Articles Posted in Workers’ Compensation

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Many employers in Maine and across the country engage in the practice of misclassifying employees as independent contractors. Misclassification is sometimes called “1099’ing” because of the 1099 tax form independent contractors receive instead of a W-2 form. While misclassification is illegal, it can save employers as much as 30% in payroll and related taxes that they would have to pay if they correctly classified their workers as employees. Employees who are misclassified as independent contractors can miss out on workers compensation insurance, unemployment insurance, fair pay, and other workplace protections.

The National Employment Law Project (NELP) has published a report which identifies the steps various states have taken in the past year to combat the problem of misclassification. The report identifies a new section of Maine’s Workers Compensation Act which sets special rules for when employers can classify workers in the trucking and messenger service industries as independent contractors. Under this statute, workers in these industries are presumed to be employees and employers can only classify them as independent contractors if they can satisfy specific criteria. To illustrate, under this statute, if a worker is not covered by his employer’s workers compensation insurance, and he does not own or lease the vehicle he uses for work, his employer cannot classify him as an independent contractor.

In addition to legislative action, the NELP report identifies some states that have stepped up enforcement of laws already on the books. For instance, in the past year, Massachusetts’ Joint Task Force on the Underground Economy and Employee Misclassification has recovered nearly $6.5 million through its enforcement efforts–which included $2 million in unpaid unemployment insurance taxes. Recently, there have been reports of rising unemployment insurance tax rates in Maine. Increased enforcement actions against employers who misclassify their workers as independent contractors could help eliminate the need to raise these tax rates. If employers who are violating the law are forced to pay the taxes that the law requires them to pay, the rates can be lower for all employers.

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In Michaud v. Fraser Paper Limited, the Maine Workers’ Compensation Board ruled that a 66 year-old mill worker with Reactive Airway Disease from workplace chemical exposure was ineligible for workers’ compensation benefits because he accepted an early retirement package that was offered by the mill, despite the fact that his light duty office job was slated for elimination as part of a company-wide downsizing.

Raymond Michaud is a 66 year-old paper mill supervisor from Frenchville. He worked for Fraser Paper Limited in Madawaska for 30 years. In 2000, he suffered a chemical exposure at work that injured his lungs and had a long-term effect on his pulmonary health. He was medically restricted from working in the mill, as he could not be exposed to fumes and dust and could not exert himself. In 2002, the mill gave him a light duty office assignment, which was less than full-time, and which he performed for approximately one year.

In 2003, due to financial difficulties, the mill announced it would lay off 190 employees. Supervisory employees over the age of 55, including Michaud, were given the option to take early retirement, with certain incentives. Michaud accepted the early retirement package, assuming that as an older worker on a less than full-time light duty assignment, his position would be eliminated during layoffs.

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In Johnson v. True North Salmon, the Maine Workers’ Compensation Board emphasized the importance of performing a good faith work search when seeking 100% partial incapacity benefits under Section 213. A 50 year-old laborer in a fish processing plant, Johnson suffered a repetitive stress injury to his elbow from “pin boning” several hundred fish a day at work. Johnson did not have a high school diploma and had worked in jobs requiring heavy or repetitive use of both hands for his entire life. Prior to his injury, Johnson earned $480 a week at True North Salmon. Subsequently, his doctor diagnosed him with epicondylitis causing swelling and pain and gave him work restrictions of no heavy or repetitive work with his right hand.

Because he could not return to pin boning and the company had no light duty work for him, Johnson asked the Board to award 100% partial incapacity benefits under Section 213. To obtain 100% benefits for only partial incapacity, Johnson had to show, through work search or other vocational evidence, that work was unavailable within his local community as a result of his work injury. Johnson produced evidence of a work search conducted over the course of five months, but the Board declined to award 100% benefits because Johnson listed several employers repeatedly, week after week, most of which were not actually advertising job openings, and he did not use help wanted ads or other employment resources. Instead, the Board found that Johnson could earn $225-250 per week and reduced his benefits accordingly. The Board did take into account Johnson’s limitations with respect to the use of his right hand as a result of the work injury, his age, lack of education, lack of experience, training or transferable skills, and the fact that he lives in an isolated geographic area of the State with a poor labor market, finding that these factors, combined with his work injury, made it unlikely that he would be able to find steady, full-time employment. However, the Board felt that Johnson had not met his burden of proof to show that he looked for work in good faith.

This decision emphasizes the importance of a good faith work search for all partially disabled claimants seeking 100% benefits and shows the degree to which the Law Court’s decision in Monaghan v. Jordan’s Meats influences the hearing officers in their decisions. In Monaghan, the Law Court gave a thorough analysis of the work search rule in workers’ compensation cases. The Court explained that whether an injured employee receives total or partial incapacity benefits depends on the extent to which the employee retains the ability to earn incomes after a workplace injury. The employee’s post-injury earning capacity is based on both the employee’s physical capacity to earn wages, and (2) the availability of work within the employee’s physical limitations. An employee who retains some ability to earn may nevertheless be entitled to receive the full amount of workers’ compensation benefits, with no deduction for earning capacity, if the persisting effects of the work-related injury prevent the employee from engaging in any regular paying work.

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Matthew Doucette, a 29 year-old Sysco warehouse worker, injured his back in April 2004. He was on light duty for two weeks but lost no earnings as a result of the injury. Sysco terminated his employment for reasons unrelated to his injury in May 2004 and Doucette had no further problems with his back until 2008, when he reinjured it while working for a different employer. In January 2009, Doucette filed a petition seeking compensation from his April 2004 date of injury to the present and continuing. The hearing officer found that Doucette was entitled to the protection of the Act for the 2004 injury even though he lost no earnings because of it. Due to a procedural glitch, the insurance company failed to file the Notice of Controversy contesting the claim within the required 14 day time period. The insurance company filed the Notice on the morning of the 15th day. The hearing officer found that the insurance company had violated the “14 day rule” requiring insurance companies to pay or contest claims within 14 days and ordered the insurance company to pay total incapacity benefits from the original date of injury, April 2004, forward, even though Doucette lost no earnings as a result of that injury. The result was a $140,000 award to Doucette. The Court acknowledged that while the result may be unfair to the insurance company, it had no authority to void the penalty.

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