AEU Longshore Blog ISSUE: Section 16

33 U.S.C. Section 916 states:

“No assignment, release, or commutation of compensation or benefits due or payable under the Act, except as provided by this Act, shall be valid, and such compensation and benefits shall be exempt from all claims of creditors and from levy, execution, and attachment or other remedy for recovery or collection of a debt, which exemption may not be waived.”

A recent case from a Pennsylvania state court provides an interesting interpretation of one aspect of section 16.

The case of In Re: C. Dwyer, Superior Court of Pennsylvania, No. 149 WDA 2016, filed on January 27, 2017, arose when a Longshore claimant tried to assign his ongoing weekly benefits to a “factoring” firm for a discounted lump sum. This enabled the claimant to receive his funds more quickly.

The claimant and his compensation carrier, Allied World Assurance Company, had agreed on a lump sum settlement agreement under section 8(i) of the Longshore Act.  Pursuant to the terms of the settlement agreement approved by the U.S. Department of Labor, Allied World entered into a two-party reinsurance contract with National Indemnity Company (NICO) whereby NICO undertook the responsibility of making weekly payments to the claimant.

Subsequently, the claimant sought to assign his weekly payments from NICO to DRB Capital, LLC in return for a lump sum at a discounted value.

Someone at NICO was awake at the switch. NICO challenged the agreement between the claimant and DRB, arguing that it violated the anti-assignment provision of section 16.  The trial court ruled in favor of the claimant and DRB and approved the assignment.  NICO appealed.

On appeal, NICO argued that the assignment was invalid. NICO based its argument on the fact that the ongoing benefit payments were pursuant to the Longshore Act and the language of section 16 was applicable and was unambiguous: “No assignment … of compensation or benefits due or payable under this Act … shall be valid.”

NICO also argued that an annuity or reinsurance contract providing for payments by a third party does not alter the fact that the payments are still “due and payable” under section 16.  The appeals court reversed the trial court and agreed with NICO.

The court found that section 16 places no limit on the type or method of payment, whether by an annuity or structured settlement or reinsurance contract.  Any payment of benefits under an approved section 8(i) lump sum settlement is “due and payable” under the Longshore Act, and pursuant to section 16 these payments cannot be assigned.

In a worst case scenario for NICO, if it had honored the claimant’s purported assignment of benefits to DRB, then at a later date the claimant could have come back to NICO and demanded payment of his benefits. If the assignment to DRB had been invalid, then payments made to DRB were invalid. The payments were due to the claimant and thus unpaid to the claimant. NICO would have potentially found itself paying twice.

In the face of what the court considered clear and unambiguous statutory language, NICO would most likely have found that the Longshore Act is not big on equitable arguments if the company had tried to take credit for the payments that did not go to the claimant.

 

Exceptions to the section 16 anti-assignment provision

Section 17 provides that a lien may be granted in favor of a trust fund established under a collective bargaining agreement under 29 U.S.C. Section 186(c) where the trust fund has paid benefits to a claimant under the Longshore Act.

Section 8(i), the lump sum settlement provision, provides an additional exception to the section 16 prohibition against release or commutation of compensation or benefits due.

 

Additional notes on section 16

Social Security Act amendments allowing garnishment for alimony and child support have been interpreted as amending section 16 of the Longshore Act to allow such garnishment where payments are made by the United States, or relevant to our purpose, the Special Fund administered under section 44 of the Longshore Act.

Curiously, there is another recent Pennsylvania state court case that ruled that under the Social Security garnishment amendment, Longshore benefits may be attached for alimony since the payments are paid under a federal law (Uveges v. Uveges, 103 A.3d 825 (Pa. Super.Ct. 2014)).

There is also a federal Eleventh Circuit Court of Appeals case that suggests that once an annuity has been purchased and Longshore Act payments are to be made by a third party, then the “due and payable” under the Longshore Act aspect of the payments no longer applies and thus the anti-assignment provision of section 16 does not apply (In Re Sloma, 43 F.3d 637, (11th Cir. 1995)).

But in my opinion, the Superior Court of Pennsylvania in the present case of In Re: Dwyer has it right.  The Longshore claimant’s attempt to assign his benefits to the factoring firm was invalid under section 16.

 

 

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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.

