ISSUE: Landmark Cases, Part 1

There are decisions of the U.S. Supreme Court that are referred to as “landmarks”.  These landmark decisions are significant events in history in their own right.  They address/resolve/create national issues and controversies in the areas of constitutional and criminal law, politics, economics, and social, cultural, and religious practices and values.

Some of these Court opinions are unanimously decided; some are closely divided with strong dissenting opinions.  They all become the “law of the land”.

There have been many landmark Supreme Court decisions in our nation’s history.  Here are a few examples I would choose:

Marbury v. Madison

Gibbons v. Ogden

Dred Scott v. Sandford

Plessy v. Ferguson

Brown v. Board of Education

Griswold v. Connecticut

Roe v. Wade

Gideon v. Wainwright

Miranda v. Arizona

Schenck v. United States

The Longshore Act has its own landmark cases that are far reaching and enduring on their own relative scale.

My candidate for one of the foremost of these is Northeast Marine Terminal Co., Inc., et al. v. Caputo, et al.

The Caputo case was decided on June 17, 1977.  It was one of a series of cases that reached the Supreme Court seeking its interpretation of the provisions of the extensive 1972 Amendments to the Longshore Act.  Language from the Caputo decision is still regularly quoted in Longshore jurisprudence as authority on key issues.

The facts of the case, consolidating the claims of two New York City longshoremen, are not complicated.  The case involves typical maritime activities on the waterfront, although at the time of the injuries containerization was a brand new cargo handling technique and land side exposure was a brand new concept under the 1972 Amendments.

The coverage issues created by the 1972 Amendments are well known.  The Amendments changed what had simply been a “situs” test for coverage (the injury had to occur over the navigable waters of the U.S. (including any dry dock)) to a test involving not only an expanded landward situs but also a maritime “status” test for workers in the newly expanded landside coverage areas.  It was not at all clear in the immediate aftermath of the Amendments exactly who and what was now covered landside.

The Court had to “determine the reach of the ’72 Amendments.”  In doing so it established principles that are still followed today.

Probably the most often quoted excerpt from the Caputo decision is the following:  “The language of the Amendments is broad and suggests that we should take an expansive view of the extended coverage.  Indeed, such a construction is appropriate for this remedial legislation.”  Furthermore, “The Act ‘must be construed in conformance with its purpose, and in a way which avoids harsh and incongruous results.’” (Quoting in turn from Voris v. Eikel, 346 U.S. 328 (1953))

To make a long story short, longshoreman Ralph Caputo was injured while assigned duties on the day of his injury as a “terminal laborer” loading cargo on to a truck.  Longshoreman Carmelo Blundo was injured while unloading cargo not directly from a vessel but from a container located on a pier used only for stripping and stuffing containers and for storage rather than for loading and unloading vessels.  Neither longshoreman was injured in the act of removing cargo from a vessel and placing it dockside.

In deciding the issues of what today would be obvious examples of maritime employment covered by the Longshore Act, the Court used this early case (the injuries occurred in April 1973; the effective date of the 1972 Amendments was November 26, 1972) to resolve several important early questions.

Note:  Situs was met, since the injuries occurred in a terminal area contiguous with navigable waters.  The issue was the maritime status of the workers.

The Court acknowledged one of the primary purposes of the 1972 Amendments:  Congress intended to provide continuous coverage to amphibious workers such as longshoremen who, without the Amendments, would be covered for only part of their activity (the part over the water).  The problem of workers walking in and out of coverage back and forth over the water during the workday had been a significant contributing factor in producing the ’72 Amendments.

So in the Caputo decision the Court resolved the problem in what today we recognize as the uniform treatment principle that if any part of a worker’s regular duties is indisputably maritime in nature then that worker has 100% maritime status under the Longshore Act.  There is no walking in and out of “status”.

The employer in Caputo raised the “point of rest” theory as a defense.  They argued that the injured workers were handling cargo that had already reached its “point of rest” at dockside and thus were no longer involved in loading/unloading.  The Court rejected this theory in light of the expansive purposes of the Amendments and the realities of the longshoring occupation.

Today we recognize this in the principle that all workers who contribute to or facilitate the loading/unloading process are covered by the Longshore Act.  This includes all intermediate steps between the vessel and land transportation.

