ISSUE: Defense Base Waivers

Jack_crop 72dpiI’ve discussed the Defense Base Act (DBA) (42 U.S.C. 1651) on several previous occasions so I’ll just briefly review it here and then discuss one particular aspect.

The DBA is a workers’ compensation law that extends the benefits of the Longshore Act to employees outside of the continental U.S. under certain circumstances.  It was enacted in 1941, supplemented in 1942 by the War Hazards Compensation Act (WHCA) (42 U.S.C. 1701), and amended in 1953 and 1958 to broaden coverage.

The DBA covers the following employment activities:

  1. All employees working overseas for private employers on U.S. military bases or on any lands used by the U.S. for military purposes outside the continental U.S. in any Territory or possession,
  2. All employees working on public works contracts with any U.S. Government agency outside the continental U.S.,
  3. All employees working on contracts approved or funded by the U.S. under the Foreign Assistance Act, generally providing for cash sale of military equipment, materials, or services to allies if the contract is performed outside the continental U.S.,
  4. All employees working for American employers providing welfare or similar services outside the U.S. for the benefit of the armed forces (such as the USO).

The DBA applies to all employees, not just to U.S. citizens, and to all employers, foreign or domestic.

The DBA applies to all contracts regardless of length, whether just a few days, a year, or longer.

There does not have to be a causal relationship between the employment of the injured worker and the injury in the conventional sense.  All that is required is that the “obligations and conditions” of employment create the “Zone of Special Danger” out of which the injury arose.  This is sometimes inaccurately referred to as “24 hour coverage”.

Defense Base Act Waivers

Section 1(e) of  the Defense Base Act states, “Upon the recommendation of the head of any department or other agency of the United States, the Secretary of Labor, in the exercise of his discretion, may waive the application of this section with respect to any contract, subcontract, or subordinate contract, work location under such contracts, or classification of employees.”

Waiver requests are routinely granted when submitted by the proper person in the proper form, but there are limits and conditions.

Waivers do not apply to any employee who is a U.S. citizen, or is hired in the U.S., or who is a bona fide resident of the U.S. regardless of nationality.  The one exception to this policy is the case of Guam, where the DBA has been waived in its entirety even though the residents are U.S. citizens.

There is a further, very important, consideration.  There is a condition attached to every waiver.  The condition is that employees covered by the waiver must receive workers’ compensation benefits pursuant to the provisions of the local laws.  If this condition is not met then the waiver is null and void and the DBA applies to all employees.

Federal agencies should insert in every contract the requirement that each contractor, before commencing performance under the contract, must provide and maintain for all waived employees such workers’ compensation insurance or injury and death benefit protection required by local law.  It is important that this protection not exclude war hazards, since a waiver under the DBA also waives coverage under the WHCA for direct claims by injured employees.

A problem arises when there is no effective local workers’ compensation law.  Where that is the case, you either apply the provisions of the DBA, or if you obtain a waiver of the DBA as to host country and third country nationals you make sure that the conditions for application of the waiver are satisfied.  For third country nationals, for example, you can provide home country or country of hire coverage.  For host country nationals, if there is no existing law, you have a problem.  What did the local law provide when and if it was in effect?  What kind of existing health and disability coverage is available which approximates workers’ compensation protection?  Does it include war risk protection?  You must come up with something close to local coverage or else you must provide DBA benefits.

The burden is on the contractor to make sure that his waiver meets all conditions.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

ISSUE: Unasked questions

Jack_crop 72dpiPrincipal Skinner once introduced Lisa Simpson as, “The answer to the question nobody asked”.  Yes, Lisa could occasionally be an annoying, obtrusive know it all.

In that same vein, it has occurred to me that some of the questions that frequently arise concerning the Longshore Act have flip sides that are left unasked.

For example, we recently discussed the application of the Longshore Act’s coverage when American workers travel temporarily on the high seas or to the foreign waters of other countries (June 2, 2015).

What about workers coming in the other direction?  What about foreign workers who come to the U.S. temporarily to perform maritime employment?