AEU Longshore Blog ISSUE: Section 905(b), Part Two

On March 15, 2017, the AEU Longshore blog discussed, in general terms, section 905(b) of the Longshore and Harbor Workers’ Compensation Act.  To expand on that discussion, here are some section 905(b) cases to illustrate interesting ways in which the vessel owner’s duties to maritime workers have been interpreted in the courts. These cases show that issues under section 905(b) can be complex, not to say unpredictable.

Brief review of vessel owner’s duties (a full discussion can be found in the previous post):  Under section 905(b), a vessel owner can be sued as a third party for the federal maritime tort of negligence by a worker covered by the Longshore Act.  Based on the concept that primary responsibility for worker safety rests on the maritime employer and not on the vessel, the vessel owner’s duties under section 905(b) are somewhat limited.

According to the U.S. Supreme Court’s decision in Scindia Steam Navigation Co. v. De Los Santos, 451 U.S. 156, (1981), there are three duties owed by the vessel owner:

  • Turnover duty – referring to the condition of the ship upon the commencement of stevedoring operations
  • Active control duty – a vessel owner must exercise reasonable care to prevent injuries to longshoremen in areas that remain under the active control of the vessel
  • Duty to intervene – regarding the vessel owner’s responsibility for cargo operations in areas under the control of the stevedore

 

Case Examples

Seaboard Spirit Ltd., Seaboard Ship Management Inc., Seaboard Marine of Florida, Inc. v. Antwon Hyman, Sieshia Reid (11th Circuit, December 5, 2016)

In this case, the issue was whether the vessel owner was subject to duties more stringent than those imposed under section 905(b) where the vessel owner acted as loading stevedore.  This raised the related issue of whether the vessel owner that acts as the loading stevedore can be sued under section 905(b) and also under section 933(a) in a third party tort suit independent of section 905(b).

An independent stevedore had loaded the cargo in this case, but the vessel’s crew had participated in the loading process by securing the cargo on the vessel.  A longshoreman suffered a fatal injury during the unloading process.

The plaintiffs claimed that not only had the vessel breached the three section 905(b) Scindia duties, but that the defendant had duties beyond the three duties imposed by the Supreme Court since the vessel’s crew had acted in a stevedoring capacity and secured the cargo.

The district court ruled against the plaintiffs on the section 905(b) negligence issue, finding that the vessel owner had not breached any of the three Scindia duties, but held that the vessel owner could be sued under section 933(a) (with possibly a different standard of care) for maritime negligence because of its participation in the cargo loading process.

The federal 11th Circuit Court of Appeals reversed the district court.  It stated, “Even assuming Seaboard acted as both onloading stevedore and vessel owner, we conclude that the District Court erred holding that the Claimants could sue Seaboard under both section 905(b) and section 933.  These Claimants are limited to suing Seaboard under section 905(b).”

Section 905(b) provides the exclusive means of relief for maritime employees against negligent vessel owners.

The Court went on to address an additional issue involving the standard of care under section 905(b) when the vessel owner also acts as the stevedore.  It recognized precedent for the proposition that under these circumstances the vessel owner should be held to the higher standard of care as a stevedore rather than to the vessel owner’s duties under section 905(b).

So in the final analysis, the court did in fact seem to recognize that ordinary tort principles may be implicated under section 905(b) in situations where the vessel owner participates in an independent stevedore’s cargo loading operations.

 

Bartholomew v. SeaRiver Maritime, Inc. (Cal. App. 4th Circuit, 2011)

In this asbestos case, the state appeals court affirmed the trial court’s grant of summary judgment in favor of the defendant vessel owner.  The court found that the vessel owner did not breach any of the duties owed under section 905(b).

The court approvingly paraphrased the vessel owner’s position:  “It was its custom and practice to turn over vessels in a safe condition, with the understanding that an experienced and skilled shipyard contractor and personnel could anticipate hazards associated with products or materials commonly present aboard vessels, including asbestos … It was not necessary to inform any shipyard contractor … that asbestos might be present or that preventative measures might be necessary to prevent asbestos exposure since they were the repair experts … When SeaRiver turned over its vessels to shipyards, it did so with the understanding that shipyard contractors would anticipate the presence of asbestos and could work around it safely…”

So this case involves the “turnover duty” to exercise ordinary care under the circumstances to have the ship and its equipment in such condition that an expert and experienced maritime employer can carry on its operations with reasonable safety, and to warn of latent hazards (not open and obvious).

