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Gender Pay Equality: Prepare for Change

Coauthored by Carmen Saginario, Jr., Esq. and Bruce L. Harrison, Esq.

Recent actions at both the federal and state level demonstrate an increased political urgency about addressing perceived gender pay inequality.  This development was highlighted on January 29, 2016 when the EEOC announced a proposal that the EEO-1 form, completed and filed annually by firms employing 100 or more personnel, be substantially revised to include gender pay information.  Speaking in support of this proposal, President Obama pointed to data which shows that the median yearly income for women working full time is only 79% of the median income for full time males.

The text of EEOC’s proposal was published in the Federal Register on February 1, 2016.  In broad brush, the proposed amendment to the EEO-1 form will require employers to report wage by gender in 10 different job categories applying 12 different wage bands.  The data source for these reports are to be Form W-2.  The EEOC has clearly acknowledged that it will use the data collected from the revised EEO-1 forms to prompt investigations of employers and proceed with enforcement actions per their discretion.

There will be a 60 day public comment period on the proposal ending April 1, 2016.  Employer groups are expected to oppose the proposal with opposition based, in part, on the belief that  factors other than gender often trigger pay differentials which will not be shown by W-2 information.  That said, it is believed that after the close of the public comment period, and before the elections in November, a final rule will be published requiring reports beginning September 30, 2017 to include the gender pay data.  Should this happen, a challenge to the rule in the federal courts would be unsurprising.

In addition to supporting EEOC’s initiative, President Obama encouraged states and cities to implement new requirements directed toward addressing gender pay inequality.  Less than a week after the President spoke, New Jersey Senate No. 92 was proposed, with Senate President Steve Sweeney as one of its co-sponsors.  The bill has already passed the Senate and has be sent to the Assembly.

If passed by the Assembly and signed into law by Governor Christie, Senate Bill No. 92 will amend New Jersey’s Law Against Discrimination (“LAD”).  Likely its most important change will be to prohibit unequal pay for “substantially similar work”.  The bill continues to permit different rates of compensation “pursuant to a seniority system” or a “merit system”.  Additionally, Senate Bill No. 92 recognizes that “bona fide factors other than sex, such as training, education or experience, or the quantity or quality of production” may justify pay differences.  However, the “other factors” defense is limited in such a manner as to be of questionable value to an employer.  Most significantly, non-gender factors “must be job related with respect to the position in question and based upon a “legitimate business necessity”.  Business necessity is a well recognized concept in the law and requires its proponent to satisfy a quite high standard of evidence.

There is, of course, a legal history which places these recent initiatives in context.  The principal historical source is the Equal Pay Act (“EPA”) of 1963.  This law amended the federal wage and hour law, the Fair Labor Standards Act (“FLSA”).  Under EPA, an employer cannot pay unequal wages to men and women who perform jobs that require substantially equal skill (experience, ability, education and training), effort (physical and mental) and responsibility, performed under similar working conditions.

In passing EPA, the Congress explicitly rejected pay equality based upon what is known as “comparable worth”.  Under this doctrine, men and women who perform work of the same value to the organization should receive identical pay, whether or not their jobs are at all similar in content.  Neither the revision to EE0-1 nor Senate No. 92 appear to go as far as incorporating the doctrine of comparable worth.  However, in 2015, in H.R. 1619 and S. 862, in bills captioned the “Paycheck Fairness Act” (“PFA”), attempts were made to minimize the affirmative defenses to the EPA.  The PFA did not pass in either the House or Senate, but on January 29, 2016, President Obama stated his support for it.

While H.R. 1619 and S. 862 are more broad in overall in scope than Senate Bill No. 92, there is a basis to believe that those federal bills served as the seed for the New Jersey proposed legislation.  Simply stated, the two federal bills and Senate Bill No. 92 seek to restrict defenses available to employers which are provided for in the EPA.

It is probable that both the federal and state path forward will be impacted by the 2016 federal election and the state elections next year.  That said, it is reasonably likely in the foreseeable future that New Jersey employers will be required to comply with a new and enhanced standard for gender pay equity.  An uptick in gender pay litigation claims will almost surely follow. Whatever the future holds, New Jersey employers should consider reviewing their own payrolls and check whether anything jumps out at them regarding pay differentials between their male and female workers.  It is probable that legislative changes are coming from state and /or federal authority, and being ahead of this issue might be wise.

