12-26-2016; Two Gaffes by IL Defense Attorneys--Ooops!!; Happy New Year from the Gang At KCB&A!!!

Synopsis: Oops! Missteps in Handling of IL Workers’ Compensation Claims–Why Not Consider A Better Defense Team for 2017?

Editor’s comment: Why Hire the Rest When You Can Hire the Best at KCB&A To Handle Intricate IL WC Death Claims And For All Your Litigation Needs!

Gaffe Number One—Oops! Widow Will Collect WC Death Benefits About $300,000 More Than The IL Statutory Death Benefit Maximum.

In Sara Foster, widow v. Mitsubishi Motors, Foster's husband was an electrician at the now-closed Mitsubishi plant in Normal, Illinois. We are sad to report the 42-year-old suffocated when he was crushed performing maintenance work on an assembly line in October 2003.

Widow Foster sought WC death benefits on behalf of herself and her five young sons. She received an award from the Arbitrator assigned in January 2004, which provided death benefits in weekly payments of $1,304.78, based on the wages her husband earned. Illinois has a statutory maximum and minimum payable death benefit tied to the statewide average weekly wage. The current death benefit maximum is $1,428.74, but for deaths occurring in 2003, it was $1,012.01 — the maximum death benefit is $292.77 less than what the Arbitrator awarded Foster. it appears clear Mitsubishi did not challenge the erroneous award, but when it began making payments to Foster, it paid her only $2,024.02 every other week.

A panel of the Illinois Appellate Court just ruled Widow Foster was entitled to weekly benefit payments in excess of the statutory maximum rate, plus interest, all because of an uncorrected but obvious mistake in an Arbitrator's award. While we can’t be sure, we believe suspect Respondent presented what is called a “death prove-up.” The IWCC website indicates there was no Petitioner’s attorney retained by the widow so the only attorneys involved in 2003-2004 were the defense lawyers. In such a setting, the Arbitrator will review all evidence and typically consider a proposed decision presented by Respondent only. In a death prove-up, the defense lawyers have to obtain and present documentation and testimony confirming the passing of the worker, the status of the widow and dependent children and the appropriate handling of medical bills, burial benefits and the payment of the death benefit. The idea is to legally lock in the death benefits due and insure the right folks are getting the right amount of support.

How Did This Claim Go South?

We safely assume but can’t be entirely sure the defense firm drafted the proposed decision for the Arbitrator and included the death benefit rate at 2/3 of the average weekly wage without referencing the IL WC Act’s statutory minimums and maximums. We also assume the Arbitrator didn’t note the mistake in calculation of the inaccurate rate. While we feel this Arbitrator can be fairly criticized for not checking, we also feel sure the Arbitrator would have asked the defense firm and reasonably relied on their representations in presenting evidence and outlining the proposed death benefit award the Arbitrator filed. Once filed, the clock starts to tick on any needed corrections/changes to the award.

Section 19(f) of the Illinois WC Act provides a period of 15 days in which this Arbitrator could have recalled the decision to correct computational errors. The IL WC Act also establishes a 30-day window in which the parties can appeal an arbitrator's decision to the Workers' Compensation Commission. After those periods, the Arbitrator's decision became the final and binding decision of the Commission. To our understanding, it might be later changed due to clear evidence of fraud but we have never seen that occur. We are sure there was no evidence of fraud in this ruling—it was a simple computational error. 

The problem in Foster v. Mitsubishi Motors was the Arbitrator's decision provided for the payment of weekly benefits at a rate of $1,304.78, when the statutory maximum death benefit limited such benefits to no more than $1,012.10. In our view, someone at an excess carrier or a manager at Mitsubishi Motors apparently noticed the mistake, because when it started making payments to Widow Foster, it paid her at the $1,012.10 rate. Whoever did so never bothered to have the obvious mistake in the Arbitrator's decision corrected consistent with the Rules. Oops! The inaccurate payments went on for 11 years and the mistake might have been buried with the passage of time. Somehow, some one tooknotice the payments the Widow was receiving didn't agree with the award she had been issued. We assume efforts to settle all of it might have occurred but again we can’t be sure. We are sure a Petitioner lawyer get involved and filed the correct pleading—a 19G Petition to collect the amounts due in the final IWCC award. The Widow’s counsel also argued she was entitled to 9% interest on the balance of the unpaid amounts dating back to the entry of the 2004 award.