There is no “moment of injury” test for maritime employment status.  There is no “point of rest” for cargo at its first stop off the vessel.  The Longshore Act is a remedial statute which is to be liberally interpreted. These are the principles involved when we refer to the Caputo decision.


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, Financial Management, and Assessments and 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: National Average Weekly Wage and Impartial Medical Examinations

National Average Weekly Wage

The U.S. Department of Labor has released Industry Notice No. 154, dated September 8, 2015.  The Subject is:  Maximum and Minimum Compensation Rates Under the Longshore Act, Effective October 1, 2015; Adjustments of Permanent Total Disability and Death Cases.

As stated in the Notice, the National Average Weekly Wage is increased by 2.10 percent effective October 1, 2015 through September 30, 2016.  The new NAWW is $703.00.  Consequently, effective October 1, 2015, the new maximum weekly rate under the Longshore Act for permanent total disability and death cases is twice the NAWW, or $1,406.00.  The minimum weekly compensation rate is one-half the NAWW, or $351.50.

Impartial Medical Examinations

Recently I offered District Directors, Parts One and Two, discussing the administrative and adjudicative authority of the U.S. Department of Labor’s District Directors.

This discussion included a reference to Section 7(e) (33 U.S.C. 907(e)) of the Longshore and Harbor Workers’ Compensation Act.  This section contains one of the most direct, immediate, and mutually beneficial provisions of the Act.

The Longshore Act states, “In the event that medical questions are raised in any case, the Secretary shall have the power to cause the employee to be examined by a physician employed or selected by the Secretary and to obtain from such physician a report containing his estimate of the employee’s physical impairment and such other information as may be appropriate….  The Secretary shall have the power in his discretion to charge the cost of examination or review under this subsection to the employer, if he is a self-insurer, or to the insurance company which is carrying the risk, in appropriate cases, or to the special fund in section 44 (33 USC section 944).”

This use of Impartial Medical Examinations (IMEs) benefits all parties to a claim, since “medical questions” are raised in most contested cases.  The DOL Regulations implementing Section 7(e), at 20 C.F.R. 702.408, offers as examples of “medical questions” … the appropriate diagnosis, extent, effect of, appropriate treatment, and the duration of any such care or treatment for a work injury ….”

Whether or not to arrange for an IME is within the discretion of the District Director.  The statute reads that the Secretary (District Director) “shall” have the power to request an impartial medical examination, but while the authority is there in every case, it is not obligatory under any circumstances.  District Directors have broad discretion in this area.

It is important to note that although in instances such as disputed scheduled award cases and questions with regard to the need for surgery, the parties usually abide by the IME opinion and thus quickly and efficiently resolve medical issues, the opinion of the IME examiner is not entitled dispositive weight, i.e., the IME opinion is not necessarily the conclusive, final word on an issue. The IME opinions are not binding, but rather are weighed along with the other medical evidence in the record.

The statute and implementing regulations do provide some rules for administering the IME process.

Neither the employer/carrier’s nor the claimant’s doctor can attend the IME.

The IME examiner is not provided with the prior conclusions of these doctors (he may be provided with the results of diagnostic tests).

The District Director (or Claims Examiner) typically will provide the parties with a list of three proposed impartial examiners and request that the parties agree on one of them (see below).

If the claimant does not want to attend the IME he can appeal the District Director’s order directly to the Benefits Review Board, bypassing the Office of Administrative Law Judges.

If the claimant does not appeal to the Board, and fails to appear for the IME, it is within the discretion of the District Director to suspend the payment of compensation during the period of refusal.  If the District Director takes no action then the employer/carrier can appeal directly to the Board.

Section 7(i)

“Unless the parties to the claim agree, the Secretary shall not employ or select any physician for the purpose of making examinations or reviews under subsection (e) of this section who, during such employment, or during the period of two years prior to such employment, has been employed by, or accepted or participated in any fee relating to a workmen’s compensation claim from any insurance carrier or any self-insurer.”

The statute says, “…the Secretary shall not ….”  The parties must agree to an exception to the section 7(i) limitations on who may be selected as an impartial examiner.  There is no discretion or requirement that any party shows prejudice in the selection process.  If the parties cannot agree under section 7(i) in controverted cases the District Director can turn to section 14(h), which provides:

“The deputy commissioner (District Director) (1) may upon his own initiative at any time in a case in which payments are being made without an award, and (2) shall in any case where right to compensation is controverted, or where payments of compensation have been stopped or suspended, upon receipt of notice from any person entitled to compensation, or from the employer, that the right to compensation is controverted, or that payments of compensation have been stopped or suspended, make such investigations, cause such medical examinations to be made, or hold such hearings, and take such further action as he considers will properly protect the rights of all parties.”