I think that this is a straightforward proposition.  The status and situs provisions which govern coverage under the Act do not mention citizenship or nationality, on the part of the employee, or for that matter, on the part of the employer.  If a foreign worker comes to the United States, temporarily or otherwise, and does work which meets the status and situs provisions then he is covered by the Longshore Act.

I know what you’re thinking.  There may be a contradiction here.  If the “navigable waters of the United States” necessary for Longshore Act coverage includes the high seas and in some cases, according to the Benefits Review Board, the foreign waters of other countries, why don’t foreign workers in these areas also meet situs for Longshore Act coverage?  Why is there Longshore Act coverage only for U.S. workers temporarily on the high seas and foreign waters?

I think that it has to do with the need for uniformity for U.S. workers in federal maritime matters.   U.S. workers should have the same workers’ compensation protection when traveling temporarily overseas that they have when at home.  This is a valid idea to the extent that it can coexist with competing principles governing the application of U.S. law overseas.

But back to foreign workers performing maritime employment in the U.S.  If they meet the situs and status provisions of the Longshore Act, then they are covered by the Longshore Act.  There are several implications here that are important for the maritime employer, domestic or foreign.

If you refer back to our recent discussions regarding section 4(a)’s statutory employer provisions (5/5/2015) and the common law doctrine of “borrowed employee” (5/19/2015), you will see that U.S. companies bringing in foreign workers, even for brief, temporary job assignments, should be concerned with making sure that they are not picking up an unanticipated Longshore Act exposure.  It is likely that most foreign companies sending workers to the United States do not have their own Longshore Act coverage.

And foreign employers who send workers to the U.S. should be aware that they are subject to the same Longshore Act insurance requirements as domestic U.S. employers.  This includes the election of remedies for the injured worker, possible criminal prosecution, and personal joint and several liability for corporate officers if the foreign employer is uninsured for its Longshore Act exposure.

While we’re on the subject of foreign workers, I should reiterate the discussion (9/21/09) with regard to workers in the U.S. illegally.

It’s a good bet that they are covered by the Longshore Act if they meet situs and status.  The definition of employee, and the way that the term has been interpreted, simply does not include modifiers like American, legal, etc.  And that goes for employers as well.  Don’t just take my word for it.

Section 902(3) – Definition of “employee” – “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 ….”

Section 902((4) – Definition of “employer” – “The term ‘employer’ means an employer any of whose employees are employed in maritime employment, in whole or in part, upon the navigable waters of the United States ….”

As inadequate as those definitions are in many respects, one thing is clear.  They do not contain any provision or condition for citizenship, nationality, or immigration status.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

ISSUE: Burden of Proof

Jack_crop 72dpi

How is the winner determined when a controverted Longshore case goes to a formal hearing at the Office of Administrative Law Judges?

The ALJ considers all of the testimony and all of the documentary evidence, medical and otherwise, for credibility, weight, and relevance, and the prevailing party is the one that meets its “burden of proof”.

Although the claimant has the overall burden of proof by persuasion by a preponderance of the evidence, the Longshore Act uses a burden shifting framework at different points during the adjudicatory process.

I’ll look at a few examples of how the burden of proof shifts from one party to the other and what this means for the outcome of the case.

Section 20(a)

The initial burden of proof in a Longshore claim is on the claimant.  He must establish his prima facie case.  He must demonstrate the existence of an injury or harm and that a work related accident occurred or working conditions existed which could have caused the harm.  This is a light burden.  In most cases, the claimant can establish his prima facie case simply by testifying that he had pain or an illness at work even if it is not supported by witnesses or medical evidence.

Once the claimant meets this initial burden of proof a rebuttable presumption arises in the case in favor of the claimant under section 20(a) that the harm or pain is work related.

At this point, the burden of proof shifts to the employer on the issue of causation by virtue of the fact that the claimant has established his prima facie case and has the benefit of the application of the section 20(a) presumption.  The employer’s burden to rebut the presumption is one of “production” rather than “persuasion”.  The employer must produce “substantial evidence” that, IF believed (credibility or persuasion is not involved at this stage) would show that the harm or pain is not work related.