Court Refuses to Apply Mode of Operation Rule to Injury Claim Caused by Leaking Shampoo Bottle

Plaintiff Yolanda White was shopping with her daughter in defendant’s Fine Fare Supermarket when she fell. While about 3 feet from the checkout counter, she slipped and fell on liquid dish detergent that had spilled on the floor. In White v. 525 Meat Corp., 2016 N.J. Super. Unpub. LEXIS 372 (App. Div. Feb. 22, 2016), she sued the defendant supermarket owner for her personal injuries.

The defendant moved for summary judgment at the end of discovery. The trial judge found that the plaintiff had not proven that the defendant was negligent – there was no circumstantial or direct evidence as to how long the dish washing liquid had been there. The trial judge also found that there should be no inference of negligence based upon the store manager’s conflicting statements that he saw the accident, the absence of the surveillance video of the accident, and that the detergent bottle was discarded.

Further, the trial judge found that the mode of operation rule did not apply to infer defendant’s negligence. The court concluded that the rule only applied to situations in which self-packaging in a store created a foreseeable risk of danger of spilled materials, which had not occurred here. Thus, the trial court granted summary judgment, dismissing the complaint.

Upon appeal, one of the arguments advanced by the plaintiff was that summary judgment should have been denied because the mode of operation rule applied. If this rule applied, it would provide an inference of negligence against the defendant business by relieving the plaintiff from the burden of proving that the defendant had actual or constructive notice of a particular dangerous condition, if the defendant’s mode of operation created the condition that caused the accident.

Under the recent New Jersey Supreme Court case, Prioleau v. Kentucky Fried Chicken, 223 N.J. 245 (2015), the court defined a supermarket’s “mode of operation to include the customer’s necessary handling of the goods when checking out, an employee’s handling of goods during checkout, and the characteristics of the goods themselves and the way in which they are packaged.” The Court made clear that the rule does not apply where there is no evidence that the accident bears the slightest relationship to any self-service component of the business.

Here, the Appellate Division agreed with the trial court that the mode of operation rule did not apply. There was no relationship between the spill of a liquid detergent bottle causing the plaintiff’s fall and a self-service component of the defendant’s business. A customer placed the bottle in a cart and it leaked near the checkout counter. The liquid was not packaged by the customer or the store employee and there was no indication that a customer or employee’s handling of the merchandise caused the spill. Thus, the Appellate Division found the trial court was correct in not applying the mode of operation doctrine to infer negligence against the defendant and affirmed the summary judgment in favor of the defendant supermarket.

When the General Counsel Isn’t Your Counsel

In a series of recent Pennsylvania cases, the state appellate courts have squarely addressed the oft-asked question of who, or what, is the general counsel’s client, particularly in the scenario of legal proceedings wherein the general counsel has interacted closely with corporate executives.  As the U.S. Department of Justice (“DOJ”) has ramped up its enforcement of individuals for corporate wrongdoing, these decisions provide a reminder to general counsel to advise agents of institutions that counsel represents the institutions, rather than the agents in their individual capacities.

The factual background of the cases[1] revolve around criminal investigations of executives of a higher educational institution in the aftermath of sexual abuse scandals regarding coaches of a certain university football team.  In each of the cases, the general counsel appeared on behalf of the university and the executives in a grand jury proceeding.  Subsequently, the executives were charged with perjury in connection with their grand jury testimony. The charges, in turn, were significantly based on the grand jury testimony of the general counsel.  Each of the executives thereafter brought actions to quash the grand jury presentment, claiming they had been denied effective counsel, as they each alleged they believed the general counsel had represented them individually.

After the Pennsylvania trial court rejected their requests for relief, the state appellate courts reversed and dismissed the criminal charges against the executives, finding that the general counsel had an attorney-client relationship with the executives and that such a privilege was violated through her testimony against the executives in the grand jury proceeding.  The appellate courts found that the general counsel communicated with the executives regarding the grand jury proceedings and appeared at the proceedings on their behalves, while failing to explain to the executives, or to the grand jury, any limitations on the scope of her representation, and that as such, the executives could reasonably believe that the general counsel was their personal attorney.

While the prosecutor argued that the general counsel only represented the university, and the executives solely as agents of the university, the appellate court determined that the general counsel did not appropriately explain to the executives the difference between representing the executives as corporate agents versus representing the executives in their individual capacities.

