Uncategorized

The 2015 Manual is a compilation of prior editions with particular emphasis on cases decided in 2013-2014 as well as the addition of important chapters for practitioners of workers’ compensation. Several Supreme Court decisions and numerous appellate division decisions are analyzed in this edition.

Some of the 2015 Edition highlights are as follows:

• New chapter entitled “Complex Issues In Temporary Disability Benefits”
• New chapter entitled “Issues Arising From Home Injuries and Telecommuting”
• New section analyzing complex issues under Section 40 including Dever and Greene
• Expanded analysis of retaliation claims and the McDonnell Douglas standard
• Expanded analysis of fraud claims including Bellino v. Verizon Wireless
• Expanded analysis of independent contractor issues
• Expanded analysis of occupational Lyme disease cases
• Expanded analysis of the “Smart Act” as part of the MSP law
• Expanded analysis of evidence in workers’ compensation
• Analysis of 65 new cases with 52 pages of additional text

Some of the 65 new cases that are analyzed in the 2015 Manual include:

• Hersh v. County of Morris (Supreme Court analysis of parking lot cases)
• Renner v. AT&T (Supreme Court analysis of stroke claim at home)
• Greene v. AIG (Section 40 lien rights in denied claim)
• Dever v. NJM (applicability of liens against UM and UIM carriers)
• Bellino v. Verizon Wireless (definition of purposeful intent under fraud statute)
• Liu v. Bally’s Casino (entitlement to temporary disability benefits post-termination)
• Durnien v. UPS (exceptions to Second Injury Fund entitlement)
• Patterson v. Atlantic Club (arising out of work standard)
• Ascione v. US Airways (occupational pulmonary claims)
• Estate of Kotsovka v. Liebman (independent contractor status)
• Graham v. Port Authority (PTSD claims and sufficient expert testimony)
• Parascandolo v. Department of Labor (TDB liens and workers’ comp)
• Farnath v. 34^th Street Market (coverage for limited liability corporations)

Nilda Zulueta owned Artime, Inc, doing business as Cardel Jewelers, in New York City.  She employed plaintiff Mirtala Pineda to clean the jewelry store and Zulueta’s home in North Bergen, New Jersey, after Pineda had immigrated to the United States from El Salvador in 1990.

In 2004, Zulueta directed Pineda to work full-time at the home of her son, Hector Zulueta, as a nanny and housekeeper.  From 2004 to 2011, Pineda worked Monday through Friday from 8:30 a.m. to 5:00 p.m. in Hector Zulueta’s home doing cooking, cleaning and laundry.  She would also pick up in the yard after the family dog.  Hector Zulueta and his wife directed Pineda’s activities in their home.

On weekends, Pineda cleaned the jewelry store and sometimes Nilda Zulueta’s home.  Even after Pineda started working in Hector Zulueta’s home, Pineda was paid by Artime, Inc.  Hector Zulueta never paid Pineda to do her job as nanny or housekeeper.

On January 27, 2011, Pineda was in the backyard of Hector Zulueta’s home, picking up dog waste, when she slipped and broke her ankle.  She filed a workers’ compensation claim in New York against Artime, Inc. and eventually collected benefits.  She also filed a workers’ compensation claim against Hector Zulueta and his wife in New Jersey but agreed to dismiss that claim in August 2013.  She filed a civil law suit against Hector Zulueta and his wife in New Jersey for negligent maintenance of their property.

Hector Zulueta and his wife argued that the civil law suit was barred because they employed Pineda; hence, her exclusive remedy was in workers’ compensation court.  The trial court agreed, and Pineda appealed.  The Appellate Division first noted that an employee may have more than one employer and observed that joint employment is rather common in New Jersey. This situation, however, bore a closer resemblance to “special employment,” where an employee is borrowed from another employer.

The court examined the case of Blessing v. T. Shriver & Co., 94 N.J. Super. 426 (App. Div. 1967) to determine if Pineda was the special employee of Hector Zulueta.  In that case the court examined whether the following factors applied:

1. Does an express or implied contract exist between the special employee and the special employer?
2. Is the work that is being done essentially that of the special employer?
3. Does the special employer have the right to control the details of the work?
4. Does the special employer pay the employee’s wages?
5. Does the special employer have the power to hire, release, or re-hire the employee?