Mitsubishi filed a motion to dismiss Foster's 19G application, arguing it was barred by the five-year statute of limitations in Code of Civil Procedure Section 13-205. In the alternative, Mitsubishi argued enforcement of the weekly award should be limited to $1,012.01, since that was the maximum statutory amount recoverable in 2004. They argued an award in excess of the maximum was void in violation of public policy. Mitsubishi also maintained any interest payable to Widow Foster should be calculated using Section 19(n) of the Workers' Compensation Act, which provides a lower interest rate.

McLean County Circuit Court Lawrence determined the statute of limitations barred Widow Foster from claiming any deficiency in the payment of death benefits for any payments made more than five years before she filed her application for judgment. Judge Lawrence also ruled Foster was entitled to payment at the $1,304.78 rate, which meant Mitsubishi had been short-changing her by $292.77 each week. That meant the company owed Widow Foster $81,682.83 for the five years pre-dating the filing of her 19G petition, to the date of the Court’s order. Judge Lawrence also added $19,738.15 in judgment interest, and directed Mitsubishi to make its future payments to Foster at the $1,304.78 per week rate.

Mitsubishi appealed and the IL Appellate Court last Tuesday affirmed Judge Lawrence's ruling in full. Oops.

I was quoted by WorkCompCentral to confirm failing to check the accuracy of the benefit awarded to Foster will likely prove to be a costly mistake for Mitsubishi, amounting to an initial ‘bonus” payment of more than $300K as it will be about $15,000 a year until 2023. I noted the same rules and deadlines that sank Mitsubishi in this case would also apply with equal force to a worker who got an award for less than the worker should have gotten, too, but in that scenario, I indicated our Illinois courts might "bend over backwards" to try to find some way to grant the worker the relief this major IL employer was denied.

Should This Outcome and the IL WC Act Be Changed/Reformed Before It Cuts Again?

Take a look about where I quote Section 19(f) of the IL WC Act that allows only 15 days to correct a clear computational error. I have no idea why that 15-day limit is there and don’t agree with it at all—why not be sure the benefits are accurate at any possible time? Shouldn’t the statutory limits either low and high be considered “hard” or mandatory limits? What if the widow had a stupid lawyer who made a dumb mistake and wrote a proposed decision with a typo awarding her $1 a week? If her stupid lawyer wrote such a decision and the Arbitrator assigned missed the mistake for whatever reason and entered the proposed ruling, would anyone want the widow and her children to starve because of it?

In short, this legal sword sliced into the fair and reasonable expectations of this major manufacturer but that sword could have cut both ways. Our courts now mandate Mitsubishi is almost certainly going to pay about $300,000 more than would otherwise have been owed—we think they should appropriately complain that is unfair. This same legal sword could have cut into the fair and reasonable expectations of the widow and her then-young kids—if the award had been under the minimum, these facts might have stripped her of any real opportunity to get money to feed and house the kids and like the poor folks in Indiana and other rock-bottom WC benefit states, they would be off work comp on welfare or some other benefit stream. Please note the IL WC death benefit which this family would have received using the accurate number of $1,012.10 a week would be a whopping $1,052,584.00! The widow and family will now receive about $1,356,971.20 from Mitsubishi (see below, as the actual payout will be signficantly higher). In contrast, the maximum Indiana WC death benefit, by our calculation is only $390,000.00, which in our view would basically cut this family’s expected annual income by more than half and possibly turn this unfortunate family into paupers. As we tell our readers all the time, Indiana WC benefits save their businesses money while possibly starving widow(er)s and children.  I fell somewhere between IL WC’s much-too-high death benefit and IN WC’s much-too-low death benefit is a fair and reasonable middle ground.

Remember the IL WC RAF Eventually Makes Our IL WC Death Benefits Very, Very High!!!