Note:  Substantial evidence is that relevant evidence that is more than a scintilla but less than a preponderance – that would cause a reasonable person to accept the fact finding.

If the employer meets its burden of proof and produces substantial evidence to rebut the presumption, then the presumption drops from the case and the burden of proof shifts back to the claimant to prove or persuade on the issue of causation by a preponderance of the evidence based on the record as a whole.

So we see at the threshold issue of whether or not the injury was work related, that the burden of proof on the claimant to establish the prima facie case shifts to the employer to rebut the section 20(a) presumption and then shifts back to the claimant to prevail on this issue by a preponderance of evidence.

Section 49

Section 49 of the Longshore Act (33 U.S.C. 948(a)) prohibits an employer from discriminating against an employee because the employee has claimed compensation under the Act.  The initial burden of proof is on the claimant to establish a prima facie case of discrimination.  To do this, a claimant must demonstrate that his employer committed a discriminatory act motivated by discriminatory intent.  He must produce enough evidence to permit the trier of fact to infer that the employer had discriminatory intent.

For example, a claimant could show that he was singled out for discipline or fired immediately after filing a claim.

Once the prima facie case of discrimination is established the burden of proof shifts to the employer to show that there was no discriminatory intent, i.e., any discipline imposed was not due to the filing of a compensation claim.

Once the employer produces evidence of lack of discriminatory intent the burden shifts back to the claimant to persuade by a preponderance of the evidence that there was discriminatory intent.

So once again the initial burden of proof is on the claimant, then it shifts to the employer, then it shifts back to the claimant.

Last Responsible Employer – Multi Employer Occupational Disease Case

The employer responsible for paying benefits under the Longshore Act in an occupational disease (OD) case is the last covered employer to expose the employee to injurious stimuli prior to the date that he becomes aware that he is suffering from an occupational disease arising out of employment.  How are the burdens of proof distributed when there are multiple potentially liable employers involved as defendants?

I’ll discuss the approach taken by the federal Ninth Circuit Court of Appeals, which frequently sees this type of case.

First, the claimant must establish a prima facie case against each employer named as a defendant in order to keep the employer in the case.  As we’ve seen, once this initial burden of satisfying the prima facie case is met with regard to an employer, the section 20(a) presumption applies to shift the burden of proof to the employer to rebut the presumption by producing substantial evidence to the contrary.  If the presumption is rebutted it drops from the case and the claimant has the burden of proving his case by a preponderance of the evidence.

But there are multiple employers potentially liable, and only the last employer to expose the worker to injurious stimuli in sufficient degree to cause or aggravate the disease will be liable for all benefits.

At this point, each employer has the burden of establishing that it is not the last responsible employer.  It must prove either, 1) that exposure to injurious stimuli did not occur at its worksite, or 2) that the employee performed work covered by the Longshore Act for a subsequent employer where he was exposed.  The adjudicator will decide these questions sequentially for each employer starting with the last and going back in reverse order until he finds the last responsible employer.

Note:  In a multi employer cumulative trauma case the approach is somewhat different.  Instead of the sequential last to first analysis used in OD cases there is more of a simultaneous analysis in cumulative trauma cases due to the natural progression/aggravation/multiple employer nature of the case which requires concurrent review of all of the medical evidence.

Note:  There is a particular situation which arises at the outset of the formal hearing process.  After the parties have submitted their pleadings, briefs, and evidence, either party may request that the ALJ issue a Summary Decision, either with respect to a single issue or on the case as a whole.

The burden of proof is on the party bringing the request, or motion.  The ALJ will review the evidence in the light most favorable to the non-moving party opposing the motion.  If the ALJ finds that there is no material issue of fact raised by the evidence and that the non-moving party cannot win as a matter of law, then he will grant the request for Summary Decision.

Note:  “material” as applied to a question of fact means of such nature that proof of the fact would establish or refute an essential element of the claim or a defense.

Note:  Mere allegations or denials will not be sufficient to successfully oppose a motion for summary decision.  The opposing party must set forth specific facts which establish a genuine issue of fact for trial.

