October 2016 HL Quarterly Update

Introduction

Successful risk management requires up-to-date information regarding all aspects of potential liabilities. At Hanba Lazar we recognize that zealous advocacy on behalf of our clients begins long before litigation ensues. Zealous advocacy begins with counseling designed to provide our clients with the relevant information needed to stay competitive and to mitigate potential exposures. It is in this light that we offer you today’s quarterly.

Last year we added two attorneys to our litigation and counseling team. As a result of our growth, we are pleased to announce that as of October 8th we will be relocating to our new corporate offices located just a couple of miles from our current location. The relocation has provided us the opportunity to update many of our systems which in turn will allow us to provide an expansion of our current services. Stay tuned!

We continue to be honored that our clients regard Hanba Lazar as their “outside/in-house” legal department. Best wishes for a great fall!

The Woes of a Traveling Salesman

The Court of Appeals issued the unpublished opinion of Salenbien v Arrow Uniform LP on August 16, 2016. This was a complicated case regarding business travel. The question involved was whether the Forgach factors applied or whether another doctrine was more applicable to this particular case. The Forgach factors apply in the typical “going to or coming from work” situation where the basic rule is that injuries occurring while a worker is going to or coming from work are not covered.

The Forgach factors, which are general guidelines for determining whether an accident suffered while going to or coming from work should be covered, are: 1) whether the employer paid for or furnished the employee’s transportation; 2) whether the injury occurred during or between working hours; 3) whether the employer derived a special benefit from the employee’s activities at the time of injury; 4) whether the employment subjected the employee to excessive exposure to traffic risks. The Forgach Court was concerned with establishing a sufficient nexus between the employment and the injury so that it may be said that the injury was a circumstance of the employment.

This case involved Mr. Salenbien, a traveling salesman for Arrow, who would go out on sales calls to various customers and often traveled by car to these appointments. On his injury date, Salenbien was traveling from his last sales call of the afternoon in a direction that could have either taken him back to his office or back home. He was involved in a motor vehicle accident and sustained a closed-head injury, losing his memory of that day’s activities in the process. The Magistrate denied the claim for compensation, determining that Salenbien failed to demonstrate, by a preponderance of the evidence, that the accident arose out of and in the course of his employment. The Magistrate noted that, as a general rule, workers are not entitled to benefits for injuries sustained while traveling to and from work.

Review was undertaken by MCAC which affirmed the Magistrate. MCAC ruled that Salenbien had not proven that he was working at the time of the accident and only presented circumstantial evidence that he was traveling for work. That evidence consisted of Salenbien’s testimony that he had a habit of returning to the office at the end of a sales day to do paperwork and prepare his routes and materials for the next day; as well as, testimony from both a friend and cousin indicating that Salenbien had contacted them before his last sales call and indicated he was returning to the office. MCAC noted that the Magistrate did not believe the testimony was credible.

That ruling was appealed in Salenbien I to the Court of Appeals. The Salenbien I Court noted that “for an injury to be compensable under the WDCA, there must be a sufficient nexus between the employment and the injury so that it may be said that the injury was a circumstance of the employment” and that “this nexus exists where the circumstances of employment place the employee where he was when he was accidentally injured.” The Salenbien I Court determined that Salenbien’s destination was relevant, as a non-work related destination would remove Salenbien’s injuries from the scope of the WDCA, while a work-related destination would bring his injuries within the ambit of the WDCA. The Court of Appeals reversed MCAC.

MCAC then narrowed the Court of Appeals holding and determined that the Magistrate should, on remand, consider the “arising out of” issue and that the Court of Appeals only found that Salenbien was on his way to the office at the time of the accident.

The Magistrate, on remand, found that Salenbien suffered an injury that arose out of and in the course of employment. The employer was arguing that the Court of Appeals did not conclude that because Salenbien was going to the office, he was in the course and scope of his employment. According to the employer, the fact that Salenbien was going to work was just one of the four Forgach factors that needed to be considered to determine whether this was an injury occurring in the course and scope of employment. The Magistrate held that the drive from the last sales call (a work activity) to the office to prepare for the next day (another work activity) would be in the course of employment.