Please also remember the IL WC RAF or Rate Adjustment Fund pays staggeringly more in additional monies to widows and T&P claimants. This fund is managed by annual levies issued at the sole cost of Illinois business and local government. The annual not-actually-COLA increases are paid by the IWCC to widows like Sara Foster and her kids while eligible. As decedent passed away in 2003, by now, she would be getting almost 14 years of compounded annual increases that would almost double the weekly death benefit at the end of the 20 year term. I estimate her actual RAF benefit due by now would be about 50% of the amount being paid or what would be $1,012.10 times 50% or approx. $1,500 a week or the inaccurate value of $1,304.78 times 50% totaling $1,957.17 each week. The admitted wrong rate with RAF increases would make the widow’s approx. tax-free annual income $101,772.84 which is about 20% more than decedent’s take home pay at the time of his passing. This RAF benefit will continue to rise until she is getting about $130,000 each year on a tax-free basis at the end of the 20 year term in year 2023. I don’t know and can’t tell anyone if the RAF should be paid by calculating the weekly benefit at the arguably “wrong” weekly benefit rate or the accurate rate, using the then-applicable maximum. I do know none of our surrounding states pay anything like this giant amount of money in a death claim and these combined benefit costs are, in my view, very high.

To try to flip this outcome, it is possible Mitsubishi could bring a due process and equal protection argument to the IL Supreme Court because this ruling is forcing them to pay dollars they shouldn’t owe under the law—the chance of the ultra-liberal IL Supreme Court considering that argument and ruling for a major employer are somewhere between a scintilla and a soupçon. We do remember the Alvarado v. IWCC ruling where our Supreme Court magically re-opened a “final ruling” to resolve an attorney fee dispute—we don’t feel that magic will apply here because, it is my view, the IL courts don’t care about jobs or the best interests of IL business.

I do feel the defense industry might reach out to Governor Rauner and his great team to ask them to “reform” this sort of problem. In the instance where there are clear and unquestioned computational errors like this it would not be hard to make the maximum and minimum benefits “hard” limits. To read the court's decision, click Foster Ruling

We get called on a regular basis for advice from attorneys on both sides regarding the proper handling of death claims. There is a lot of money at stake, so send us an email and we will get you accurate answers and appropriate backup research. One advantage you have in retaining the defense team at KCB&A is our firm is headed by three adjunct professors of workers’ compensation law at The John Marshall Law School in Chicago.

Gaffe Number 2 Averted: Oops! Insurer's Legal Malpractice Suit Against Prominent IL WC Defense Attorney Fails.

The federal U.S. Seventh Circuit Court of Appeals just upheld dismissal of a legal malpractice suit filed by West Bend Mutual Insurance Co. against an Illinois WC defense attorney for allegedly failing to adequately represent it against a workers' compensation claim filed against one of its policyholders. We agree with the Seventh Circuit Court of Appeals stating the bullet of legal malpractice missed its mark under these facts. It appears to be a case of Monday morning quarterbacking to some extent. That said, we do consider this ruling to be required reading for all Illinois defense lawyers to see where criticism and possibly litigation might arise. We are unsure whether the lawyers involved in such claims have a self-reporting obligation to the ARDC.

In West Bend Mutual Insurance Co. v. Schumacher, issued 12/21/2016, Plaintiff West Bend Mutual Insurance hired a defense law firm to defend an IL workers' compensation claim filed by a worker named Marzano against a West Bend insured. Plaintiff West Bend alleged an independent medical examiner wrote a report favorable to its position, but defense counsel decided to forego deposition of the doctor and instead appears to have taken a unilateral “short-cut” to agree with the claimant's attorney to put a redacted version of the expert report into evidence. It does not appear this strategy was cleared with or approved by the West Bend claims adjuster. Further Plaintiff West Bend alleged defense counsel did not call any potential witnesses to contradict statements made by Claimant Marzano until one day before the hearing was scheduled, only to learn a crucial potential witness who were out of town. The Complaint also indicated the Defendant (attorney) unilaterally agreed to pay temporary disability benefits to Claimant Marzano without West Bend's approval, damaging its defenses.

The IWCC website indicates more than four years of TTD were paid and the underlying claim settled for $350,000. After settling for this significant amount, Plaintiff West Bend filed suit against their defense attorney who handled the case. A U.S. District Court judge dismissed the action, finding the insurer failed to appropriately plead how Defendant Schumacher's alleged actions damaged the defense case. While the insurer objected to Schumacher's unilateral agreement to pay some TTD benefits, those payments did not preclude the carrier from contesting Marzano's claim, the District Court found.