There are many other instances where the Longshore Act shifts the burden of proof during the adjudicatory process, whether to rebut a presumption by producing substantial evidence or to persuade by a preponderance of the evidence.  The “winning” party successfully meets its burden of proof.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

ISSUE: High Seas, Foreign Waters

Jack_crop 72dpiYogi Berra might have said this.  “Some questions always come up, because they don’t come up that often.”   You know.  Sort of like, “Nobody goes there anymore.  It’s too crowded”.

Questions continue to come up with regard to U.S. workers going overseas, either on the high seas or in foreign waters, to do work that would meet the maritime “status” requirement for Longshore Act coverage if done on or adjoining the navigable waters of the United States in the conventional sense.

We are assuming that these high seas/foreign waters workers meet “status”, so this is strictly a “situs” issue.

It has been a safe bet that the Longshore Act applies on the “high seas”, subject to conditions such as contacts with the U.S. and the temporary nature of the work assignment.  The problem has been, and still is, with regard to foreign territorial waters.

We have the U.S. Department of Labor’s Benefits Review Board’s decision in Weber v. S.C. Loveland Co., 35 BRBS 75 (2001) aff’d on recon., 35 BRBS 190 (2002) for the proposition that the Longshore Act coverage extends to the territorial waters of foreign countries.  The Board’s rationale is based on the language of section 39(b) of the Longshore Act, which authorizes the Secretary of Labor to establish compensation districts to include the high seas, and provides for judicial jurisdiction for proceedings involving injuries occurring on the high seas.  The Board also cited the trend in Admiralty law to extend federal maritime jurisdiction into foreign waters to provide uniform coverage for American workers.

But in Keller Found./Case Found. v. Tracy, 696 F.3rd 835 (9th Cir. 2012), the federal Ninth Circuit Court of Appeals (states of WA, OR, MT, ID, CA, NV, AZ, AK, HI) accepts the proposition that the Longshore Act applies on the high seas, but the court states, “we hold that foreign territorial waters and their adjoining ports and shore based areas are not the ‘navigable waters of the United States’”.  The court cited the strong presumption that enactments of Congress do not apply extraterritorially, and did not find strong enough intent in the Longshore Act to overcome this presumption.

To further muddy the waters, in Kollias v. D.G. Marine Maintenance, 29 F.3rd 67 (2nd Cir. 1994) the federal Second Circuit (states of NY, CT, VT) opined that the Longshore Act covers injuries on the high seas without qualification and that in section 39(b) the court found Congressional intent to overcome the general presumption against extraterritoriality.

So what’s our best guess today with regard to American workers overseas performing maritime employment?

  1. In the Ninth Circuit the Longshore Act applies on the high seas subject to conditions, but not in the territorial waters of other countries.
  2. Outside of the Ninth Circuit, the Longshore Act applies on the high seas also subject to conditions, but the issue of coverage in foreign territorial waters is uncertain.
  3. Will Circuits other than the Ninth follow the rationale of the Board in Weber (and for that matter will the Board continue to follow its own precedent in the wake of Tracy), or will the Circuits split? It may be worth noting that the Board did not disturb its opinion in Weber when Tracy went through on its way to the Ninth Circuit. Rather, the Board distinguished Tracy in that Mr. Tracy was based overseas from 1998 to 2002, not temporarily, and his trips did not begin and end in the U.S. This prolonged foreign assignment did not meet the conditions of Weber for Longshore Act coverage.
  4. Until the issue of situs in foreign territorial waters is clarified, maritime employers whose cases are likely to end up in a Circuit other than the Ninth should get Longshore Act coverage for their employees who are going overseas to perform maritime work.

Note:  if the overseas work is on a U.S. military base or pursuant to a government contract, be thinking about the Defense Base Act.

Note:  Will your case end up in the Ninth Circuit?  The location of the Office of Workers’ Compensation Program’s District Director who serves the Order of the Administrative Law Judge controls jurisdiction.  Cases are usually assigned to the District Director closest to the injured worker’s residence.