This is another example of the broad authority and discretion and authority granted to the District Director in medical management of cases.


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, Financial Management, and Assessments and 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- Suitable Alternate Employment

This is a very important concept for all parties to a Longshore Act claim.  There is a great deal at stake.

dollar sign1If an injured worker meets his prima facie case, raising the section 20(a) presumption of causation, and he establishes that he is unable to return to his former employment, he is totally disabled.  And remember, an injury does not have to be severely medically disabling to constitute total disability under the Longshore Act’s approach to defining disability in terms of wage earning capacity.  A relatively minor injury can preclude a worker from returning to heavy labor.

Once the worker’s prima facie case is made, and he presents evidence that he cannot return to his old job, the burden of proof shifts to the employer to show that the disability is partial rather than total.  The employer can meet this burden by demonstrating the existence of “suitable alternate employment” (SAE).

To illustrate the importance of this issue, let’s take the example of a thirty year old worker with an Average Weekly Wage (AWW) of $1,200.  Let’s say that he is a container repairman, doing work that is considered to be “heavy”.  He injures his back, and he produces evidence that he cannot return to his former job.  At this point, he is totally disabled.  When he reaches MMI (maximum medical improvement) his condition changes from temporary to permanent (and total) disability.

His compensation rate for total disability is $800 per week (two-thirds of his AWW of $1,200), and if and when the disability changes from temporary to permanent, the weekly rate will be adjusted each October 1 for changes in the National Average Weekly Wage.  Barring a change of condition or a modification under Section 22, the total incurred loss to the employer for weekly compensation payments for this case of permanent and total disability, based on life expectancy, is in the range of $2 million, without even factoring in annual cost of living increases.

If the employer is able to establish a wage earning capacity (WEC) for this worker of $400 per week based on proof of SAE then the total disability is partial, the weekly compensation rate becomes $533.33 (two-thirds of the difference between the pre-injury AWW of $1,200 and the post injury WEC of $400) and the total incurred loss to the employer in this case is about $1.38 million. Since the disability is partial and not permanent there are no annual cost of living increases.

So establishing “suitable alternate employment” in this case can be worth around $600,000 to the employer/carrier over the life of the claim (actually much more than that when you consider the effect of annual increases).

So, now that we have an idea of what’s at stake let’s discuss the concept of SAE.

Our starting point is the case of a worker who cannot return to his former job.  At this point, the burden is on the employer to show that the disability is partial rather than total.

The employer meets this burden by presenting evidence that a range of jobs exists in the relevant labor market which is reasonably available and which the disabled employee can perform and is realistically able to secure.

There are a number of formulations of the employer’s burden among the various federal Courts of Appeal, but with some differences that your lawyer will have to worry about they all express the same general idea.  That is, that there are jobs within the relevant geographic area (usually where the claimant resides) which he is capable of performing, considering his age, education, work experience, physical restrictions, and any other relevant vocational factors that present themselves, and which he would be hired for if he diligently tried to get hired.

The foundation of the employer’s evidence usually takes the form of a labor market survey (LMS) prepared by a vocational specialist and based on a functional capacity evaluation (FCE).  The FCE will reflect the claimant’s physical restrictions with regard to activities such as bending, lifting, carrying, repetitive motions, sitting, standing, walking, changing position, etc.

The vocational report and LMS must reflect all of the claimant’s physical restrictions and other vocational factors, such as technical and verbal skills, language barriers, level of education, etc. (even things like the ability to drive may be relevant).

The LMS will present a list of available and reasonably obtainable jobs in the relevant area that the vocational expert believes that the claimant can perform.

The Administrative Law Judge (ALJ) will compare the claimant’s physical restrictions and other vocational factors to the physical requirements of the jobs relied on by the employer’s LMS to determine whether any of the jobs are suitable.  On the basis of this evaluation, the ALJ may establish a wage earning capacity for the worker.

