Newsletter

Summary of Amendments to the Michigan Workers’ Disability Compensation Act – as Amended, December 19, 2011

Governor Snyder signed the amendments to the Michigan WDCA on December 19, 2011. The bill was given immediate effect. The amendments apply to injuries that occur on or after December 19, 2011.

There were a number of changes, some of which will affect the adjuster’s claim handling on a daily basis, weekly basis or yearly basis. Some non-substantive changes were of a corrective or grammatical nature.

Independent Contractors

The 2011 amendments added several additional provisions that become effective on January 1, 2013. On and after 1/1/2013 to determine if an employer-employee relationship exists we are to look to the 20-factor test used by the United States Internal Revenue Service. (See Revenue Ruling 87-41, 1 C.B. 296). Additionally if the employer is required to withhold Federal Income Tax this would be prima facie evidence that an employment relationship exists. After 1/1/2013 a business entity may ask for a ruling from the Michigan Administrative Hearing System on an individual case Basis.

Board of Magistrates

The Qualifications Advisory Committee (QAC) has been abolished. The Governor has the sole power to appoint Magistrates. The only pre-qualification is the individual has been licensed to practice law in the State of Michigan for at least five years. The Magistrates are evaluated by the Director of the Agency and the Chief Magistrate on an annual basis. The Governor has the power to remove the Magistrate based upon their recommendations or what the Governor considers to be a neglect of duties.

The Magistrates are appointed to four year terms and may be reappointed without term limitations. (This eliminates the prior 12 year term limitation)

Wage-Earning Capacity

Under the prior § 301(4)(b), “wage-earning capacity” means the wages an employee “is capable of earning” at a job reasonably available to him or her. The legislature added language “…whether or not wages are actually earned.” The amendments place an affirmative duty on the employee to seek work that is reasonably available and that a Magistrate may consider a good faith job search in determining that availability.

The employee must:

1. Disclose his/her qualifications and training, including education, skills and experiences, whether or not they are relevant to the job the employee was performing at the time of his or her injury.

2. Provide evidence as to the jobs, if any, he or she is qualified and trained to perform within the same salary range as his or her maximum wage earning capacity at the time of the injury.

3. Demonstrate that the work related injury prevents the employee from performing jobs identified within his or her qualifications and training paying maximum wages.

4. If the employee is capable of performing any of the jobs identified above, they must show that they cannot obtain those positions.

The Act requires a showing of a good-faith effort to procure post-injury employment on the part of the employee.

The burden then shifts to the defense to refute the employee’s testimony. Therefore, the Act now provides a right of discovery to the employer “if necessary for the employer to sustain its burden and present a meaningful defense.” The employee may then present additional rebuttal evidence.

Under § 301(8) of the new amendments, if the disability is partial, the employer is responsible for 80% of the difference between the after-tax AWW at the time of the injury and the employee’s “wage-earning capacity after the injury.” In figuring this differential, we use the new definition that includes what the employee actually earns as well as what he or she is capable of earning.

Police/Firefighters Exception - the wage-earning capacity standard is different for police and firefighters under § 302. It omits the language contained within § 301 that defines wage-earning capacity as the capability of earning wages “whether or not actually earned.” We will determine the full impact of that omission from the Michigan courts in the months and years ahead.

Aggravation of Pre-Existing Conditions

§ 301 adopted the language from the Rakestraw case relative to aggravation:

A personal injury under this Act is compensable if work causes, contributes to or aggravates pathology in a manner so as to create a pathology that is medically distinguishable from any pathology that existed prior to the injury.

Prior to the amendments mental disabilities and conditions of the aging process, including heart and cardiovascular conditions were the only conditions or injuries that were subject to the “significant manner” test. The amendments have added the term “degenerative arthritis” as a condition of the aging process subject to this additional standard of proof. This is a significant change which could have a major impact on cases as we deal with an aging workforce.

Mental disabilities were further defined with the addition of the following language:

…and if the employee’s perception of the actual events is reasonably grounded in fact or reality.

