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Employers often find New Jersey to be a very frustrating state for workers’ compensation because it is very difficult to close a file for good, unless the parties have grounds for a Section 20 disposition and the proposed Section 20 meets with the approval of the Judge of Compensation.  Now those employers will have added basis to complain in light of one of the most astonishing workers’ compensation decisions in decades.  In Catrambone v. Bally’s Park Place, A-3589-13T4 (App. Div. November 12, 2015), the New Jersey Appellate Division this month held that a man who received an award for total and permanent disability for his neck with Second Injury Fund contribution can reopen a prior award for his low back.

The case appears to be the first of its kind in New Jersey and is causing waves in the workers’ compensation community because almost every practitioner had been of the impression that total disability means exactly what it says:  the most one can get in workers’ compensation court.

It is important to understand the factual context.  Mr. Catrambone had two accidents:  the first was on March 18, 2006 involving the low back.  That led to a settlement on May 15, 2008 for 27.5% of partial total with a small credit for a gross amount of $27,570.  The second accident happened on June 14, 2008 and involved mainly the left shoulder.  On March 24, 2009, petitioner filed a reopener of the award on the low back and filed a claim petition for the second accident on June 14, 2008 for the left shoulder. Mr. Catrambone alleged that he was totally disabled from a combination of the second accident and the preexisting back problems from the first accident and applied for benefits from the Second Injury Fund.

The parties proposed a simultaneous resolution of both claims on November 29, 2010 with participation of the Second Injury Fund:

1. The low back reopener was settled for 30% credit 27.5%. That award became the basis for Second Injury Fund contribution because the Fund will only contribute if there is proof of previous disabling conditions, whether work-related or non-work-related.
2. The left shoulder claim was settled for 100% permanent total disability with the employer paying 150 weeks and the Second Injury Fund paying 300 weeks and then paying for the rest of petitioner’s life.

All was well until November 14, 2011 when Mr. Catrambone moved to modify the prior low back award.  The modification, often called a reopener, was an attempt to increase the prior award of 30% to a higher percentage because Mr. Catrambone argued that his back was worse than it was when he settled on November 29, 2010.  Bally’s protested that Mr. Catrambone had already been adjudged totally and permanently disabled and could not therefore get any further increase in his low back award.  Bally’s also pointed out that the basis for the contribution of the Second Injury Fund was the prior 30% award, and that award had already been considered as part of the simultaenous settlement with the Second Injury Fund.

The Judge of Compensation disagreed with Bally’s and held that when there are two accidents, the first one being a partial award, the employee could settle for total disability on the second accident and still seek an increase later on the previous award for partial disability from the first accident.  The Judge did state that if there is only one accident resulting in total and permanent disability, that award cannot be reopened.  The Judge of Compensation entered an order for 35% permanent partial disability with a credit for the prior 30% award, granting petitioner another $27,048.  Bally’s appealed this decision.

The Appellate Division noted in its recent decision that when the case actually settled on November 29, 2010, the Judge of Compensation did say to the claimant that he had a right to reopen the partial award and neither attorney said anything at the time.  Further, the Appellate Division noted that no prior case directly on point existed precluding Mr. Catrambone from reopening the earlier award on his low back, even though he received total and permanent disability benefits for his left shoulder injury.  The Appellate Division held that if a claim for increased benefits is based on a different injury than the one that totally disables the claimant, then the earlier injury award can be reopened.  In this case, there was a period of about six months when Mr. Catrambone would be receiving both his additional partial award and total and permanent disability benefits from the Second Injury Fund. The Court ordered Bally’s to repay the Second Injury Fund during that period of double payment.  In the end, Bally’s had to pay $27,048, but Mr. Catrambone got $16,054 and the Second Injury Fund got repaid by Bally’s the sum of $10,994.

This case has serious implications for employers who resolve total disability claims with the Second Injury Fund using a prior partial award as a basis for Fund contribution, as well as employers who resolve total disability claims on their own without the Fund when the claimant has prior partial total awards.  There appears to be no end to the claimant’s right to reopen the prior award in these situations. While common sense would suggest that total and permanent disability is the end of the line, this case is now the leading one in New Jersey.  Based on this decision, Mr. Catrambone can continue to reopen his low back claim so long as he does so within two years from the last payment of compensation to him.  The sense of finality that employers had with regard to total and permanent disability claims appears now to be illusory.

