Fascinating WC/employment ruling out of North Carolina—shouldn’t you have to be a valid employee to get WC benefits?
Editor’s comment: As we have told our readers, one preliminary aspect to any WC claim is a valid contract of employment. Frank Keres, a top-notch construction risk manager advised us of a landmark ruling from the East Coast that highlights the importance of that concept.
In Freeman v. Rothrock, the North Carolina Court of Appeals applied common law contract theories to deny workers’ compensation benefits. In that case, the injured employee/plaintiff, had previously suffered back injuries while working as a truck driver from a prior employer. There was no dispute the driver received substantial workers compensation benefits from the previous employers. After the most recent of the prior injuries, he was advised that his physical restrictions would make him incapable of working as a truck driver, and he should therefore seek employment.
Four years later, Plaintiff sought employment with Defendant. As part of the employment application process, Plaintiff completed a medical history questionnaire in which he denied suffering any prior back conditions, denied having any health issues that would prevent him from working, denied having any work restrictions or any impairments and denied having ever filed a workers compensation claim. On a form for a medical exam, which was required for employment, he left the spaces pertaining to prior medical history blank.
Two years after being hired, Plaintiff again hurt his back and filed a claim for workers compensation benefits, which he was awarded, based on the conclusion of the North Carolina Industrial Commission normal standards for compensation were satisfied. The North Carolina Court of Appeals reversed the award. Recognizing the basic principle there should be no “judicial legislation” in the interpretation of workers compensation statutes, the Court of Appeals ruled common law rules apply to “construing the provisions” of the Workers’ Compensation Act. Specifically, the court held common law rules apply in determining if there was an employment relationship at the time of the injury.
In examining the facts of the case, the court examined the thorough application process and medical questionnaire on which Plaintiff knowingly misrepresented his medical condition and Defendant’s reliance on that misrepresentation in its decision to hire Plaintiff. The court also found a direct connection between the misrepresentation and the subsequent injury. Looking to the workers compensation statute, which defines an employee as a person engaged in employment “under any appointment or contract of hire …, express or implied, oral or written,” the court found the willful misrepresentation of material information and the direct link to the subsequent injury satisfied the common law definition of fraud in the inducement of employment; therefore, no employment relationship ever actually existed. Thus, fraud in the inducement of employment would render the employment contract void. In the absence of a valid employment contract, a claimant would fail to meet the statutory definition of an ‘employee’ and would therefore lack standing under the Workers’ Compensation Act.
This matter is presently pending appeal in the state’s Supreme Court. We are certain it will be watched by employers across the U.S. If you have thoughts or comments, please send a reply. For your construction risk management needs, Frank Keres can be reached via email at frank.keres@constructionriskassociates.com.
