ISSUE: Outer Continental Shelf Lands Act and the U.S. Supreme Court

On January 11, 2012, the U.S. Supreme Court heard oral arguments in the case of Roberts v. Sea-Land Services, Inc. et al.  I’ve discussed the Roberts case here on the AEU Longshore blog on December 21, 2011, and on January 11, 2012, and I provided an Argument Preview and an Argument Recap that are currently posted on SCOTUSblog.com.

Remarkably, on the same day, January 11, 2012, the Supreme Court issued its decision in another Longshore case (as extended by the Outer Continental Shelf Lands Act (OCSLA)), Pacific Operators Offshore LLP v. Valladolid.  I discussed the Valladolid case on the AEU Longshore blog on March 14, 2011, while the case was still at the Ninth Circuit.

In Valladolid the issue at the Supreme Court was whether Section 1333(b) of the OCSLA contains a situs of injury provision.  In other words, must an injury occur on the outer continental shelf (OCS) to be covered.

Section 1333(b) provides:

“With respect to disability or death of an employee resulting from any injury occurring as the result of operations conducted on the outer Continental Shelf for the purpose of exploring for, developing, removing, or transporting by pipeline the natural resources, or involving rights to the natural resources, of the subsoil and seabed of the outer Continental Shelf, compensation shall be payable under the provisions of the (Longshore Act)”

Looking at this “result of operations” language, the U.S. Court of Appeals for the Fifth Circuit interpreted it narrowly to mean that to be covered under OCSLA an injury must occur on an OCS platform or the waters above the OCS (Mills v. Director, Office of Workers’ Compensation Programs, 877 F. 2^nd 356 (5^th Cir. 1989)).

Looking at the same language, the U.S. Court of Appeals for the Third Circuit interpreted it broadly to mean that the OCSLA covers all injuries that would not have occurred “but for” operations on the OCS (Curtis v. Shclumberger Offshore Service, Inc., 849 F. 2^nd 805 (3^rd Cir. 1988)).

Most recently, the U.S. Court of Appeals for the Ninth Circuit read the same language somewhere in the middle, holding that a claimant must establish a “substantial nexus between the injury and extractive operations on the shelf.”  The claimant in Valladolid, although he spent most of his working time on the OCS, was fatally injured working at his employer’s onshore facility.

This conflict among the circuits prompted the Supreme Court to grant Pacific Operators’ petition for review. 

History of this case – The U.S. Department of Labor’s Benefits Review Board (BRB) had affirmed the decision of an Administrative Law Judge (ALJ) denying survivor’s benefits based on the Mills (Fifth Circuit) situs of injury interpretation.  On appeal, the Ninth Circuit reversed and remanded the case to the Board for a reevaluation of the facts of the case using the Ninth Circuit’s “substantial nexus” test.  It is this action by the Ninth Circuit that the Supreme Court has now affirmed.  Thus, the remand to the BRB is back in process.

Aside from establishing that there is no situs of injury test in the OCSLA, thus rejecting the Fifth Circuit’s approach, and ruling out the Third Circuit’s “but for” test, the Supreme Court hasn’t helped much in interpreting the new “substantial nexus” test.  In fact, the Supreme Court concedes that the test “may not be the easiest to administer”.  The Court found that the test, “best reflects the text of Section 1333(b), which establishes neither a situs of injury nor a “but for” test.  We are confident that ALJ’s and courts will be able to determine whether an injured employee has established a significant causal link between the injury he suffered and his employer’s on-OCS extractive operations.”  The Court’s opinion, however, gives virtually no indication as to how the substantial nexus test should be applied, or even how it should be applied in the Valladolid case.

But the Court does use, in my opinion, curious language.  The Court is saying that there must be a significant causal link between the injury and the employer’s OCS operations.  The causal link is not simply between the worker’s job and the employer’s OCS operations.  I don’t yet know the significance of the phrasing, but it seems to introduce elements of risk and causation into the no-fault workers’ compensation scheme.