We expect the new language requiring perceptions to be “reasonably grounded in fact or reality” will be further clarified by the Michigan courts in the coming years.

Favored Work

The 2011 amendments state in 301(9) (b) “If an employee is terminated from reasonable employment for fault of the employee, the employee is considered to have voluntarily removed himself/herself from the work force and is not entitled to any wage loss benefits under the act.” It appears from this language that the forfeiture of wage loss benefits is permanent. Please note that medical and other benefits are not forfeited, only “wage loss” benefits. Reasonable medical care is still required.

If the employee after being employed doing “favored or accommodated” work loses his/her job through no fault of the employee and if the employee is still disabled they are then entitled to benefits as follows: if the favored work was less than 100 weeks then you are required to reinstate wage loss benefits. If the favored work lasted longer than 100 weeks but less than 250 weeks the 2011 amendments state that the employee must first exhaust their unemployment benefits and then there is a rebuttable presumption that they have established a new wage earning capacity. Benefits are to be reinstated but based upon the new wage earning capacity and not the original wage at date of injury. The burden is upon the employee to file a petition to prove that he/she has not established a new wage earning capacity. Note that this is a complete switch of the burden from the prior law. As indicated above under the prior law if the favored work was for less than 100 weeks the presumption was that the employee had not established a new wage earning capacity and the employer had the burden of going forward with proof that a new wage earning capacity had been established.

If the favored work is for more than 250 weeks there is a presumption that a new wage earning capacity has been established. It appears from the language of the new amendments that this presumption is “non- rebuttable”.

These are significant changes from the old law relative to favored work. Before the 2011 amendments fault was not a factor in less than 100 week cases and the act stated benefits “shall” be reinstated. Now that is true only if the employee was not at fault in losing his/her job. Under the old law the rebuttable presumption was that a new wage earning capacity had not been established and the burden was on the employer to prove otherwise. Under the 2011 amendments the reverse is true.

Medical Care and Treatment

§ 315 Allows the employer/carrier to direct treatment for 28 days “from the inception of medical care.” As in the prior act, there is a provision which allows the employer/carrier to file a Petition with the Board of Magistrates objecting to the employee’s choice of physician “for cause.” The Magistrate will have the power to order treatment discontinued if “good cause” is shown. This type of hearing should have “60 day” rush status.

Rehabilitation Hearings

Rehabilitation hearing determinations will now be appealed directly to the appellate commission as opposed to the Board of Magistrates. This means that future rehabilitation hearings will need to be conducted “on the record.”

Dependency and Coordination

The amendments have removed the “conclusive presumption” that an injured employee’s wife is a dependent. Also, if an employee is already receiving old-age social security benefits at the time an injury occurs, the coordinated social security reduction under § 354 cannot lower the weekly workers’ compensation rate below 50% of the full benefit rate that would be in place if the individual was not on social security. The employer may take a credit for old-age social security or pension benefits regardless of whether the employee is receiving those benefits. However, they cannot be forced to apply for a pension or old-age social security.

Specific Loss/Trammel

One final significant amendment considered specific loss benefits and the standards outlined by the recent decision in Trammel v Consumers Energy. The amendments state that the effect of the joint replacement “shall be considered” is determining whether a specific loss has occurred. Under Trammel, the standard revolved around the “pre-corrected” state. It is not retroactive and all pending cases will be evaluated under the old Cain II standard.

Miscellaneous

The inconsistencies between Chapter 3 and Chapter 4 have been eliminated.

There were several amendments to the section covering professional athletes. Basically, these changes prohibit the filing of petitions in multiple states.

There were some final administrative changes regarding subpoenas, redemption hearings and mediation that are still being developed. We expect guidance from the Agency and/or publication of new rules on how these procedural changes will be implemented. Mediation will be eliminated and the mediators transferred. Future mediations will be conducted by a Magistrate.