In this case the Appellate Division found that four factors favored special employment, and it said that it is not essential that all five factors must apply under New Jersey case law.  On the first factor, the court said that there was evidence of an oral agreement with defendants.  Pineda took direction from Hector Zulueta and his wife for many years.

Pineda argued that the second factor was not met because Hector Zulueta and his wife are not business owners.  The court said that one does not need to be a business entity to employ others to perform services.  Pineda took care of the Zulueta children and that was her main job Monday through Friday.

The court also believed the third factor was met because Pineda took direction from Hector Zulueta and his wife during the week, even if they did not tell her exactly how to cook or clean.  The court noted that Nilda Zulueta certainly did not provide direction to Pineda when she was working as a nanny for her son.

The court acknowledged that the fourth factor was missing because Hector Zulueta and his wife did not pay Pineda.  Artime, Inc., owned by Hector’s mother, paid her.  The court did not raise the issue of whether Hector Zulueta or his wife violated any tax or employment laws in so doing. “We leave it to others, if appropriate, to address the lawfulness of defendants’ employment of plaintiff and their potential liability for income and other taxes that may have arisen as a result of the facts we have described.”

The fifth factor was also disputed, as Pineda argued that there was no proof that Hector Zulueta and his wife could fire Pineda.  The court said, “There is no evidence that plaintiff was granted lifetime employment without any right retained by defendants to terminate her services in their home and with their children.”

Since four of the factors existed under the special employment test, the court ruled that plaintiff was a special employee of Hector Zulueta and his wife and therefore affirmed the dismissal of her law suit.  The case can be found at Pineda v. Hector Zulueta and Sheila Zulueta, A-1552-13T4 (App. Div. October 23, 2014).

Employers continue to deal with federal intrusions in workers’ compensation: the Medicare Secondary Payer Statute and now new rules being considered by OSHA.  On November 8, 2013, OSHA published a notice of proposed rule-making to amend the agency’s regulations on reporting injuries and illnesses.

OSHA is concerned that injury reporting may be inaccurate because employers may have policies that discourage employees from reporting injuries.  Therefore, OSHA is considering three provisions:

1. A requirement that employers inform their employees of their right to report injuries and illnesses free from discrimination or retaliation;
2. A provision requiring that any injury and illness reporting requirements established by the employer be reasonable and not unduly burdensome; and,
3. A prohibition against disciplining employees for reporting injuries or illnesses.

OSHA is asking the following questions:

• Do you or does your employer currently inform employees of their right to report injuries and illnesses?  If so, please describe how and when this information is provided.
• Are there any difficulties or barriers an employer might face in trying to provide such information to its employees?  If so, please describe them.
• How might an employer best provide this information:  orally to the employee, through a written notice, posting or in some other manner?

Adverse actions mentioned by participants in public meetings with OSHA include automatically disciplining those who seek medical attention and requiring an employee who reported an injury to undergo drug testing where there was no reason to suspect drug use.

There are already rules prohibiting discrimination against an employee for reporting a work-related injury or illness, but OSHA is not satisfied with existing rules.  It feels additional explicitness is needed because stakeholders were concerned that new requirements to publicize record-keeping data might provide employers new motivation for disciplining employees for reporting.

The comment period for the proposed rule runs on October 14, 2014.  Thanks to National Workers’ Compensation Defense Network member, Mike Fish, Esq. of Fish, Nelson and Holden in Alabama for bringing this development to our attention.

Inez Graham worked for the Port Authority of New York and New Jersey.  She began her employment in June, 1987 as a toll collector.  She was injured in 1989 when she slipped and fell while working at the Holland Tunnel.  She received an award in 1993 of 30% partial permanent disability for her left leg and 12.5% for her low back.

On September 11, 2001, petitioner was attending a training session on the sixty-first floor of the North Tower of the World Trade Center.  After the American Airlines plane struck the building, she walked down the stairs to safety.  Outside, she was told to “run for her life.”  She scraped her knee but walked safely away before the building collapsed.  She was covered in white ash and reached a center where others helped clean her up.  She was transported to University Hospital in Newark where she was decontaminated and sent home.  She never returned to work.