The jurisprudence is somewhat sparse, but not non-existent, but unfortunately what exists is not uniform.

So, once again we look to Yogi Berra, who almost certainly never said, “When you come to a fork in the road – take it.”

When there’s any doubt, play it safe and get coverage.

Notwithstanding the above discussion, some aspects of overseas coverage are clear.  The navigable waters of the United States includes the Territories and the territories, such as Guam, American Samoa, the U.S. Virgin Islands, the Commonwealth of the Northern Marianas, Gilbert and Solomons (not Sullivans), etc.

Note:  The Longshore Act does not apply in Puerto Rico, but the Defense Base Act does.  The Defense Base Act does not apply in Guam, but the Longshore Act does.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

 

ISSUE: Borrowed Employee

Jack_crop 72dpiThis is a continuation of our discussion of a contractor’s statutory liability for workers’ compensation benefits under section 4(a).

Remember, section 4(a) deals with contractor liability in the case where a subcontractor has failed to properly secure its workers’ compensation insurance obligation.  It doesn’t say anything about the application of the “borrowed employee” doctrine, a common law concept that pre-dates passage of the workers’ compensation laws.  So, the common law doctrine of “borrowed employee” is separate from section 4(a)’s “statutory employer” liability.

The borrowed employee doctrine shifts compensation liability not on the basis of a subcontractor’s failure to properly secure its workers’ compensation obligation, but on the basis of the application of an evidence test to determine if some employer other than the “nominal” employer is responsible for an injured worker’s compensation benefits.

Note:  The application of the borrowed employee doctrine does not depend on who has properly secured workers’ compensation insurance and who hasn’t.  Paradoxically, the doctrine can shift liability from an insured subcontractor to an uninsured general contractor.

Note:  The application of the borrowed employee doctrine does not require the problematic identification of a “contractor” and a “subcontractor” relationship under the “two contract” scenario that we dealt with in the section 4(a) discussion.

So, section 4(a) as amended in 1984 does not modify the common law doctrine of borrowed employee.

There are two ways for an employer to become liable for the workers’ compensation benefits due to a worker who is generally not its employee:

  1. As a general contractor, forced into the role of the insurance guarantor of an uninsured subcontractor under the statutory employer provisions of section 4(a), and
  2. As a common law borrowing employer.

In its simplest form, the borrowed employee doctrine involves the question of when and how a worker can be in the general employ of one employer while at the same time being in the particular employ of another employer at the time of an injury.

When and how does it happen?

There are tests used by the courts, and not all courts use the same tests, but they all involve an analysis of the basic principles as stated by the U.S. Supreme Court in an early formulation.  “… we must inquire whose is the work being performed – a question which is usually answered by ascertaining who has the power to control and direct the (employees) in the performance of their work.  Here we must carefully distinguish between authoritative direction and control, and mere suggestion as to details of the necessary cooperation, where the work furnished is part of a larger undertaking.”  (Standard Oil Co. v. Anderson, 212 U.S. 215 (1909)).

When does an employee of the nominal, or general, employer pass under the direction and control of the particular, or borrowing, employer?

Here is the nine part test used by the federal Fifth Circuit Court of Appeals, based on its decisions in the cases of Ruiz v. Shell Oil Co. (413 F.2nd 310, 5th Cir. 1969) and Gaudet v. Exxon Corp., (562 F.2nd 351, 5th Cir. 1977):

  1. Who has control over the employee and the work he is performing,
  2. Whose work is being done,
  3. Was there an agreement, understanding or meeting of the minds between the original and borrowing employer,
  4. Did the employee acquiesce in the new work situation,
  5. Did the original employer terminate its relationship with the employee,
  6. Who furnished the tools and the place for performance,
  7. Was the new employment over a considerable length of time,
  8. Who had the right to discharge the employee,
  9. Who had the obligation to pay the employee.

The federal Fourth Circuit of Appeals does not use the Fifth’s nine-part test.  The Fourth Circuit uses an “authoritative direction and control” test, but much of the analytical framework is similar, involving issues of who supervises the employee, who assigns jobs to the employee, who pays the employee, who can terminate the employee, etc.