Please note: The firm is in the process of revising our desk manual and an updated version including the 2011 amendments will be available in the near future. If you are interested in receiving a copy of this 85 +page manual please email us at:

firm@micompdefense.com

Petersen v Magna Corp, 484 Mich 300 (2009) – Attorney fee on unpaid medical bills

In Petersen, the Michigan Supreme Court confronted the issue of an award for an attorney fee on unpaid medical bills under Section 315(1). Although the exact precedential authority of this decision is somewhat convoluted due to the fact that the Court rendered five different written opinions, Petersen does ultimately hold that Section 315(1) applies to employers and/or insurance companies. Therefore, those defendants can be ordered by the Magistrate to pay an attorney fee over and above the amount of an unpaid medical bill at trial. Section 315(1) specifically reads:

“If the employer fails, neglects, or refuses to [pay for appropriate medical treatment], the employee shall be reimbursed for the reasonable expense paid by the employee, or payment may be made on behalf of the employee to persons to whom the unpaid expenses may be owing, by order of the worker’s compensation magistrate. The worker’s compensation magistrate may prorate attorney fees at the contingent fee rate paid by the employee.”

It is still unclear following Petersen as to what, if any, standard currently exists that must be met for a Magistrate to award an attorney fee over and above the payment of an outstanding medical bill. Most appellate commission opinions, both before and after Petersen, have determined that whether a Magistrate does or does not award an attorney fee on unpaid medical bills is done purely at his or her discretion. While there has been some guidance – for example, payment of the bill must be specifically requested and presented to the defendant prior to trial – this is an issue where we expect further guidance from the WCAC, Michigan Court of Appeals and Michigan Supreme Court in the future.

Gallup v Jackson County Road Commission, 2010 ACO #102

This is a new decision from the Workers’ Compensation Appellate Commission regarding the specific proofs required under Stokes v Chrysler, LLC, 481 Mich 266 (2008). Magistrate Goolsby issued an open award of benefits for left knee and right shoulder injuries.

On appeal, the Commission affirmed the finding of the right shoulder injury. However, it reversed the award of wage loss benefits on the premise that the plaintiff failed to establish “disability.” The Commission stated:

“The plaintiff’s proofs focused on his ability or inability to perform his past jobs instead of focusing on his transferable skills. The plaintiff needed either vocational testimony or additional lay testimony to establish the universe of jobs he is qualified and trained to perform…[b]ecause the plaintiff failed to prove the universe of jobs he is qualified and trained to perform, he necessarily also failed to prove his work-related injury prevents him from performing those jobs. While the plaintiff could have gone a long way in establishing disability by conducting serious job search efforts, the record is also lacking in those proofs. Accordingly, we reverse the award of wage loss benefits.”

This case again reaffirms that Stokes has established that vocational proofs are a necessary part of Michigan workers’ compensation litigation, and that the burdens considered by the Stokes decision must be addressed in all cases. While it is the plaintiff’s burden to establish the “universe of jobs” that he or she is qualified to perform, it is also important for the defense to obtain expert vocational opinions regarding, among other things, the availability of those jobs.

The Michigan Court of Appeals and the Michigan Supreme Court have now denied Leave to Appeal in the Trammel case, and the WCAC’s decision is now final. The Michigan Supreme Court also denied a Motion for Reconsideration. A concurring opinion written by Justice Corrigan acknowledged that the WCAC’s opinion may ultimately authorize “more benefits than the Legislature intended for workers claiming limb loss” under MCL 418.361(2), particularly in light of the increasing success of joint replacement surgery. However, she believed that these concerns were best addressed through the Legislature and not through the judicial system.

Specific Loss Award Kicks In After Knee Replacement Surgery

Timothy Trammel reported a left knee injury while working for Consumers Energy in June of 1984. Following arthroscopic surgery, he returned to work without restrictions and then reported a second left knee injury occurring on December 12, 2005. He underwent a total knee replacement surgery on April 12, 2006 and returned to unrestricted employment for Consumers Energy less than two months later. He eventually retired from active employment in October of 2007.