The Solicitor General, representing the U.S. Government in this case, had suggested a different type of test for coverage, based on the Chandris test for crewmember status under the Jones Act, but the Court rejected it.  One prong of the Chandris test requires an employment connection to a vessel that is substantial in terms of both duration and nature.  Since this was rejected by the Court, and based on the above language requiring some kind of causal link between the injury and the employer’s operations, I’m not sure were we stand right now.

Justice Scalia, joined by Justice Alito, wrote a concurring opinion in which he proposes “proximate cause” as the test for coverage rather than what he terms the even “more indeterminate standard” of “substantial nexus”.  Proximate cause is a test used in tort law, and Justice Scalia prefers to borrow it in this workers’ compensation context because at least the courts have more experience applying it to facts.   

What we have, however, is “substantial nexus” as our test for OCSLA coverage.  But we do not yet have any guidance as to how it will be applied.  It’s up to the Benefits Review Board to articulate their take on the test. 

It seems certain that all employers engaged in covered activities on the OCS have now picked up shore side OCSLA exposures.  Unfortunately, we’ll have to wait for case by case interpretations to tell us how extensive this new exposure will be.

I will keep you up to date on this case, and other OCSLA cases in which the new test is applied.  And you know what I always say.  If there’s any doubt (and there’s plenty here), get coverage.

Supreme Court

Oral argument will be held today at the U.S. Supreme Court in the case of Roberts v. Sea-Land Services, Inc. et al., which I briefly mentioned here last week.  Following is a fuller discussion of the case.  If you want to read more about the case, I also have an Argument Preview posted today at SCOTUSblog.com.

 

Roberts v. Sea-Land Services, Inc., et al.

What does section 6(c) of the Longshore and Harbor Workers’ Compensation Act mean?  What maximum weekly rate applies to compensation for disability?  Have we been applying it incorrectly ever since the 1972 Amendments added a cost of living provision?  Have virtually all disabled workers at the maximum weekly rate been underpaid? 

Do we pay the maximum in effect as of the date of first entitlement to permanent total disability (in this case 7/12/05), or do we pay the higher, later maximum as of the date of an Administrative Law Judge’s Compensation Order (in this case 10/12/06)?        

Let’s start at the beginning.

Background

The Longshore and Harbor Workers’ Compensation Act (The Act) (33 U.S.C. 901 et seq., 1927) is a federal workers’ compensation law covering land based maritime workers employed on and around the navigable waters of the United States.  In the event of a work related injury, the Act provides compensation for lost wages, medical care, vocational rehabilitation services, and survivor’s benefits.  It is administered by the U.S. Department of Labor (DOL).  Informal dispute resolution and medical management services are available at DOL district offices.  Unresolved issues, if any and when necessary, are referred for formal hearing at the DOL’s Office of Administrative Law Judges (ALJ), with appeals to DOL’s Benefits Review Board (BRB).  Appeals from BRB decisions go to the federal Courts of Appeal and ultimately to the U.S. Supreme Court.

Employers buy insurance from insurance carriers licensed by the DOL, or they obtain DOL approval to be self-insured.

Weekly benefits are paid at the rate of two-thirds of the disabled worker’s average weekly wage (AWW), established as of the date of injury. 

The weekly rate is capped at 200% of the applicable National Average Weekly Wage (NAWW), which is determined as of each October 1 by the Secretary of Labor.

According to section 6(c), weekly benefits are increased each October 1 for employees or survivors “currently receiving” compensation for permanent total disability (PTD) or related death benefits “during such period”, as well as those “newly awarded” compensation “during such period”, based on the change in the NAWW. 

Recent Changes to NAWW

 

October 1, 2001            NAWW $ 483.04           Weekly Maximum $    966.08

October 1, 2002                           498.27                                             996.54

October 1. 2003                           515.39                                          1,030.78

October 1, 2004                           523.58                                           1,047.16

October 1, 2005                           536.82                                           1,073.64

October 1, 2006                           557.22                                           1,114.44

October 1, 2007                           580.18                                           1,160.36

October 1, 2008                           600.31                                           1,200.62

October 1, 2009                           612.33                                           1,224.66

October 1, 2010                           628.42                                           1,256.84

October 1, 2011                           647.60                                           1,295.20                     

Issue

 

The question in Roberts v. Sea-Land Services, Inc., et al., 625 F.3d 1204 (9^th Cir. 2010) (Docket No. 10-1399) is basic, and it is surprising that we are just now determining the correct benefit in maximum rate cases. 