West Bend appealed to the U.S. 7th Circuit Court of Appeals in Chicago. The federal appellate court ruled in order to prevail, West Bend would have to allege and prove not only that its former attorney breached his duty but the breach caused the carrier to lose a valid claim or defense in the underlying WC action. The federal appellate court ruled Plaintiff West Bend gave only sketchy information about Marzano's workers' compensation claim in its amended complaint and was also not clear about the impact of Schumacher's alleged negligence. The insurer pled that Schumacher's actions placed it in a "disadvantageous position" and had "greatly compromised" its ability to defend the claim without providing a clear basis for the allegations. The Court confirmed those were "conclusory assertions and certainly do not set forth a plausible description of a lost defense that, absent Mr. Schumacher's alleged neglect, would have assured West Bend's success on the underlying claim." Similarly, Plaintiff West Bend asserted Defendant failed to seek a continuance even though a key witness was unable to testify. Yet, for reasons unclear to us, the insurer’s malpractice attorneys did not provide a detailed description of the specific evidence that could have been presented to ensure a successful outcome in the case. 

As we indicate above, a bullet was dodged to get the malpractice claim dismissed. Regardless, it is challenging to read about a defense attorney who was alleged to:

      Agree to pay benefits without authority and

      Enter into a trial stipulation without permission and

      Tried a claim without a defense witness.

However, it is difficult to know the nuances of the underlying workers’ comp litigation to know exactly what led to these decisions as trial approached. For example, we don’t know whether the Arbitrator compelled a hearing even without defense witnesses available. When such instances occur, we always instruct our attorneys to make a proper  “offer of proof on the record” as to the excluded evidence, preserving the issue for further appeal. An evidentiary “offer of proof” can be critical to preserving rights on appeal. If you would like to learn and understand more, please contact our office.

To read the decision, click here West Bend v. Schumacher. We appreciate your thoughts and comments.

Synopsis: Happy New Year from the Gang at KCB&A!!

Editor’s comment: There is no chance, none that we are about to enter 2017--where has the time gone?

Please have a safe and prosperous New Year!!

12-19-2016; Neither Borrower or Lender Be?; Simple Year-End OSHA Update; WC Insurance Dec Action Not Great for Insurer and more

Synopsis: Neither Borrower or Lender Be???--In Illinois, Staffing Temp Workers Can't Bring Suit Against 'Borrowing' Employer for Motor Vehicle Accident.

Editor’s comment: The Illinois Appellate Court ruled two staffing workers sent from a temporary agency could not sue their staffing employer's client, nor an employee of the client for alleged civil damages from motor vehicle accident that occurred within the course and scope of their employment. I strongly agree with this ruling.

In Morales v. Herrera, issued 12/07/2016, Claimants Morales and Sanchez both worked for Express Employment Professionals, a temporary employment agency. In April 2010, Express assigned them to work for their account, Radio Flyer Inc.

The two women suffered injuries in a car accident traveling between from one Radio Flyer facility in Chicago to another facility in Elwood, IL. There was no question they were in the course and scope of continued employ during the trip. At the time of the accident, they were riding as passengers in a vehicle being driven by another Radio Flyer employee who arguably contributed to the accidental event.

Prior to filing suit to recover for their injuries at the Circuit Court, it was undisputed Morales and Sanchez collected workers' compensation benefits from Express. Having received WC benefits, they also sued both the borrowing employer, Radio Flyer and the co-employee driver for negligence.

In response, Radio Flyer moved for summary judgment to summarily dismiss the claims against it. The company argued Claimants Morales and Sanchez were "borrowed employees" and that it was immune from civil liability. The trial judge agreed and granted Radio Flyer's motion to dismiss.

The Illinois Appellate Court said the fact Morales and Sanchez were offered and appropriately collected workers' compensation benefits, which are payable only for injuries that occur within the scope of employment, meant they could not now claim the accident fell outside the scope of the IL Workers' Compensation Act.

The Court also said the record clearly established Morales and Sanchez were "borrowed employees" of Radio Flyer, so Section 5 of the IL Workers' Compensation Act barred them from seeking additional compensation/recovery from the company or their co-employee, Herrera.