The plaintiff was awarded specific loss of the left leg by Magistrate Decker because the deterioration of the left leg prior to the knee replacement was “tantamount to amputation.” The Workers’ Compensation Appellate Commission then issued an en banc decision on June 8, 2009 affirming the specific loss award. Trammel v Consumers Energy Company, 2009 ACO #126. Both the Magistrate’s and the Appellate Commission’s decisions were based upon an interpretation of the recent Michigan Supreme Court case of Cain v Waste Management, Inc, (after remand), 472 Mich 236 (2005).

Plaintiff Cain suffered an industrial accident resulting in the amputation of his right leg, along with a severe crushing injury to his left leg which was “saved” with extensive surgery and bracing. Plaintiff claimed permanent and total disability under Section 361(3)(b) for the one amputated leg and the other non-amputated leg. The Michigan Supreme Court awarded Permanent & Total disability benefits on the basis of plaintiff’s “uncorrected” status to the left leg. They also ruled that the “uncorrected” status should be applied in determining whether an individual has incurred a specific loss of the leg.

Subsequent to the Cain decision, there have been numerous Applications for Hearing filed in cases involving joint replacements, primarily the hip or knee. The Trammel case represents the first time such a claim has been reviewed by the Appellate Commission. The defendant has filed an Application for Leave to Appeal to the Michigan Court of Appeals. We will be monitoring the progress of that appeal. If left undisturbed, the Trammel case should be considered by employers and carriers any time an employee undergoes a joint replacement following a work injury, even if the surgery (“correction”) is completely successful.

Our office has been directly involved in numerous such cases following the Cain decision in both Permanent & Total disability and specific loss type claims.

Please feel free to contact our office with any specific questions. This should be a very interesting topic of discussion moving forward.

Recent Opinion from Michigan Supreme Court

This recent decision from the Michigan Supreme Court addressed the Sington requirement that a plaintiff must show that he or she is disabled from all jobs paying the maximum wages within his or her qualifications and training. The Court’s opinion addressed specific factors that must be considered by the Magistrate, the proofs that must be presented by the plaintiff and the defendant, as well as some practical discovery applications.

The plaintiff bears the burden of proving a disability by a preponderance of the evidence pursuant to MCL § 418.301(4). To establish a disability, the plaintiff must prove a work-related injury and a reduction of his or her maximum wage earning capacity in work suitable to his or her qualifications and training. The Michigan Supreme Court noted in Stokes that the plaintiff must do the following:

1) disclose all of his or her qualifications and training;

2) consider other jobs that pay the maximum pre-injury wage within his or her qualifications and training;

3) show that the work-related injury prevents performing any of the jobs identified as within his or her qualifications and training; and,

4) show that he or she cannot obtain any of the jobs that he or she may be capable of performing.

It is important that plaintiff now must engage in a type of “transferable skills analysis,” where his or her qualifications and training extend beyond just jobs that he or she has had previously. After these factors are established, the plaintiff has met the initial burden of showing disability. The defense must then produce evidence to refute the plaintiff’s showing by proving that there are actual jobs within the plaintiff’s qualifications, training, and physical restrictions for which the plaintiff either did not apply or refused. Following that production, the plaintiff then may come forward with additional evidence to refute the defendant’s evidence. The defense is entitled to discovery necessary to present its case.

Note the importance of ensuring that the available jobs pay the maximum pre-injury wage. If this is not the case, then Sington may not be applicable. There is still some question whether a plaintiff who failed to find employment due to poor economic conditions would be entitled to benefits. Previous cases seem to suggest that benefits could be denied. The Court in Stokes did not address that issue directly.