Bear in mind that this is an adversarial process.  The claimant will likely have his own vocational expert testify at a hearing, and it is likely that the claimant’s treating physician will list physical restrictions more limiting than those reported by the employer’s doctor.  And of course, the claimant will testify as to his own self-described limits.

Proving the existence of SAE is a difficult burden for the employer.  The ALJ may favor the functional restrictions found by the claimant’s treating physician due to his greater familiarity with the claimant’s medical history.  He may credit the claimant’s testimony regarding constant pain and other limiting factors.  The employer has to try to cover all the bases with his LMS.

To reach a decision as to whether the employer has met its burden to establish SAE, the ALJ will weigh all of the evidence, comparing the LMS(s) with the claimant’s physical and vocational restrictions to determine whether the employer has shown a range of available jobs in the labor market that the claimant can perform and that there is a reasonable likelihood that he would be hired for.

If the employer is successful in establishing the existence of SAE, and the ALJ finds a wage earning capacity (WEC) based on that SAE, it’s not over.

The burden now shifts back to the claimant.  His burden of proof to rebut the employer’s showing of SAE (and retain his award of total disability) is to show that he diligently pursued alternate employment opportunities but was unable to find a job.  He is not required to prove that he tried to get the actual jobs the employer showed were available, but he must establish that he was reasonably diligent in trying to find a job within the range shown by the employer to be suitable, available, and attainable.

Certain broad principles have formed in the course of the adjudication of SAE issues, although remember you will encounter differences in the analyses performed in the various federal Courts of Appeal.

The employer usually does not have to contact prospective employers on the claimant’s behalf or otherwise find the claimant a job.  But the employer’s evidence is stronger if he can show that his vocational specialist actually visited alternate works sites, spoke to hiring officials, and is able to offer a complete list of job requirements.

Usually a LMS showing a single job will not be good enough, unless your claimant is in a field with few openings for highly specialized workers.  The more jobs you offer as SAE, in different fields, then the better your chances will be of establishing SAE.

Temporary, short term or seasonal jobs will usually not establish SAE.

An employer’s vocational expert usually can rely on standard occupational descriptions from the Dictionary of Occupational Titles (DOT) without visiting actual worksites.

The need for a reasonable commute will not rule out jobs otherwise suitable.

Even in a scheduled award case the employer should be prepared to show SAE if the injured worker claims total disability.  Even if it’s just minimum wage positions among the usual litany of parking lot attendant, self service gas station clerk, cashier, etc. any wage earning capacity will rule out total disability.

You can establish SAE retroactively.

If the injured worker moves after the injury the case could get complicated, particularly if he moves to an area where employment opportunities of any kind are limited compared to the area where the injury occurred.  Usually where the claimant lives is presumed to be the area where the employer must show the availability of SAE.   When the claimant moves, some courts will inquire into the circumstances of the move and evaluate the reasons for it if the employer raises an issue in relation to possible prejudice.  If the court considers that the move was justified, then the employer will have to show SAE in the new area.

An excellent way for an employer to establish SAE is to offer the injured worker a job to return to in its own operation that meets his vocational restrictions.  Of course, it has to be a legitimate job, not simply make work or “sheltered employment” of the kind offered by a benevolent employer or family member entailing no real duties.  If the employer has such a job to offer, then it has met its burden of demonstrating SAE and the worker’s actual earnings on the job will establish his wage earning capacity.

This has been only the broadest introduction to an important and difficult issue for employers under the Longshore Act.  We saw what can be at stake in these cases.  This is the type of issue where consultation with an experienced Longshore attorney is indispensable.


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, Financial Management, and Assessments and 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 – District Directors, Part Two

Jack_crop 72dpiThis is a continuation of our discussion concerning the authority and responsibility of the U.S. Department of Labor’s District Directors in the adjudication/administration of claims under the Longshore Act.  Remember, references in the statute to the Secretary usually include his designee the District Director, and references to “Deputy Commissioner” mean either the District Director, the Administrative Law Judge, or both, depending on context.

Section 8(f) – This is the second injury provision.  It begins with the District Director.  Section 8(f)(3) provides that, “Any request (for second injury relief) filed after the date of enactment of (the 1984 amendments) for apportionment of liability to the special fund … for the payment of compensation benefits, and a statement of the grounds therefore, shall be presented to the deputy commissioner prior to the consideration of the claim by the deputy commissioner.  Failure to present such request prior to such consideration shall be an absolute defense to the special fund’s liability ….”

