Erosion of the Exclusive Remedy in Workers' Compensation

• Publication year: 2002
• Pages: 83
• Citation: Vol. 31 No. 12 Pg. 83

31 Colo.Law. 83 Colorado Lawyer 2002.

2002, December, Pg. 83. Erosion of the Exclusive Remedy in Workers' Compensation

---

83

Vol. 31, No. 12, Pg. 83

The Colorado Lawyer
December 2002
Vol. 31, No. 12 [Page 83]

Specialty Law Columns
Tort and Insurance Law Reporter
Erosion of the Exclusive Remedy in Workers' Compensation
by Edwin L. Felter, Jr, Sarah A. Hubbard

This column provides information concerning current tort law issues and insurance issues addressed by practitioners representing either plaintiffs or defendants in tort cases In addition, it addresses issues of insurance coverage regulation, and bad faith

Column Editor:

William P. Godsman of the Law Office of William Godsman, Denver - (303) 455-6900

About TheAuthors:

This month's article was written by Edwin L. Felter, Jr., Senior Administrative Law Judge, Colorado Division of Administrative Hearings - (303) 764-1417, ed.felter@state.co.us; and Sarah A. Hubbard, a law clerk at Wedgle & Kukreja, P.C. - wekorobugu@hotmail.com.

The views expressed in this article are those of the authors and do not necessarily reflect those of the Division of Administrative Hearings or other entities with which the authors are associated.

Colorado courts have allowed some exceptions to the exclusive remedy in workers' compensation cases. This article reviews the history and erosion of workers'
compensation as an exclusive remedy.

It has been said that the law will not suffer a wrong without a remedy. In the historical compact between workers and employers, workers gave up the right to sue employers in tort in exchange for a no-fault system that afforded them a speedy remedy. The underpinning of the workers' compensation system is that workers bargain for adequate compensation for work-related injuries and employers negotiate for a predictable, fixed benefit structure.

This article provides a brief history of the workers' compensation system and reviews the distinctions between employees and independent contractors.
It covers the evolution of non-exclusive workers' compensation remedies and gives details about the main exceptions to the system. The article also addresses questions personal injury attorneys and attorneys involved in the workers' compensation system should ask when analyzing whether a cause of action in tort is warranted.

Workers' Compensation Background

In 1884, Germany adopted the first modern workers' compensation system.1 The Colorado workers' compensation system was adopted in 1915.2 That year, the General Assembly enacted the Colorado Workmen's Compensation Law and established it as the exclusive remedy for work-related injuries.3 In 1919, the Colorado Supreme Court determined that negligence of the employee was irrelevant to workers' compensation claims.4

In 1925, the Colorado Supreme Court upheld the presumption of workers' compensation as constitutional where the employer had not rejected such coverage.5 Shortly thereafter, a 50 percent increase in benefits for employees of noninsured employers was affirmed.6 Thus, as of 1925, an employer had little practical choice on whether to opt out of the workers' compensation system unless the employer could establish an "independent contractor" relationship with the individual doing the work.

After 1925, case law evolved to make it clear that workers' compensation was the exclusive remedy in most work injury situations. Limited exceptions to this rule were carved out gradually.

Employee/Employer
Relationship

A person who works for another person or company is either an "employee" or an "independent contractor." An employee performs services for pay for another.7 However, subject to detailed proof requirements,8 the individual may be considered an independent contractor who is not covered by the Workers' Compensation Act of Colorado ("Act")9 if the individual is: (1) free from control and direction in the performance of the service, both under the contract for performance of service and in practice; and (2) customarily engaged in an independent trade, occupation, profession, or business related to the service performed.

In Colorado, it is difficult for a worker not to be considered an "employee" for workers' compensation purposes. In fact, a workers' compensation-insured employer that outsources part of its total business operation to a noninsured person or company may be considered the statutory employer of the worker employed by the noninsured company.10

Under CRS § 8-41-401(1)(a), a statutory employer of a subcontractor's employees is a business (including a sole proprietorship) that contracts out part of its "regular business," as defined by its total business operation. The Court of Appeals stated, "In applying this test [for determining whether an alleged employer is a 'statutory employer' under CRS § 8-41-401(1)(a)], courts should consider the elements of routineness, regularity, and importance of the contracted service to the regular business of the employer."11

Compensability

The core issue in workers' compensation cases is whether the injured worker sustained a compensable injury. Fault and the usual defenses to a tort action ordinarily are not factors in workers' compensation cases. A compensable injury occurs when: (1) an employee is performing service "arising out of" and "in the course of" employment; (2) the injury is proximately caused by the conditions of employment; and (3) the injury is not intentionally self-inflicted.12

The terms "arising out of" and "in the course of" have been part of the law in Colorado since 1915, when the Colorado legislature replaced common law causes of action and defenses with a workers' compensation act.13 An injury occurs within the course of employment "when it is shown that the injury occurred within the time and place limits of the employment and during an activity that had some connection with the employee's job related functions."14

An injury "arises out of" the employment relationship "when it has its origin in an employee's work-related functions and is sufficiently related thereto as to be considered part of the employee's service to the employer in connection with the contract of employment."15 However, because an injury happens at work, it is not necessarily compensable.16 An idiopathic event causing an injury, absent a special hazard of employment, is not a compensable event.17

Non-Compensable Activities And Situations

Injuries arising from some common activities are non-compensable because courts have held that they do not arise out of or occur in the course of employment. Such activities include: (1) going to and coming from work;18 (2) voluntary recreational activities;19 (3) off-duty exercise to maintain fitness for the job;20 (4) horseplay that is not condoned by the employer and amounts to a substantial deviation from duties that benefit the employer;21 (5) some intentional torts by fellow employees, such as sexual harassment, sexual assault, and other assaults unrelated to the employment injury;22 and (6) injuries that occur at the workplace, but that would have occurred regardless of the employee's location (for example, a spontaneous brain hemorrhage or a spontaneous fall where no special work hazard exists).23

There is a thicket of case law creating exceptions to the exceptions, thus bringing the injuries back within the ambit of compensability, including: (1) being on travel status;24 (2) local travel for a work-related matter;25 (3) parking lot injuries in an employer-provided parking lot;26 (4) recreational activity that is incidental to employment and thus within the ambit of compensability;27 and (5) horseplay condoned by the employer.28

In most instances, a more thorough analysis would consider several issues. It would examine whether the injury occurred while the employee was at work and whether he or she was benefiting the employer. The analysis also would take into account whether the employee was deviating significantly from activities incidental to the performance of the work.

Erosion of the
Exclusive Remedy

If legislatures make workers' compensation benefit structures so draconian that an injured worker does not have a meaningful remedy in the workers' compensation system the courts may find ways to carve out more exceptions to the exclusive remedy doctrine by applying black letter law. Indeed,...