***This article is part of a series. If you haven’t read from the beginning please start here: WC 2.0- The Work Comp Claims Managment Program.***
We interrupt our tutorial on WC 2.0 to discuss some breaking news. That is, the recent ruling by the Florida Supreme Court on the Castellanos v. Next Door Company.
In a 5-2 decision the court decided that the attorney fee schedule in 440.34 of the WC law was unconstitutional. This was a “facial” challenge, meaning it ruled the schedule to be unconstitutional in all cases, as opposed to an “as applied” challenge, where it found it to be unconstitutional in this specific case.
The basis of the challenge was that the law created an “irrebuttable presumption”, resulting in a situation where an injured worker (IW) could not adequately access the WC system due to lack of attorney representation. The reasoning was that the WC system had become so difficult to navigate that an injured worker, particularly with a complex case that only involved a relatively small judgment amount, would be unable to receive the compensation promised by statute because no attorney would take the case.
The reason this law and fee schedule were enacted was to reduce attorney involvement in the WC system. It sought to eliminate the exact situation described in Castellanos; an IW who ended up receiving only $822.70 in benefits, but due to the complexity of the case, the lawyer’s fees would have been 107.2 hrs. x $350/hr. or $37,520! The fee schedule would have limited the attorney’s remuneration to $164.54…an equally absurd number for the amount of hours expended by the lawyer.
Florida had close to the highest WC rates in the nation prior to the fee schedule. After the fee schedule was utilized, the rates dropped by roughly 60%. This decision essentially returns us to the conditions that resulted in the extremely high rates.
I expect the legislature to respond to this ruling as soon as it is practical to do so. Hopefully, they will be able to devise a formula that will allow for reasonable remuneration for cases involving smaller benefits. With the exception of WC attorneys, no one wants to see us return to the rates we saw in the past.
It is unknown just how much this will affect WC rates or increase litigation. NCCI (National Council on Compensation Insurance) may consider proposing a midterm rate increase, if they calculate that this will have an immediate and substantial impact on WC costs. However, it appears that there is little question that this will increase WC rates going forward.
I did not agree with this ruling. I felt the dissenting arguments were compelling and that this qualified more as an “as applied” challenge than a “facial” one. I do agree that having no way to contest the fee schedule results in an unfair burden on attorneys and could potentially have a chilling effect on an IW’s ability to receive compensation benefits. However, just because a law does not work in every situation, it does not mean the law is unconstitutional “on its’ face”. It means it is a badly written law…there are many of those. Again, I am hopeful the legislature can find that middle ground.
There is another case currently pending before the Florida Supreme Court, Westphal v. City of St. Petersburg. This case is challenging whether the maximum temporary total benefit period of 104 weeks is constitutional. I have looked at all Florida’s surrounding states and the lowest maximum limit I found was 350 weeks, so it appears our limit of 104 is unusually low. As mentioned above, however, it may be a bad law, but that does not mean it is unconstitutional. I would expect we will be receiving that opinion soon.
Finally, a more serious case Stahl v. Hialeah Hospital was at first accepted by the FL Supreme Court then later dismissed for jurisdictional reasons. This case struck directly at the core of the FL WC law, essentially challenging it as the “sole remedy” for employees injured at work. Definitely something to keep an eye on.
What Employers Need To Know:
Besides knowing that WC rates are likely heading up, it is important that employers understand the importance of doing everything possible to minimize attorney involvement. The best way to do that is to properly manage your WC claims. Please read blog post WC 2.5- What We Can and Can’t Do- Part 2 if you have not done so. It explains the costs involved with settlements- virtually always the result of attorney involvement.
I will also deal with this in my next blog post, as it is vital that you know what you can do limit settlements. It deals primarily with the way you and your employees treat an IW; simple but very effective advice.
TL;DR- Takeaways- The recent FL Supreme Court ruling on Castellanos v. Next Door Company invalidated the attorney fee schedule for WC cases. This will result in more litigation and higher WC rates. Another case, Westphal v. City of St. Petersburg will be decided soon and may also result in increased rates. All steps should be taken by employers to minimize attorney involvement in WC claims.
Next blog post:
WC 2.7- Reducing Settlements
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