The rule in IL WC is both the borrowing and lending employers are fully responsible for work injuries suffered by staffing workers. The IL WC Act indicates which company may be primarily liable and which company may be secondarily liable but they are both “on the hook” during the relationship. If you have questions or concerns about primary liability, send a reply.

Other than for arguably intentional injuries, a staffing workers injured during the course and scope of work performed for either company should only be able to recover WC benefits. They are barred from common law claims.

To read the decision, click here. We appreciate your thoughts and comments. Please post them on our award-winning blog.

Synopsis: Simple OSHA Update for U.S. Risk/WC/Safety/Claims Managers

Editor’s comment: We are getting lots of questions about OSHA issues during the current transition between Presidential administrations. Here are some thoughts about OSHA's electronic reporting, retaliation and “blanket” post-accident drug testing rules.

We want our readers to understand we do lots of OSHA consulting and defense work at rates that are half of what the national firms over-charge, ooops, we mean charge.

In short, Occupational Safety and Health Administration (OSHA) standards cover everything from port-a-potties to fall protection, and tracking all of OSHA’s specific guidelines can be difficult for employers.

OSHA rules now include two components: anti-retaliation, which went into effect Dec. 1, 2016, and electronic injury and illness reporting, which takes effect in 12 days on Jan. 1, 2017. OSHA reasons that the anti-retaliation component must be put in place first, because the outbound administration feels it is necessary so U.S. employers will provide accurate data under the reporting component.

The anti-retaliation component includes these provisions:

Ø  U.S. Employers must inform employees of their right to report work-related injuries and illnesses, free from supposed retaliation. Employers can fulfill this obligation by posting the Job Safety and Health — It’s The Law poster - https://www.osha.gov/Publications/poster.html

Ø  OSHA also recommends employers make it clear in your employee handbooks and new employee orientation materials your employees have the right to report workplace injuries to OSHA.

Ø  OSHA leadership feels an employer’s procedure for reporting work-related injuries and illnesses must be “reasonable” and must not deter or discourage employees from reporting. For example, procedures that do not allow a reasonable amount of time for an employee to supposedly “realize” they suffered a work-related injury or illness could violate their views, resulting in enforcement procedures. This OSHA administration dislikes and may sanction “same-shift” or same-day reporting of work accidents.

Ø  Finally, this administration feels a U.S. employer may not retaliate against employees for reporting work-related injuries or illnesses. OSHA cites three types of policies they consider retaliatory under this provision:

§  Disciplinary policies

§  ”Blanket” drug-testing policies and

§  Anti-accident safety or incentive policies.

The rule does not prohibit a U.S. employer from disciplining employees for violating legitimate safety rules, even if the employee was injured as a result of the violation. The rule does, however, prohibit retaliatory action against an employee as a result of reporting a work-related injury or illness. Examples include suspension, harassment, reassignment and termination.

Their rule does not prohibit employee safety incentive policies, but it does prohibit incentive programs that deter or discourage an employee from reporting an injury or illness. They feel anti-accident Incentive programs should encourage safe work practices and promote worker participation in safety-related activities.

The new rule does not prohibit “blanket” post-accident drug testing, but it does provide if an injury or illness is very unlikely to have been caused by employee drug use, or if the method of drug testing doesn’t identify impairment but only use at some point in the recent past, a drug test might inappropriately deter reporting.

The electronic injury and illness reporting component requires certain employers to electronically submit the injury and illness information they are already required to keep under OSHA regulations. OSHA designed this component to increase accountability and prevent injuries. As stated above, the electronic submission requirements take effect Jan. 1, 2017, but OSHA will phase them in over time.

As we outline above, if you need help dealing with these issues or anything related to OSHA, send a reply.

Synopsis: IL WC Insurance Dispute/Coverage Doesn’t Work Out Well for Staffing Insurer.

Editor’s comment: In LM Insurance Corp. v. B&R Insurance Partners, LLC, issued December 13, 2016, Defendant B&R Insurance Partners, LLC (B&R), entered into client agreements with Southern Illinois Workers Inc. and Speed SEJA School District 802 whereby B&R would obtain workers’ compensation insurance on their behalf. Plaintiff LM Insurance Corporation issued a policy naming B&R as the insured and extended WC coverage through policy endorsements to those employees of B&R’s that had been leased to B&R’s clients.

