Pennsylvania Supreme Court Resolves Statutory Inconsistencies in Three Cases

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1 Pennsylvania Supreme Court Resolves Statutory Inconsistencies in Three Cases Deborah A. Beck HARRISBURG OFFICE 3510 Trindle Road Camp Hill, PA PITTSBURGH OFFICE 525 William Penn Place Suite 3300 Pittsburgh, PA WESTERN PA OFFICE 983 Third Street Beaver, PA SCRANTON OFFICE 220 Penn Avenue Suite 305 Scranton, PA MARGOLIS EDELSTEIN Deborah A. Beck The Curtis Center 170 S. Independence Mall W. Suite 400E Philadelphia, PA FAX CENTRAL PA OFFICE P.O. Box 628 Hollidaysburg, PA SOUTH JERSEY OFFICE 100 Century Parkway Suite 200 Mount Laurel, NJ NORTH JERSEY OFFICE Connell Corporate Center Three Hundred Connell Drove Suite 6200 Berkeley Heights, NJ DELAWARE OFFICE 750 Shipyard Drive Suite 102 Wilmington, DE

2 Pennsylvania Supreme Court Resolves Statutory Inconsistencies in Three Cases At the beginning of 2012, at least 11 workers' compensation cases were pending before the Supreme Court of Pennsylvania. The court has already rendered its decisions in three of them concerning: the suspension of medical benefits for a claimant's failure to attend a physical examination; classification of a statutory employer; and the calculation of a claimant's average weekly wage based on earnings from an employer subsequent to the liable employer for purposes of specific loss benefits. An examination of these three workers' compensation decisions from the Supreme Court reveals the court's approach to the interpretation of statutory construction and the resolution of inconsistencies in statutory language. In Giant Eagle v. WCAB, 39 A.3d 287 (Pa. 2012), the court faced deciding whether the word "compensation" in Section 314(a) of the Workers' Compensation Act must include medical benefits as well as wage loss benefits. The facts, as stated by the court, note that Giant Eagle filed suspension petitions based upon the claimant's failure to attend a physical examination that it had scheduled, which the workers' compensation judge granted. However, the WCJ only granted a suspension of the claimant's receipt of wage loss benefits. The employer appealed this decision of the WCJ and argued that the WCJ should have suspended the receipt of wage loss benefits and medical benefits by the claimant. The Workers' Compensation Appeal Board and the Commonwealth Court of Pennsylvania affirmed the decision of the WCJ. The Commonwealth Court held that the WCJ, using discretion, must expressly state whether medical benefits are to be suspended. Upon examination of the specific language of Section 314(a), as well as Article III of the Act as a whole, a plurality opinion of the Supreme Court, authored by Justice Seamus P. McCaffery and joined by Justices Max Baer and Debra Todd, concluded that, based upon Article III of the Act, the General Assembly did not intend that "compensation" under Section 314(a) must always be restricted to wage loss benefits; however, "compensation" also did not always need to include medical benefits as well as wage loss benefits. Therefore, the opinion of the Commonwealth Court was affirmed as it was held that "compensation" as used in Section 314(a) does not always need to include medical expenses. In a concurring opinion, Justice J. Michael Eakin stated that he agreed with the plurality's opinion so long as its holding meant that a WCJ has the discretion to suspend either wage loss benefits or medical benefits or both pursuant to Section 314(a). In a dissent joined by Chief Justice Ronald D. Castille and Justice Joan Orie Melvin, Justice Thomas G. Saylor opined that "compensation" as used in Section

3 314(a) denotes both wage loss and medical benefits. Given the tone of the plurality, concurring and dissenting opinions, it does appear that WCJs will have some authority to address a suspension of a claimant's medical benefits under Section 314(a); however, as the Commonwealth Court's decision was upheld, it appears that the WCJs must explicitly assert that authority and state with clarity that they intend to also suspend a claimant's medical benefits. In a unanimous decision, the Supreme Court in Six L's Packing v. WCAB, A.3d, 2012 WL , Pa., May 29, 2012 (No. 46 EAP 2011) at [J ]-17, held that neither the McDonald test nor a per se owner exclusion applies under Section 302(a) of the Workers' Compensation Act. Section 302(a) states that: "A contractor who subcontracts all or any part of a contract and his insurer shall be liable for the payment of compensation to the employees of the subcontractor unless the subcontractor primarily liable for the payment of such compensation has secured its payment as provided for in this act." Section 302(a) further states that "for the purposes of this subsection, a person who contracts with another... to have work performed of a kind which is a regular or recurrent part of the business, occupation, profession or trade of such person shall be deemed a contractor, and such other person a subcontractor." According to the Supreme Court, Six L's grows, harvests, processes and distributes tomatoes and other produce and contracted with F. Garcia & Sons, a trucking company, to perform various services, including transporting tomatoes from its warehouse in Pennsylvania to a processing facility in Maryland. The claimant, employed by the uninsured trucking company, was involved in a motor vehicle accident in Pennsylvania. The claimant alleged that Six L's was his statutory employer pursuant to Section 302(a) of the act and, therefore, was secondarily liable for the payment of workers' compensation benefits. The WCJ, applying the well-established McDonald test, held that Six L's was liable for the payment of workers' compensation benefits to the claimant per Section 302(a). While the WCAB affirmed, it held that the McDonald test did not pertain to statutory employer status under Section 302(a). The Commonwealth Court affirmed utilizing almost the same reasoning as the WCAB. Six L's argued to the Supreme Court that the McDonald test, which has been applied by the intermediate courts to all statutory employer determinations for the past 30 years, was applicable to the instant matter, and that the owner exclusion present under the McDonald test should be extended to Section 302(a). The claimant argued that permitting Six L's to evade liability as a statutory employer per the plain language of Section 302(a) would "contravene the intent of the General Assembly to provide security for injured workers."