Petitioner filed a claim petition alleging orthopedic and psychiatric injuries from the events of September 11^th.  She alleged that she injured her back with left radiculopathy while running for her life, and she alleged psychiatric injuries from the day’s events, particularly from witnessing a co-worker being crushed in an ambulance as the tower fell.

Petitioner produced two experts at trial: Dr. Vin Gooriah and Dr. Morris Horwitz.  Respondent produced Dr. David Gallina.  Its orthopedic report of Dr. Philip Keats was introduced into evidence by agreement of the parties.

The Judge of Compensation awarded petitioner 75% of partial total on a psychiatric basis and 10% for her orthopedic claim with a credit of 5% for a prior low back sprain.  Neither party was aware of the prior 1993 workers’ compensation judgment at the time.  The Port Authority sought reconsideration after it became aware of the prior award, arguing that the two awards together gave petitioner 113% of partial total disability.  The Judge thereafter reduced the award to 75% of partial total with a credit of 12.5%.

The Port Authority appealed on several grounds, including the failure of the Judge to properly credit the prior award.  The Appellate Division faulted the Judge of Compensation for not explaining why Dr. Gooriah’s testimony on the psychiatric aspect of the case was given credence over Dr. Gallina’s testimony.  Dr. Gooriah only saw petitioner once on October 1, 2007, while Dr. Gallina saw petitioner three times:  June 10, 2004, February 15, 2005, and September 28, 2006.  He opined that petitioner had a 5% disability on a psychiatric basis; Dr. Gooriah opined that petitioner had a 75% disability.

The Court said:  “In accepting Dr. Gooriah’s recommended disability of seventy-five percent, the court made no findings and gave no explanation as to how it arrived at the figure.  The court simply restated Graham’s complaints, and concluded that the award is ‘fully supported by the testimony of Dr. Gooriah, by the petitioner’s testimony concerning her inability to function both at work and a normal life pursuits.’”

In the opinion of the Appellate Division, Dr. Gallina had the benefit of three exams and was able to chart petitioner’s progress.  “When Dr. Gallina saw Graham in 2005, he noted that ‘she had really substantially improved.’”  He attributed the improvement to psychological counseling she had received.  “Finally, Dr. Gallina remarked that the medication prescribed by Graham’s psychiatrist had helped to calm down some of the anxiety she had been experiencing.  Dr. Gallina’s assessment after his second evaluation of Graham was that she had demonstrated ‘considerable functional improvement although she still indicated that she had some symptoms.’”

The Court observed that Dr. Gallina still found petitioner had PTSD in his last exam but it was in partial remission.  Petitioner had no signs of depression, was able to drive a car, go to restaurants, go shopping, and her sexual libido had improved.  In a crushing admission at trial, Dr. Gooriah admitted that he could not state whether petitioner had improved more than three years after he examined her because of the lapse in time since his examination.  “Clearly, Dr. Gooriah could not present a reliable opinion based on objective medical evidence as to whether Graham showed improvement or regressed, as he only saw her on one occasion.”

The Appellate Division reversed and remanded and reminded practitioners that an expert opinion on partial permanent disability must be supported by a recent medical examination.

This case may be found at Graham v. The Port Authority of New York and New Jersey, A-5419-11T3 (App. Div. March 12, 2014).  It is an unusual case because the Appellate Division seldom reverses a Judge of Compensation on the amount of disability.  This was not a dispute about whether petitioner had psychiatric disability from work:  the issue was how much disability she had.  The key to the victory by defense counsel was in skillfully highlighting the greater familiarity which Dr. Gallina had with the petitioner over Dr. Gooriah, and also in highlighting specific activities which petitioner was able to engage in as of the last examination by Dr. Gallina. By contrast, Dr. Gooriah merely parroted petitioner’s complaints, leaving the Judge very little basis to adopt Dr. Gooriah’s opinion as being more credible.

Shaun Cronrath, a Burlington County College employee, was injured at work when he was attacked by a fan while coaching a basketball game.  He filed a claim petition, and Travelers Casualty Insurance Company of America (hereinafter “Travelers”) filed an answer on behalf of the College.  Travelers negotiated a settlement of $35,000 on behalf of the College on a Section 20 basis on February 3, 2012.  Three weeks after the settlement occurred, Travelers first became aware that it did not insure the College.