Plaintiff LM subsequently cancelled the policy and retroactively removed B&R’s clients from the policy’s endorsements after B&R informed LM that none of its clients’ employees were on B&R’s payroll. Meanwhile, the individual defendants, all of whom were employees of B&R’s clients, filed workers’ compensation claims with the IL Workers’ Compensation Commission alleging injuries suffered during the course and scope of their employment.

Defendant B&R tendered the claims to Plaintiff LM Insurance, since the alleged injuries occurred during a time when the policy was still in effect. LM then filed this declaratory judgment action. The amended complaint sought a declaration LM Insurance had no duty to defend or indemnify against the individual defendants’ claims. The trial court denied LM’s motion for summary judgment and granted summary judgment in favor of Defendants. LM timely appealed.

The Appellate Court noted Plaintiff insurance company issued their WC policy naming Defendant B&R, which entered into agreements with staffing clients to obtain workers' compensation insurance on their behalf, as insureds. They also extended coverage through policy endorsements to employees that had been leased to its clients.

Plaintiff filed this declaratory action seeking a court declaration that it had no duty to defend or indemnify Defendant in workers' compensation claims filed by employees of Defendant's clients. Court properly found Plaintiff had duty to defend, as all WC claims fell within or potentially within policy coverage.

The Appellate Court further noted the Circuit Court's finding that Plaintiff has duty to indemnify was premature and must await a final determination by Workers' Compensation Commission. The Appellate Court further noted the Circuit Court erred in granting summary judgment in favor of Defendant B&R on Plaintiff's claim for rescission, as it required a factual determination as to whether Defendant actually leased any employees.

We appreciate your thoughts and comments. Please post them on our award-winning blog.

Synopsis: Merry Christmas and Happy Holidays to all of our readers, clients and friends from the Defense Team at Keefe, Campbell, Biery & Associates!!

Thanks to all of you for another great and prosperous year!!

12-12-2016; New U.S. Dept Labor Secretary-to-be Will Change for the Better; IL Rules on Large Deductible WC Insurance To Start Soon; Non-Competes For Line Workers A Bad Idea and more

Synopsis: The U.S. Work Comp/Safety and Risk Industries Can Expect Changes to OSHA and “Overtime” Rules and Lots of Other Important Things--Trump Nominates Fast Food Exec for Labor Secretary

Editors’ comment: President-Elect Donald Trump has nominated Andrew Puzder, the chief executive officer of CKE Restaurants, as head of the U.S. Department of Labor. CKE Restaurants, Inc. owns, operates and franchises some of the most popular brands in the quick-service restaurant industry, including the Carl’s Jr.®, Hardee’s®, Green Burrito® and Red Burrito® restaurant brands. The CKE system includes more than 3,300 restaurant locations in 42 states and in 28 countries. CKE is headquartered in Carpinteria, California.

As a Washington newbie, Puzder lacks a track record to indicate what changes he will implement when he takes the helm at the Department of Labor. As a successful businessman and manager, Mr. Puzder has been a critic of minimum wage hikes and new overtime rules. He is expected to take a pro-business approach to his new position. Puzder worked on the Trump campaign as an adviser and fundraiser.

President-elect Trump’s nomination of Mr. Puzder is subject to confirmation from the U.S. Senate, where Mr. Puzder will face tough questions from grumpy Democrat Senators on his positions on minimum wage, sick leave, work safety and the Affordable Care Act.

The U.S. Work Comp Community Can and Should Forget About the Feds Imposing Their Will on the WC System in Your State

Last week, national work comp observer Joe Paduda noted growing concerns in the U.S. Work Comp community about the growing concept of federalization of state work comp systems. The whiny folks at ProPublica put out a report last year about the Demolition of Workers’ Comp to try to press for such intervention, claiming some state work comp systems don’t truly cover everything an injured worker needs. Following that model, it appeared more likely could have been some sort of federal standard for minimum work comp benefit for all states.

“For those in the workers’ comp world concerned about a new [federal] commission on work comp, your concerns are gone,” Paduda said. We strongly agree with this national WC pundit.