It is the understanding of this practitioner that Bally’s has applied for certification from the Supreme Court of New Jersey.

The signature workers’ compensation event in the United States takes place each year at the National Workers’ Compensation and Disability Conference and Exposition in Las Vegas, Nevada.  The highlight of the conference is the presentation of the “Teddy” award to a select few companies, chosen from hundreds of applicants, for outstanding achievement in workers’ compensation. The “Teddy” award honors the memory of President Theodore Roosevelt who lobbied for years on behalf of workers’ compensation laws to protect injured workers.

This year New Jersey based Barnabas Health System along with three other companies around the nation won the coveted “Teddy” award for its innovative Corporate Care program, spearheaded by Caryl Russo, Vice President of Corporate Care.  Several Capehart Scatchard attorneys were present at the ceremony.  Russo acknowledged the efforts of her business partners in winning this award, including PMA Management Corporation, third party administrator, William H. Connolly, the hospital’s insurance broker, as well as Capehart Scatchard, among others.

Russo and three other representatives of award winning companies, including American Airlines, participated in a 90 minute panel discussion focusing on the elements of success behind each company’s award winning workers’ compensation program.  Russo began by posing this challenge, “Creating consistency in an occupational health program is like tacking jello to a wall.”  There are countless challenges to be faced.  She said that for  Barnabas Health Care the key was establishing clear and achievable goals. In the hospital’s case the main goals were to provide the best possible health care while reducing lost time frequency.

The hospital created a system-wide “corporate care” program which was rolled out at each member hospital one hospital location at a time. A highly qualified occupational physician was hired to oversee treatment of workers’ compensation cases at each hospital.  All the physicians were trained in understanding the requirements on the New Jersey Workers’ Compensation system.  The program also focused on the need for creative modified duty positions at every hospital location. Since the rollout of the program,  Barnabas has seen a 72 percent drop in lost time  frequency.

Another key aspect of the program was the creation of a claim triage team, including the third party administrator, broker, department heads and other professionals. The triage team convened each week to focus on complex and high cost claims, looking for innovative ways to close files and resolve claims in an efficient manner.  Another focus of the program was to put in place systems which helped gather detailed past medical history early in the life of a new claim which could bear on causation and credit issues.  Such information became critical for occupational physicians and specialists involved in providing medical care.

Russo explained that all of these changes have resulted in millions of dollars in cost savings and reductions of reserves and letters of credit for the hospital, at a time when many New Jersey employers are experiencing skyrocketing workers’ compensation costs.

Those who are interested in learning more about Barnabas Hospital’s Corporate Care program can hear Russo and her award-winning program team speak about the crucial elements of their cost saving program at the Millennium Seminar on December 3, 2015 at the Hilton Hotel in Parsippany, New Jersey.  Information on and registration for the seminar is available at www.millenniumseminars.com or by contacting cwright@capehart.com.

In the past month three clients have asked what they should do when there is a third party award larger than the comp award and the adjuster needs to pay a permanency award.  For example:  the claimant recovers $750,000 in a third party law suit.  The total medical and temporary disability benefits are $150,000, and the permanency award is 50% of partial total at 2013 rates or 300 weeks at $551 per week for a total of $165,300.  The claimant has already repaid $100,000 minus $750 for costs of suit to resolve the lien on the medical and temporary disability benefits. Now only the permanency award needs to be paid.  Does the adjuster pay the permanency award over 300 weeks or does the adjuster pay one lump sum to the claimant?

This situation happens quite frequently, and the answer to the question can be found in the case of Owens v. C&R Waste Material, 76 N.J. 584 (1977).  That case involved an award in workers’ compensation for total and permanent disability benefits; however, the third party recovery was higher than the total workers’ compensation payments.  The employer argued that the payments for permanency should be made over 450 weeks.  The employee argued that the adjuster should pay one third of the permanency amount due in one check.

