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Case Law Update – March 14, 2016

Navigating Recent Amendments to the Wisconsin Worker’s Compensation Act

Microsoft Word - 2 of 5 Final after JRA markup.docxInstallment 2 of 5

The Wisconsin Worker’s Compensation Act has been substantially amended in favor of employers and insurers. The changes are vast and plenty and an update laying them all out at once would only provide a brief glimpse.

This is part two in a five-­part series aimed at exploring the predicted consequences of some of the key changes to the Worker’s Compensation Act. This format allows us to dive deep into the new statutory changes, so you’ll have a fuller understanding of your new rights under the law.

For the second installment we’ll look at Wisconsin’s new intoxication defense, and compare it to laws in nearby bordering-­states.

Indemnity Benefits are Barred if a Violation of the Employer’s Drug or Alcohol Policy Causes the Injury, Wis. Stats. §102.58

Effective March 2, 2016, employers may deny primary compensation for a work injury claim if the employee violated the employer’s policy concerning employee drug or alcohol use and that violation was causal to the employee’s injury.

What did the law used to say?

The intoxication statute used to call for a rather minor penalty instead of a full-blown affirmative defense to primary compensation. You will want to make sure you remain familiar with the prior law, since it is applicable to dates of injury before March 2, 2016. For those older dates of injury, the penalty is limited to 15% of primary compensation capped at $15,000.00.

Under the old law the burden is on the respondent to prove (1) that the employee was actually intoxicated, and (2) that the intoxication was “a substantial factor in bringing about the injury.” Milwaukee Forge v. ILHR Department, 66 Wis. 2d 428, 439 (1975).

Further, because the Department’s “unwritten” internal policy prohibits an employer or insurer from reducing benefits without first adjudicating the issue or obtaining approval, benefits are usually paid out first, with the hope of reimbursement if the penalty is awarded. Of course, there is no statute or administrative rule carrying the force of law that actually requires prior approval, and seeking reimbursement from an injured worker is often an exercise in futility. Thus, if you have a pre amendment date of injury and are fearful the disputed benefits will be paid out in full long before you obtain approval from the Department you may want to challenge the validity of this “unwritten” policy.

What did the recent amendment change?

The new law removes the 15% penalty in favor of a complete bar to indemnity benefits, stating in pertinent part as follows:

If an employee violates the employer’s policy concerning employee drug or alcohol use and is injured, and if that violation is causal to the employee’s injury, no compensation or death benefits shall be payable to the injured employee or a dependent of the injured employee. Nothing in this section shall reduce or eliminate an employer’s liability for incidental compensation under s. 102.42(1) to (8) or drug treatment under s. 102.426.

Does this mean I don’t have to pay the medical expenses in cases of intoxication?

No. You still owe the medical expenses, but may be able to escape liability for indemnity benefits if the date of injury is March 2, 2016 or later, and all of the following apply:

  1. The employer has a drug or alcohol policy;
  2. The employee violates that policy; and,
  3. His/her violation is causal to the injury.

Microsoft Word - 2 of 5 Final after JRA markup.docxHow is the new law similar to the old?

Both laws require that the “intoxication” (old law), or a “violation of the employer’s drug or alcohol policy” (new law), actually cause the injury. The mere presence of drugs or alcohol in the employee’s system is not dispositive of the causation issue, especially if at low levels.

Look to the circumstances surrounding the injury to determine whether the employee’s impairment may have been a factor in causing the injury, or whether the injury might have occurred regardless of the presence of drugs or alcohol.

For example: Consider an Employee sitting at a red light while in the course of his employment. He is intoxicated in violation of his employer’s alcohol policy. He is rear-ended and sustains injuries. However, because the employee’s violation of the alcohol policy did not cause the accident, the intoxication defense does not apply.

Also, as under the old law, the burden of proof remains on the employer to prove a violation of the drug or alcohol policy and a causal connection between that violation and the injury. This is an affirmative defense. What that means is that it is initially the employee’s burden to show that his/her injury arose out of the employment, while performing services growing out of and incidental to the employment, and while subject to the Worker’s Compensation Act. The burden then shifts to the employer to show that any number of defenses, including the new intoxication defense, apply to deny or reduce the entitlement to benefits.

How does the new law differ from the old?

The difference between the new law and the old may seem rather obvious: employers can now deny all primary compensation, rather than just reduced that compensation by 15%. However, there are also some less obvious differences that are just as important to recognize.