The court emphasized that under Scindia a vessel owner is not required to turn over a vessel free of all hazards.  Rather, the vessel must be in such condition that an experienced contractor, mindful of the dangers he should reasonably expect to encounter, will be able to conduct operations with safety.

The question, in this case, was whether the maritime employer, an expert and experienced ship repair contractor, would reasonably expect asbestos-containing products and/or airborne asbestos fibers to be aboard the vessel.

The court concluded that the use of asbestos in ships was apparent in the industry and this condition was one that an experienced contractor should reasonably expect to encounter. Thus, the presence of asbestos was not a latent hazard implicating the section 905(b) duty to warn.  Latent means hidden, not open or obvious, and not reasonably to be anticipated by an experienced contractor.

 

Leonal Robinson v. Orient Marine Co.,Ltd.; Clio Marine Inc.; Wells Fargo Northwest; Oldendorff Carriers GMBH & Co. K.G. v. Pan Ocean Shipping Co., Ltd.; United Kingdom Mutual Steamship Assurance Association (Bermuda) Ltd. (5th Circuit, October 19, 2007)

This was an interlocutory appeal to the appellate court on a specific issue while the lawsuit remained pending in district court.  The question was whether an indemnification   clause in the time charterer’s contract with the vessel owner in some way expanded the time charterer’s duties to longshoremen under section 905(b).

The case arose when a longshoreman in the Port of New Orleans was injured as a result of crates that had been unevenly stacked in the loading port in Indonesia.  Oldendorff was the vessel owner and Pan Ocean Shipping was the time charterer of the vessel.   A clause in the charter contract contained an indemnification agreement for the benefit of the vessel owner (Oldendorff) by passing liability for negligently stowed cargo to the time charterer (Pan Ocean).

The issue was whether this contract clause expanded the time charterer’s duties under section 905(b).

The district court found that the contract clause placed liability for the negligent storage of the cargo on Pan Ocean, the time charterer, regardless of whether the hazard was hidden.  It granted summary judgment in favor of Oldendorff, the vessel owner, because the unevenly stacked crates was not a latent hazard, but it denied Pan Ocean’s motion for summary judgment.

The appellate court reversed.  It found that the contract clause at issue transferring liability for “risk and expense” to the time charterer is an indemnification clause determining contractual issues between the vessel owner and the time charterer, but it does not expand the duties owed to longshoremen under section 905(b).

 

Bunn v. Oldendorff Carriers GMBH Co. KG (4th Circuit, July 17, 2013)

This case involved the section 905(b) “turnover duty” when a longshoreman slipped on an icy deck and was injured.  You would think that an icy deck would be an “open and obvious” condition for which the vessel owner would not be liable, but the case took a turn when the vessel’s Chief Mate voluntarily undertook to remedy the open and obvious condition but then failed to follow through.

This is an unusual case in that it inserted a general tort principle (volunteering can create a duty) into the framework of the vessel owner’s duties under section 905(b).

While ice on the deck may have been open and obvious, was it obvious that the ship owner would promise to take care of the hazard and then fail to do so?  The court reasoned that “When a ship owner voluntarily and affirmatively undertakes to remedy an unsafe condition, but fails to do so, liability can attach to the ship owner” – even under section 905(b).

Specifically, the court stated, “Although a ship owner need not warn of hazards that would be ‘obvious to or anticipated by’ a stevedore, a reasonably competent stevedore has no reason to anticipate a hazard that the ship owner has promised to remedy but fails, without warning, to do so.”

There was a strong dissent in the case following a more traditional section 905(b) analysis.  The dissenting judge stated, “…a ship owner’s promise to remedy a hazard does not create a duty actionable under section 905(b).  This is so because in the absence of a ‘contract provision, positive law, or custom to the contrary’, all section 905(b) claims must fall under one of the duties identified by the Supreme Court in Scindia. An expert and experienced longshoreman cannot, by the mere virtue of a ship owner’s promise, shirk his duty to act with reasonable care in the face of an open and obvious hazard.”

 

 

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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.

AEU Longshore Blog ISSUE: Section 905(b)

Section 5(b) of the Longshore Act, 33 U.S.C. 905(b), allows an injured maritime worker to bring a third party tort lawsuit against a vessel owner for vessel negligence.