The appellate courts stated that the right to counsel is personal and designed to ensure that the party offering testimony does not provide incriminating testimony and, thus, counsel must properly explain the limitations of any representation.  Since said limitations were not adequately communicated to the executives, the courts found that the executives were deprived of their personal counsel during their grand jury testimony.

Importantly, although the executives were aware that the general counsel represented the university, the court found that such knowledge does not automatically establish the conclusion that the general counsel is only representing the executives in their capacities as agents for the university.

The courts also noted that since certain communications between a corporate attorney and a corporate employee may be personally privileged, the prosecutor’s argument, that none of the communications between general counsel and an executive are privileged, did not logically follow.  Rather, the courts distinguished discussions between general counsel and executives for the purposes of 1) business operations and internal investigations and 2) the executive’s personal legal issues, in these cases, the individual subpoenas to the executives.

The instant cases confirm the importance of the “Upjohn”[2] warnings, or the obligation to advise members of an institution that corporate/general counsel represents the institution and is not the personal attorney of the members/executives/directors of the institution.  Such an obligation arose from the United States Supreme Court opinion in Upjohn Co. v. United States, 449 U.S. 383 (1981), wherein the Supreme Court held that communications between corporate counsel and certain lower-level employees are privileged and, that in order to avoid such a misunderstanding, warnings should be given to advise the corporate employee that the attorney-client privilege belongs to the corporation, that said privilege cannot be invoked by the employee, and that the corporation may disclose such communications in its discretion.

Although the instant cases do not raise many new issues of law, they reflect the uptick in cases wherein liability of individuals has been sought, in both criminal and civil investigations, for what was arguably corporate wrongdoing, as well as the pressure on corporations to cooperate in governmental investigations.  On September 9, 2015, the DOJ issued guidelines, the so-called Yates Memo[3], on corporate conduct which allow corporations to receive credit for cooperating with DOJ investigations, including the requirement that the corporation “completely disclose” all facts regarding “individual misconduct” and identify all individuals involved with or responsible for the misconduct under investigation.  Moreover, the Yates Memo instructs prosecutors to concentrate on the wrongdoing of individuals from the beginning of the investigation through its resolution.

Given the increased focus on individual culpability by the DOJ, general counsel must be vigilant to provide an accurate and timely Upjohn warning and ensure that any dual representation issues are resolved.  Moreover, general counsel must be aware that participating in legal proceedings or investigations raises ethical hazards when the general counsel knows, or has reason to know, that an agent of the corporation may face individual legal liability.

Conversely, while many healthcare executives have been made aware of the Yates Memo, particularly given the breadth of health care laws and regulations which provide for individual penalties, executives down to lower-level employees must be aware of the limitations on the representation of the general counsel, whether an Upjohn warning is issued or not and, that most importantly, the general counsel is not personal counsel, from the early stages of an investigation, during grand jury proceedings, or through trial.

[1] Commonwealth v. Curley, 2016 PA Super 13 (Pa. Super. Ct. 2016); Commonwealth v. Schultz, 2016 PA Super 12 (Pa. Super. Ct. 2016); Commonwealth v. Spanier, 2016 PA Super 14 (Pa. Super. Ct. 2016)

[2] Upjohn Co. v. United States, 449 U.S. 383, 101 S. Ct. 677, 66 L. Ed. 2d 584 (1981)

[3] http://www.justice.gov/dag/file/769036/download

 

Questions regarding this article may be sent to Publications@Capehart.com. 

Medicare Revamps the Conditional Payment Process

By Nancy Johnson, Esq.

Many of you have been contacted by petitioners’ attorneys about their inability to obtain conditional payments over the past several months due to a revision in Medicare protocols and processes.  This article gives an overview of the changes to the process and we will provide more information as the full extent of the changes come to light.

Workers’ compensation carriers were required to report compensation claims to Medicare online since 2009 under Section 111 of the Medicare Act.   However, Medicare allowed both the petitioners’ attorneys and the carriers to seek conditional payment information by reporting a claim, providing proof of representation and utilizing the Medicare portal.  Conditional payments were coordinated through Medicare’s Benefit Coordination & Recovery Center (BCRC).

Medicare has now created a new entity to determine when it paid medical bills that should have been paid by a compensation carrier:  the Commercial Repayment Center (CRC).  This entity is responsible for seeking payment for recoveries initiated after October 1, 2015 while the BCRC will continue to handle open claims prior to that date.