Does the injured worker have to be legally intoxicated in order for me to deny their claim?

No. The statute does not require the employee to be intoxicated, just that he/she violate the employer’s drug or alcohol policy. Most employer drug or alcohol policies require absolute sobriety. Since it is the employer’s policy that dictates what constitutes a violation, even low levels of drugs or alcohol in the employee’s system that do not rise to legal intoxication (usually a BAC equal to or greater than .08%) could be sufficient grounds to find a violation of the employer’s policy, thus satisfying one element of the intoxication defense.

Does this mean that if an injured worker violates the employer’s drug or alcohol policies, I can deny their claim?

No. As mentioned above, the violation of the drug or alcohol policy is only one element of the intoxication defense. The other important element is that the violation must be causal to the employee’s injury. This will act as a limitation to the defense when the employee has very low levels of drugs or alcohol in their system. The lower the levels of intoxicating substances, the lower the likelihood that those substances caused impairment sufficient to play a causative role in the injury.

Microsoft Word - 2 of 5 Final after JRA markup.docxHow do I invoke the defense? Do I still need Department approval first?

Probably not. It is unlikely that the Department will continue to require prior approval or adjudication before denying benefits based upon this provision because it is essentially an affirmative defense to primary compensation rather than just a penalty.

Further, as mentioned above, there is nothing in the statutes or rules that requires to you get prior approval from the Department, even when invoking the old intoxication defense. Pursuant to the Department policy, under the old law, you would start paying benefits on a non-conceded basis and file a “reverse” hearing application to request a determination of whether the 15% reduction in compensation applied. If the reduction is awarded, you would then adjust the payments made or request that a credit be applied to any future benefits if you have already overpaid.

Under the new law, you would have an absolute defense to any primary compensation if the employee’s violation of the employer’s drug or alcohol policy was causal to the injury. Therefore, you would be unlikely to recover any benefits paid on a non-conceded basis if it is ultimately determined that the intoxication defense applies. If you have credible evidence supporting the defense, use it to deny primary compensation. Do not wait for Department approval.

Expert Proof Required

We recommend that you treat this defense similar to other “medical” defenses. If you have credible evidence that shows the employee’s injury may have been due to his/her intoxication, get support from an expert, likely a toxicologist. Just as you would consult with an independent medical examiner to determine whether a particular knee injury caused the need for a recommended surgery, you will want to solicit an opinion from a toxicologist as to whether the employee’s violation of the drug or alcohol policy was causal to the injury.

What else should I be aware of regarding the new intoxication defense?

It is also important to recognize how this intoxication defense differs from s. 102.43(9)(c), which is the portion of the Act that allows an employer to deny or discontinue temporary disability benefits when an employee is terminated during the healing period for a violation of the employer’s drug or alcohol policy. While both of these sections deal with violations of a drug or alcohol policy, they have different requirements and apply at different times during the pendency of a work injury claim.

Section 102.58 is a defense to all primary compensation arising out of a work injury and requires that the violation of the drug or alcohol policy occur at the time of injury. Section 102.43(9)(c) is only a defense to temporary disability benefits and requires that the violation of the drug or alcohol policy occur after the date of injury while the employee is still in the healing period and able to return to a restricted type of work.

Further, section 102.43(9)(c) requires that the drug or alcohol policy be established in writing and regularly enforced by the employer. These are two requirements that are not contained in section 102.58 and therefore make it more broadly available. However, you should be cautious about invoking the new intoxication defense if the employer’s alleged policy is not in writing. It will be far more difficult to prove the policy’s existence if it is not in writing.

What legal standard will apply to the causation requirement?

The biggest question about this new intoxication defense is what legal standard will be applied to prove that the violation of the drug or alcohol policy was “causal to the employee’s injury.” Because this law just took effect on March 2, 2016, you will not find any case law specifically interpreting the level of proof necessary to show that causal connection yet. Further, there are no other provisions in the Act that use the same causation language to compare with our new amendment. But when you look at the case law interpreting the prior intoxication provision, you will notice that the language used by the court is the same or similar to that used in the new amendment.

In Massachusetts Bonding & Ins. Co. v. Industrial Commission, 8 Wis.2d 606 (1959), the Court stated that “[i]f the employer fails to convince the Industrial Commission, or if the commission has a legitimate doubt about the alleged intoxication or its causal relationship with the injury, then it is the duty of the commission to deny the claim for a decrease in the compensation,” (emphasis added).