As a practical matter, investigation should be taken during the early stages of a claim to determine exactly what the plaintiff’s qualifications and training may be (e.g., past educational experiences, special skills they may possess, etc.). The Court clearly states in the recent Stokes opinion that “[t]he employer is entitled to discovery before the hearing to enable the employer to meet [its] production burden.” A good initial investigation will help the attorney to identify what discovery is necessary when the case proceeds to litigation. Interrogatories are appropriate in light of the recent Stokes decision, in order to get a better and more thorough understanding of an individual’s qualifications and training. A wage earning capacity evaluation/labor market survey may be appropriate in certain cases. The Court stated that face-to-face interviews of the plaintiff by defendant’s vocational expert are allowed as part of the discovery process.

Kashou v Coca-Cola Enterprises, Inc, 2008 ACO #89

This is an interesting new case from the Workers’ Compensation Appellate Commission regarding wage earning capacity. The Magistrate granted an open award of benefits, but found a residual wage earning capacity of $280.00 per week as of January 17, 2007. The plaintiff testified that he tried to obtain employment pursued by the vocational counselor. The Magistrate’s decision to find a residual wage earning capacity was specifically influenced by the plaintiff’s presentation in her courtroom. She believed that the plaintiff greatly exaggerated his impairment, which would have clearly prevented a potential employer from wanting to hire him. As of January 17, 2007, the Magistrate believed that the plaintiff could perform positions listed by the vocational counselor.

We presume that this case will be appealed. Note, however, that the opinion goes out of its way to describe the specific effect that the plaintiff’s poor credibility had on its decision. This, as well as the decision’s language that this case is not to be used as precedent to “secure reduction of weekly indemnity in cases involving all but the most severely disabled” makes this a limited but interesting issue. Pursuant to this holding, however, the Magistrate can imply a false presentation to potential employers based on the false presentation of an individual during trial. This false presentation as to the extent of impairment to potential employers may result in the Magistrate calculating a residual wage earning capacity.

Recent Amendments to the MSPA

Recent amendments to the Medicare Secondary Payor Act, which were adopted by Congress in late 2007, change the reporting provisions for any claimant who is a Medicare recipient. As a practical matter, as soon as a claim is filed in any workers’ compensation case, the insurer or self-insurer should immediately discover whether or not the claimant is a Medicare beneficiary. If the injured employee is entitled to Medicare, CMS must be notified and provided with his or her identity and basic claim information. If the Act is not complied with, Medicare can enforce fines of up to $1,000.00 per day.

At this point, there are still a lot of questions. The Secretary of Health and Human Services has not yet specified what reporting deadline is required to comply with this amendment. Additionally, the law is not scheduled to take effect until June 2009. The Secretary will be issuing a directive as to how an insurer or self-insurer complies with these new requirements before that time. From past experience, we know that these directives are generally published on CMS’ website. We will continue to check their website periodically in order to stay informed of all requirements when the information is eventually published. We will keep you updated in that regard.

The Medicare amendment also addresses issues related to reporting dealing with other types of claims, such as liability and medical malpractice claims.

On December 7, 2007 the Michigan Supreme Court issued the latest order interpreting Simpson v Borbolla Construction & Concrete Supply, Inc, and the application of Rakestraw to pre-existing work-related conditions.

Simpson v Borbolla Construction & Concrete Supply, Inc, 133274 (S Ct December 7, 2007)

Plaintiff Dennis Simpson injured his left wrist while working as an iron worker in 1979. He continued to work as an iron worker for various employers through October 23, 2000. The left wrist fracture developed necrosis, which led to bone loss and traumatic arthritis. His last day worked was with Borbolla Construction & Concrete Supply, Inc. He worked for them only one day.

Magistrate Thomas Burden granted benefits against Borbolla Construction for plaintiff’s left wrist injury. The WCAC affirmed. The Michigan Court of Appeals affirmed on the basis that the “medically distinguishable condition” standard of Rakestraw only applied to pre-existing non-occupational injuries, and did not apply to pre-existing work-related injuries. The Michigan Supreme Court recently issued an Order vacating the decision of the Michigan Court of Appeals. It determined that the Court of Appeals erroneously held that Rakestraw does not apply to pre-existing work-related conditions. However, it affirmed the award of benefits based on the reasoning in the WCAC opinion.