The focus of the CRC is different:  rather than creating an itemization of payments and divulging it to the first party who requests it, the CRC will have direct contact with the carriers regarding obligations it believes they owe.

An overall description of the process is set forth at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Insurer-NGHP-Recovery.html

The process indicates that when Medicare learns that a beneficiary has workers’ compensation insurance through a carrier report or a beneficiary report, it updates its records and then begins identifying claims it believes were paid based upon the type of injury or illness alleged.  The search will include claims from the date of injury forward.

The CRC will then issue a Conditional Payment Notice (CPN) to the carrier.  The notice will advise the carrier that certain actions must be taken within 30 days of the date on the notice or the CRC will automatically issue a demand for payment.  The notice will list all of the claims and advise the carrier how to dispute items that are not related to the case.  A courtesy copy will be sent to the beneficiary and his attorney.  If a carrier has designated a specific recovery agent, they will also receive a copy of the notice.

Note: If a beneficiary or his or her attorney or other representative reports a no-fault insurance or workers’ compensation situation before the carrier submits a Section 111 report, the CRC will send the carrier a Conditional Payment Letter (CPL). The CPL provides the same information as a CPN, but there is no specified response timeframe. When this occurs, the applicable plan is encouraged to respond to the CPL to notify the CRC if it does not have ongoing responsibility for medical treatment (ORM) and will not be reporting ORM through Section 111 reporting or if the applicable plan would like to dispute relatedness.

The carrier has 30 days to challenge the claims in the CPN.  The carrier may contact the CRC or use the portal to dispute the charges.

Medicare will then issue a demand for payment to the carrier and request reimbursement within 60 days of receipt of the letter.  If the CRC agrees that some items need to be removed, they are omitted from the demand letter.

The carrier then has 120 days from receipt of the demand letter to file an appeal.  It appears that when Medicare seeks recovery from a carrier, only the carrier has appeal rights.  The beneficiary cannot appeal.  An attorney or a vendor may act on behalf of a carrier (plan) with proof of representation. See https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Downloads/Appeal-Rights-for-Applicable-Plans.pdf.  Medicare has its own appeal process and it clearly states it is not required to establish causation to prove a debt. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Downloads/Applicable-Plan-Appeals-Presentation.pdf

If no appeal is initiated, the carrier makes payment and the CRC will send a letter that the debt was resolved but that new claims may be demanded if the carrier is obligated to provide ongoing medical.

Interest accrues from the date of the demand letter and if the debt is not resolved within 60 days, the interest is applied every 30 days.  If the carrier fails to make payment, the matter is referred to the Department of Treasury for collection.

This new process imposes significant burdens on carriers as they will be expected to ensure all Medicare beneficiary claims are reported, scrutinize the demands for payment to verify which diagnosis codes are related to the claim and timely dispute them.  However, the Medicare website acknowledges that the carriers may retain vendors and agents to work out conditional payment obligations if an authorization is received that meets its specifications.  https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Downloads/2015-Insurer-Services-Whats-New-Archive.pdf

The exact nature of the process and the degree to which it excludes petitioners’ attorneys from acting on their clients’ behalf to resolve conditional payment issues is unknown at this point.  Many petitioners’ attorneys are frustrated because the Medicare offices are no longer allowing them to report workers’ compensation claims to initiate the conditional payment process.  They are being told by Medicare representatives that only the carrier can report and develop the case.  This appears contrary to the information on the CMS website that both a beneficiary and the carrier may report the claim to trigger the CRC to open a file, compile conditional payments and send them to the carrier for consideration for payment.  See https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/InsurerServices/Insurer-NGHP-Recovery.html

Another concern is whether outstanding conditional payments should hold up settlement of the underlying workers’ compensation case.  At a recent meeting of the New Jersey State Bar, there was no consensus how the conditional payment issue should be handled if a carrier fails to fulfill its obligations to communicate with the CRC and if the workers’ compensation settlement must be held up for resolution of the conditional payment process.  Some petitioners’ attorneys argued that they should be allowed to settle their claims without conditional payments being resolved since Medicare was not looking to the beneficiary for payment.  Other attorneys suggested that they will file motions for penalties if the carrier does not comply.  The Division of Workers’ Compensation does not yet have a formal policy and the State Bar Executive Committee proposed to present a seminar on the topic at the Mid Year Bar meeting in May 2016.