Section 5(b) states:

“In the event of injury to a person covered under this Act caused by the negligence of a vessel, then such person, or anyone otherwise entitled to recover damages by reason thereof, may bring an action against such vessel as a third party in accordance with the provisions of section 33 of this Act … If such person was employed by the vessel to provide stevedoring services, no such action shall be permitted if the injury was caused by the negligence of persons engaged in providing stevedoring services to the vessel.  If such person was employed to provide ship building, repairing, or breaking services and such person’s employer was the owner, owner pro hac vice, agent, operator, or charterer of the vessel, no such action shall be permitted, in whole or in part or directly or indirectly against the injured person’s employer … The remedy provided in this subsection shall be exclusive of all other remedies against the vessel except remedies available under this Act.”

In the case of Scindia Steam Navigation Co. v. De Los Santos, 451 U.S. 156 (1981), the U.S. Supreme Court articulated the somewhat limited duties owed by a vessel owner under section 5(b).

There are three separate duties imposed.  The first, called the “turnover duty”, relates to the condition of the vessel upon the commencement of stevedoring operations.  The second, called the “active control duty”, provides that a vessel owner must exercise reasonable care to prevent injuries to longshoremen in areas that remain under the active control of the vessel. The third, called the “duty to intervene”, concerns the vessel owner’s obligation with regard to cargo operations in areas under the principal control of the stevedore.

The vessel owner’s duties are narrower than under ordinary tort principles, such as when a maritime worker is suing a negligent third party (but not a vessel) under section 33(a).  The rationale for this is that the primary responsibility for the safety of the longshoremen rests with the stevedore employer.

 

Turnover duty

It is the duty of the vessel owner to exercise ordinary care under the circumstances to turn over the vessel and its equipment in such condition that an experienced stevedore can carry on stevedoring operations with reasonable safety.  Also included is the duty of the vessel owner to warn the stevedore of latent or hidden dangers which are, or should be, known to the vessel owner.

The vessel owner’s duty to warn is limited because the vessel owner is not obligated to warn of dangers which are open and obvious or those which a competent stevedore should anticipate encountering and be able to deal with safely.  The duty to warn attaches only to latent hazards.

The vessel owner has the right to rely on the stevedore’s competence to safely conduct cargo operations.  Thus, the vessel owner is not required to turn over a vessel free from all hazards.  Rather, the vessel must be free of hazards which prevent an expert and experienced maritime employer from carrying on his operations in a reasonably safe manner.

To summarize, the vessel owner has the turnover duty to provide a reasonably safe vessel and to warn of hidden dangers, but not dangers that are open and obvious.  The vessel owner does not have an obligation to inspect and supervise cargo operations for the benefit of the longshoremen.  That is the stevedore employer’s job.

The turnover duty defines the vessel owner’s obligation before and at the commencement of cargo operations; the “active control duty” comes next.

 

The “active control duty”

The vessel’s active control duty defines the vessel owner’s obligation after cargo operations have begun, in those areas remaining under the control of the vessel owner.  Liability under this duty depends on whether the vessel owner negligently exposes a longshoreman to hazards – even avoidable, open or obvious ones – in areas controlled by the vessel owner during cargo operations.

It is a question of fact as to whether the vessel owner retains control over a particular area.  For example, courts will consider whether the area in question is within the stevedore’s work area, whether the work area in question has been turned over to the stevedore, and whether the vessel owner controls the methods and details of the stevedore’s work.

 

The “duty to intervene”

The narrowest of the vessel owner’s duties under section 5(b) is the “duty to intervene”. A vessel owner has the duty to intervene in cargo operations only when it has actual knowledge of a dangerous condition and actual knowledge that the stevedore, in the exercise of poor judgment, has failed to correct the dangerous condition.

To establish a breach of the duty to intervene, an injured worker must show that: 1) the vessel owner had actual knowledge that a condition or operation posed an unreasonable risk to safety, 2) the vessel owner had actual knowledge that it could not rely on the stevedore to protect its employees, and 3) if uncorrected, the condition posed a substantial risk of causing injuries.

The vessel owner only acquires a duty to intervene when the stevedore decides to continue working in the face of a dangerous condition.

NOTES:

The section 5(b) negligence remedy was added to the Longshore Act as part of the 1972 Amendments.  In 1946, the U.S. Supreme Court had (mistakenly) given longshoremen the right to sue a vessel for unseaworthiness under the general maritime law (Seas Shipping v. Sieracki, 328 U.S. 85 (1946)).  The 1972 Amendments corrected this mistake by removing vessel liability to longshore workers under the general maritime law and substituting section 5(b)’s federal maritime tort remedy.