4 As in Giant Eagle, Six L's involved a matter of statutory construction. The court in Six L's noted that its "task was to ascertain and effectuate the intent of the General Assembly, the best indication of which is the language of the statute." The court held that "viewing the statutory scheme as a whole... and employing the principle of liberal construction in furtherance of the act's remedial purposes... we find it to be plain enough that the legislature meant to require persons (including entities) contracting with others to perform work which is a regular or recurrent part of their businesses to assure that the employees of those others are covered by workers' compensation insurance, on pain of assuming secondary liability for benefits payment upon a default." Given the court's decision, claimants should find the imposition of statutory employer status less daunting; conversely, contractors should now be more aware of, and place greater importance on, their subcontractor's insured status. The third workers' compensation case decided by the Supreme Court this year was Lancaster General Hospital v. WCAB, A.3d, 2012 WL , Pa., May 29, 2012 (No. 69 MAP 2010). In Lancaster General Hospital, the court considered how a claimant's average weekly wage should be calculated under Section 309 of the Workers' Compensation Act when a claimant suffers an initial incident, changes employers and later suffers a specific loss of use as a result of the initial incident. Pursuant to the court's decision, the claimant suffered a work-related injury to her left eye in 1979 or 1980 while working for Lancaster General; however, the claimant did not miss any time from work with Lancaster General as a result of her left eye injury. The court noted that in 1985, the claimant left her full-time, $8 an hour employment with Lancaster General for reasons unrelated to her injury. In 2007, while working for a different employer earning $21 an hour, the claimant lost the vision in her left eye as a result of the prior incident that occurred at Lancaster General. The claimant filed a claim petition against Lancaster General alleging that she sustained a loss of use of her left eye as of March 8, 2007, as a result of the 1979/1980 prior incident. The WCJ awarded benefits, finding that the claimant suffered a work-related injury on May 16, 2007, as a result of the incident that occurred at Lancaster General, and calculated her benefits as $ per week based upon her 2007 wages. Lancaster General appealed to the WCAB, which affirmed. Regarding the WCJ's calculation of the claimant's average weekly wage, the WCAB held that the WCJ correctly used her wages at the time of her injury, which was agreed to be in May Lancaster General then appealed to the Commonwealth Court, which affirmed and held that the act defined wages in terms of a claimant's weekly pay at the time of the injury. At the Supreme Court level, it was noted that Lancaster General was not contesting the date of the specific loss or its responsibility for the payment of the claimant's benefits. Lancaster General's sole argument on appeal was the fact that the claimant's average weekly wage should have been based upon

5 her 1985 earnings, not her 2007 wages. As with Giant Eagle and Six L's, the court was charged with interpreting the meaning of a provision of the act; specifically, whether "employer" as used in Section 309 of the act means the employer at the time of injury or the employer liable for compensation. Applying the principles of statutory construction, the court concluded that the most logical interpretation of "employer" in Section 309 refers to the employer at the time of the work-related injury. In support of its conclusion, the court noted that, by interpreting "employer" to mean the employer at the time of the injury, consistency is achieved with the goal of providing a claimant specific loss benefits that were calculated using an accurate representation of his or her actual lost wages as of the date of injury. Eakin, joined by Baer, concurred in the result but not the majority's reasoning. Eakin agreed that a claimant's benefits must be based on "wages earned at the time the injury manifested, rather than wages at the time of the incident which led to that manifestation." Nonetheless, Eakin wisely pointed out that the precedent established in Lancaster General Hospital may work to the "detriment of the next claimant whose wages decreased between the incident and manifestation" as the "desire to effectuate the humanitarian purposes of the act, interpreting ambiguous language with an eye toward charitable results, can lead to a rule with noncharitable results in the next case." Eakin stated that the issue presented in this case, as well as other scenarios presenting inconsistencies, needed to be "dealt comprehensively with by the legislature," not "piecemeal by the courts." Deborah A. Beck is an associate with Margolis Edelstein in its workers' compensation department. She has been representing employers and workers' compensation insurance carriers for more than 15 years. She can be reached via telephone at and via at Reprinted with permission from the July 6, 2012 issue of The Legal Intelligencer (c) 2012 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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