The impact upon resolution of New Jersey workers’ compensation cases is problematic.  Once can foresee serious complications in denied occupational claims where there may be multiple employers and carriers involved.  How will the CRC handle apportionment of liability and demands for payment amongst multiple employers and carriers involving the same petitioner?  The answer is anyone’s guess.  In addition, the settlement of the compensation case and the negotiation of the conditional payment obligations may be on two wholly separate timelines and the petitioners’ attorneys and judges are not going to want to delay resolution of the compensation matters.  However, settlement of the compensation case may prejudice the carrier since it will lose access to a motivated petitioner or petitioner’s attorney who may be needed to provide information to assist an appeal when liability for payments is disputed.

Healthcare Reform Update: Budget Deal Impacts ACA Tax Provisions

On December 18, 2015, President Obama signed the Consolidated Appropriations Act of 2016 (H.R. 2029) into law. The legislation affects several taxes implemented by the Affordable Care Act (“ACA”), however, the ACA’s substantive provisions will remain intact.

Notably, the legislation delays the effective date of the excise tax imposed on high cost employer-sponsored health coverage, colloquially referred to as “Cadillac plans.” Initially non-deductible and set to go into effect in 2018, the Cadillac tax will now be delayed until January 1, 2020 and will be tax deductible for employers. The Cadillac tax is intended as a tool to finance the ACA and curb the rate of healthcare costs by discouraging overuse of healthcare services. In 2020 a 40% tax will be assessed on annual plan premiums that exceed threshold amounts. The 2018 threshold amount was set to $10,200 for individuals and $27,500 for families and will adjust prior to the 2020 implementation. The threshold amount can also increase for certain employers based on the group’s age, gender, and the risk of the profession.

The recent legislation also imposes moratoriums on the health insurance providers fee (HIP) and the medical device excise tax. The HIP fee or tax is an assessment on covered entities engaged in the business of providing health insurance for United States health risks, and whose annual premium revenue exceeds $25 million. Health insurers share in the payment of this industry-wide annual tax in an amount proportionate to the insurer’s market share. The federal government will forgo collection of the $13.9 billion HIP tax for 2017. The HIP tax, which will resume in 2018, is meant to fund subsidies for low-income individuals and families when purchasing insurance on exchanges established by the ACA. Additionally, the 2.3% medical device excise tax will be in moratorium for 2016 and 2017. This tax has been in effect since 2013 and is imposed on the sale of certain medical devices by the manufacturer or importer of the devices.

ACA opponents tout these tax adjustments as the beginning of the ACA’s unraveling. However, the Cadillac tax delay and moratoriums on the HIP and medical device taxes do not alter the substantive provisions of the ACA.

 

Questions regarding this article may be sent to Publications@Capehart.com. 

New Jersey Governor Vetoes Two Major Workers’ Compensation Bills Opposed by Employers

On Monday, January 11, 2016, Governor Chris Christie issued vetoes of two bills long supported by the petitioners’ bar in New Jersey and strongly opposed by employers and carriers.

S-374/A-3403 involved legislation sponsored by attorneys for injured workers to increase their legal fees.  This particular legislation was aimed at voluntary offers that employers have been making for many decades under the law.  N.J.S.A. 34:15-64 provides that if an employer makes a voluntary offer of permanency within 26 weeks of the date of maximal medical improvement or return to work, whichever date is later, the employer pays no counsel fees on the amount offered, and neither does the injured worker.  This provision is an inducement to employers to make offers of permanency long before the case settles.  The voluntary offers put money quickly in the hands of injured workers and save counsel fees for both parties.

Claimants’ attorneys sought to eliminate the benefit to the employer and employee of not paying counsel fees on the amount offered.  The bill was pushed hard by attorneys for injured workers solely to augment their legal fees even though this would have meant that injured workers would pay more as well as employers.  For example, if an employer offered $5,000 early in the case within a few weeks of maximal medical improvement, the proposed bill would allow the claimant’s attorney to obtain a fee of $1,000 on the $5,000 offer.  That $1,000 fee would be paid $400 by the injured worker and $600 by the employer.  Current law provides that the claimant’s attorney gets no fee on the $1,000 early offer.  But current law does permit the claimant’s attorney to obtain a fee on any benefits paid to claimants at the end of the case in excess of the amount of the early offer.

S-264/A-1347 involved a series of proposals targeted to benefit certain public safety workers.  One of the provisions of this bill would create a rebuttable presumption that any cancer must be presumed to be work related to a New Jersey firefighter, if that firefighter has seven years of service.  In other words, even if the firefighter developed skin cancer in his foot, the judge must presume that it is work related unless the employer can prove that it is not.  All internal cancers – colon, prostate, liver, bladder, etc – would be presumed to be work related.