OSHA Is Also Certain to Change in the Interests of U.S. Business

Please also note OSHA or the Occupational Safety and Health Administration is a division of the U.S. Department of Labor and will report to Mr. Puzder.  We are certain there will be a completely new administration with a business focus. In our view, the outbound group was very strong about using their position and using it to “punish” businesses that were forced to report many unfortunate and unplanned occurrences at their work sites. Our favorite example was a young man sadly killed in southern Illinois during logging operations. The OSHA investigators determined the company was not at fault for the unfortunate death. However, while they were there, the OSHA folks used the opportunity to investigate with their fine-toothed combs and then nit-pick and issue citations with hefty fines. The only effective answer to those federal meddlers was to file suit in federal court to try to block the fines—that cost can be well over $50,000 in fees and costs.

Following Trump’s victory in last month’s election, we predict the new Occupational Safety and Health Administration is certain to take a gentler approach to enforcement under the new administration, placing a greater emphasis on voluntary compliance and less on punishment.

Let’s Hope Secretary-to-be Puzder Can Protect Jobs and Carefully Slow Automation and Drones

On a related note, the U.S. workers’ comp community is watching with some trepidation to monitor the populist movement to ratchet up the minimum wage. A study out of Oxford University shows that we could lose 47% of all our jobs within 25 years through a combination of globalization, automation and the fact so many people don’t have the skills that may be required for many available jobs. The higher the minimum wage rises, the more financial incentive there is for companies to spend the time and money to automate and end many minimum wage positions. Once a job is automated, we don’t feel that position will ever return to be handled by humans.

As we tell many of our human resources managers—you don’t need HR managers without “humans” to manage! In short, we feel Mr. Puzder should bring a strong management role to our government and may be able to work more closely with private industry to keep people work and build jobs. If we are to move to automation, we feel folks like Andrew Puzder “get it” and will understand the bigger picture.

Post-Accident Drug and Alcohol Testing Is Almost Certain to Rapidly Change

As we outlined last week, the outbound folks at OSHA just enacted their nutty rule about “blanket” post-accident drug and alcohol testing. In short, they want you to make a reasoned decision when an accident occurs to decide whether impairment might or could have been a factor before you to decide to drug/alcohol test your injured worker. There are also at least two major exceptions to the requirement outlined in the last sentence.

We are telling all our clients and readers to hang on for the time being and not worry too much about this new OSHA rule. If you have a specific fact situation arise where you need rapid help on whether you can test after an accident, send me an email at ekeefe@keefe-law.com or call our office and ask for me. I assure you I can and will provide strong guidance on the best approach.

I will continue to report when/if the current post-accident drug and alcohol test rule is modified or more likely dropped under the inbound administration.

We appreciate your thoughts and comments. Please post them on our award-winning blog.

Synopsis: Illinois Rules on “Large Deductible” Work Comp Insurance Coming to Policies Near You Shortly.

Editor’s comment: The large-deductible rule is on the agenda for a meeting of the Joint Committee on Administrative Rules tomorrow Dec. 13 in Chicago. If the committee places the rule on a “no objection” list, it will become effective by the end of December or in early 2017, according to a spokesman with the Illinois Department of Insurance.

The proposed rule would implement Senate Bill 1805, which Gov. Bruce Rauner signed into law in August 2015. The proposed Part 2909 of Section 155.44 of the Illinois Insurance Code would apply to insurers that

·         Have less than $200 million in surplus,

·         Are rated less than A- by A.M. Best Co. or

·         Have no A.M. Best rating.

Workers’ comp insurers not exempt from the rule would be required to obtain an audited financial statement from large-deductible policyholders during the underwriting process. The per-occurrence deductible amount under the large deductible agreement would be limited to 20% of the policyholder's net worth as determined by the audited financial statement. The insurers would have to require full collateralization of policyholders’ obligations under a large-deductible agreement, including policyholder obligations for employees located in other states. The collateral could take the form of a surety bond or letter of credit. The initial collateral would be determined by computing the standard premium and determining the amount by which the standard premium is reduced as a result of a large-deductible credit.

Nonexempt insurers that have issued a large deductible policy would be required to file an annual disclosure statement with the IL Department of Insurance.