The employer appealed again to MCAC which reversed the Magistrate. MCAC held that the Court of Appeals left open the issue of whether or not Salenbien’s injuries were both in the course and arising from his employment. MCAC held that the Court of Appeals only reversed one of the Forgach factors.

This case was brought up on appeal to the Court of Appeals for a second time in Salenbien II. The Salenbien II Court held that this case fell into a special category in which traveling from site to site is the essence of the employee’s job. The Court quoted Wilhelm v Angell, Wilhem & Shreve, 252 Mich 648; 234 NW 433 (1931) approvingly:
In the discharge of his duties, the employee is required to travel upon the highway or to use other means of transportation, and while so doing in the performance of a service to his employer, he suffers an accidental injury caused by his so traveling, he is entitled to compensation. When engaged in this type of work, he should be protected while on the highway in the course of his duties after leaving the last point at which he rendered service regardless of whether he is then journeying to his next place of service or returning to business headquarters or to the place of his domicile.

The Court offered the following example of a traveling salesman required to go to Towns A, B, and C. The salesman would be protected while traveling to Town A regardless of whether he began from his home or his office. He would also be protected while traveling in between Towns A-C. He would also be protected coming from Town C, his last appointment, back to the place he started from. The Court held that cases in which an employee’s travel is integral to his employment are fundamentally different and the Forgach factors don’t apply.

The effect of this case is still debatable. Obviously, this is an unpublished decision by the Court of Appeals and is not binding precedent. However, it is persuasive authority and may represent a shift in the Court’s thinking with regard to these special cases. At this point, there is still some likelihood that the Supreme Court will take up the question on leave to appeal, so we await word on whether that application will be granted or not.

Submitted by Stephen A. Cooley

Vested v. Non-Vested Rights and Coordination
The Michigan Supreme Court issued its opinion in Arbuckle v General Motors, LLC on July 15, 2016. That case dealt with the questions involving an open award for weekly workers’ compensation benefits and coordination of a long-term disability pension.

Mr. Arbuckle sustained a work-related back injury, on June 20, 1991, while working for GM. As of May 1, 1993, he began receiving a total and permanent disability pension from GM and retired later that month. He then filed an Application for Hearing with the Workers’ Compensation Agency seeking benefits under the WDCA. In 1995, a Magistrate awarded Mr. Arbuckle an open award of benefits.

GM and the UAW executed a letter of agreement in 1990 in which GM agreed not to coordinate workers’ compensation benefits and disability pension benefits under MCL 418.354. That agreement was then incorporated into a collective-bargaining agreement in 1990 which was to remain in place until termination or amendment, however the CBA was scheduled to expire in November 1993. That agreement against coordination was continued subsequently until 2009. At that time, GM and the UAW adopted a coordination formula, reducing the amount of workers’ compensation benefits for all workers and retirees, regardless of retirement date. GM advised Mr. Arbuckle of this change in 2010.

Mr. Arbuckle requested a hearing before the Director of the Workers’ Compensation Agency who concluded that GM was improperly using SSDI benefits to offset workers’ compensation benefits in violation of MCL 418.354(11). A Magistrate reversed the Director’s ruling but also concluded that the UAW had no authority to bind Mr. Arbuckle since he was retired. MCAC reversed noting that GM was permitted to coordinate Mr. Arbuckle’s compensation rate per statute. The Court of Appeals reversed and the Supreme Court heard oral arguments in lieu of granting leave to appeal.

The Supreme Court first considered the preemption question, i.e. whether the highest court of our State was to apply federal law by virtue of the state substantive law claim being inextricably intertwined with consideration of the terms of the labor contract, which was governed by the Labor Management Relations Act, 29 USC 185(a). The Court held that they must apply federal law in the case.

The Court noted that MCL 418.354(14) permits parties to a CBA to decline to coordinate the employee’s workers’ compensation benefits with his or her disability pension benefits. The central issue was whether the 1990 agreement provided vested or nonvested benefits to Mr. Arbuckle. Under federal law, a union may represent and bargain for already-retired employees only with regard to nonvested benefits. However, if an employer explicitly obligates itself to provide vested benefits, that promise is rendered forever unalterable without the retiree’s consent.