Another aspect of this bill provided that illness due to vaccines received in connection with an employee’s employment would be work related, if the vaccine pertained to potential bioterrorism or epidemics.  This proposal applied to all employees, not just public safety workers.

The bill also covered public safety workers who get exposed to communicable disease, biological warfare or epidemic-related pathogen in the course of employment.  Such workers would be covered under workers’ compensation as far as medical treatment even if the worker does not have the disease.  Should the worker subsequently contract the disease there is a rebuttable presumption that the condition is work related.

While the Governor rejected these two bills, he did pass one less significant bill which raised the amount that an evaluating physician can receive to $600 for an evaluating report.

NLRB Strikes Again!

As many of you know, the NLRB has been incredibly active over the past several years in getting its message across to employees that the NLRA protects their concerted workplace activities even where the employee does not work in an already unionized work setting.  Such efforts will likely continue, especially after a prominent federal circuit court of appeals in late November, 2015 upheld the NLRB’s finding that certain employer workplace policies by their very existence had a “chilling effect” on an employee’s ability to participate in protected concerted action under Section 8(a)(1) of the NLRA.

In Hyundai Am.  v. NLRB, 204 LRRM 3557 (D.C. Cir. 2015),  a former Hyundai  employee claimed that she was wrongfully terminated because of her participation in certain protected concerted activities in violation of federal labor law requirements.  When the NLRB decided to bring suit against  Hyundai, it also claimed that the employer maintained certain work rules (some as part of the company’s employee handbook) that “on their face violated Section 8 (a)(1).”  When the case was ultimately administratively tried, the wrongful termination claim was rejected, with the ALJ finding that the employee would have been fired even had she not violated any of the challenged rules.  Nonetheless, the ALJ and subsequently the NLRB itself upheld the conclusion that the challenged rules were indeed violative of the NLRA because their mere existence had a chilling effect on an employee’s ability to engage in protected concerted actions under Section 7 of the Act.

Hyundai subsequently appealed this ruling to the Federal Circuit Court of Appeals for the D.C. Circuit.  The court ultimately affirmed the finding that three of the four challenged rules violated the NLRB because of the chilling effect that the rules had on the possibility of employee collective action.  The rules that were struck down as violating the NLRA included : (1) an oral blanket confidentiality rule prohibiting employees from revealing information about matters under investigation; (2) a handbook rule placing limitations on the use of the Company’s electronic communications systems that concluded with the requirement that “employees should only disclose information or messages from theses [sic] systems to authorized persons”; and (3) a handbook rule allowing disciplinary action, including termination, “[f]or performing activities other than Company work during Company hours.”   A fourth rule that was challenged, an “open door” type complaint procedure contained in the Company handbook, was found to not be a violation of the Act.

With decisions of this kind upholding the NLRB’s right to continue its scrutiny of employer policies as violations of the concerted activity protections of the NLRA, it is important that employer’s rigorously review their own polices to insure that such polices would pass muster if ever challenged by the NLRB.  With help from an experienced labor and employment lawyer, employers can maneuver through the legal landmines being set by the NLRB as it continues in its efforts aimed at facilitating greater employee participation in workplace concerted activities.

Trial Court Improperly Admitted Evidence of Defendant’s Other Accidents to Prove He Was Negligent in Causing Auto Accident

Plaintiff Angela Gonzalez-Caceres was a rear passenger in a 2008 Toyota, seated directly behind the driver defendant Corrales. Plaintiff, who was asleep, was awakened by the impact from a collision involving the Toyota and a tractor-trailer driven by defendant Murray. She was injured and sued both Murray and Corrales for negligently operating their motor vehicles in Gonzalez-Caceres v. Murray, 2015 N.J. Super. Unpub. LEXIS 2826 (App. Div. Dec. 8, 2015). The issue on appeal is whether the trial court improperly admitted into evidence information regarding Corrales’ other accidents.

The accident happened when Corrales was struck in the rear by Murray’s tractor trailer. Murray, however, claimed that Corrales cut him off and change lanes in front of him.

