Eliminating a Most Convenient Forum: the Case for Restricting the Extraterritorial Operation of Neb. Rev. Stat. Section 48-115(2)(b)

• Publication year: 2022

38 Creighton L. Rev. 1. ELIMINATING A MOST CONVENIENT FORUM: THE CASE FOR RESTRICTING THE EXTRATERRITORIAL OPERATION OF NEB. REV. STAT. SECTION 48-115(2)(B)

Creighton Law Review

Vol. 38

ROBERT A. ZINK(fn*) & WALTER E. ZINK II(fn**)

I. INTRODUCTION

Though all states maintain some form of workers' compensation laws that purport to extend subject matter jurisdiction over those occasions where an employee is injured performing services outside the state, no state in the country maintains as broad an extraterritorial(fn1) provision as does Nebraska's section 48-115(2)(b),(fn2) which permits Nebraska courts to assert subject matter jurisdiction over all such injuries so long as the employer is "performing work within" the state.(fn3)

Historically, few claims have been asserted in Nebraska purely on the allowance provided under section 48-115(2)(b).(fn4) Yet the provision's status as a rarely invoked jurisdictional grant stands to change as the result of the Nebraska Workers' Compensation Court's ("NWCC") recent "plain language" application of the provision.(fn5) The unsettling effect of a plain-language fashioning of section 48-115(2)(b) effectively empowers forum-shopping plaintiffs with a previously unrecognized avenue to file qualifying workers' compensation claims in Nebraska, thereby granting a significantly greater population access to the potentially pro-employee advantages provided in the Nebraska Workers' Compensation Act ("NWCA").(fn6)

The significance in clearly defining the extraterritorial reach of states workers' compensation laws rests with each state's interest to protect the rights and general welfare of those employees and employers operating within its borders.(fn7) To this end, a majority of states have adopted, by statute or judicial decree, explicit rules defining those grounds where a state may properly assert the subject matter jurisdiction of its compensation act over an out-of-state injury.(fn8) Foremost among these factors are: (1) the place where the contract for employment was created; (2) the residence of the parties; and (3) the location where the injured employee's services are principally performed.(fn9)

Nebraska, however, has long been unique with its own judicially fashioned "business localization"(fn10) test, from which section 48115(2)(b) is traceable. In additional to other jurisdictional bases,(fn11) this provision permits Nebraska courts to extend subject matter jurisdic-tion upon a showing that: (a) the defendant employer performs work in Nebraska, and (b) the injured employee's work, at the time of injury, was "incidental" to the defendant employer's industry in Nebraska.(fn12)

In 1973, the Nebraska State Legislature passed Legislative Bill 150,(fn13) ("L.B. 150") effectively codifying the business localization test into section 48-115(2)(b).(fn14) Though the plain language of the provision states that Nebraska may assert jurisdiction over all employers "performing work within"(fn15) Nebraska, there exists substantial support, both in the legislative history of L.B. 150, as well as subsequent Nebraska Supreme Court decisions, that section 48-115(2)(b) need be interpreted narrowly within the confines of Nebraska's common-law, business localization test in order to properly effectuate the provision's true purpose.

However, when applying section 48-115(2)(b), the NWCC consistently fails to consider the constitutional imperative that some relation need exist between the injured employee and the forum state suffi-cient to support a legitimate state interest, in clear violation of relevant constitutional requirements.(fn16) It is the contention of this Article that a state may not properly maintain a qualifying "legitimate interest" over a workers' compensation claim where jurisdiction is asserted solely on the basis of the employer's performance of work in the state absent proof of some tenable nexus, or relationship, between the injured employee's work and the defendant employer's industry in Nebraska.

Part II of this Article traces the development of the business localization test in Nebraska, from common-law foundations, to codification, and through to its present application. Part III identifies relevant constitutional limitations within the context of section 48115(2)(b). Part IV considers recommendations by two institutional authorities regarding the extraterritorial reach of state workers' compensation laws generally, while Part V addresses and dismisses residual justifications calling for the provision's preservation. Part VI concludes that Nebraska would be better served to repeal the broad jurisdictional allowance afforded its courts under section 48-115(2)(b).