The U.S. Department of Labor’s Benefits Review Board tends to use the Fifth Circuit’s nine part test.

As noted by the Supreme Court in the excerpt from the Anderson case quoted above, it is important to distinguish between authoritative direction and control and the mere suggestion as to details or necessary cooperation in relation to the particular work being done at the time of the accident.

Whenever the borrowed employee doctrine is applied there are legal consequences for all parties involved, since the application of the borrowed employee doctrine affects other remedies and obligations.  For example, once a borrowing employer is identified, that employer becomes entitled to the employer’s immunity under the exclusivity provision of section 5(a).  It cannot be sued as a third party by the injured worker.

There is also one case in which the borrowing employer was required to reimburse an injured worker’s nominal employer for workers’ compensation benefits that the nominal employer had paid prior to the application of the borrowed employee doctrine (Total Marine Services v. Director, Office of Workers’ Compensation Programs, 987 F.3rd 774 (5th Cir. 1996)).

Conclusion:  Once the conditions of the borrowed employee test are met, the borrowing employer becomes the “employer” as defined in the Act, with all of the rights and obligations inherent in the employer-employee relationship.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

ISSUE: Section 4 – Insurance requirement, statutory employer, and a no-fault remedy

Jack_crop 72dpiWe all have our favorite sections of the Longshore Act.  There are the cryptic “status” and “situs” provisions of sections 2(3) and 3(a).  There are the sweeping medical care provisions of section 7; the complex average weekly wage provisions of section 10 and attorney fee provisions of section 28; the scary criminal and liability provisions of sections 5 and 38.  The section 8 grab bag of compensation provisions from scheduled awards to second injury fund relief to lump sum settlements has its proponents as the most important section.  Claims people struggle with the presumptions provided in section 20.  Don’t forget the ticking clocks in sections 12 and 13.  And so forth.

But don’t overlook section 4 (33 U.S.C. 904).  It’s relatively short, but it has important things to say.

“Section 4(a) Every employer shall be liable for and shall secure the payment to his employees of the compensation payable under sections 7, 8, and 9 (33 U.S.C. Sections 907, 908, 909).  In the case of an employer who is a subcontractor, only if such subcontractor fails to secure the payment of compensation shall the contractor be liable for and be required to secure the payment of compensation.  A subcontractor shall not be deemed to have failed to secure the payment of compensation if the contractor has provided insurance for such compensation for the benefit of the subcontractor.

(b) Compensation shall be payable irrespective of fault as a cause for the injury.”

Important points:

First, there is the “insurance requirement”.  Every employer shall secure the payment of compensation.
Second, if the employer is a subcontractor, only if such subcontractor fails to secure the payment of compensation shall the contractor be liable.
Third, a subcontractor has not necessarily failed to secure compensation if the contractor has provided insurance.
Fourth, Fault is irrelevant under the Longshore Act.

There are some tricky issues.

How do you “secure” the payment of compensation?
What is a “contractor”?
What is a “subcontractor”?
What does “failed” to secure compensation mean?”

In the course of discussing these issues, we’ll get indirectly involved with what is the common law doctrine of “borrowed employee”.

Section 32 answers the question about securing the payment of compensation.  You have two choices.  You buy insurance from an insurance carrier authorized by the U.S. Department of Labor (DOL) to write coverage under the Act, or you obtain authorization from the DOL to self-insure.

Section 4 states that every employer “shall” secure the payment of compensation.  Sections 5 and 38 provide the consequences to the employer who doesn’t properly secure payment.  Hint – it involves an election of remedies for the employee and joint and several civil and criminal liability for corporate officers.

Next, let’s consider what happens if the “subcontractor” “fails” to secure the payment of compensation.

If the subcontractor fails to secure payment then the “contractor” shall be “liable for and be required to secure the payment of compensation”.

The 1984 amendments to the Longshore Act changed the language of section 4 to require the failure of the subcontractor to secure payment in the first instance in order to shift statutory liability to the contractor.