This worker’s average weekly wage is so high in relation to the NAWW at all times that the issue is significant.  If, in fact, earnings in segments of the maritime industry have outpaced the NAWW to such a degree, then it is time to resolve this question.  

The Court will interpret the following language:

 

Section 906(c) – Applicability of determinations.  Determinations under subsection (b)(3) (new NAWW) with respect to a period shall apply to employees or survivors currently receiving compensation for permanent total disability or death benefits during such period, as well as those newly awarded compensation during such period (emphasis added).

So the weekly rate at which a disabled worker is paid a PTD benefit is increased each October 1 and is capped at 200% of the NAWW in effect “during the period” he is “newly awarded” benefits.  Is this the date that he first becomes entitled or is it the later date of an ALJ’s Compensation Order?   

Facts

Mr. Roberts’ date of injury is February 24, 2002.  His AWW is $2,853.08, two-thirds of which is $1,902.05, far in excess of the maximum weekly rate on the date of injury ($966.08).  Due to his high AWW, Mr. Roberts will be paid at whatever maximum rate the Court applies.

The ALJ’s Compensation Order, dated October 12, 2006, found that Mr. Roberts is entitled to:  temporary total disability (TTD) from March 11, 2002 to July 11, 2005, permanent total disability (PTD) from July 12, 2005 to October 9, 2005, and permanent partial disability (PPD) from October 10, 2005 and continuing. 

If Mr. Roberts was “newly awarded” PTD benefits during the period of his first entitlement on July 12, 2005, his benefit is $1,047.16 per week increasing to $1,073.64 on October 1, 2005, with the new NAWW and maximum.

If Mr. Roberts was “newly awarded” PTD benefits on the date of the ALJ’s Compensation Order on October 12, 2006, his weekly rate for PTD beginning back on July 12, 2005 is $ 1,114.44.  There is no increase on October 1, 2005, since he would be already above the maximum for that year based on the retroactive application of the maximum in effect on the date of the ALJ’s Order.

Note:  The time line in Mr. Roberts’ case is typical for contested cases.  Following his date of injury on February 24, 2002, his employer voluntarily paid benefits up until May 18, 2005, when disputes arose and the employer ceased payments.  The case was referred to an ALJ and a formal hearing was held in January 2006 followed by the ALJ’s Compensation Order dated October 12, 2006. 

Entitlement Determined by Ninth Circuit 

Administrative Law Judge Order                       BRB                 Ninth Circuit

 

TTD 03/11/02-07/11/05 – $   966.08/wk         affirmed            affirmed

PTD 07/12/05-09/30/05 – $   966.08/wk         affirmed            $1,047.16/wk

PTD 10/01/05-10/09/05 – $1,073.64/wk         affirmed            affirmed

PPD 10/10/05- cont.      -  $   966.08/wk         affirmed            affirmed 

Entitlement Claimed by Mr. Roberts

 

TTD 03/11/02-07/11/05    $   966.08/wk

PTD 07/12/05-09/30/05    $1,114.44/wk

PTD 10/01/05-10/09/05    $1,114.44/wk

PPD 10/10/05-cont.           $   966.08/wk       

Reminder:  the rates for TTD and PPD are subject to the maximum on the date of injury, which is $966.08, and are not increased annually.

Note that the Ninth Circuit partially reversed the BRB and increased Mr. Roberts’ rate to $1,047.16, the then current maximum on July 12, 2005, the date that he was first entitled to PTD.  But the Ninth Circuit and the Benefits Review Board both agree that Mr. Roberts was “newly awarded” PTD benefits on the date that he first became entitled to those benefits, and not as of the date of the ALJ’s Compensation Order.  Mr. Roberts wants the date of the Compensation Order to control the applicable maximum.