Nine months after the order was entered, Travelers moved to modify the award to reflect that Travelers was not the correct carrier for Burlington County College.  The College opposed the motion and argued that Travelers was bound by the settlement agreement. 

The Judge of Compensation held that he did not have a statutory basis nor jurisdiction to reopen the settlement. Travelers disagreed and contended that the interests of justice required the Judge of Compensation to reopen the settlement and amend the order to name the correct carrier, which was the New Jersey Community College Insurance Pool as administered by Qual-Lynx.  Travelers appealed the decision of the Judge of Compensation to refuse to amend the order.

The Appellate Division held that in certain cases of mistake or inadvertence, a record may be reopened.  However, in this case the Court concluded that the Judge of Compensation did not have jurisdiction to reopen this matter:

Travelers, however, did not present sufficient cause to reopen the settlement to change the identity of the settling entity.  If Travelers is entitled to reimbursement for a settlement it mistakenly entered into, it must seek such reimbursement from the liable entity in another court.  As Travelers acknowledges, petitioner is not at blame nor should petitioner be involved in litigation seeking to modify the settlement.  Workers’ Compensation Court is not the proper forum for litigation between two insurers after a judgment has been entered and payment of that judgment made to petitioner.

The Court went on to say that the Division of Workers’ Compensation is the forum for deciding issues of compensability or appropriate benefits for work-related injuries but not for disputes between employers after a mistaken settlement occurs.  It said that the Division should not be involved in a post-judgment dispute between two insurers.  “The Judge of Compensation correctly determined that he lacked jurisdiction to entertain Travelers’ litigation against BCC to amend the judgment.  This is particularly true in light of the fact that Travelers waited until October 19, 2012 to move to correct the Judge’s February 3, 2012 judgment.  Travelers could have sought to be dismissed from the action prior to paying the judgment.”

As practitioners know, it is a common problem in New Jersey that the wrong carrier is listed by the claimant on the claim petition.  This case underscores why it is important for carriers and third party administrators to work promptly to amend the pleadings before final orders get entered with incorrect information.  This case may be found at Cronrath v. Burlington County College, A-4667-12T2 (App. Div. June 23, 2014). 

The New Jersey Senate passed S374 by a vote of 23-12 on Monday, June 30, 2014.  The bill effectively ends the benefit that employers obtain from making voluntary offers of permanency under N.J.S.A. 34:15-64.

New Jersey has an unusual practice of requiring employers to pay 60% of the attorney’s fee of the claimant in an order approving settlement.  For example, if a case should settle for 25% of partial total at 2013 rates, which would be $37,644, the petitioner’s attorney would receive a 20% counsel fee, which would be $7,528.  Respondent would pay 60% of that fee or $4,517.  But N.J.S.A. 34:15-64 has always given respondent the right to avoid paying a counsel fee on any amounts offered within 26 weeks of maximal medical improvement or return to work, whichever is later.  This benefits injured workers by receiving some monetary compensation while the case is pending and also provides an incentive for employers to make such offers.

Using the example above, if respondent were to offer 7.5% or $9,900 within 26 weeks of the date of maximal medical improvement, (a voluntary offer), respondent would not pay a fee on that amount at the end of the case. The savings to respondent would amount to $1,188. Respondent would keep that amount instead of paying it to petitioner’s attorney at the time of settlement.  Petitioner’s attorney would still get a counsel fee but only on the amounts paid in settlement in excess of the offer of $9,900.

S374 proposes to eliminate the respondent’s savings in counsel fees on voluntary offers.  N.J.S.A. 34:15-64 would allow voluntary offers to be made as a benefit to employees in providing prompt funds after reaching maximal medical improvement, but there would be no longer any benefit to employers in making those offers.  Counsel for petitioner would get a fee on all amounts received by the injured worker, including amounts paid as voluntary offers.  Interestingly, the bill would cost injured workers more because they too would have to pay a fee to their attorney on the amount of a voluntary offer.  Right now they do not pay a fee on a voluntary offer.

The Bill has not yet been voted on by the New Jersey Assembly.  If it passes the Assembly, it will be presented to the Governor.