Comment:  If the employer/carrier is seeking to place a case in the Special Fund under Section 8(f) then they have to raise the issue when permanency first becomes an issue in the case or DOL will raise the absolute defense of section 8(f)(3).

Section 17 –  “Where a trust fund which complies with section 302(c) of the Labor-Management Relations Act of 1947 (29 U.S.C. 186(c)) established pursuant to a collective-bargaining agreement in effect between an employer and an employee covered under this Act has paid disability benefits to an employee which the employee is legally obligated to repay by reason of his entitlement to compensation under this Act or under a settlement, the Secretary shall authorize a lien on such compensation in favor of the trust fund for the amount of such payments.”

Section 18(a) – “In case of default by the employer in the payment of compensation due under any award of compensation for a period of thirty days after the compensation is due and payable, the person to whom such compensation is payable may, within one year after such default, make application to the deputy commissioner … for a supplementary order declaring the amount of the default ….”

Comment:  The Special Fund may pay an insolvency case.  It starts here with a default order.

Section 18(b) – “In cases where judgment cannot be satisfied by reason of the employer’s insolvency or other circumstances precluding payment, the Secretary of Labor may, in his discretion and to the extent he shall determine advisable after consideration of current commitments payable from the Special Fund … make payment from such fund upon any award made under this Act and in addition, provide any necessary medical, surgical, and other treatment required by section 7 of the Act ….”

Section 19(a) – “Subject to the provisions of section 13 a claim for compensation may be filed with the deputy commissioner … at any time after the first seven days of disability following any injury, or at any time after death, and the deputy commissioner shall have full power and authority to hear and determine all questions in respect of such claim.”

Section 19(b) – “Within ten days after such claim is filed the deputy commissioner … shall notify the employer and any other person (other than the claimant), whom the deputy commissioner considers an interested party, that a claim has been filed….”

Section 19(c) – “The deputy commissioner shall make or cause to be made such investigations as he considers necessary in respect of the claim, and upon application of any interested party shall order a hearing thereon….”

Section 21(a) – “A compensation order shall become effective when filed in the office of the deputy commissioner ….”

Comment:  This is important because the location of the District Director who “files” the Order usually determines which federal court of appeals the parties will end up in on appeal.  It is also important because it determines the effective date for subsequent events, such as appeals and when compensation is due and payable.

Comment:  “Filing” simply means the dating and receipt of an Order in the office of the District Director.  It does not include service on the parties.

Section 22 – This section permits modifications based on mistakes of fact or change in conditions within one year after the date of the last payment of compensation or within one year after the rejection of a claim, in any claim whether or not a compensation order has been issued.  The modification procedure begins with the District Director.

Section 28 – Attorney fees are awarded in appropriate cases for work done at each level of the adjudication process.  The District Director approves attorney fees for work done at the informal district office level, based on a fee petition showing the work performed and the hourly rate.  All attorney fees must be approved by DOL.

Section 30(e) – “Within ten days from the date of any injury, which causes loss of one or more shifts of work, or death … the employer shall send to the … deputy commissioner … a copy of a report ….”  This is the Form LS-202, Employer’s First Report of Injury.  There is a civil penalty of up to $11,000 per occurrence for failure to file the required report.

Section 31(b)(2)(A) – “The Secretary shall annually prepare a list of those individuals in each compensation district who have represented claimants for a fee in cases under this Act and who are not authorized to represent claimants.”

Comment – There is currently no list.

Section 33(f) – “If the person entitled to compensation institutes proceedings within the period prescribed in section 33(b) the employer shall be required to pay as compensation under this Act, a sum equal to the excess of the amount which the Secretary determines is payable on account of such injury or death over the net amount recovered against such third persons….”

Comment – The District Director determines the amount based on the net amount received by the injured worker in his third party suit..

Section 39(c)(2) – “The Secretary shall direct the vocational rehabilitation of permanently disabled employees …. “

Comment – District Directors have broad discretion here.

Section 49 (33 U.SC. section 948(a)) – “It shall be unlawful for any employer or his duly authorized agent to discharge or in any other manner discriminate against an employee as to his employment because such employee has claimed or attempted to claim compensation ….”

Comment – The District Directors handle discrimination complaints.

The District Directors, as well as the Claims Examiners, can be an excellent resource for both parties in the handling of a Longshore Act claim.