Just prior to trial, plaintiff settled her claim with Corrales and proceeded to try her case solely against Murray. The jury returned a no cause for action as to Murray and the plaintiff appealed. She argued that the trial court judge erred in permitting the introduction of evidence regarding other motor vehicle accidents in which Corrales had been involved to establish that Corrales was not a good driver and, as a result of this error, she was entitled to a new trial.

The Appellate Division noted that the admissibility of evidence is governed by several evidence rules. First, Rule 402 applied, which states that “Except as otherwise provided by these rules or by law, all relevant evidence is admissible.” Evidence is considered “relevant” if it has “a tendency in reason to prove or disprove any fact of consequence to the determination of the action.” Rule 401. Finally, pursuant to Rule 403, relevant evidence may be excluded “if its probative value is substantially outweighed by the risk of (a) undue prejudice, confusion of issues, or misleading the jury or (b) undue delay, waste of time, or needless presentation of cumulative evidence.”

Here, the Appellate Division found that the defendant Murray had not established a logical relationship between Corrales’ other accidents and the accident involving the plaintiff. The trial court mistakenly characterized the prior accidents as similar in nature. After reviewing the circumstances of the prior accidents, the appeals court stated that none of them occurred in the same manner as the accident in this case. Hence, this evidence was not relevant to prove or disprove that Corrales’ actions caused the accident.

Further, the Appellate Division examined the application of Rule 404, which essentially permits character evidence including a trait of care or skill or lack thereof to show that the person acted in conformity therewith on a particular occasion. Evidence of other wrongs or bad acts is prohibited unless admitted for other purposes.

In this case, the defendant Murray presented evidence of Corrales’ other accidents to show he was a bad driver and, implicitly, was responsible for the accident at issue. The Appellate Division noted that general evidence of careless driving is inadmissible to show how someone drove on a particular occasion.

Habit evidence may be admissible if the party offering this evidence can show that the conduct of the other party is so uniform that it amounts to a nearly automatic response to a specified situation. Thus, the only habit evidence arguably that could have been relevant to this case was “whether Corrales had a specific, routine practice of carelessly cutting in front of tractor-trailer trucks.” In examining the evidence presented, the Appellate Division found that the defendant was unable to present proofs that this practice was Corrales’ habitual conduct.

The admission of this evidence was harmful to the plaintiff because the defense largely depended on whose version of events to believe and whether Corrales did cut off Murray. Accordingly, the Appellate Division determined that this evidence was improperly admitted, was likely prejudicial to the plaintiff, and that the plaintiff was entitled to a new trial.

No Spoliation Found Due to Failure to Preserve Surveillance Video

A failure to preserve relevant evidence could lead to a claim for spoliation of evidence with potentially dire sanctions against a party such as an adverse inference against that party, barring the use of an expert, or the dismissal of a claim. In the federal court case, Van De Wiele v. Acme Supermarkets, 2015 U.S. Dist. LEXIS 96711 (D.Ct. N.J. July 24, 2015), the District Court was asked to permit an amendment of a complaint against Acme Supermarkets for the intentional spoliation of evidence for failing to preserve the video of the plaintiff’s accident. The plaintiff claims that she tripped and fell while shopping at the Acme.

The accident allegedly happened on July 9, 2012. The plaintiff reported the accident to the Acme on that date. The assistant store manager thoroughly reviewed the surveillance video for the date and time of the plaintiff’s alleged fall and was unable to locate plaintiff in the video.

The Acme tapes are routinely taped over within 30 to 60 days in accordance with the store’s retention policy. The plaintiff did not send a letter to the Acme asking for the video and indicating that a lawsuit would be forthcoming until April 16, 2013. Thus, the store was not on notice that litigation was probable until the receipt of the April 16th letter, well after the time the video had been deleted per the store’s retention policy.

The court applied the Third Circuit test for determining whether a party has engaged in spoliation: spoliation occurs where: (1) the evidence was in the party’s control; (2) the evidence is relevant to the claims or defenses in the case; (3) there has been actual suppression or withholding of evidence and (4) the duty to preserve the evidence was reasonably foreseeable to the party. The court must also consider whether the destruction of evidence was done in bad faith.

The court noted that litigants are under no duty to keep or retain all documents in their possession. But, in the face of reasonably foreseeable litigation, they are under a duty to preserve evidence that they know, or reasonably should know, will likely be requested.

