Opinion
NO. 2018-CA-000925-WC
02-21-2020
TERRY ADAMS APPELLANT v. EXCEL MINING, LLC; HONORABLE CHRIS DAVIS, ADMINISTRATIVE LAW JUDGE; AND WORKERS' COMPENSATION BOARD APPELLEES
BRIEF FOR APPELLANT: C. Phillip Wheeler, Jr. Pikeville, Kentucky BRIEF FOR APPELLEE EXCEL MINING, LLC: Terri Smith Walters Pikeville, Kentucky
NOT TO BE PUBLISHED PETITION FOR REVIEW OF A DECISION
OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-13-64729 OPINION
REVERSING AND REMANDING
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BEFORE: CLAYTON, CHIEF JUDGE; K. THOMPSON AND L. THOMPSON, JUDGES. THOMPSON, L., JUDGE: Terry Adams appeals from an opinion of the Workers' Compensation Board (hereinafter "Board") which upheld an Administrative Law Judge's (hereinafter "ALJ") order that he was permanently and totally disabled. The only issue before us concerns how long Appellant is to receive his workers' compensation benefits. We hold that Appellant is subject to the most recent version of Kentucky Revised Statutes (KRS) 342.730(4); therefore, we reverse and remand for the Board to enter a new award.
FACTUAL AND PROCEDURAL BACKGROUND
Appellant was a mine electrician when he suffered a workplace injury on October 3, 2013. He was 63 at the time of his injury. Appellant filed for workers' compensation benefits after his injury. A formal hearing was held before an ALJ on February 23, 2016. An award was entered on April 27, 2016, which found Appellant permanently and totally disabled. During his hearing before the ALJ, Appellant argued that the version of KRS 342.730(4) in effect at the time was unconstitutional. That version of the statute stated that workers' compensation benefits would terminate when the recipient became eligible for Social Security old-age benefits. The ALJ did not make a finding regarding the constitutionality of the statute.
Appellant appealed to the Board. The Board held the appeal in abeyance pending the outcome of Parker v. Webster Cty. Coal, LLC (Dotiki Mine), 529 S.W.3d 759 (Ky. 2017), which was before the Kentucky Supreme Court and was going to determine whether KRS 342.730(4) was unconstitutional. Parker found the statute unconstitutional. Once Parker was rendered, the Board ruled on Appellant's appeal. On May 18, 2018, the Board entered an order which upheld the ALJ's award of benefits. The Board also held that because the version of KRS 342.730(4) in effect at the time was unconstitutional, the prior version from 1994 would be applied. This version stated that benefits would be reduced by 10% when a recipient reaches age 65. Benefits would then be further reduced another 10% every year until the recipient reaches age 70, at which point they will no longer be reduced.
Appellant then appealed to this Court. Around the same time, a new version of KRS 342.730(4) was being drafted by the Kentucky Legislature. This new version went into effect on July 14, 2018. The new, and current, version of KRS 342.730(4) states in pertinent part that "[a]ll income benefits payable pursuant to this chapter shall terminate as of the date upon which the employee reaches the age of seventy (70), or four (4) years after the employee's injury or last exposure, whichever last occurs." The Legislative Research Commission (hereinafter "LRC") note that went along with the statute states that KRS 342.730(4) was to apply retroactively to all cases which have not been fully adjudicated, including those on appeal. This retroactive provision was not specifically set forth in the statute itself.
After Appellant appealed to this Court, we, on our own motion, held it in abeyance pending the outcome of Holcim v. Swinford, 581 S.W.3d 37 (Ky. 2019). The issue in that case was whether the current version of KRS 342.730(4) applied retroactively. The Holcim Court ultimately held that the LRC note applied and that the statute was retroactive. Id. at 44.
We then removed this case from abeyance.
ANALYSIS
Appellant argues that the Board erred in applying the 1994 version of KRS 342.730(4), that the retroactivity of the current version of KRS 342.730(4) is unconstitutional, and that he is entitled to full benefits for life. The only issue we need address is whether the current version of KRS 342.730(4) is constitutional. If it is, then Holcim requires that it be applied to Appellant's benefits.