II. EXTRATERRITORIAL JURISDICTION AND THE NEBRASKA WORKERS' COMPENSATION ACT

A. NEBRASKA'S COMMON-LAW EXTRATERRITORIAL FORMULATION

Before 1973, only a few remaining states, including Nebraska, had yet to adopt specific laws addressing the extraterritorial operation of state workers' compensation laws.(fn17) With the passage of section 48115(2)(b) in 1973, the Nebraska Legislature codified, for the first time, those grounds empowering the NWCC with extraterritorial subject matter jurisdiction over claims filed in the state.(fn18)

However, key Nebraska State Supreme Court decisions before the formation of both the NWCC in 1935, and the enactment of 48115(2)(b) in 1973, have not been explicitly overruled and still stand as good law.(fn19) Taken together, these decisions constitute Nebraska's common-law tests employed to determine when the application of subject matter jurisdiction over an out-of-state injury is proper. These rules state:

1) A contract for employment made in Nebraska for services to be performed outside the state alone is never enough to confer jurisdiction over an out-of-state injury.(fn20)

2) Where the localization of the employer's industry, performance of employment, and contract formation occurs outside Nebraska, jurisdiction over an out-of state injury is improper, even when both the employee and employer are residents of Nebraska.(fn21)

3) Where both an employer and employee perform work in Nebraska, but where the employee's work in Nebraska is not incidental to the employer's business in the state, and where the formation of the contract and the place of injury occur outside the state, jurisdiction is improper.(fn22)

4) Where the employer performs work in Nebraska, and the employee's work outside the state is incidental to the employer's business in the Nebraska, and where the contract for hire is formed in Nebraska, jurisdiction over an out-of-state injury is proper.(fn23)

5) Where the employee is a resident of Nebraska, the contract of hire is made in Nebraska, but the employer performed no work in Nebraska at the time of plaintiff's injury, jurisdiction over an out-of-state injury is improper.(fn24)

6) Where an employer's principal place of business is located in Nebraska, and where the employee performs temporary work outside Nebraska incidental to the employer's business in Nebraska, jurisdic-tion over an out-of state injury is proper, even when the contract was formed outside the state.(fn25)

Of primary interest are rules three, four, and six, the aggregation of which constitute Nebraska's "business localization test,"(fn26) the common-law precursor to section 48-115(2)(b). At common law and in contrast to its statutory counterpart, the test explicitly required an "incidental" relationship between the injured employee's work and the employer's localized industry in Nebraska.(fn27)

1. The Localization Requirement

Given the aforementioned rules, it is unclear the degree to which an employer need be localized in Nebraska to qualify for the application of subject matter jurisdiction under the state's common-law, business localization test. This ambiguity is exacerbated by Nebraska courts' inconsistent use of "localized"(fn28) and "principal place of business"(fn29) as terms denoting the level of contacts a typical employer maintains with Nebraska to qualify for jurisdiction. However, strong implicit support exists in the applicable case law for the notion that Nebraska courts do not distinguish between these terms when applying the requisite jurisdictional calculus.(fn30)

In the context of its business localization test, Nebraska courts frequently make reference to the term "principal place of business" when determining whether jurisdiction over an extraterritorial claim is proper. The term has been applied broadly so as to include instances: (1) where the employer maintains a substantial business presence in Nebraska such that it conducts the majority of its business in the state,(fn31) or (2) where the employer maintains its industry headquarters(fn32) in Nebraska. However, nothing in the relevant opinions explicitly require such a high level of contacts in order to qualify for jurisdiction.(fn33) Rather, Nebraska courts typically give passing mention to the term only in their recapitulation of the facts.(fn34)

For purposes of conferring jurisdiction under the business localization test, references to "principal place of business," properly understood, are therefore relevant in applicable Nebraska case law only to the extent that such factors significantly increase the probability that an incidental relationship exists between the employer's Nebraska industry and the employee's...