after his usual winter stay in Mexico, Flores sought work with Bredbenner.
•Here the story conflicts: Bredbenner testified he had no gutter work for Flores, and instead offered to hire Flores to work at his hose, doing yard cleanup for two days. Pay was $100 per day. Flores testified that he was hiredin his usual capacity as ‘laborer’ without limitation or qualification on the amount or type of work to be done.
•Flores did do yard work for Bredbenner.
•After two days of yard work, Flores accompanied Bredbenner to a gutter worksite. According to Bredbenner, the gutter installation was for a ‘friend’ and the work was unpaid (although Bredbenner was reimbursed for materials).
•According to Bredbenner, Flores offered to help at the gutter installation job, and Bredbenner accepted the offer.
•Flores fell off the roof at the job site, breaking both arms, his nose, and one leg.

Bredbenner argued that Flores was a ‘volunteer’ at the time he fell of the roof – not an employee. Bredbenner argued that Flores ‘offered’ to help and there was no promise of payment for his help. The Judge of Compensation found that Flores was an employee of Bredbenner at the time of the accident. The Appellate Panel agreed.

The legal decision was based on the following factors:
1. Credibility. Basically, the trial judge found Flores more credible than Bredbenner.
2. The statutory definition of employee. N.J.S.A. 34:15-36 defines an employee as “a servant . . . who performs a service for financial consideration.”
3.The prior employment relationship. Flores was able to show a two-year history of working for Bredbenner.
4.The circumstances of the incident. Flores was transported to the work site by Bredbenner, used materials and tools provided by Bredbenner, and worked under the ‘direction and control’ of Bredbenner.

All of the judges acknowledged that the lack of a contract and the fact that Flores was a seasonal employee who had only been back in Bredbenner’s employ for two days complicated the decision.

Case: Flores v. Paragon Construction and Restoration, App. Div. A-1035-07T3, decided September 15, 2008 by Judges Payne and Alvarez. (Note: this blog entry discusses an ‘unpublished’ decision). Also note: I can’t find a copy of this decision online, either at the Rutgers Law Library or the Appellate Division’s page. If you would like a copy of this decision, please contact me directly – my office # is 973-622-3000.

Statute discussed: N.J.S.A. 34:15-36
NEW CASE: FLORES V. PARAGON CONSTRUCTION – DEFINING “EMPLOYMENT”
9/15/08
New Case – Employment – Who Is an ‘Employee’?

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Employer not entitled to credit for workers' compensation payments when settling co-defendant is a public entity

In a case of first impression, the Appellate Division held that where a public entity settles with an injured plaintiff for an at-work injury, the plaintiff’s independent contractor-employer is not entitled to a credit for workers compensation payments in a subsequent indemnity suit by the public entity. In Serpa v. New Jersey Transit, a construction worker was severely injured while working on a train station owned by New Jersey Transit — a publicly owned concern. He received some $900,000 in workers’ compensation payments from his employer, the general contractor for the job. New Jersey Transit paid the plaintiff $1.5 million to settle a personal injury suit, wherein the employer was named as a third-party defendant on an indemnity claim. The employer’s attorney agreed on the record that the $1.5 million was a reasonable settlement. However, after being apportioned 85% of the fault at trial on the indemnity issue, the employer sought a credit for its workers compensation payments. The trial court declined the requested relief and the Appellate Division affirmed. The court held that N.J.S.A. 59:9-2(e) precludes reimbursement to an employer from a public entity tortfeasor. Rather, the public entity or public employee receives a credit for the workers compensation payments, if a judgment is entered. Thus, in a settlement, a public entity cannot reasonably be expected to pay full value for a claim, knowing that if the case goes to trial, it will receive a credit against the damage verdict for the workers’ compensation payments. This was not accounted for by the employer in consenting to the reasonableness of the settlement.

Ultimately, the lesson taught by Serpa for carriers with insureds who work with public entities is that the public entity’s right to a credit for workers compensation payments made to injured employees must be taken into account before conceding as to whether a settlement proposal is reasonable. In this case, counsel for the employer should have argued that a settlement of $600,000 was appropriate.

Defending Employers