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, Financial Management, and Assessments and 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: U.S. Department of Labor District Directors

Jack_crop 72dpiThe U.S. Department of Labor, which administers the Longshore and Harbor Workers’ Compensation Act, has a three step process for adjudicating claims.  The first step is informal proceedings at the district office level consisting primarily of dispute resolution services and medical management.  The next step, for unresolved, disputed issues, is a formal hearing at the Office of Administrative Law Judges (OALJ).  The third step is an appeal from the decision at the OALJ to the Benefits Review Board (BRB).

Each district office is managed by a District Director.  District offices are located in Boston, New York, Norfolk, Jacksonville, New Orleans, Houston, Long Beach, San Francisco, Seattle, and Honolulu.  In recent years offices in Chicago, Philadelphia, and Baltimore have been closed.

What does “dispute resolution services and medical management” mean?  What is the authority of the District Directors?  What do they do?  Here’s a briefly summarized list of the responsibilities and authority of the District Directors.

NOTE:  Where the Act says “Secretary (of Labor)” it includes the Secretary’s designee, the District Director.  Also, references to a “Deputy Commissioner” refer either to a District Director or to an Administrative Law Judge, depending on the context.

Section 6(b)(3) (33 U.S.C. 906(b)(3)) – “…. The Secretary shall determine the national average weekly wage….  Such determination shall be the applicable national average weekly wage for the period beginning with October 1 of that year and ending with September 30 of the next year….”

Comment: The national average weekly wage is used to set the maximum (twice the NAWW) and minimum (one-half the NAWW) weekly compensation rates under the Longshore Act.

Section 7(b) – “The employee shall have the right to choose an attending physician authorized by the Secretary to provide medical care under this Act …. The Secretary shall actively supervise the medical care rendered to injured employees, shall require periodic reports as to the medical care being rendered to injured employees, shall have authority to determine the necessity, character, and sufficiency of any medical aid furnished or to be furnished, and may, on his own initiative or at the request of the employer, order a change of physicians or hospitals when in his judgment such change is desirable or necessary in the interest of the employee….”

Comment: A physician “authorized by the Secretary” is any properly licensed physician who has not been barred from providing medical services under the Act.

Section 7(c)(1)(A) – “The Secretary shall annually prepare a list of physicians and health care providers in each compensation district who are not authorized to render medical care or provide medical services under this Act….”

There is currently no list.

Section 7(c)(2) –  “…. An employee may not change physicians after his initial choice unless the employer, carrier, or deputy commissioner has given prior consent to the change….”

Comment: The section goes on to say that such consent is always given when the initial choice of treating physician was not of a specialist whose services are necessary for proper care.  In all other cases a change may be made on a showing of good cause.

Section 7(d)(2) – “No claim for medical or surgical treatment shall be valid and enforceable against such employer unless, within ten days following the first treatment, the physician giving such treatment furnishes to the employer and the deputy commissioner a report of such injury or treatment, on a form prescribed by the Secretary.  The Secretary may excuse the failure to furnish such a report within the ten-day period whenever he finds it to be in the interest of justice to do so.”

Comment: The Secretary almost always finds it in the interest of justice to do so.

Section 7(e) – “in the event that medical questions are raised in any case, the Secretary shall have the power to cause the employee to be examined by a physician employed or selected by the Secretary ….  The Secretary shall have the power in his discretion to charge the cost of examination … to the employer, if he is a self-insurer, or to the insurance company which is carrying the risk, or in appropriate cases, to the Special Fund in section 44.”

Comment:  These so-called Impartial Medical Exams (IMEs) are very helpful to the parties, especially in disputed scheduled award cases.  They are routinely billed to the employer/carrier.

Section 7(f) – “An employee shall submit to a physical examination under subsection (e) at such place as the Secretary may require.  The place, or places, shall be designated by the Secretary ….”

Comment:  Frequently, disputed medical issues, as well as other issues such as average weekly wage under section 10, are resolved at Informal Conferences among the parties convened in the district offices and presided over by the District Director.

Section 8(i) – “Whenever the parties to any claim for compensation under this Act … agree to a settlement, the deputy commissioner or administrative law judge shall approve the settlement within thirty days unless it is found to be inadequate or procured by duress ….”

Comment:  The best way to close a case under the Longshore Act is to have an order issued by a District Director or ALJ approving a lump sum settlement under section 8(i).