The amount at stake in this case is only $830.99, since Mr. Roberts’ entitlement changed from PTD to PPD on October 10, 2005, after only 3 months of PTD.  (PPD benefits based on a loss of wage earning capacity are paid at two-thirds of the difference between the worker’s AWW and his residual wage earning capacity, are capped at the maximum on the date of injury, and are not subject to annual increases.)  In the typical case, however, PTD benefits are paid for life and the difference per week based on a higher maximum rate each week for each affected disabled worker, multiplied in each case by life expectancy, would add up significantly for maritime employers.

Circuit Conflict

After the petition for writ of certiorari was granted on September 27, 2011, the Eleventh Circuit published Bernard D. Boroski v. Dyncorp International, et al., a Defense Base Act case (the Defense Base Act is an extension of the Longshore and Harbor Workers’ Compensation Act which incorporates the relevant statutory provisions).  The Eleventh Circuit reached conclusions opposite to those of the Ninth Circuit in Roberts.

Although the Eleventh Circuit viewed the statutory language as “clear and express” and based its decision on a plain reading of the terms, it conducted an elaborate forty one page analysis and concluded that the Ninth Circuit, the BRB, and the DOL have all been reading the clear and express language of section 6(c) incorrectly.  In the opinion of the Eleventh Circuit, “newly awarded compensation” occurs at the time of the Compensation Order.

The Ninth Circuit acknowledged the inconsistent use of the term “award” in the Act and interpreted it within the overall context of the statute.  It issued a 6 page decision: “newly awarded compensation in section 6 means newly entitled to compensation”. 

There is also a Fifth Circuit case that supports Mr. Roberts’ position, but the Ninth Circuit and the BRB marginalized it as lacking pertinent analysis (Lovett R. Wilkerson v. Ingalls Shipbuilding, Inc. and Director, Office of Workers’ Compensation Programs, 125 F.3d 904 (5^th Cir. 1997)).

Discussion

The Act does not define “award” for purposes of section 906(c), and the term does not have a consistent meaning throughout the Act. 

For example, section 914(f), establishing a penalty for late payment of compensation, uses the term “award” to mean a Compensation Order. 

On the other hand, section 908, in discussing the different types of disability, uses “award” to mean entitlement, with or without a Compensation Order.  Similarly, section 910(h)(1) discussing the annual increase uses “awarded” as equivalent to “entitled to”.  Section 933(b), seemingly anticipating this issue, specifies that “award”, for purposes of that section only, means Compensation Order.

There are additional examples both ways.

Mr. Roberts wants to be paid retroactively the maximum weekly rate that applied on the date that the Compensation Order was eventually issued in his case.  It does not help his case that his meaning of “award” will result in workers who are injured on the same day, even with the same AWW, being paid at different rates, based on the fortuitous date that a Compensation Order is issued in each case.  It could also lead to the spectacle of workers trying to delay their Compensation Orders for as long as possible, or at least until the next October 1 and its new maximum rate.  Presumably, when survivor’s benefits are ultimately “awarded” by Compensation Order, we will have still another (higher) maximum rate to apply.

Mr. Roberts’ argument adds an extra-statutory penalty whenever an employer exercises its due process rights to contest entitlement and go to a formal hearing, even though there are already existing penalties in the Act for the late payment of compensation.  Mr. Roberts will leave an employer with two poor alternatives; 1) either seek an early Compensation Order, and if the worker is not at maximum medical improvement, be stuck with a running Order for TTD, or 2) follow what Mr. Roberts concedes are “slow-moving adjudication procedures”, go to a formal hearing when the issues are ripe, and pay retroactively a higher rate based on the maximum in effect on the date of the eventual Compensation Order.

This is the Longshore Act, however, and it is interpreted liberally in the tradition of remedial statutes, and in the maritime tradition in which workers are treated as “wards of the court” even to this day.  In a close case of statutory construction, the disabled worker usually wins.  It can also be argued that if Mr. Roberts wins then employers will be motivated to resolve disputes as quickly as possible, thus promoting a primary purpose of the Act, to provide prompt payment of compensation.

The Ninth Circuit’s reasoning is rational within the statutory context and internally consistent with the dates of injury and entitlement.  The Eleventh Circuit’s decision undeniably has support in the statute and reflects the plain meaning of words, and its discussion is thorough.  This case can go either way.