As the Court of Appeals decision has now been vacated, Rakestraw will clearly apply to all pre-existing conditions, regardless of whether they are work-related or non-work related in origin.

The reasoning in the WCAC opinion supported the Magistrate’s decision that Borbolla Construction is fully liable for benefits even though plaintiff only worked for them for one day. The WCAC believed that Rakestraw’s “medically distinguishable condition” standard applied to all pre-existing conditions. Please note that a recent Michigan Supreme Court order in the case of Fahr v General Motors Corp, 133500 (S Ct June 22, 2007) described a “medically distinguishable condition” as requiring pathologic change as opposed to merely a worsening of symptoms. Thus, it was their duty to determine whether plaintiff now had a “medically distinguishable condition” from his injury in 1979. They answered affirmatively, stating that his ongoing work as an iron worker caused or accelerated an arthritic change in condition that disabled him upon his last day worked.

The WCAC also had to determine whether plaintiff established a “last day worked injury” by showing that he was performing similar work. The Commission reasoned, “[p]laintiff was not required to prove a discrete contribution from the single day plaintiff worked for the defendant…where it is the cumulative effect of work that constitutes the injury.” Simpson v Borbolla Construction & Concrete Supply, Inc, 2005 ACO #153. Though he only worked for one day with Borbolla Construction, he performed similar iron working jobs to those he had performed throughout his career. Thus, the last employer is liable for benefits pursuant to MCL § 418.301(1).

Overall, a plaintiff must still prove a “medically distinguishable condition” pursuant to Rakestraw as of his or her last day worked. However, once this medically distinguishable condition is established, the last employer who subjected plaintiff to the conditions that resulted in the disability will be liable for benefits, even if the employee only worked for one day.

On May 23, 2007 the Appellate Commission issued their latest decision interpreting the wage earning capacity issue or “Sington issue”. See below for the Court of Appeals interpretation in Stokes v DaimlerChrysler

Sington Analysis from the Appellate Commission as reported in

Welch v Means Industrial, Inc, 2007 ACO #121

The plaintiff, John Welch, was an employee of the defendant, Means Industrial, where he worked in a variety of different positions. He suffered a cervical injury while employed as a forklift operator and a lumbar injury while employed as a box maker. He also had experience as a shipping and receiving clerk, machine operator/welder, crane operator, furnace operator/bolt assembler, weld cell worker, cell leader, and vibe attendant. The Magistrate granted an open award of benefits, determining that the plaintiff established a disability because he was precluded from working without restrictions, and the defendant had failed to offer him a job within those restrictions. The defendants appealed, arguing that these findings were insufficient to establish disability under Sington v Chrysler Corp, 467 Mich 144 (2002).

The WCAC agreed and reversed the Magistrate’s open award. Under Sington, disability can only be established if there is a loss of wage earning capacity in work suitable to an employee’s qualifications and training. Therefore, the plaintiff needs to establish his or her qualifications and training in order to identify the pool of relevant jobs, and then show that those jobs are not reasonably available or do not pay the equivalent of his or her maximum wage earning capacity.

Pursuant to Stokes v DaimlerChrysler, 272 Mich App 571 (2006), plaintiff’s proofs will essentially consist of the employee’s resume. Namely, there should be a listing and description of employee’s pre-injury employment, the pay for those jobs, a description of the employee’s training and qualifications, and testimony that the employee is unable to perform those jobs within his or her training and qualifications.

Specifically, taking into account both Sington and Stokes, a Magistrate’s decision must include findings on the following:

1) Plaintiff’s pre-injury qualifications and training;

2) Exact extent of plaintiff’s work-related physical or emotional limitations;

3) Work suitable to plaintiff’s qualifications and training within those limitations;

4) Whether that work is reasonably available;

5) Whether current pay for that kind of work is equivalent to plaintiff’s maximum wage earning capacity.