Section 8(j)(2) –  Section 8(j)(2) provides that “An employee who (A) fails to report the employee’s earnings (on Form LS-200) … when requested, or (B) knowingly and willfully omits or understates any part of such earnings … forfeits his right to compensation with respect to any period during which the employee was required to file such report.  Section 8(j)(2) provides that “compensation forfeited under the subsection, if already paid, shall be recovered by a deduction from the compensation payable to the employee in any amount and on such schedule as determined by the deputy commissioner.”

The District Director determines in what amount and how quickly the employer recovers his overpayment.

Section 9(b) – With regard to survivor’s benefits, “… The deputy commissioner having jurisdiction over the claim may, in his discretion, require the appointment of a guardian for the purpose of receiving the compensation of a minor child….”

Section 9(g) –  “Compensation under this chapter to aliens not residents (or about to become nonresidents) of the United States or Canada shall be the same in amount as provided for residents, except that dependents in any foreign country shall be limited to surviving wife and child or children, or if there be no surviving wife or child or children, to surviving father or mother whom the employee has supported, either wholly or in part, for the period of one year prior to the date of the injury, and except that the Secretary of Labor may, at its option or upon the application of the insurance carrier, shall, commute all future installments of compensation to be paid to such aliens by paying or causing to be paid to them one-half of the commuted amount of such future installments of compensation as determined by the Secretary of Labor.”

Section 10(h)(1) – Under this section the Secretary determines the increase in weekly benefit amount in cases of permanent total disability or death effective each October 1, based on the change in the national average weekly wage determined under Section 6(b)(3).

Section 12(d) – “Failure to give such notice (30 day notice of injury) shall not bar any claim under this Act (1) if the employer (or his agent or agents or other responsible official or officials designated by the employer pursuant to subsection (c)) or the carrier had knowledge of the injury or death, (2) the deputy commissioner determines that the employer or carrier has not been prejudiced by failure to give such notice, or (3) if the deputy commissioner excuses such failure on the ground that (i) notice, while not given to a responsible official designated by the employer pursuant to subsection (c) of this section, was given to an official of the employer or the employer’s insurance carrier, and that the employer or carrier was not prejudiced due to the failure to provide notice to a responsible official designated by the employer … or unless objection to such failure is raised before the deputy commissioner at the first hearing of a claim for compensation ….”

Section 14(b) – “The first installment of compensation shall become due on the fourteenth day after the employer has been notified pursuant to section 12, or the employer had knowledge of the injury or death, on which date all compensation then due shall be paid.  Thereafter compensation shall be paid in installments, semimonthly, except where the deputy commissioner determines that payment in installments should be made monthly or at some other period.

Section 14(e) – If any installment of compensation payable without an award is not paid within fourteen days after it becomes due … there shall be added to such unpaid installment an amount equal to 10 per centum thereof, … unless such nonpayment is excused by the deputy commissioner ….”

Section 14(h) – “The deputy commissioner (1) may upon his own initiative at any time in a case in which payments are being made without an award, and (2) shall in any case where right to compensation is controverted, or where payments of compensation have been stopped or suspended, … make such investigations, cause such medical examinations to be made, or hold such hearings, and take such further action as he considers will properly protect the rights of all parties.”

Comment:  I believe that the powers of the District Directors to affect the conduct of a case are generally underestimated and under utilized.

Section 14(i) – “Whenever the deputy commissioner deems it advisable he may require any employer to make a deposit with the Treasury of the United States to secure the prompt and convenient payment of such compensation, and payments therefrom upon any awards shall be made upon order of the deputy commissioner.”

Comment:  This section is never used.

Section 14(g) – “Within sixteen days after final payment of compensation has been made, the employer shall send to the deputy commissioner a notice, in accordance with a form prescribed by the Secretary of Labor, stating that such final payment has been made, the total amount of compensation paid, the name of the employee and of any other person to whom compensation has been paid, the date of the injury or death, and the date to which compensation has been paid.  If the employer fails to so notify the deputy commissioner within such time the Secretary of Labor shall assess against such employer a civil penalty in the amount of $100.”

Comment:  The form prescribed by the Secretary is Form LS-208, Notice of Final Payment or Suspension of Compensation Payments.

Comment:  Effective November 11, 1997, the penalty amount is $110.00.