 

ISSUE: Recreational Vessels

On December 30, 2011, the U.S. Department of Labor (DOL) published final regulations (at 20 CFR Part 701) implementing the amendment to section 902(3)(F) that was contained in the American Recovery and Reinvestment Act (ARRA).  This was the amendment that removed the sixty five foot limitation for the exclusion from Longshore Act coverage for workers employed to repair or dismantle in connection with repair any recreational vessel.

The current, amended law, which was effective on February 17, 2009, states:

Section 902(3) – The term “employee” means any person engaged in maritime employment, including any longshoreman or other person engaged in longshoring operations and any harbor-worker including a ship repairman, shipbuilder, and ship-breaker, but such term does not include …

            (F) individuals employed to build any recreational vessel under sixty-five feet in length, or individuals employed to repair any recreational vessel or to dismantle any part of a recreational vessel in connection with the repair of such vessel; 

If such individuals … are subject to coverage under a State workers’ compensation law.

So, the under sixty five foot exclusion now only applies to workers who build recreational vessels.  There is no longer any size limit for workers who repair or dismantle in connection with repair any recreational vessel.  These workers are excluded from coverage under the Longshore Act.  This change is effective for injuries occurring on or after February 17, 2009.

The new regulations, effective January 30, 2012, provide the interpretation of the U.S. Department of Labor, which administers the Longshore Act.  To the extent that the regulations are consistent with the statute, they have the force of law.

Noteworthy points:

1)      The DOL has attempted to define “recreational vessels”.  They have done this by providing two different definitions; one is for manufacturers or builders of recreational vessels, and the other is for repairers.  For employers who are manufacturers or builders, a vessel is a recreational vessel if it is intended, based on design and construction, to be for ultimate recreational use.  For repairers, the actual usage of the vessel at the time of repair or dismantling in connection with repair is the test.

2)      “public vessels” as defined, i.e., vessels owned or bareboat chartered and operated by the U.S. or by a state or political subdivision thereof and not used for military or traditionally commercial activity at the time of repair, are considered to be recreational vessels. 

3)      For occupational disease and hearing loss cases the date of exposure is the date of injury for coverage questions under amended section 902(3)(F), and not the date of manifestation or triggering audiogram.

4)      For death cases, the date of the event or exposure that led to the death is the date of injury, not the date of death.

5)      For cumulative trauma cases, the date of injury is the same as in all other aggravation type cases.

It is clear that DOL has gone to great lengths to seriously address all of the comments they received following the publication of the initial Notice of Proposed Rulemaking on August 17, 2010.  

Even so, I’m not sure that we yet know what a recreational vessel is at the fringes.  For example, the test for manufacturers is whether the vessel “appears intended, based on its design and construction, to be for ultimate recreational uses.”  For repairers, the test is how the vessel has been operating “around the time” of the repair.  The point is made that “occasional” non-recreational use does not alter the vessel’s “core recreational purpose” and should not take a vessel outside of the recreational vessel definition.  The final rule provides that a vessel remains recreational unless it falls within the designated Coast Guard vessel categories on a “more than infrequent basis”.

This is not exactly bright line language.  But I think that it’s the best that DOL could do given the general language used in the ARRA amendment.  At any rate, none of the many comments on the initial Notice of Proposed Rulemaking contained better suggestions.

The burden as to whether the amended section 902(3)(F) exclusion applies to a particular employee will be on the employer, whether a manufacturer/builder or a repairer.  Remember that those employees who you might consider to “walk in and out of coverage” in that they work on both recreational and commercial vessels, are most likely covered by the Longshore Act full time.

If you have any questions with regard to any aspect of this amendment to the Longshore Act or to the DOL’s final regulations please let me know.

Issue: Maximum Weekly Rate

Back on March 14, 2011, I mentioned that an Outer Continental Shelf Lands Act case (OCSLA) (43 U.S.C. 1331 et seq.) was at the U.S. Supreme Court to determine whether and where there is a situs of injury requirement in the OCSLA.  Oral argument was held in that case (Pacific Operations Offshore LLP v. Vallodolid, Docket No. 10-507) on October 11, 2011, and we are waiting for the decision of the Court.  The OCSLA is an extension of the Longshore Act.

