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Judge Declares Comp Act Unconstitutional

Tuesday, May 9, 2017 | 1494 | 0 | 0 min read

An Alabama Circuit Court judge on Monday declared the state’s entire workers' comp system unconstitutional.

Judge Pat Ballard

Judge Pat Ballard

Judge Pat Ballard of the 10th Judicial Circuit in Jefferson County took issue with two statutory provisions that cap attorney fees and permanent partial disability benefits – but because the Alabama Workers’ Compensation Act contains a non-severability clause, he tossed the whole thing.

He stayed enforcement of his order for 120 days to give lawmakers a chance to cure the deficiencies he identified in Alabama Code Sections 25-5-68 and 25-5-90.

But the legislative session ends in less than two weeks, so lawmakers will have to act fast.

In Clower v. CVS Caremark Corp., Ballard found that Section 25-5-68 impermissibly subjects workers to differential treatment depending on whether they had permanent disabilities that were partially or totally disabling.

Section 25-5-68 provides that the maximum compensation payable for PPD “shall be no more than the lesser of $220 per week or 100% of the average weekly wage.”  Unlike the benefits available for totally disabling injuries, this is a hard cap that is not adjusted for inflation and increases in the cost of living.

Temporary total and permanent total disability benefits in Alabama are tied to the statewide average weekly wage, which is revised every year, but “PPD rates have stagnated in place at $220 per week for three decades,” Ballard noted. Providing temporarily disabled workers “with an indexed system of benefits and denying it to those permanently disabled (to an extent less than totally) makes no rational sense at all,” he opined.

Ballard also said he also thought there was “little credibility” for a benefit structure that pays the same $220 weekly benefit to a worker who had been making $350 per week and a worker who had been making $3,000 per week.

“There cannot conceivably be any more arbitrary, capricious, irrational, or attenuated idea than telling both workers that ‘equal protection of the laws’ means that they each get the identical amount,” Ballard contended.

What’s more, Ballard said an income of $220 per week would have kept a family of four above the poverty line when the Section 25-5-68 cap was imposed 30 years ago – but now that amount is 46.4% of the poverty level for the same family. "What once qualified as an adequate 'remedy' for those partially disabled no longer does,” Ballard said.

As the cost of living continues to rise, Ballard reasoned that the value of a $220 weekly benefit has “rotted away” to the point that it is “too infirm to qualify as a ‘remedy’ sufficient to meet the requirement that the Workers’ Compensation Act involve adequate ‘quid pro quo’ to pass constitutional muster.”

Ballard then went on to find the attorney fee cap in Section 25-5-90(a) unconstitutional as well.

The statute limits a claimants’ attorney to a fee of no more than 15% of the compensation awarded to an injured worker – without any exception.

Last year, the similarly unyielding nature of Florida’s attorney fee statute led the state’s Supreme Court to strike the statute down as unconstitutional. Ballard said he found the Florida Supreme Court’s reasoning in Castellanos v. Next Door Co. to be persuasive.

He also said he agreed with the reasoning of the Utah Supreme Court, which declared the Utah fee state unconstitutional in a case called Injured Workers' Association of Utah v. State.

The Utah court’s decision had been based on the fact that the state constitution placed the regulation of attorney fees falls within the judicial branch's authority. In Alabama, Ballard said, the task of regulating attorney fees has historically been a function of the judiciary as well. He said he viewed Section 25-5-90(a) as a “legislative trespass into a function reserved to the judicial branch of government.”

Lawrence King of King Simmons is representing Nora Clower, the injured worker whose case provided the opportunity for Ballard to address the constitutionality of Sections 25-5-68 and 25-5-90.

King said Monday that he didn’t see Ballard’s ruling as establishing any sort of “doomsday scenario,” since the Workers’ Compensation Act remains the controlling law for the next 120 days.

He said he thought it would be “a heavy lift” for some sort of amended version of the law to get through before the end of the regular legislative session, but he said it’s possible the governor could order a special session so something can be enacted.

King said if lawmakers don't act, the parties will have to report back to the judge, the judge’s ruling will take effect, and most likely he will have to defend the ruling before the appellate court.

But King said he hoped the decision will “prompt discussion about reforms” with the members of the legislature and that they will “change the law so we don’t have to have what would amount to a constitutional crisis.”

The “lowest hanging fruit” for lawmakers would be changing the $220 cap, King suggested.

He acknowledged that “reasonable minds can differ as to what the limit might should be,” and he conceded that it “shouldn’t be unlimited.” But King said he thought “reasonable people can sit down and come up with something” that would be acceptable to payers and workers alike.

King said that’s what lawmakers did in 1985 – the problem was that “what was reasonable 30 years ago has rotted in the barrel” as inflation and the cost of living rose year over year.

The attorney fee cap then compounded the problem, because the low rate of PPD meant an attorney’s prospective fee from taking on a client with a PPD claim wouldn’t be very much, King said.

The joint operation of Sections 25-5-68 and 25-5-90 created “a huge disincentive for lawyers to get involved,” he said, and “in far, far too many cases, injured workers are being left to the wolves because they can’t find a lawyer.”

While King said many members of the claimants’ bar will do pro bono work and “try to help where we can,” the attorneys also had to make ends meet and not every worker could get representation.

Michael Gruber, president of the national Workers’ Injury Law and Advocacy Group, said Monday that Ballard’s decision affirmed “pretty much everything we’ve been saying about workers’ compensation for years.”

WILG’s position has been that as states have cut benefits to injured workers “the grand bargain between labor and business has been breached” and that the amounts of workers recover under the comp systems of many states are not an equivalent for a tort claim, Gruber said.

He said it would be interesting to see if other states participating in “the race to the bottom” will take Ballard’s decision into account when considering further reforms to erode the rights and benefits available to workers.

Charley Drummond, a defense attorney with Fish Nelson & Holden said he was sure the judge’s decision isn’t going to be the last word on the constitutionality of Alabama’s comp laws. He said an appeal is bound to be filed.

He acknowledged that many had viewed the $220 cap as “antiquated,” but Drummond said he didn’t believe that made it unconstitutional.

But David Nomberg, a claimants’ attorney with the Nomberg Law Firm, said he saw Ballard’s decision as “a really big deal that’s been a long time coming.” He said he was hopeful that “stakeholders can come together and try to enact some meaningful change” now that Ballard’s ruling was bound to spur people into action.

Fellow claimants’ attorney Stevan Goozee said the claimants’ bar had been trying to get the legislature’s attention for years, as lawmakers “kept passing up opportunities to amend the act” despite complaints that the Alabama comp act was the worst in the country.

Goozee said “it’s a fluid situation” in Alabama now, since the judge “has apparently put this in the hands of the legislature.”

For the next 120 days, it will be “a wait and see thing,” he opined.  

Ballard was elected to the Jefferson County Circuit Court in 2014, running as a Democrat. His current term expires in January 2021. Before he took the bench, Ballard had been a civil litigator, and before he was a lawyer, he worked as a carpenter for 15 years.

To read his decision, click here.

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