Making the Most of the New Misrepresentation During Hiring Defense

Tuesday, July 24, 2012 | 0

The revisions to the North Carolina Workers’ Compensation Act provide a new and much needed defense to workers’ compensation claims. N.C.G.S. § 97-12.1 now permits the complete denial of a claim where an employee engages in misrepresentation about his physical abilities during the hiring process.  This article examines the provisions of the new law and suggests “Good, Better, and Best” practices for employers to maximize usage of the new defense.

Reason for New Law – Freeman v. Rothrock

The reason the Legislature added N.C. Gen. Stat. § 97-12.1 was the Supreme Court’s decision in the case of Freeman v. Rothrock. Randy Freeman was a truck driver with a long history of lower back problems and permanent work restrictions that precluded him from returning to work as a truck driver. Nevertheless, plaintiff applied for a job as a truck driver with J.L. Rothrock. On his job application, plaintiff denied having any physical limitations, and he also falsely reported his medical history to the doctor during his DOT exam. Plaintiff began work for the employer in June 2000. On March 11, 2002, plaintiff was cranking a dolly when he suffered pain in his low back. The claim was initially accepted as compensable, but defendants later sought to terminate benefits based on plaintiff’s willful misrepresentation at the time of hiring. While the Court of Appeals ruled in favor of defendants, the decision was ultimately overturned by the North Carolina Supreme Court.  As a result, the plaintiff who deceived his employer into hiring him for a job he was not qualified to perform was entitled to benefits at the expense of that same employer.

N.C.G.S. § 97-12.1 – The New Defense of Misrepresentation

In response to the decision in Freeman, the North Carolina Legislature added a new defense for all claims with dates of injury on or after 24 June 2011.  The new statute reads:

§ 97-12.1. Willful misrepresentation in applying for employment.

No compensation shall be allowed under this Article for injury by accident or occupational disease if the employer proves that (i) at the time of hire or in the course of entering into employment, (ii) at the time of receiving notice of the removal of conditions from a conditional offer of employment, or (iii) during the course of a post-offer medical examination:

(1) The employee knowingly and willfully made a false representation as to the employee's physical condition;

(2) The employer relied upon one or more false representations by the employee, and the reliance was a substantial factor in the employer's decision to hire the employee;

(3) There was a causal connection between false representation by the employee and the injury or occupational disease.

There are several points in the hiring process when an actionable misrepresentation may occur.  The first is “at the time of hire or in the course of entering into employment.”  The statute is not limited to the employment application. An employee who makes false misrepresentations during the interview process would fall under this statute.  The second point is “at the time of receiving notice of the removal of conditions from a conditional offer of employment.” This addresses employers who are covered by the ADA, and who may not be able to ask specific questions about a candidate’s abilities until after making a conditional offer. The last point at which the defense may apply is “during the course of a post-offer medical examination.”  An employee who misrepresents his or her condition to a medical provider, and not just the employer, is also covered by this new section.

While the statute provides an opportunity for denial of claims by fraudulent employees, it also poses a number of challenges. The defendants have the burden of proving all three elements of the defense. This can be difficult for several reasons. First, the employer must prove that the employee “knowingly and willfully” made a “false” representation.  If plaintiff was only negligent or careless in his actions, the standard is not met. A representation that is only “evasive” or “incomplete” may not be sufficient to meet the standard either. Defendants next must prove that the employer “relied upon” the misrepresentation and that the reliance was a “substantial factor” in the hiring decision.

If there is no evidence that the employer relied upon the representation, or if the evidence shows the representation only went to a minor issue in the hiring process, then the burden is not met. Defendants lastly must prove “a causal connection” between the representation and the injury or occupational disease. Thus, if the plaintiff lies about the physical condition of his knees, but the injury he suffers is to his shoulders, then there would not automatically be a causal connection, and the defense would not apply.

“Good, Better, and Best” Practices for Employers

The new misrepresentation defense makes the hiring process far more important than it has traditionally been in workers’ compensation claims.  Documenting closely what occurred during the hiring process is essential if a case ultimately goes to litigation.  And, since nobody knows in advance which employee is going to suffer an injury, all employees must be treated the same in the hiring process.  However, every company’s resources and hiring needs are different.  Therefore, the following are “Good, Better, and Best” practices for employers to use in the hiring process.
     
Good:  At the very minimum, every employer should include a form or a statement in the job application packet which states (1) that the employee has been given an opportunity to discuss and fully understands the essential physical functions of all positions being applied for, (2) that by signing the form he is certifying that he is capable of performing those functions with or without reasonable accommodations, (3) that the employer is relying on the employee’s certification, and that such reliance is a substantial factor in the hiring decision, and (4) that the employee understands that misrepresentation may result in the denial of workers’ compensation benefits if the employee suffers an on-the-job injury. The employee should be required to sign and date this certification. This will provide documentary evidence to support the elements of the defense. However, it leaves the door open for an employee to claim that he was not actually informed of the job requirements or that he did not “fully understand” everything required.
   
Better: Employers should prepare a job description for every position in the company. The job description should contain a list of the essential physical components of the job and specific weight amounts and time requirements for all such components. At the bottom of the job description, the employee should be required to sign and date a statement containing the elements listed above under the “Good” practices. This should be attached to the job application, and no employee should be considered for employment who does not sign the statement.  This practice is better because it provides evidence refuting a claim by the employee that he did not understand the requirements of the job.  It also may result in some potential fraudulent applicants “self selecting” not to apply for the job, which is the optimal result for all involved.
   
Best: The best practice, in addition to having the employee sign a certification on a complete job description, is to send the employee for a post-offer medical examination.  This will not only provide actual testing of the employee’s abilities, but it will also trigger another point at which a fraudulent applicant will have to continue a willful misrepresentation in order to get the job.  This will effectively double the amount of evidence available for use in defense of any claim in the future.  It may also result in discoveries about the plaintiff’s physical condition (such as surgical scars or atrophy) that can be further investigated with the employee since the hiring process is now in the post-offer stage.  The downside of a physical examination is the expense involved. 

However, the amount of money spent on such an exam will pale in comparison to the amount of a serious workers’ compensation claim that could have been avoided either by not hiring the person or by being able to successfully defend a claim under the new misrepresentation defense.
   
Conclusion

The defense of misrepresentation provides a powerful new weapon for employers in North Carolina workers’ compensation claims.  However, it is not an easy defense to establish.  Employers must know the requirements of the new statute and adjust their hiring processes if they intend to use it successfully.  The “Good, Better, and Best” practices listed above are steps that all employers can take to maximize their chances at success and to limit exposure in claims made by fraudulent employees.

Michael Ballance is the shareholder-in-charge of the Raleigh Area office of Dickie McCamey & Chilcote law firm.