First, the New Jersey Supreme Court made clear that in a situation where the third party award is larger than the total workers’ compensation benefits, the employer is relieved of all liability to the claimant, other than to pay the employer’s share of the attorney’s fee in the third party case.  That percentage is usually one third.  That point must be emphasized because it means that the employer is not really paying workers’ compensation benefits in this situation:  the employer is just reimbursing petitioner for counsel fees.

Next, the court dealt with the argument that it is unfair to require the employer to accelerate the permanency payments in one lump sum because the employee might die during the period of the payments of total and permanent disability.  The employer further argued that if the employee should die during the period of permanency payments and not be survived by dependents, then all the employer would have to pay is a contribution to funeral expenses.

The Supreme Court rejected the employer’s argument:

We disagree and conclude that the legislative intent as expressed in N.J.S.A. 34:15-40 is that the computation of the employer’s pro rata share of the attorney’s fee in the third party recovery should be based on the potential compensation liability from which it has been released and does not depend on the happenstance of whether such liability were to terminate prematurely.

The Court added, “Since the obtaining by the employer of this tangible benefit coincides with the third-party recovery, it follows that the obligation to share legal expenses attributable to that recovery should be satisfied at the same time those expenses are borne by the employee.”

So, let’s go back to the initial example above.  Does the employer pay $551 per week over 300 weeks reduced by two thirds or does it just issue one lump check in the amount of $55,100, which is  one third of $165,300?  Under the rationale of Owens, the answer is the employer pays one lump sum check for $55,100.  It does not make the payments over a period of 300 weeks.

While it is true that Owens was a claim for total and permanent disability, the rationale should be the same whether the award is for partial or total permanent disability.  The point is that the employer is not paying the employee workers’ compensation benefits.  It is reimbursing the employee for its share of counsel fees, and the Supreme Court felt that this should be done.

New Jersey has a statute of limitations for occupational disease claims.  In Rajpaul v. McDonald’s Corporation, A-4681-13T4 (App. Div. August 28, 2015), the proper application of the statute became the issue on appeal.

In this case, the petitioner worked as a maintenance person from August 1995 until November 2005 at McDonald’s.  He began to have pain in his shoulders, wrists, and elbows in 1999.  He sought medical treatment at Somerset Family Practice and was referred to Somerset Orthpedic Associates where he was diagnosed with bilateral bicipital tendonitis in 2001.

For the next four years petitioner continued to work at McDonald’s.  In June 2005, he returned to Somerset Family Practice for treatment of his left shoulder.  In November he left McDonald’s to work elsewhere.  In June 2006, petitioner was diagnosed with a left shoulder rotator cuff tear and underwent surgery to repair the tear.

On December 14, 2006 petitioner filed a claim petition against McDonald’s alleging that occupational duties over 10 years caused his rotator cuff tear.  McDonald’s moved to dismiss and argued that petitioner had failed to file within two years from when he knew the nature of his condition and thought that it was due to work.  The Judge of Compensation granted the motion, and petitioner appealed.

On appeal, petitioner argued that the two-year statute of limitations should not have run in his case because he did not know he had a rotator cuff tear until 2006.  While he did know he had shoulder problems as far back as 2001, he was never told he had a rotator cuff tear.  Respondent argued that his condition was simply a progressive one due to tendonitis.

The Appellate Division sided with petitioner.  “We agree with the compensation judge that petitioner knew of his prior diagnosis of tendonitis as early as 2001.  Even so, we disagree with the compensation judge’s determination that petitioner had sufficient knowledge of a torn rotator cuff, based on previous treatment for tendonitis, to trigger the statute of limitations under N.J.S.A. 34:15-34.”

The Court in this case felt that the statute cannot run on a rotator cuff tear condition via a prior diagnosis of tendonitis because these are two completely different medical conditions.  The case is helpful for practitioners in deciding when there is a valid statute of limitations defense.  At a minimum, the medical condition at issue must have been diagnosed sometime in the past, and it must be the same medical condition that is presently at issue for the employer to win a statute of limitations defense.

In a surprising decision that is particularly topical with various states facing similar issues with the popular company UBER, the Appellate Division held in Babekr v. XYZ Two Way Radio, A-3036-13T3 (App. Div. August 6, 2015) that a limo driver was not an employee when his vehicle was involved in a crash during the course of his work.