Illinois is one of eight states with statutes in place regarding large-deductible workers’ comp policies. The others are California, Indiana, Michigan, New Jersey, Pennsylvania, Texas and Utah.

It is possible more states will follow suit, as the National Association of Insurance Commissioners or NAIC moves to finalize their large-deductible study written by its workers’ compensation task force in collaboration with the International Association of Industrial Accident Boards and Commissions, or IAIABC.

Although the NAIC report said large-deductible programs are “an integral component of the modern workers’ compensation insurance marketplace,” allowing employers in some cases to save on their insurance costs, the large-deductible policies come with risk. “If the employer has misjudged its ability to fulfill that obligation, or is simply unlucky, the financial consequences to the employer could be catastrophic, and the employer’s inability to pay could have a cascading impact on the financial health of the insurer,” the report noted.

Large-deductible policies may contribute to insurance carrier insolvencies, according to the NAIC study, and in those cases a state guaranty fund becomes responsible for covering unpaid workers’ compensation claims. The NAIC large-deductible study contains recommendations similar to some of the provisions of the pending regulations in Illinois.

The large-deductible report recommends states establish financial requirements for insurers writing large-deductible policies, and limit the risks employers could retain relative to their financial capacity. The NAIC study also calls for collateral requirements, including prohibitions against commingling collateral with other assets of the insurer or pledging the money for competing purposes. The NAIC study also recommends that an insurer’s staff evaluate the creditworthiness of large-deductible policyholders, with the underwriting department working together with the finance department, if necessary.

The NAIC Workers’ Compensation Task Force unanimously approved the large-deductible study during a meeting in San Diego on Aug. 28. The study is now on the agenda for the upcoming NAIC annual conference in Miami later this month. The NAIC Executive Committee and Plenary will consider adoption of the study on Dec. 13.

The Workers’ Compensation Task Force, meeting on Dec. 12, will receive a progress report on the large-deductible study. The task force is planning to work with the Financial Condition Committee in the coming year on implementation of the study’s recommendations.

Synopsis: Jimmy John’s Agrees to Pay $100K in Non-Compete Lawsuit and Stop Using Them for Line Employees.

Editor’s comment: Please note I hate non-compete agreements. Very few folks understand them and most of such agreements aren’t truly “enforceable” but such unilateral agreements still act as anti-competitive threats because the big company can always sue you and your new employer if there is an alleged breach of the agreement.

Jimmy John’s agreed to settle a lawsuit with the office of Illinois Attorney General Lisa Madigan over use of non-compete agreements, Madigan’s office announced. The Champaign, IL-based sandwich chain will pay the State $100,000 and must notify all current and former employees such agreements as they relate to counter staff or delivery folks are void and unenforceable.

In a lawsuit filed in June, Madigan alleged Jimmy John’s workers were required to sign a “highly restrictive” non-compete agreement as a condition of employment. The agreement prohibited sandwich shop workers and delivery drivers from working at similar shops while employed at Jimmy John’s and for two years after leaving the company. Employees were specifically barred from working at businesses earning more than 10 percent of their revenue from the sale of “submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches.”

According to the Attorney General’s office, the agreement applied to sandwich businesses located within 3 miles of any Jimmy John’s shop nationwide. This was later reduced to 2 miles in a “nearly identical version” of the agreement, the attorney general’s office states.

“This settlement helps ensure Illinois’ workers have freedom to change jobs in order to seek better wages, further their careers and improve their lives,” Madigan said in a statement. “Workers in Jimmy John’s sandwich shops should know they are not subject to these unfair and unenforceable agreements.”

The $100,000 provided to the attorney general’s office will fund education and outreach to raise awareness about the legality of non-compete agreements. As part of the settlement, Jimmy John’s must also remove such agreements from future hiring practices and agree to use non-competes in accordance with Illinois law moving forward.

Beginning in January, the State of Illinois will prohibit the use of non-compete agreements for employees earning less than $13 an hour as part of the Illinois Freedom to Work Act.

Shawn R. Biery, J.D., MSCC is KCB&A’s resident guru on non-competes. If you want a real one you can enforce and defend, Shawn can give you the requirements.

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