Of these four factors, the court found that the first factor was met because Acme conceded that the videotapes cannot be produced as they were taped over. However, the court found that the plaintiff failed to meet her burden in establishing that there was a reasonably foreseeable duty to preserve evidence. Because the assistant store manager did not locate plaintiff in the video, there was nothing on the tape which would have alerted her that the litigation might be forthcoming. Further, until the store received the letter from the plaintiff’s counsel, notifying it of potential litigation, it had no duty to preserve the video up to that point.

Also, the court found that the destruction of evidence by an automated system, such as recording over videotapes in the usual course of business, does not constitute bad faith for the purposes of a spoliation claim. Plaintiff made no showing that the Acme received constructive notice of this litigation such that a duty to preserve arose while the Acme was still in possession of the video. Hence, the court found that the plaintiff’s allegation of spoliation would fail and, accordingly, denied the request to amend the complaint to assert a spoliation claim.

Time for a Checkup: Admitting Facilities Must Ensure Physicians Carry the Proper Medical Malpractice Insurance

On September 29, 2015, the New Jersey Supreme Court, in Jarrell v. Kaul,[1] clarified what is actionable under the statutory medical malpractice insurance mandate imposed on physicians practicing medicine in the State of New Jersey.

Notably, under the Court’s decision in Jarrell, healthcare facilities which grant privileges to physicians, both employees and contractors, have a continuous responsibility to ensure that the physicians comply with licensure requirements, including the maintenance of proper malpractice insurance. However, the Court ruled that patients have neither a private cause of action against a physician who violates the malpractice insurance mandate nor the ability to bring an informed consent claim against the physician premised upon said physician’s uninsured status.

According to the Court’s opinion, Dr. Richard Kaul performed a spinal fusion procedure on his patient, James Jarrell, at the Market Street Surgical Center, however, his insurance policy expressly excluded spinal surgical procedures from coverage.  Following the procedure, Jarrell experienced a new pain in his left side and “drop foot.” Jarrell underwent a revision surgery, performed by another doctor, to correct Dr. Kaul’s work.  Jarrell thereafter asserted several claims against Dr. Kaul, among them: (1) a direct negligence claim against Dr. Kaul based on his uninsured status; (2) a claim seeking damages for lack of informed consent; and (3) a negligent hiring claim against Market Street Surgical Center, the facility granting privileges to Dr. Kaul.

Physicians in New Jersey, pursuant to N.J.S.A. 45:9-19.17, must maintain medical malpractice liability insurance in the sum of $1,000,000.00 per occurrence and $3,000,000.00 per policy year or provide a letter of credit for at least $500,000.00. Failure to maintain these minimum standards is punishable via civil penalties and license revocation or suspension. The public policy consideration behind these provisions is to provide some level of recourse in the event of medical malpractice.

While neither the statute nor the regulations expressly permit a patient to bring claims against a treating physician who does not comply with the insurance mandate, the Supreme Court in Jarrell clarified that the statutory and regulatory scheme does not implicitly provide for such a private cause of action against a noncompliant physician. The Court reasoned that the Board of Medical Examiners’ oversight and enforcement was the legislature’s chosen mechanism to enforce the law’s compliance — an aggrieved patient bringing a lawsuit is not the vehicle by which the legislature wished to enforce compliance.

The Court further held that Dr. Kaul’s lack of malpractice insurance did not implicate the doctrine of informed consent. The Court was unwilling to expand informed consent jurisprudence to the financial consequences of an uninsured physician’s negligence.  The Court so ruled because a physician’s medical malpractice insurance or lack thereof has little bearing on the nature of the attendant risks of the patient’s treatment. A patient’s inability to recover a judgment is not the injury contemplated by the informed consent doctrine.

However, and importantly, Jarrell’s claim against the Market Street Surgical Center for negligent hiring survived. The Court held that when a principal, in this case the surgical center, retains an independent contractor, here the physician, for a task that requires certain permits and licenses, the principal has a continuing duty to ensure that the contractor maintains the requisite licensure. Because medical malpractice insurance is an essential condition for a license to practice medicine in New Jersey, the surgical center had a continuous duty to ensure that physicians with privileges to practice at the facility carry the required malpractice insurance.

In the wake of the Court’s decision in Jarrell, healthcare facilities granting privileges to physicians must be vigilant and take extra care in ensuring that physicians at their facility, whether employees or contractors, have the minimum required professional liability insurance as well as any other required licenses.

[1] Jarrell v. Kaul, 2015 N.J. LEXIS 963 (Sept. 29, 2015)

 

Questions regarding this article may be sent to Publications@Capehart.com. 

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