Babekr provided chauffeuring services to XYZ, a car limousine service, since 1988.  The company had about 430 drivers and 50 other employees doing administrative duties in its office. XYZ is made up of individual drivers, including Babekr, who own shares in XYZ.  The drivers elect the “board members,” who make decisions on operations.

Petitioner worked as a driver 10-12 hours per day, six days per week.  He decided the days and hours he wanted to work, generally from early evening to 6:00 a.m. He did not have to work at all; it was up to him.  He used his own car to chauffer passengers and paid for his car insurance.  No evidence was offered that he was reimbursed for gasoline or other expenses.

The company gave each driver a computer to install in his car.  Drivers would log on when they were ready to work.  Most communications between XYZ and a driver came through the computer.  When a driver was in a zone, he could alert XYZ that he was available to pick up a passenger but he would have to get in line behind other drivers in that zone.  The driver could reject any offer to transport a passenger but if that happened, he could not receive any communications from XYZ for 30 minutes.

Passengers had accounts with XYZ and paid their fares directly to it. XYZ then forwarded to drivers a percentage of the fares generated by the driver. The company issued each driver a 1099 form and took out no deductions for taxes.  The company did require drivers to dress a certain way.

After petitioner was injured in a car accident on October 21, 2011, he filed a motion for medical and temporary disability benefits.  XYZ denied that he was an employee.  The Judge of Compensation ruled for XYZ and the Appellate Division affirmed the dismissal of petitioner’s case.  It said:

XYZ exercised very little control over the means and manner of petitioner’s performance.  While petitioner had to dress in a certain way and drive a particular kind of car, these were hardly exacting, controlling measures and he was otherwise left on his own and was largely unaccountable to XYZ.  XYZ located passengers for him when he chose to log onto the computer and, in return, he transported the passengers for a percentage of the fare.

The Court said that petitioner could work when he pleased and that he did not lose the right to log on if he limited his hours or did not work at all.  The Court interpreted this to mean that he could not be terminated from his job for not showing up for work.  The Court also emphasized that XYZ did not need to provide any direction over how petitioner drove passengers to their destinations.  It said that petitioner supplied his own equipment but for the computer that XYZ installed.  He used his own car, insured it himself and did not get reimbursed for expenses. It also said that petitioner was free to use or not use XYZ as a source to locate passengers.  Petitioner had no retirement benefits or annual leave.

The more dominant test is the relative nature of the work test.  The Court admitted, “Here, to be sure, transporting passengers was an integral part of XYZ’s business.  But those who transported the passengers were not employees but co-owners of XYZ.  The understanding between XYZ and the drivers was that, in exchange for producing passengers for the drivers, the drivers would transport the passengers and take a percentage of the fare.”

The Court seemed to misapply the concept of mutual dependency.  “Moreover, the evidence indicated that XYZ was never dependent upon any one particular driver to carry out the job of transporting passengers.  If one driver were not available to pick up and transport a passenger, another was waiting in line ready to do so.  No one driver was ever so essential to the effective functioning of the business to become a cog in its wheel.”  In prior cases, this test has not focused on the company’s relationship to any one person but on the relationship of alleged workers generally with the company. In Re/Max v. Wausau Ins. Cos., 162 N.J. 282 (2000) the Supreme Court found that real estate agents were employees even though they could choose their own hours of work and used their own vehicles, as well as running their own advertisements. In that case, the Supreme Court said, “We hold that the innovative structure created by the Re/Max agreement is simply another sophisticated attempt to thwart the employer-employee relationship…” Id. at 288.

The decision in Babekr should not be seen in isolation.  While it appears to depart from prior case law holding that cab drivers were employees of cab companies and real estate agents were employees of real estate agencies, this case is now the second one this year to find in favor of the independent contractor defense.  The other case of great importance is Kotsovska v. Liebman previously discussed in this Blog where the Supreme Court ruled this year that a personal caretaker for an elderly gentleman was not an employee, reversing the Appellate Division’s holding. The tide may be turning in favor of the independent contractor defense, but it is hard to square the reasoning of these recent cases with prior case law.

In sum, the rumors of the death of the independent contractor defense in New Jersey appear to be rather premature.