ISSUE: Section 8(j) – Report of Earnings – Forfeiture of Compensation

Jack_crop 72dpiIs it a good idea for an employer to monitor the post injury earnings of an employee to whom it is paying disability benefits under the Longshore Act?  Yes.  Does the Act provide a way to do this?  Yes.

Why is it a good idea?

If an employee meets the light burden of establishing a prima facie case, i.e., he has suffered a harm and working conditions or an accident at work might have caused the harm, then the section 20(a) presumption supplies the necessary causation link between the employment and the injury.

Then if the injured worker provides evidence that he cannot return to his pre-injury job (which does not necessarily entail a severe injury in the strictly medical sense), and the employer does not establish the existence of suitable alternate employment, the worker is totally disabled, and the employer is paying temporary total disability (TTD) or permanent total disability (PTD) benefits.

It is possible that injured workers receiving TTD or PTD benefits under the Longshore Act are potentially or in fact capable of working, or in fact are working.

We’ve recently discussed section 22, under which any party may request modification in a compensation case, even a case in which a Compensation Order has been issued and is final, based on a change in condition or because of a mistake in a determination of fact.  Such a modification may “terminate, continue, reinstate, increase, or decrease such compensation ….”

A change in the injured worker’s earning capacity may qualify as a change in condition under section 22 and provide the grounds for a modification of an existing TTD or PTD award, or even an award based on a loss of wage earning capacity (PPL) if the partially disabled worker’s actual earnings have increased.

Alternatively, if the claimant doesn’t return the earnings report as required, the employer may seek a compensation order forfeiting compensation for the period of the failure to report.

How does the Longshore Act provide a way for the employers to monitor the earnings of “disabled” employees?

Section 8(j) (33 U.S.C. 908(j)):

8(j)(1) The employer may inform a disabled employee of his obligation to report to the employer not less then semiannually any earnings from employment or self-employment, on such forms as the Secretary shall specify in regulations.

(2) An employee who –

(A) fails to report the employee’s earnings under paragraph (1) when requested, or

(B) knowingly and willfully omits or understates any part of such earnings, and who is determined by the deputy commissioner to have violated clause (A) or (B) of this paragraph, forfeits his right to compensation with respect to any period during which the employee was required to file such report.

(3) Compensation forfeited under this subsection, if already paid, shall be recovered by a deduction from the compensation payable to the employee in any amount on such schedule as determined by the deputy commissioner.

The employer can monitor the earnings of “disabled” employees, but it must be done right.

The Form is U.S. Department of Labor (DOL) Form LS-200, Report of Earnings.  It should be used by an employer to request earnings information at no less than 6 month intervals.

Section 8(j) uses the ambiguous term “disabled employee”.  This has been interpreted to mean an employee to whom the employer is paying Longshore Act benefits, either voluntarily or under an Order.  The employer must be paying benefits concurrently with the request for an earnings report.

Section 8(j) refers to the “deputy commissioner”.  This means the District Director of a DOL Longshore claims office.

The employee is required to report “any earnings”, including earnings from employment, self-employment, investment or rental income, and even earnings from illegal activity.

Form LS-200 requires that the employee sign and return the form to the employer within 30 days after receipt, even if the report is that there have been no earnings.

The administrators of the Special Fund send out Forms LS-200 once a year to those claimants to whom the Fund is paying benefits.  Since the earnings report may be requested at six month intervals it is in the interest of an employer who has placed cases in the Special Fund under the second injury provision of section 8(f) to also request earnings reports in its Special Fund cases.

What if the earnings report shows that the employee may be working or that he may have an earning capacity.  What if the earnings report shows no earnings but the employer has evidence that the employee may be working.  What if the employee fails to return the signed LS-200?

The employer should initiate proceedings with the DOL’s District Director in charge of the claim (or with the Administrative Law Judge if the case is already pending at the ALJ level).  The District Director should convene an informal conference and, depending on the facts of the case and the evidence provided by the employer, the District Director may issue a Compensation Order forfeiting compensation for the period during which the claimant failed to report as required by Form LS-200, or initiate modification proceedings under section 22.

Note:  Any forfeiture will be handled in accordance with section 8(j)(3).   If compensation forfeited for a past period has already been paid then the amount will be recovered by deduction from future compensation on a schedule set up by the District Director, taking into consideration all of the facts, including the claimant’s financial condition as reflected by his living expenses, total income from all sources, and total assets.

Note:  None of the three sections of the Act which provide for recovery of overpayments (sections 14(j), 8(j), and 22), provides that the employer may recover overpayments directly from the employee; such recovery can only be obtained by an offset against future compensation under the Act.

Note:  Employers should check to see if their insurance carriers are sending out LS-200s.  AEU does it for ALMA Members.  The procedures provided in section 8(j) are an appropriate way to monitor cases where benefits are being made, even where benefits are being paid pursuant to a final Compensation Order.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

ISSUE: Update – Top Ten Longshore Act Questions – Question Number 4 – What Is a Vessel? – What Is a Crewmember?

Jack_crop 72dpiLongshore Act question number 4 was discussed on the AEU Longshore Blog back on March 31, 2010.  It’s finally occurred to me that the previous discussion needs to be updated.

What is a vessel?

Neither the Longshore and Harbor Workers’ Compensation Act nor the Jones Act defines exactly what a vessel is, although the question is central to key issues under both laws.