One of the most challenging aspects of New Jersey workers’ compensation practice is estimating the level of permanent partial disability, particularly in a system in which the evaluating physicians have such disparate estimates.  The New Jersey Division of Workers’ Compensation does not use AMA Guidelines, which makes it even harder to reconcile widely diverging medical opinions on disability percentage.  Clients often ask whether there is a guide to how much each type of injury is worth, and the answer is no.  Is a two-level herniated disc with fusion procedure properly valued at 30%, 35%, 40%, 50% or higher? That can make a big difference because 30% at 2013 rates equals $48,564, and 50% equals $165,300.  Clients also ask how does one reconcile a case where the respondent’s expert estimates 5% and the petitioner’s expert estimates 60%?

The answer is that it depends on the individual case and the restrictions that the employee has at work or outside work.  Each case must be viewed on its own merits.   Has the employee returned to the same job?  Is the employee able to participate in sports, chores or hobbies that he or she used to enjoy?  The important point for practitioners to realize is that a tremendous amount of discretion is vested in the Judge of Compensation because of his or her expertise, and seldom if ever is a judge reversed on the assessment of the proper level of disability.

A case in point is Blake v. City of Asbury Park, A-1551-12T1 (App. Div. June 20, 2014).  Both parties disputed the judge’s assessment of disability but both parties agreed there was disability.  Petitioner felt that the judge should have assessed total disability, and respondent felt that the judge awarded percentages of disability that were too high.

Dennis Blake worked for the city as a police officer.  In 2002, he injured his right shoulder arising from work and had surgery.  He received an award of 15% permanent partial disability.  In 2005 he reinjured the same shoulder effecting an arrest and had a second surgery.  One question in the case was how much disability petitioner was left with following his second surgery.

In 2006, petitioner responded to a crime scene of a shooting.  He was upset in part because he knew the victim, who sustained gunshot wounds to the face.  His superior officer told him to “suck it up.”  After this incident, petitioner began abusing alcohol.

Later in the year in November 2006 petitioner responded to the scene of a gunshot suicide.  He knew this victim as well and became depressed.  His physician prescribed an anti-depressant and diagnosed post-traumatic stress disorder.  Petitioner resigned from his employment a month after this incident and was also examined by a psychiatrist on the same day.  The psychiatrist recommended extensive treatment, and petitioner treated for four months.

Petitioner filed three workers’ compensation claims:  one for the right shoulder, another for overuse of the left shoulder, and a third for his psychiatric disorder.  He also applied for Second Injury Fund benefits asserting that he was totally disabled.

Various experts testified in the case, and the Judge of Compensation awarded petitioner 37.5% credit, 15% for the right shoulder and 42.5% for psychiatric injuries.  Both parties appealed.

The Appellate Division noted that the Judge of Compensation found petitioner to be credible and observed that the judge must evaluate the testimony of witnesses and doctors according to their demeanor and qualifications, as well as trustworthiness.  The Judge did not find respondent’s expert, Dr. Holl, to be credible because there was no evidence to support Dr. Holl’s statement that petitioner’s psychiatric problems were from a prior personality disorder.  The judge did, however, find Dr. Gooriah, petitioner’s psychiatric expert, to be credible.  Nonetheless, the judge did not agree with Dr. Gooriah that petitioner had a 65% psychiatric disability.

In the end, the judge did not believe petitioner made out a case for total and permanent disability but made fairly substantial awards of partial permanent disability.  The judge did not award total disability because the judge believed that with adequate psychiatric treatment, petitioner could return to work.  The Appellate Division found that there was sufficient credible evidence to support the judge on this finding.

The disparity in orthopedic estimates was also notable.  Dr. Krengel estimated a 70% disability for the right shoulder, while Dr. Allen estimated 10%, half preexisting.  The judge assessed the orthopedic disability at 37.5%, which the Appellate Division accepted as supported by the evidence.  No disability was found for the left shoulder.

The Appellate Division simply stated, “We conclude that the judge’s award was neither excessive nor inconsistent with the credible evidence.” The main lesson in this case is that appellate courts will defer to the judge of compensation on assessments of permanent disability because of the judge’s expertise.  In most cases in New Jersey, there is a gross disparity in the estimates of disability between the parties’ experts, but judges deal with such disparities daily.  The Appellate Division will bow to the expertise of the Judge of Compensation when it comes to assessing the percentage of disability.