This language deliberately overruled Supreme Court precedent in the case of Washington Metropolitan Area Transit Authority v. Johnson, 467 U.S. 925 (1984).  Under the pre-amendment version of section 4(a), a contractor could pre-empt the subcontractor’s insurance requirement by providing “wrap-up” insurance for the employees of subcontractors.  One result of this would be that the contractor would assume the employer’s immunity to tort suits by the subcontractor’s employees under the exclusivity provision of section 5(a), since it was the statutory employer.

So the 1984 amendment denies tort immunity to a contractor except in circumstances where it is forced into the role of statutory employer by the failure of the subcontractor to secure compensation.

Now we get to a difficult issue under section 4.  In this context, what is a contractor, and what is a subcontractor, such that the relationship gives rise to section 4(a) statutory employer liability?

Of course, Congress did not define the terms “contractor” and “subcontractor”, so they have been open to interpretation.

Section 4(a) premises liability on a finding that the contractor is subject to some contractual obligation to a principal which it in turn passes on in whole or in part to a subcontractor.

In a typical formulation, a contractor will be held secondarily (statutorily) liable for workers’ compensation when the injured employee was engaged in work either that is a subcontracted fraction of a larger project or that is normally conducted by the contractor’s own employees rather than by a subcontractor, or as it is sometimes unfortunately phrased, an independent contractor.

Another approach to identifying a contractor-subcontractor relationship is the “two contract” requirement.  This is where there is an employer, or contractor, passing along part of its own contractual obligation to subcontractors.  In other words, the general contractor is one who has a contractual obligation of its own, a portion of which he subcontracts to another.

Example:  A shipyard contracts for the renovation of one of its sheds.  The shipyard is the owner of the shed, not under a contractual obligation to renovate the shed.  Also, the shipyard is not in the business of renovating buildings and its employees do not usually do that type of work.  The shipyard merely contracted out the job to an “independent contractor”.  The shipyard has no liability under section 4(a) if the “independent contractor” has failed to secure compensation.

The Longshore Act in section 4 distinguishes between employers who are owners or principals and those who are general contractors working under contractual obligations to others.

So, for the statutory employer provision of section 4(a) to apply there must be a principal, a contractor, and a subcontractor relationship with a “two contract” context.

Section 4(b) is clear.  Compensation shall be payable irrespective of fault as a cause for the injury.  This is due to the nature of the concept of workers’ compensation as a compromise.  Remember, before the workers’ compensation laws were passed beginning in 1910, if a worker were injured on the job he had to sue his employer in tort based on negligence.  The employer had several effective common law defenses to such lawsuits, such as negligence of a fellow employee, assumption of risk, and contributory negligence.

Under the approach embodied in the Longshore Act and other workers’ compensation laws, the employer relinquishes his defenses in exchange for limited and predictable liability, and the employee accepts the limited statutory recovery because he receives prompt payment without the uncertainties and delays inherent in going to court.

The issue of fault is irrelevant in Longshore Act cases.  The sole exception is the defense provided in section 3(c) if the injury is due solely to the employee’s intoxication or the employee’s willful intent to injure himself or another.

This discussion has run on too long.  We’ll wait for next time to discuss how, if at all, the doctrine of “borrowed employee” fits in with the statutory employer provision of section 4.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

ISSUE: Section 8(j) – Report of Earnings – Forfeiture of Compensation

Jack_crop 72dpiIs it a good idea for an employer to monitor the post injury earnings of an employee to whom it is paying disability benefits under the Longshore Act?  Yes.  Does the Act provide a way to do this?  Yes.

Why is it a good idea?

If an employee meets the light burden of establishing a prima facie case, i.e., he has suffered a harm and working conditions or an accident at work might have caused the harm, then the section 20(a) presumption supplies the necessary causation link between the employment and the injury.

Then if the injured worker provides evidence that he cannot return to his pre-injury job (which does not necessarily entail a severe injury in the strictly medical sense), and the employer does not establish the existence of suitable alternate employment, the worker is totally disabled, and the employer is paying temporary total disability (TTD) or permanent total disability (PTD) benefits.

