In this month’s NC Chamber Legal Institute Sidebar, we’re reviewing a recent case in which the Court of Appeals undermined landmark 2011 workers’ compensation reform legislation.

 

Since 1929, North Carolina’s workers’ compensation system has generally operated as what is commonly referred to as the “Grand Bargain,” which is a compromise between workers, who give up the right to sue their employer for most injuries sustained on the job, and employers, who provide coverage to injured employees within the pre-set terms of the workers’ compensation system. In exchange for funding this insurance, employers cannot be sued in the State’s courts for the injury to the employee (with exceptions, of course, for example, injuries intentionally inflicted on an employee by the employer), and a system is in place to put defined values on the degree of injury suffered by the employee.

 

Under workers’ comp, an employee is entitled to compensation for injuries incurred on the job without regard to whether that injury was caused or contributed to by the negligence of the employee. It is essentially an insurance policy for on-the-job injuries and a no-fault system. It is intended to be compensatory only and not punitive. Workers’ comp claims are adjudicated before a Deputy Commissioner and may be appealed to the full NC Industrial Commission where three of the six members review the Deputy Commissioner’s decision.

 

Prior to 2011, North Carolina law contained a 400-week cap on the obligation to pay temporary total disability benefits. The problem was many injured employees were nonetheless awarded lifetime benefits, which served as an annuity for many plaintiff’s lawyers.

 

When the time frame for temporary total disability and partial disability was extended to 500 weeks in 2011, the General Assembly narrowed the law on how an injured worker could receive lifetime benefits, despite strong protests from the plaintiffs’ bar. The 2011 legislation allowed for “extended benefits” that were available only in certain cases. To ensure that a worker who did not automatically fit into one of the categories for eligibility, but who was injured to the same extent as a worker who was, the General Assembly allowed for extended benefits beyond 500 weeks where the worker could satisfy a new standard of “total loss of wage-earning capacity.” The General Assembly also provided a mechanism for claimants to receive education and retraining to be paid for by the employer. By placing a limit on the duration of disability benefits, and providing for retraining for those injured workers who did not qualify for extended benefits, the amendment encouraged and incentivized employees to return to the workforce.

 

Sturdivant v. NC Department of Public Safety (“DPS”) involves an employee who aggravated a pre-existing back injury in the course of his job in 2011. DPS initially denied his claim, but a Deputy Commissioner ruled in 2013 that the injury was compensable. The parties entered into a consent agreement whereby DPS accepted the finding of compensability and began to pay temporary total disability benefits. Subsequently, in 2020, Mr. Sturdivant sought extended benefits – benefits beyond the 500-week limit, as provided under the 2011 amendment. His claim was denied at the Industrial Commission level on the basis that he failed to establish that he sustained a total loss of wage-earning capacity. Mr. Sturdivant then appealed to the NC Court of Appeals.

 

The Court of Appeals upheld the decision of the Industrial Commission. The court said Mr. Sturdivant failed to meet his burden of showing “total loss of wage-earning capacity,” because he did not show that there was no work that he could perform, and he produced no evidence that he searched for jobs suitable to his work abilities. Problematically, however, the court equated “total loss of wage-earning capacity” with “total disability.” This ignored a key part of the 2011 reforms.

 

It is a rule of construction that when the General Assembly uses a term or standard that differs from a comparable term or standard previously contained in the law, it indicates that the new term or standard has a meaning different from the existing term or standard. Else, why would the General Assembly have created the new standard when it could have simply reverted to the existing one?

 

Many advocates in the defense workers’ comp bar are concerned that “total disability” provides a lower bar than “total loss of wage-earning capacity.” In fact, utilizing standard rules of construction, an argument can be convincingly made that the General Assembly fully intended the latter showing to be more difficult. While workers’ compensation has been aptly described as a statutory insurance program, it was not intended to be a retirement plan. Plaintiffs’ lawyers predictably will use this decision to argue that the 500-week cap on disability claims is inapplicable to their disabled client, effectively rendering illusory the 500-week cap. Another rule of construction is the presumption that the legislature does not incorporate meaningless language in its bills.

 

The impact of the Sturdivant decision could be significant. Since 2011, insurers and self-insured companies have based premiums and claims reserves on a clear reading of the law – that benefits for temporary total disability were capped at 500 weeks except in the most rare and extreme cases. Reinsurance companies that provide catastrophic coverage for insurers and self-insured employees may also now be on the hook for a lifetime of benefits that they, too did not underwrite for, reserve for, or collect premiums on, for the past 12 years.

 

In essence, the Sturdivant decision undermines the “Grand Bargain” and the landmark 2011 workers’ compensation reform legislation.

 

The next step is for the NC Supreme Court to address the issue on appeal, or the General Assembly might once again clarify their intentions with respect to the workers’ compensation program.