The Longshore Act’s definition in section 2(21) (33 U.S.C. 902(21)) states, “Unless the context requires otherwise, the term ‘vessel’ means any vessel upon which or in connection with which any person entitled to benefits under this Act suffers an injury or death arising out of or in the course of his employment ….”

Parenthetical Note:  Section 2(21) quoted above refers to an injury or death “arising out of or in the course of employment….”  Section 2(2), which defines “injury”, states “arising out of and in the course of employment….”  Usually the distinction between “and” and “or” is significant.  But in this context is it a distinction without a difference?  Is it just a case of careless phrasing?  That’s for an other day.

So, “vessel” is defined in the Longshore Act as “any vessel”.  That’s no help.

We do know from the case law that whatever “vessel” means, it means the same thing under both the Longshore Act and the Jones Act and general maritime law.

Back on March 31, 2010, I mentioned the then recent U.S. Supreme Court case of Stewart v. Dutra Construction Co., a vessel status case involving the Super Scoop dredge at work digging a tunnel in Boston Harbor.  The Court found that the dredge was a vessel, by a broad application of 1 U.S.C. section 3 (1873), which defines a vessel as, ‘every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water”.  The decision seemed to suggest that anything that floats and is not permanently affixed to land was a vessel.

There has been new case law on the vessel question from the U.S. Supreme Court, and thus the need for this update.

On January 15, 2013, the Supreme Court decided the case of Lozman v. City of Riviera Beach, Florida.  The issue was whether Mr. Lozman’s floating home was a vessel, subject to Admiralty jurisdiction.  The federal Eleventh Circuit Court of Appeals had held that it was a vessel, using Stewart’s reasoning.  The Supreme Court reversed, holding that the floating home was not a vessel, interpreting the language of 1 U.S.C. section 3 through the eyes of a reasonable observer looking at the practical characteristics of the craft or contrivance.  As a result, we have a new vessel status test based on this case.

The test is whether, through the eyes of a reasonable observer, the contrivance is practically, not theoretically, designed as a means of transportation of people or things over water.  Of course, this is a case by case test.

The Court itself recognized the nature of the test.  It admitted that its approach “is neither perfectly precise nor always determinative….  Nonetheless, we believe the criterion we have used, taken together with our examples of its application here, should offer guidance in a significant number of borderline cases….  Moreover, borderline cases will always exist.”

So, good luck with the Lozman reasonable observer looking for practical capability based on design characteristics test.

What Is a Crewmember?

For the issue of crewmember status, we’re still using the test from the Supreme Court’s 1995 Chandris v. Latsis, Inc. decision.  There hasn’t been anything more recent.

To qualify as a crewmember, the employee must:

  1. Contribute to the function of the vessel or to the accomplishment of its mission, and
  2. Have an employment connection to a vessel in navigation (or to an identifiable group of such vessels) that is substantial in terms of both duration and nature.

For the “duration” part of the second prong of the test, there is a 30% rule of thumb.  If you spend less than 30% of work time “in the service of a vessel” then you are probably not a crewmember.

The substantial “nature” part of the employment connection test is more problematic.  This test has not worked too well.

In spite of language in Chandris paying lip service to the necessity of separating land based workers from those sailors who go to sea, in the judicial language, the “perils of the sea” has been replaced by the watered down “perils of the maritime work environment” or similar terminology as a necessary element for seaman status.

We’ve certainly seen many examples of live at home “seamen” qualifying for the seamen’s remedies under the Jones Act and the general maritime law.  Construction workers on all manner of special purpose vessels, ship repair and maintenance workers, and even cargo handlers, all of whom in no sense of the word are exposed to the “perils of the sea”, can qualify as daily commuting crewmembers.

There is a recent example of this from the federal Fifth Circuit Court of Appeals (states of TX, LS, MS).  In the case of Larry Naquin v. Elevating Boats Inc. a ship repair supervisor was determined by the jury in district court to be a seaman, and this finding was affirmed by the appellate court.  The injured worker’s job was ship repair and he worked nearly exclusively on moored vessels in a shipyard canal.  He rarely went to sea.

He met the 30% test, because as a ship repair worker he obviously spent most of his time on the ships he was repairing.  To find that ship repair work meets the “substantial nature” employment relationship requirement of the Chandris test, however, for a worker who rarely goes to sea, seems very broad.  Clearly a worker has an employment relationship with a vessel that he is building or repairing, just as an airplane mechanic has a relationship with the airplane he is repairing, but that doesn’t make the mechanic a pilot.

So, it seems to me that Lozman may have somewhat narrowed the application of the vessel status test, or at least didn’t expand it; some things that float may not be vessels.  But the test for crewmember status is becoming more broadly interpreted.

Paradoxically, the Supreme Court’s rejection of the “voyage test” for seaman status, and the Chandris requirement for a substantial employment relationship in terms of duration have prevented workers who actually do go to sea in ships from achieving crewmember status.  Workers such as harbor pilots, divers, and oilfield industry service contractors who typically work on successive short contracts on different vessels often have trouble meeting the 30% test with a single vessel or group of vessels under common ownership.

Maybe one of these days we’ll have a better test for crewmember status.

John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as the Chief, Branch of Insurance and Financial Management, and the Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.