The 1984 Amendments to the Longshore Act changed section 5(b) to protect shipbuilding employers who are also vessel owners.  Workers who provide shipbuilding, repairing, or breaking services cannot sue their vessel owner employers under section 5(b).

There is a “dual capacity” employment situation recognized under section 5(b) that provides a narrow solution to a specific problem that arises when a vessel owner directly employs longshoremen or other maritime workers (other than shipbuilders, ship repairers, and ship breakers).  In this instance, the employee has his right to workers’ compensation benefits from the employer in its capacity as a Longshore Act maritime employer, and he has his right to a negligence remedy against the employer in its capacity as vessel owner.

For “dual capacity” liability for vessel negligence, the negligence must occur as a result of vessel operations.

The section 5(b) negligence remedy is available not only to longshoremen; the standards are the same for any worker covered by the Longshore Act who is injured as a result of vessel negligence.

This post has been a very broad review of the section 5(b) remedy. In the coming weeks, we will expand on this information by reviewing some section 5(b) cases that apply these general principles in actual situations.

 

 

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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.

AEU Longshore Blog ISSUE: Review of Fines and Penalties

The blog post from February 9, 2017 included a discussion of the U.S. Department of Labor’s Industry Notice No. 160, which announced the latest increase in the amounts of civil penalties under the Longshore Act.

Below is a more comprehensive, section-by-section review of the various civil penalty and criminal fine provisions in the Act.

Section 8(j) (added by the 1984 Amendments)

“(j)(1) The employer may inform a disabled employee of his obligation to report to the employer not less than semiannually any earnings from employment or self-employment, on such forms as the Secretary shall specify in regulations (Form LS-200).

(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 … forfeits his right to compensation with respect to any period during which the employee was required to file such report.”

Notes on Section 8(j):

  • “A disabled employee” is interpreted to mean one who is actually receiving compensation.
  • Any amounts forfeited under section 8(j) may only be recovered by offset against future compensation as determined by the District Director.

 

Section 14(e)

“(e) If any installment of compensation payable without an award is not paid within fourteen days after it becomes due, as provided in subdivision (b) of this section, there shall be added to such unpaid installment an amount equal to 10 per centum thereof, which shall be paid at the same time as, but in addition to, such installment … unless such nonpayment is excused by the deputy commissioner …”

Notes on Section 14(e):

  • The employer is not liable under section 14(e) if it timely controverts the claim under section 14(d).
  • “Deputy Commissioner” here as elsewhere in the Act means District Director.
  • Nonpayment may be excused by the District Director based on a showing by the employer of conditions beyond its control.

 

Section 14(f)

“(f) If any compensation, payable under the terms of an award, is not paid within ten days after it becomes due, there shall be added to such unpaid compensation an amount equal to 20 per centum thereof, which shall be paid at the same time as, but in addition to, such compensation, unless review of the compensation order making such award is had as provided in section 21 and an order staying payments has been issued by the Board or court.”

Notes on Section 14(f):

  • “…within ten days” outside the federal Fifth Circuit Court of Appeals means 10 calendar days. Within the Fifth Circuit (states of LA, MS, TX) it means 10 business days.
  • There is no defense, equitable or otherwise, to the 10 day requirement of money in the claimant’s hands.

 

Section 14(g)

“(g) Notice of payment; penalty.  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 (Form LS-208), 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.”

Note on Section 14(g):

Effective January 13, 2017, the maximum penalty amount is $279.

 

Section 15(a)

“(a) No agreement by an employee to pay any portion of premium paid by his employer to a carrier or to contribute to a benefit fund or department maintained by such employer for the purpose of providing compensation or medical services and supplies as required by this Act shall be valid, and any employer who makes a deduction for such purpose from the pay of any employee entitled to the benefits of this Act shall be guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of not more than $1,000.”

 

Section 28(e) (added by the 1984 Amendments)

“(e) A person who receives a fee, gratuity, or other consideration on account of services rendered as a representative of a claimant, unless the consideration is approved by the deputy commissioner, administrative law judge, Board, or court, or who makes it a business to solicit employment for a lawyer, or for himself, with respect to a claim or award for compensation under this Act, shall, upon conviction thereof, for each offense be punished by a fine of not more than $1,000 or be imprisoned for not more than one year, or both.”