Microsoft Word - 2 of 5 Final after JRA markup.docxIn Haller Beverage Corp. v. Department of Industry, Labor and Human Relations, 49 Wis.2d 233 (1970), the Court rephrased the Massachusetts Bonding standard to indicate that the “burden of proof is upon the employer to establish: (1) the fact of intoxication; (2) that the injury was caused by the intoxication,” (emphasis added). “Causal relationship with the injury,” and “caused by the intoxication,” are essentially the same as “causal to the employee’s injury,” which is the standard quoted in the new amendment. Therefore, it seems likely that the courts will continue to use the same legal standard regarding causation as they did when analyzing the prior intoxication law.

The seminal case regarding the standard of proof necessary in the prior intoxication law is Milwaukee Forge v. Dept. of Industry, Labor and Human Relations, 66 Wis.2d 428 (1975). In that case, at the circuit court level, it was observed that the law of causation recognizes that there may be more than one cause of an injury. The Supreme Court appeared to agree with this observation and ruled that the objective of the legislature would be served by imposing the provisions of the statutes (ss. 102.57 and 102.58) where the conduct of both the employer and the employee are “substantial factors in bringing about the injury.” The intoxication need not be the sole cause of the injury. Therefore, unless new case law provides a different interpretation to the new amendment, we recommend continuing to follow this “substantial factor” standard of proof when using the intoxication defense to deny benefits.

 

How does our new law compare to surrounding states?

These statutory changes bring us much closer to the laws applicable in Iowa and Minnesota, but they are not quite as employer-friendly as the current law in Illinois. So if you adjust claims in either of those nearby states, our new law may seem familiar to you in some respects.

In ILLINOIS, for dates of injury before September 1, 2011, an employee is not entitled to compensation if he/she was intoxicated at the time of the injury and the intoxication was the cause of the injury. For dates of injury on or after September 1, 2011, an employee is not entitled to compensation if his/her intoxication was the proximate cause of the injury or he/she was so intoxicated when the injury occurred that it constituted a departure from the employment. Further, there is a rebuttable presumption that the employee was intoxicated and that the intoxication was the proximate cause of the injury if (1) the employee’s blood alcohol level is .08 or higher, (2) there is any evidence of impairment due to the unlawful use of cannabis or controlled substances, or (3) the employee refuses to submit to testing. If any of these three circumstances is present, the burden shifts to the employee to show by a preponderance of the evidence that the intoxication was not the proximate cause of the injury before he/she can recover any benefits. This rebuttable presumption makes the current law in Illinois much easier for claims adjusters to use than the law now applicable in Wisconsin.

In IOWA, if an employer/carrier can prove that the intoxication was a substantial factor in the employee’s injury, then no worker’s compensation benefits are due. Assuming our standard of proof remains unchanged as discussed above, the law in Iowa is essentially the same as our new law, but for the fact that an employer/carrier in Wisconsin would still be liable for medical benefits.

In MINNESOTA, if intoxication of the employee is the proximate cause of the injury, there is no liability for worker’s compensation benefits. Therefore, similar to Iowa, Minnesota allows an employer to deny all benefits rather than just primary compensation; but it requires that the intoxication be the proximate cause of the injury. This is a different standard than a contributory cause or a substantial factor. It is a higher legal standard.

Conclusion

Given its greater potential for reducing claim exposure, this new statutory amendment will likely increase the use of the intoxication defense in Wisconsin where applicable. As you would with any other affirmative defense, make sure you support your use of this defense with credible evidence demonstrating that (1) the employer had a drug or alcohol policy, (2) the employee violated that policy, and (3) the violation of the policy was causal to the injury.


Jennifer R. Augustin

Jennifer is an associate at Aplin & Ringsmuth, LLC, working in the Madison, Wisconsin office. She represents employers and insurers in the defense of worker’s compensation claims and is licensed in both Wisconsin and Minnesota. She earned her Bachelor of Science in sociology from the University of Wisconsin in Madison, and her Juris Doctor from William Mitchell School of Law in St. Paul, Minnesota.

After graduating from law school, Jennifer practiced worker’s compensation defense at a firm in Minneapolis. When she and her husband welcomed their first child in 2013, they decided to move back to their hometown of Madison to be closer to family. Now the proud parents of two girls, they spend their free time getting reacquainted with their Madison surroundings and defending themselves from the “terrible twos.”

 


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