I’ll have to end Part One here, since I’m nowhere near finished.

ISSUE: Per Diem, Fair Labor Standards Act, and the I.R.S.

Jack_crop 72dpiWhat do the Fair Labor Standards Act of 1938 (FLSA)(amended many times), the Internal Revenue Code of 1954 (amended many times), and the nature of “per diem” payments to employees have to do with the Longshore and Harbor Workers’ Compensation Act?

I’m not sure, so I’ll work through it and see where they intersect.

I’ll start with section 10 of the Longshore Act (33 U.S.C. 910) which deals with the calculation of an employee’s average weekly wage, from which an injured worker’s weekly compensation rate is derived.

Back on January 15, 2014, here at the AEU Longshore Blog I discussed the Average Weekly Wage (it would be helpful at this point if you went back and read that discussion)(now if possible)(Ok.  But definitely later).

In the course of that discussion I briefly referred to several issues that arise in the course of calculating the worker’s average weekly wage, one of which was:

“’Per diem’ payments – usually not taxable thus not includable in ‘wages’, but there have been instances where so-called ‘per diem’ payments were made without reference to travel costs and were simply wages under a misleading name;”

So let’s back up and see how the FLSA and Internal Revenue Code may intersect with the concept of per diem payments in the context of calculating the average weekly wage.

The FLSA is a federal law dealing with workers’ rights; it defines the 40 hour work week, sets the federal minimum wage, and deals with many issues such as overtime, child labor, equal pay, compensatory time off, etc.  Overtime is a hot topic right now.

It applies to employers whose annual sales total $500,000 or more or who are engaged in interstate commerce.  Interstate commerce in the context of FLSA has been interpreted so broadly that let’s assume that the law applies to everybody (did you mail a business letter addressed out of state today? – congratulations, you have engaged in interstate commerce).

For its own purposes the FLSA appears to include per diem payments for meals and lodging in the definition of “wages” in some contexts and not in others, but luckily for us neither have anything to do with the I.R.S. or the Longshore Act’s usage of the term, so I’m getting out of the FLSA with the conclusion that its treatment of per diem payments is not relevant under the Longshore Act.

Let’s start over with just the I.R.S. and the Longshore Act to consider.

First, let’s clarify what we mean by “per diem”.  In its conventional form, I mean payments or a daily allowance to an employee as reimbursement for meals, lodging, and incidental expenses and for which the employee files an expense report, usually in connection with business travel or working away from home.

The I.R.S. will not treat these per diem payments as wages or taxable income to the employee.  This is a very important consideration with regard to the Longshore Act, since the Longshore Act looks to the I.R.S. Code in its definition of “wages”.

Section 2(13) of the Longshore Act defines “wages” as follows:

“The term ‘wages’ means the money rate at which the service rendered by the employee is compensated by an employer under the contract of hiring in force at the time of injury, including the reasonable value of any advantage received from the employer and included for purposes of any withholding of tax under subtitle C of the Internal Revenue Code of 1954 ….”

The Longshore Act’s definition of wages looks to the I.R.S., and “wages is defined by what the I.R.S. considers to be taxable income subject to withholding tax.  The I.R.S. does not consider legitimate per diem payments to be taxable income, thus they are not “wages” under the Longshore Act, and are not included in the calculation of the average weekly wage.

There are issues and red flags, however, when dealing with “per diem” payments.

If the employee does not file an itemized expense report, you may have “wages”, not “per diem” payments.

If the employee receives the same amount in each pay check designated as “per diem”, but unrelated to any travel expenses, you may have wages, not per diem payments.

If all employees are paid the same amount regularly designated as per diem regardless of duties or travel stratus, you may have wages, not per diem.

If an employment contract contains a provision for a fixed, regular amount to be paid under such references as “food and lodging”, “subsistence and quarters”, etc., these payments may constitute wages.

To sum up, the FLSA’s treatment of per diem payments has no bearing on the effect of these payments in establishing an injured worker’s average weekly wage under the Longshore Act.

On the other hand, the I.R.S.’s treatment of per diem payments will usually be determinative as to whether or not these payments are to be considered, “wages” under the Longshore Act and thus includable in the calculation of the average weekly wage.

But it is important sometimes to take a closer look at so-called “per diem” payments.

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, Financial Management, and Assessments and 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: 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.


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