Sometimes attorneys, unfamiliar with workers’ compensation, file civil suits that really belong in the Division of Workers’ Compensation.  That was the situation in Garofalo v. East Whitehouse Fire Department, A-3649-12T2, A-4687-12T2, (App.Div.March 28, 2014).

The case began with an injury on March 11, 2009 to Anthony Garofalo, who was a podiatric surgeon in New York who also worked as a volunteer firefighter for the East Whitehouse Fire Department.  Mr. Garofalo fell on the stairs at the East Whitehouse Fire Department due to an improperly installed runner.  He tore his right distal bicep and injured his elbow.  He was at the firehouse for a weekly drill night.  The fire department’s compensation carrier paid for the hospital and other medical bills, with the last payment taking place on March 26, 2009.

On March 8, 2011, within two years of the last compensation payment, Garofalo sued the fire department in civil court for negligence.  The fire department moved to dismiss the case on the grounds that the civil suit was barred by the exclusive remedy provision in workers’ compensation.  In other words, the fire department said that Garofalo’s only remedy was in the Division of Workers’ Compensation as one cannot sue one’s employer, and Garofalo was a volunteer of the fire department at the time of injury.

After the motion to dismiss was filed by the fire department, Garofalo’s attorney asked the fire department if it would consent to remove the case to the Division of Workers’ Compensation.  The department declined.  The motion judge dismissed the case on March 20, 2012 and said that there is no authority for a civil court to transfer a law suit to the Division of Workers’ Compensation.  Garofalo did not appeal the dismissal of his civil suit.

On April 17, 2012, some three years after the work injury, Garofalo filed a claim petition in the Division of Workers’ Compensation.  The Judge of Compensation eventually dismissed that claim petition for failure to file within two years of the last payment of compensation.

Plaintiff appealed to the Appellate Division and ultimately attempted to argue that the original law suit filed in 2011 should have been transferred to the Division of Workers’ Compensation.  He relied on the case of Townsend v. Great Adventure, 178 N.J. Super. 508 (App. Div. 1981).  That case did involve a transfer to the Division of Workers’ Compensation, but the Appellate Division distinguished Townsend because the injured worker in Townsend filed simultaneously a civil claim and a workers’ compensation claim.  In this case, no workers’ compensation claim was filed until three years after the accident, over a year after the civil suit had been filed.

The Court rejected the argument of Garofalo both for failing to file the workers’ compensation petition at the same time as the civil suit was filed, but also for failing to appeal the original dismissal of his civil law suit.  The lesson here is simple: when a lawyer is in doubt about whether someone is acting as an employee, it is wise to file both a civil suit and a workers’ compensation claim petition, thereby protecting the employee’s rights in the event that the civil suit is dismissed.

There are many instances in which an injured worker argues that he was not employed so as to be able to bring a negligence action.  The case of Hernandez v. Port Logistics, A-3558-12T3 (App. Div. 2014) illustrates this situation.

Daniel Hernandez was placing a box onto a load of pallets on August 23, 2011, when a wood splinter broke off and struck him in the eye, causing total loss of vision in the left eye.  Hernandez was employed by Staff Management, which had entered into a “Service Agreement” with Distribution Solutions, Inc. doing business as Port Logistics Inc. Hernandez sought workers’ compensation benefits from Staff Management.  Then he sued Port Logistics Inc., contending that the company was negligent in not providing him with eye protection.

Port Logistics Inc. argued that Hernandez was its employee and could not sue the company because his exclusive remedy was workers’ compensation.  In his deposition, Hernandez acknowledged that he was doing work for Port Logistics in loading and unloading trucks.  He worked under the direct supervision of Port’s managers, who provided him with his assignments and directed his work at the loading docks.  Port controlled his work hours and lunch time.  Port Managers could send Hernandez home early if work was lacking.

For his part, Hernandez argued that the Service Agreement said he was an employee only of Staff Management and that Staff Management was exclusively responsible for payroll, taxes and workers’ compensation.  The trial judge rejected this argument that only Staff Management was Hernandez’s employer.  The judge found that Hernandez was a special employee of Port Logistics.  Hernandez appealed.