Seeking guidance from the 6th Circuit, our Supreme Court determined that, because the language of the initial agreement and all subsequent agreements had an express durational limit, the agreement did not vest any benefits to Mr. Arbuckle. GM was allowed to coordinate Mr. Arbuckle’s workers’ compensation benefits with his disability pension benefits.

Submitted by Stephen A. Cooley

Further Implications for Overtime Pay: Flores v. City of San Gabriel
Last quarter, I wrote an article explaining updates to the overtime regulations under the Fair Labor Standards Act. These changes, effective December 1, 2016, will allow many more salaried employees to receive overtime pay for working more than 40 hours per week. Currently, salaried employees are eligible for overtime pay if they earn less than $23,600 annually; this limit will be raised to $47,476.

A recently decided – and first of its kind – case, Flores v. City of San Gabriel, 824 F.3d 890 (9th Cir. 2016), carries further implications for overtime pay. If adopted in this jurisdiction, Flores has the potential to dovetail with the new Department of Labor overtime regulations and result in further increased labor costs for businesses.

In Flores, the City of San Gabriel administered a flexible benefit package that provided employees with an allowance to purchase health insurance and other benefits. Employees who declined some or all of these benefits received a cash payment for the unused portion of their allowance. These cash-in-lieu of benefit payments were not incorporated into the employees’ pay when overtime was calculated. The City was sued under the legal theory that it violated the Fair Labor Standards Act by excluding the cash-in-lieu payments from its overtime calculations. Essentially, the employees argued that they were underpaid for overtime hours worked.

The Flores court found that the employer’s cash-in-lieu payments were “compensation for services” that must be included in the regular rate of pay for overtime purposes. The court also found that the employer’s exclusion of the cash-in-lieu payment from its overtime calculations was willful. The City had an opportunity to avoid liquidated damages pursuant to the good faith provision in 29 USC § 260, however, was noted to have “failed to take the steps necessary to ensure its practices complied with FLSA” and was further found to have “offered no evidence to show that it actively endeavored to ensure such compliance.” Flores at 905. Ultimately the employer was held liable for double the amount of unpaid overtime for the three years prior to the complaint being filed.

As of now, Flores is an isolated case out of the 9th Circuit with no binding precedential value in Michigan. However, this is an interesting development that we will continue to monitor. Employers should still be tracking the number of hours worked by their employees to determine the extent to which the new Department of Labor regulations will affect their operations.

I will note that the House of Representatives passed HR 6094 on September 28th which seeks to delay by 6 months the effective date of the new overtime regulations. However, if passed in the Senate, this delay will likely not have the votes to overcome a certain veto from President Obama.

Submitted by Brian A. Zielinski

Michigan Adopts Medical Marijuana Dispensary Model: No Impact on WDCA or Employers’ Substance Abuse Policies
On September 20th, Governor Snyder signed three bills into law – HB 4209, HB 4210, and HB 4827 – that legalize and regulate medical marijuana edibles and dispensaries. Given these significant changes to the law, it is an opportune time to review the relationship between medical marijuana and the WDCA, employers’ substance abuse policies generally, and also to speculate on the long-term treatment of medical marijuana under the WDCA.

The Michigan Medical Marijuana Act previously used a caregiver model to dispense medical marijuana, allowing a caregiver to grow up to 12 plants for a qualifying patient. The changes just signed into law allow municipalities to create ordinances allowing dispensaries and provisioning centers, and create the Medical Marijuana Licensing Board to regulate virtually every aspect of marijuana production and distribution. With these changes, Michigan will join the majority of other states that have legalized medical marijuana in implementing a dispensary system.

It is significant that these new bills do not alter Section 315(a) of the Worker’s Disability Compensation Act which exempts medical marijuana treatment from reimbursement. In fact, a review of workers’ compensation statutes in other jurisdictions allowing medical marijuana shows no correlation between legalization and changes to workers’ compensation statutes in this regard.

Instead, whether medical marijuana becomes a reimbursable treatment will depend on medical evidence. Currently, the Official Disability Guidelines (ODG), American College of Occupational and Environment Medicine Guidelines (ACOEM), and state medical treatment guidelines fail to list marijuana as a viable treatment option. This is due to the fact that there are no quality controlled clinical data with cannabinoids, which is partially the result of marijuana’s schedule I classification under the Controlled Substances Act.