 

Section 30(e)

“(e) Any employer, insurance carrier, or self-insured employer who knowingly and willfully fails or refuses to send any report (Form LS-202) required by this section or knowingly or willfully makes a false statement or misrepresentation in any such report shall be subject to a civil penalty not to exceed $10,000 for each such failure, refusal, false statement, or misrepresentation.”

Notes on Section 30(e):

  • The blog post from February 9, 2017 contained a full discussion of Form LS-202.
  • Effective January 13, 2017, the penalty amount was increased again to a new maximum of $22,957.
  • The 1984 Amendments added the “knowingly and willfully” language.

 

Section 31(a)(1)

“(a)(1) Any claimant or representative of a claimant who knowingly and willfully makes a false statement or representation for the purpose of obtaining a benefit or payment under this Act shall be guilty of a felony, and on conviction thereof shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both.”

Note on Section 31(a)(1):

This section was changed by the 1984 Amendments when a misdemeanor became a felony.

 

Section 31(c) (added by the 1984 Amendments)

“(c) A person including, but not limited to, an employer, his duly authorized agent, or an employee of an insurance carrier who knowingly and willfully makes a false statement or representation for the purpose of reducing, denying, or terminating benefits to an injured employee, or his dependents pursuant to section 9 if the injury results in death, shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both.”

 

Section 37

“No stevedoring firm shall be employed in any compensation district by a vessel or by hull owners until it presents to such vessel or hull owners a certificate issued by a deputy commissioner assigned to such district that it has complied with the provisions of this Act requiring the securing of compensation to its employees.  Any person violating the provisions of this section shall be punished by a fine of not more than $1,000, or by imprisonment for not more than one year, or by both such fine and imprisonment.”

Note on Section 37:

This Certificate, Form LS-239, may be obtained by the employer by request to the District Director in the district where the covered operations will take place.

 

Section 38(a)

“(a) Any employer required to secure the payment of compensation under this Act who fails to secure such compensation shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than one year or by both such fine and imprisonment; and in any case where such employer is a corporation, the president, secretary, and treasurer thereof shall be also severally liable to such fine or imprisonment as herein provided for the failure of such corporation to secure the payment of compensation;…“

Note on Section 38(a):

The amount of the fine was increased from $1,000 to $10,000 by the 1984 Amendments.

 

Section 38(b)

“(b) Any employer who knowingly transfers, sells, encumbers, assigns, or in any manner disposes of, conceals, secretes, or destroys any property belonging to such employer, after one of his employees has been injured within the purview of this Act, and with intent to avoid the payment of compensation under this Act to such employee or his dependents, shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than one year, or by both such fine and imprisonment; and in any case where such employer is a corporation, the president, secretary, and treasurer thereof shall be also severally liable to such penalty or imprisonment as well as jointly liable with such corporation for such fine.”

Note on Section 38(b):

The amount of the fine was increased from $1,000 to $10,000 by the 1984 Amendments.

 

Section 41(f)

“(f) Any employer who, willfully, violates or fails or refuses to comply with the provisions of subsection (a) of this section (furnish and maintain safe places of employment) … shall be guilty of an offense, and, upon conviction thereof, shall be punished for each offense by a fine of not less than $100 nor more than $3,000; and in any case where such employer is a corporation, the officer who willfully permits any such violation to occur shall be guilty of an offense, and, upon conviction thereof, shall be punished also for each offense by a fine or not less than $100 nor more than $3,000.”

 

Section 48(a) (as recodified; section 49 in printed versions of the Act)

“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 from such employer, or because he has testified or is about to testify in a proceeding under this Act … Any employer who violates this section shall be liable to a penalty of not less than $1,000 or more than $5,000…”

Notes on Section 48(a):

  • The 1984 Amendments raised the range from $100/$1,000 to $1,000/$5,000 and added the phrase, “The discharge or refusal to employ a person who has been adjudicated to have filed a fraudulent claim for compensation is not a violation of this section.”
  • Effective January 13, 2017, the minimum penalty amount is $2,296 and the maximum penalty amount is $11,478.

 

Final Note:  Fines and penalties assessed under the various provisions of the Act go into the Special Fund, but raising money for the Fund is not the purpose of the fine and penalty provisions.  An insignificant amount of Special Fund receipts in any given year are due to fines and penalties.  The fine and penalty provisions are intended solely to improve administration of the Act.

 

 

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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.