The Appellate Division noted that it is quite common for an employee to have two employers.  The court said that the language of the Service Agreement alone did not control the outcome of the litigation.  Instead, the court reviewed all the factors noted above showing that Port Logistics exercised tremendous control over the day-to-day activities of Hernandez.  “In short, under the precedent cited, defendant (Port) was a special employer of plaintiff, despite any contract language to the contrary.  As a result, plaintiff’s tort claim against defendant was barred by N.J.S.A. 34:15-8.”

The lesson in this case is that sometimes an employer wants coverage under workers’ compensation because the exclusive remedy provision offers powerful protection for an employer faced with a potentially large negligence law suit.

Readers should be aware of a potential landmark decision from the National Labor Relations Board on Wednesday, March 26, 2014, in which the NLRB found that the Division I football players receiving scholarships at Northwestern University are employees of the university under the National Labor Relations Act.  It is anticipated that the decision will be appealed by Northwestern University to the full National Labor Relations Board in Washington D.C. and possibly end up in front of the Supreme Court of the United States.  The Board’s decision is limited to the football players at Northwestern University, but could pave the way for athletes at similar private universities.  The Board’s decision was based on several specific factors listed below.

First, the Board found that scholarship football players perform services for the benefit of the University for which they receive compensation.  In finding that the University benefits from the scholarship football players, the Board noted that Northwestern University’s “football program generated revenues of approximately $235 million during the nine year period between 2003-2012 through its participation in the NCAA Division I and Big Ten Conference that were generated through ticket sales, television contracts, merchandise sales and licensing agreements.”  The Board found that the scholarships to the players are a transfer of economic value since the University pays for the players’ tuition, fees, room, board, books and a stipend for players living off-campus for up to five years, which can total up to $76,000 per calendar year at Northwestern University.  The Board also found that “The fact that the Employer does not treat these scholarships or stipends as taxable income is not dispositive of whether it is compensation.”

Secondly, the Board found that the scholarship football players are subject to the University’s control in the performance of their duties as football players.  The Board noted that the players who receive scholarships are under strict and exacting control throughout the entire year.  The players are subject to NCAA eligibility guidelines as well as the team rules that are enforced by threat of discipline or loss of scholarship.

Third, the Board found that the scholarship players are employees under the common law definition.  “Under the common law definition, an employee is a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.”  Brown University, 342 NLRB 483, 490, fn. 27 (2004) (citing NLRB v. Town and Country Electric, 516 U.S. at 94).  The Board found that “players receiving scholarships to perform football-related services for the Employer (Northwestern University) under a contract for hire in return for compensation are subject to the Employer’s control and are therefore employees within the meaning of the Act.”  However, the Board found that the walk-on players, those not receiving scholarships, do not meet the definition of “employee.”  Similarly, the Board noted that unpaid interns, even if they are subject to similar terms and conditions of employment, are not employees because they did not receive compensation.

The Board specifically found that the statutory definition of employee articulated in Brown University, 342 NLRB 483 (2004), was not applicable to the football players at Northwestern University.  In Brown University, the Board found that graduate assistants were not employees of the university since the relationship between the graduate assistant and the university was primarily an educational one, rather than an economic one.

The Board found the scholarship football players at Northwestern University were employees under the Act and that the College Athletes Players Association (CAPA) (Petitioner) is a labor organization within the meaning of the Act.  The Board ruled that all football players receiving football grant-in-aid scholarships not having exhausted their playing eligibility that were employed by the Employer were eligible to vote whether or not they desire to be represented for collective bargaining purposes by CAPA.  The Board specifically excluded office clerical employees, professional employees and supervisors from voting.

What are the possible implications of the Board’s Decision for Workers’ Compensation?  If the decision is affirmed, the Board’s ruling has the potential to change the landscape of college sports and raises a number of important questions for workers’ compensation practitioners.  Will the decision include Division I scholarship athletes for all sports at private universities?  What kind of benefits will the labor union(s) be bargaining for?  If the athletes are employees within the meaning of the Act, are they entitled to workers’ compensation benefits for injuries that occur while they are working? Should the scholarships received by the athletes be taxed as income and used to establish a wage?  The ultimate impact of the decision remains to be seen and we will keep readers posted as this case moves forward.