In addition, this change does not impact an employer’s ability to implement its substance abuse policies including: forbidding employees from reporting to work under the influence, forbidding employees from distributing drugs, searching workspaces upon a reasonable suspicion, and reserving the right to drug test employees in clearly defined circumstances.

Longer term, medical marijuana is thought to have the potential to replace higher-cost opioids in medical treatment. This would likely result in lower costs for insurance companies; however, no comprehensive studies examining the extent of these cost savings have yet been published.

Further developments in this area will depend on an interesting interplay between local governments (allowing dispensaries through zoning ordinances), state governments (legalizing medical marijuana dispensaries and decriminalizing possession/sale for medical purposes), and the federal government (reclassifying marijuana under the Controlled Substances Act and encouraging further study).

Submitted by Brian A. Zielinski
Three-Way Collision: Surviving the Intersection of ADA, FMLA, and Workers’ Compensation
When an employee alleges a workplace injury, employers need to know how to respond correctly. It is important to have an understanding of what the right procedures are when applying the ADA, FMLA, and Workers Comp rules to real life situations. A few examples may help explain how an employer should respond when facing questions under multiple sets of rules simultaneously.

Example #1 involves an employee who suffers a workplace injury that causes a femur fracture and requires subsequent surgery. If the injury is truly work-related, of course the employee would be entitled to receive Workers Comp benefits covering wage loss and medical treatment. However, the FMLA is the next consideration for employers. If an employee is FMLA eligible, employers need to immediately start running their FMLA playbook. That is to say, employers need to notify the employee, in writing, that their Workers Comp leave is in fact being covered under the FMLA, is being designated as FMLA leave, and will run at the same time as the employee’s 12-week FMLA entitlement.

When the FMLA’s 12-week leave period has expired, the employee may still require a leave of absence as part of their recovery. In this instance, an employer needs to immediately switch gears and examine whether the employee has a disability that is protected under the ADA. If an employee is in fact protected under the ADA, the employer may have to provide additional leave as an accommodation to the employee if they remain unable to return to work. Further, if the employee can return to work, but has some restrictions, the employer may need to accommodate those restrictions.

Example #2 involves an employee who suffers a workplace injury that causes a wrist fracture, but surgery is not necessary, and the employee can return to unrestricted work in less than 12 weeks. Again, if the injury is in fact work related, the employee would be entitled to benefits under Workers Comp. Similarly, they would be entitled to FMLA leave if they qualified. However, in this instance, it is unlikely that the ADA would come into play. This type of injury is unlikely to be classified as a disability under the ADA, unless further complications arise and the employee needs continued treatment and restrictions. Therefore, the employer should proceed with their Workers Comp and FMLA procedures, and should only consider the ADA’s requirements if the employee’s recovery and return to work do not progress as expected.

Example #3 involves the same employee and workplace injury as in Example #1. However, this time the employee does not meet the requirements to receive FMLA leave. This would most commonly occur when an employee has not been employed long enough. In this case, employers would do well to take a serious look at whether or not the employee may be entitled to leave under the ADA as a reasonable accommodation. It is also worth noting that the ADA does not specify how much leave an employee is entitled to take, but instead applies the test of whether the leave granted to the employee would be a reasonable accommodation that does not create an undue hardship for the employer. While “undue hardship” is hard to define, several courts have held that ADA leave as an accommodation cannot simply run for an indefinite amount of time.

Example #4 involves the same employee and workplace injury as in Example #2. However, this time the employee is able to return to work after 8 weeks, but with restrictions. If an employee accepts this type of favored position, the time spent working in this new job would not count towards their 12 weeks of FMLA leave. Further, if the employee has not yet exhausted their 12 weeks of FMLA leave when they return from favored work, they do not waive their right to reinstatement. That is to say that whenever the employee is able to transition back to unrestricted activities, they have the right to be reinstated to their previous position (or an equivalent one), as long as they can perform the essential functions of the position.

Of course, every situation is different, and it’s not always easy to apply the FMLA and ADA rules correctly in the heat of the moment. That’s why it is important to at least know what your responsibilities are as an employer, and put in place the procedures that can help you abide by these laws once you actually need to.

Submitted by Jonathan T. Rea

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 Stephen Cooley at scooley@hanbalazar.com