July 2017 HL Quarterly Update

15 Jul July 2017 HL Quarterly Update

In a fairly unusual occurrence, the Michigan Court of Appeals recently issued two opinions directly addressing issues that are frequently seen in the Worker’s Compensation arena. While only one of the decisions will have a binding effect after being published, we are glad to see that Worker’s Compensation issues are still being litigated, so that we may have clarity on these issues going forward.

Just in Time
The Defendant employer in Walrath v. Witzenmann USA LLC, (Mich. Ct. App. June 8, 2017), secured a worker’s compensation insurance policy effective January 1, 2014. However, Defendant missed their May 1, 2014 premium payment, and was put on notice that their coverage would be cancelled, which did in fact occur on May 29, 2014.

Plaintiff employee was injured a few weeks later, on June 14, 2014. When Defendant attempted to file a claim on Plaintiff’s behalf, they learned that their policy had been cancelled. Shortly thereafter, Defendant sent their insurance company a premium payment and their policy was reinstated with “no lapse in coverage.” Plaintiff’s claim was opened and they did receive wage loss and medical benefits.

Once Plaintiff found out that Defendant didn’t have a policy in effect on the injury date, they sued in circuit court for negligence. Filing a tort claim is an option available to an employee if their employer violated that Act by not having insurance coverage. Therefore, if Defendant violated the terms of the Act’s coverage provision, MCL 418.611(1)(b), the Plaintiff’s tort action in circuit court could proceed. This section of the Act requires that an employer “secure the payment of compensation . . . by insuring against liability.”

Both the circuit court and the Court of Appeals held that the statute does not in fact require an employer to have coverage, but requires that they “secure the payment of compensation.” The fact that the Defendant was uninsured on the Plaintiff’s injury date does not change the fact that subsequent efforts by Defendant made sure that the Plaintiff was paid compensation according to the Act. Therefore, Defendant did not violate the terms of the Act and was not liable for any tort claims. This decision is set to be published by the Court of Appeals in the near future.

Fight For Your Fringes
Plaintiff employee in Heine v. Mach 1 Global Servs., (Mich. Ct. App. Apr. 25, 2017) sued Defendant employer over unpaid “earnings” after they were terminated from employment. Plaintiff argued that the money they were entitled to constituted wages, which were still owed even after their employment ended. Defendant argued that the money constituted a fringe benefit and would no longer be owed to Plaintiff.

Many of the legal arguments made in this matter revolved around the language of the employment contract between the parties. One of the lower courts held that there was significant confusion in the contract regarding how the disputed earnings were classified. The lower courts ultimately reasoned that the earnings in question weren’t paid until 45 to 90 days after the end of each fiscal quarter, so they constituted wages and not fringe benefits.

The Court of Appeals took a much different approach, and almost entirely relied on the Payment of Wages and Fringe Benefits Act (PWFBA), MCL 408.471. This law gives a fairly clear and workable standard as to difference between a fringe and wages. As stated in the PWFBA:

(e) “Fringe Benefits” means compensation due an employee pursuant to a written contract or written policy for holiday, time off for sickness or injury, time off for personal reasons or vacation, bonuses, authorized expenses incurred during the course of employment, and contributions made on behalf of an employee.

(f) “Wages” means all earnings of an employee whether determined on the basis of time, task, piece, commission, or other method of calculation for labor or services except those defined as fringe benefits under subdivision (e) above.

Instead of addressing arguments over the employment contract’s language, or the timing of payments, or the parties’ understanding as to how the earnings were classified, the Court of Appeals simply held that the earnings fell under the definition of “fringe benefits” within the PWFBA. Therefore, Plaintiff was no longer entitled to receive these types of payments after ending employment with Defendant.

Submitted by Jonathan Rea, jrea@hanbalazar.com

Please leave us comments/questions. If there is a topic that you would like to see discussed in this Quarterly, please let us know. Comments and questions can be directed to Jonathan Rea at jrea@hanbalazar.com.