Update on Colorado Appellate Decisions in Workers' Compensation Law

• Publication year: 1999
• Pages: 77

28 Colo.Law. 77 Colorado Lawyer 1999.

1999, May, Pg. 77. Update on Colorado Appellate Decisions in Workers' Compensation Law

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77

Vol. 28, No. 5, Pg. 77

The Colorado Lawyer
May 1999
Vol. 28, No. 5 [Page 77]

Specialty Law Columns
Workers' Compensation Report
Update on Colorado Appellate Decisions in Workers' Compensation Law
by Ralph Ogden

This article is an update of recent decisions from the Colorado Court of Appeals and Supreme Court regarding workers' compensation issues. Previous updates were published in the January 1999 issue at page 83 and the September 1998 issue at page 107

Employer-Employee Relationship

Independent Contractors

In Nelson v. Industrial Claim Appeals Office,1 the Colorado Court of Appeals construed the independent contractor provisions of CRS § 8-40-202(2). These provisions provide guidelines for determining whether an individual?usually a licensed professional or someone in a skilled trade?is an independent contractor or an employee

Section 8-40-202(2)(b) states that independence may be proven through a written contract or by showing evidence of nine specified "conditions." The court held that the statute was ambiguous because, on the one hand, it said that "to prove independence it must be shown that the person for whom services are performed does not" do certain things, and, on the other hand, it states that the "existence of any one of these factors is not conclusive evidence that the individual is an employee."2

The court then held that a written agreement or other document was not necessary to show independence, and that all nine of the criteria set forth in CRS § 8-40-202(2)(b) need not be satisfied in order to establish independence "Whether the criteria in section 8-40-202(2)(b)(II) are present in any particular case is a factual determination for resolution by the ALJ. . . . [W]e must uphold the ALJ's findings of fact if such are supported by substantial evidence. . . ."3 Thus, even if only a few of the criteria are established, the administrative law judge ("ALJ") may still find that the worker was an independent contractor rather than an employee.

Because a worker's status as an independent contractor is a defense to compensability, the employer and its insurance company bear the burden of proof on this issue.4

Statutory Employers

In M&M Management Company v. Industrial Claim Appeals Office,5 the Court of Appeals briefly discussed the statutory employer rule in CRS § 8-41-401(1)(a). This statute states that a company that contracts out all or part of its work to any subcontractor is the statutory employer of the subcontractor's employees, and that if the subcontractor fails to obtain workers' compensation insurance, the statutory employer is liable for benefits as if it were the actual employer. The court noted that, "One purpose of the statute is to prevent employers from avoiding responsibility under the Workers' Compensation Act by contracting out their regular work to uninsured independent contractors rather than hiring the worker directly."6

The M&M Management court also noted that "[s]tatutory employer status is found when a contractor has subcontracted out its 'regular business.' The 'regular business' test is satisfied if the contracted services are part of the employer's regular business as defined by its 'total business operation' considering elements of routineness, regularity and the importance of the contracted service to the contractor's business operations."7

In M&M, the statutory employment relationship was found where a painter hired by Steve Maier Painting and Maintenance was injured on the job. Because Maier was uninsured and because that company was hired to paint a thrift store managed by M&M, the court held that there was substantial evidence of record to support the ALJ's finding of the statutory relationship.

Forfeiture of Benefits Because Of Fraudulent Claims

The case of Support, Inc. v. Industrial Claim Appeals Office8 involved the application of CRS § 8-43-402, which provides as follows:

If, for the purpose of obtaining any order, benefit, award, compensation, or payment under the provisions of articles 40 to 47 of this title, either for self-gain or for the benefit of any other person, anyone willfully makes a false statement or representation material to the claim, such person commits a class 5 felony and shall be punished as provided in section 18-1-105, C.R.S., and shall forfeit all right to compensation under said articles upon conviction of such offense.

The court held that the scope of the forfeiture clause at issue here was dependent on the meaning of the term "compensation" and that, because the term was ambiguous, it would defer to the Panel's interpretation. The court held that "compensation" did not include medical benefits and that the term "compensation" in CRS § 8-43-402 closely resembled the use of that same term in the penalty statute at issue in Wild West Rodeo, Inc. v. Industrial Claim Appeals Office.9 Wild West Rodeo involved an unsuccessful argument that medical benefits were subject to a 50 percent reduction for safety violations and intoxication, just the same as other benefits available under the Workers' Compensation Act ("Act").10

In response to the employer's argument that it could be liable for medical benefits even if the underlying claim itself was fraudulently filed because it involved a non-work-related injury, the court held, "If a fraudulent claim is filed based upon a non-work-related injury, a claimant is not entitled to an award of medical benefits from the outset. Indeed, the claimant would not be entitled to an award of any type."11 Thus, the fraudulent claim would be defeated simply by showing that there was no causal relationship between a compensable injury and medical treatment at issue.

Offsets

Equal Protection Challenge

In Culver v. Ace Electric,12 a consolidated case, the Colorado Supreme Court addressed the constitutionality and application of the offset provisions of CRS § 8-42-103(1)(c)(II) and (IV). This statute requires that permanent total disability benefits be reduced "but not below zero" by 50 percent of the worker's Social Security or employer-paid retirement benefits. This allows permanent total disability benefits to be reduced to zero if the Social Security or other retirement benefits are great enough.

The offset applies only to permanent total disability benefits and only to those workers who have reached the age of sixty-five and who were injured after reaching the age of forty-five. It does not apply where totally disabled workers are injured before their forty-fifth birthday, and it does not apply to temporarily or permanently partially disabled workers.

The injured workers in Culver argued that the statute arbitrarily discriminated between permanently and totally disabled workers and workers who are only partially or temporarily disabled, and between workers injured before their forty-fifth birthday and those injured after. One claimant also argued that the offset should not apply because he was receiving the Social Security retirement benefits on the date of his industrial injury.

The court held that because the offset statute served a legitimate governmental purpose and that there was a rational basis for the classification, it did not violate the equal protection clause. In doing so, the court specifically held that its earlier decision in Industrial Claim Appeals Office v. Romero13 was not controlling.

In Romero, the court struck down a statute that terminated permanent total disability benefits, but not temporary total ("TTD"), temporary partial ("TPD"), or permanent partial disability ("PPD") benefits, when the worker reached age sixty-five. The court distinguished Romero on the grounds that (1) there was a difference between terminating benefits outright and reducing them by up to 50 percent of Social Security or other retirement benefits, even if that reduction meant the worker received no workers' compensation benefits; (2) Romero did not involve a coordination of benefits because it terminated benefits outright rather than reducing them in conjunction with the receipt of other benefits; and (3) it was legitimate for the legislature to coordinate permanent total disability benefits, but not permanent partial or temporary total disability benefits, with Social Security and other retirement benefits.

The workers argued that because Romero characterized Social Security retirement benefits as "old-age entitlements," which served a different purpose from workers' compensation disability benefits, the legislature was foreclosed from placing Social Security retirement and workers' compensation benefits in a common pool. Disagreeing, the court held that "our discussion of the nature of social security benefits [in Romero] was tentative and not dispositive. . . ."14

The Culver court held that the legitimate governmental purpose served by the offset provision is the prevention of duplicate benefits, and that the offset provision evidenced the General Assembly's choice to place Social Security retirement and permanent total disability benefits "into the same pool of benefits." The court concluded that it was proper for the General Assembly to include all such benefits...