Remarkably, there currently is a second Longshore Act case at the Supreme Court (Roberts v. Sea-Land Services, Inc., et al., 625 F.3d 1204 (9^th Cir. 2010)), with oral argument scheduled for January 11, 2012.

The issue in Roberts is: What maximum weekly rate applies to compensation for disability under the Longshore Act?  Is it the maximum in effect as of the date of first entitlement to permanent total disability (in this case 7/12/05), or is it the higher, later maximum as of the date of the Administrative Law Judge’s Compensation Order (in this case 10/12/06)?    

This case involves benefits being paid at the maximum rate.  This worker’s average weekly wage ($2,853.08) is so high in relation to the NAWW at all times that the issue is significant. And it’s about time we’re settling the question, since the language to be interpreted has been in the Act since the 1972 Amendments.

This case could end up costing maritime employers and their insurance carriers money in the form of higher benefit rates in maximum rate cases. 

The Court will interpret the following language: 

Section 906(c) – Applicability of determinations.  Determinations under subsection (b)(3) (new NAWW) with respect to a period shall apply to employees or survivors currently receiving compensation for permanent total disability or death benefits during such period, as well as those newly awarded compensation during such period (emphasis added).

The weekly rate at which a disabled worker is paid a PTD benefit is increased each October 1 and is capped at 200% of the NAWW in effect during the period he is “newly awarded” benefits.  Is this the date that he first becomes entitled or is it the later date of an ALJ’s Compensation Order?   

Facts

Mr. Roberts’ date of injury is February 24, 2002.

The ALJ’s Compensation Order, dated October 12, 2006, found that Mr. Roberts is entitled to:  temporary total disability (TTD) from March 11, 2002 to July 11, 2005, permanent total disability (PTD) from July 12, 2005 to October 9, 2005, and permanent partial disability (PPD) from October 10, 2005 and continuing. 

If Mr. Roberts was “newly awarded” PTD benefits during the period of his first entitlement on July 12, 2005, his benefit is $1,047.16 per week increasing to $1,073.64 on October 1, 2005, with the new NAWW and maximum.

If Mr. Roberts was “newly awarded” PTD benefits on the date of the ALJ’s Compensation Order on October 12, 2006, his weekly rate for PTD beginning back on July 12, 2005 is $ 1,114.44.  There is no increase on October 1, 2005, since he would already be above the maximum for that year based on the retroactive application of the maximum in effect on the date of the ALJ’s Order.

The amount at stake in this case is only $830.99, since Mr. Roberts’ entitlement changed from PTD to PPD on October 10, 2005, after only 3 months of PTD.  PPD benefits based on a loss of wage earning capacity are paid at two-thirds of the difference between the worker’s AWW and his residual wage earning capacity, are capped at the maximum on the date of injury, and are not subject to annual increases.  In the typical case, however, PTD benefits are paid for life and the difference per week based on a higher maximum rate for each affected disabled worker, multiplied in each case by life expectancy, would add up significantly for maritime employers.

Circuit Conflict

After the petition for writ of certiorari was granted on September 27, 2011, the Eleventh Circuit published Bernard D. Boroski v. Dyncorp International, et al., a Defense Base Act case (the Defense Base Act is an extension of the Longshore and Harbor Workers’ Compensation Act which incorporates the relevant statutory provisions).  The Eleventh Circuit reached conclusions opposite to those of the Ninth Circuit in Roberts.

There is also a Fifth Circuit case that supports Mr. Roberts’ position, but the Ninth Circuit and the BRB marginalized it as lacking pertinent analysis (Lovett R. Wilkerson v. Ingalls Shipbuilding, Inc. and Director, Office of Workers’ Compensation Programs, 125 F.3d 904 (5^th Cir. 1997)).

This case could go either way.  The term “award” is used inconsistently in the Act, and there is support in the statute for both arguments.

If Mr. Roberts wins his case, then, at least going forward, virtually all injured workers eligible for payment at the maximum weekly rate would be entitled to payment at the higher rate in effect on the date of the ALJ’s Compensation Order retroactive to the date of their first entitlement to PTD. 

You can read more about the Roberts case next month at my posting on SCOTUSblog.com.