It is possible that injured workers receiving TTD or PTD benefits under the Longshore Act are potentially or in fact capable of working, or in fact are working.

We’ve recently discussed section 22, under which any party may request modification in a compensation case, even a case in which a Compensation Order has been issued and is final, based on a change in condition or because of a mistake in a determination of fact.  Such a modification may “terminate, continue, reinstate, increase, or decrease such compensation ….”

A change in the injured worker’s earning capacity may qualify as a change in condition under section 22 and provide the grounds for a modification of an existing TTD or PTD award, or even an award based on a loss of wage earning capacity (PPL) if the partially disabled worker’s actual earnings have increased.

Alternatively, if the claimant doesn’t return the earnings report as required, the employer may seek a compensation order forfeiting compensation for the period of the failure to report.

How does the Longshore Act provide a way for the employers to monitor the earnings of “disabled” employees?

Section 8(j) (33 U.S.C. 908(j)):

8(j)(1) The employer may inform a disabled employee of his obligation to report to the employer not less then semiannually any earnings from employment or self-employment, on such forms as the Secretary shall specify in regulations.

(2) An employee who –

(A) fails to report the employee’s earnings under paragraph (1) when requested, or

(B) knowingly and willfully omits or understates any part of such earnings, and who is determined by the deputy commissioner to have violated clause (A) or (B) of this paragraph, forfeits his right to compensation with respect to any period during which the employee was required to file such report.

(3) Compensation forfeited under this subsection, if already paid, shall be recovered by a deduction from the compensation payable to the employee in any amount on such schedule as determined by the deputy commissioner.

The employer can monitor the earnings of “disabled” employees, but it must be done right.

The Form is U.S. Department of Labor (DOL) Form LS-200, Report of Earnings.  It should be used by an employer to request earnings information at no less than 6 month intervals.

Section 8(j) uses the ambiguous term “disabled employee”.  This has been interpreted to mean an employee to whom the employer is paying Longshore Act benefits, either voluntarily or under an Order.  The employer must be paying benefits concurrently with the request for an earnings report.

Section 8(j) refers to the “deputy commissioner”.  This means the District Director of a DOL Longshore claims office.

The employee is required to report “any earnings”, including earnings from employment, self-employment, investment or rental income, and even earnings from illegal activity.

Form LS-200 requires that the employee sign and return the form to the employer within 30 days after receipt, even if the report is that there have been no earnings.

The administrators of the Special Fund send out Forms LS-200 once a year to those claimants to whom the Fund is paying benefits.  Since the earnings report may be requested at six month intervals it is in the interest of an employer who has placed cases in the Special Fund under the second injury provision of section 8(f) to also request earnings reports in its Special Fund cases.

What if the earnings report shows that the employee may be working or that he may have an earning capacity.  What if the earnings report shows no earnings but the employer has evidence that the employee may be working.  What if the employee fails to return the signed LS-200?

The employer should initiate proceedings with the DOL’s District Director in charge of the claim (or with the Administrative Law Judge if the case is already pending at the ALJ level).  The District Director should convene an informal conference and, depending on the facts of the case and the evidence provided by the employer, the District Director may issue a Compensation Order forfeiting compensation for the period during which the claimant failed to report as required by Form LS-200, or initiate modification proceedings under section 22.

Note:  Any forfeiture will be handled in accordance with section 8(j)(3).   If compensation forfeited for a past period has already been paid then the amount will be recovered by deduction from future compensation on a schedule set up by the District Director, taking into consideration all of the facts, including the claimant’s financial condition as reflected by his living expenses, total income from all sources, and total assets.

Note:  None of the three sections of the Act which provide for recovery of overpayments (sections 14(j), 8(j), and 22), provides that the employer may recover overpayments directly from the employee; such recovery can only be obtained by an offset against future compensation under the Act.

Note:  Employers should check to see if their insurance carriers are sending out LS-200s.  AEU does it for ALMA Members.  The procedures provided in section 8(j) are an appropriate way to monitor cases where benefits are being made, even where benefits are being paid pursuant to a final Compensation Order.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

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