Appellant argues that the retroactivity provision is an unconstitutional ex post facto law. The prohibition against ex post facto laws found in the United States Constitution and the Kentucky Constitution only applies to criminal matters, Nicholson v. Judicial Ret. & Removal Comm'n, 562 S.W.2d 306, 308 (Ky. 1978); however, Section 19(1) of the Kentucky Constitution and Article 1, Section 10, Clause 1 of the United States Constitution prohibit laws which impair the obligation of contracts. This is Appellant's argument. He claims that the retroactive application of this statute infringes on his rights to recover workers' compensation benefits pursuant to the statute in effect at the time of his injury. In other words, he agreed to take part in Kentucky's workers' compensation scheme and demands he receive the benefits he was entitled to at the time he was injured, not pursuant to the new retroactive regulation.
Despite the seemingly unequivocal language of the federal and state Contract Impairment Clauses, "[a] constitutional prohibition against impairing the obligation of contracts . . . is not an absolute one to be read with literal exactness. The Contract Clause does not prevent a state from enacting regulations or statutes which are reasonably necessary to safeguard the vital interests of its people."Maze v. Bd. of Directors for Commonwealth Postsecondary Educ. Prepaid Tuition Tr. Fund, 559 S.W.3d 354, 368 (Ky. 2018) (citation omitted). When determining whether a legislative act violated the contract impairment clause, we are to utilize the following standard:
(1) whether the legislation operates as a substantial impairment of a contractual relationship; (2) if so, then the inquiry turns to whether there is a significant and legitimate public purpose behind the regulation, such as the remedying of a broad and general social or economic problem; and (3) if, as in this case, the government is a party to the contract, we examine "whether that impairment is nonetheless permissible as a legitimate exercise of the state's sovereign powers," and we determine if the impairment is "upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption."Id. at 369.
"The first step . . . is determining 'whether the state law has, in fact, operated as a substantial impairment of a contractual relationship.'" Id. at 369-70 (citations omitted).
A significant consideration in this step of the analysis is the extent to which the industry subject to the contract has been regulated in the past. The rationale for this rule is thusly stated: "One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them."Id. at 370 (citations omitted). Here, we believe the new law substantially impairs Appellant's benefits. Although the workers' compensation scheme is heavily regulated, past versions of KRS 342.730(4) have allowed a benefit recipient to receive benefits for life. In fact, the 1994 version that was to be applied allowed Appellant to receive benefits for life, although they were subject to reduction from time to time. The current version terminates benefits once Appellant reaches 70 years of age.
The second stage of the . . . analysis involves a determination of whether the newly-imposed conditions that impair the contract can be justified by a significant and legitimate public purpose. Among the purposes that justify such impairment is legislation aimed at the remedying of a broad and general social or economic problem.Id. at 371 (citations omitted). The Kentucky Supreme Court has found that limiting the duration of benefits is justified by a legitimate public purpose. The Court found that limiting the duration of benefits solves two economic problems: "(1) it prevents duplication of benefits; and (2) it results in savings for the workers' compensation system." Parker, 529 S.W.3d at 768. This is evident from the fact some version of limiting the duration of benefits has been in effect in Kentucky since the 1996 version of KRS 342.730(4).
The third stage of the . . . analysis examines whether the adjustment of "the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation's] adoption." Analysis under this prong varies depending upon whether the State is a party to the contract. When the State itself is not a contracting party, "[a]s is customary in reviewing economic and social regulation, . . . courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure."Maze, 559 S.W.3d at 372 (citations omitted). The contracts at issue here are not between individuals and the state, but between an employee, an employer, and a workers' compensation insurance provider. We, therefore, will defer to the judgment of the legislature.
We believe retroactive application of KRS 342.730(4) is reasonable and appropriate. As previously stated, limiting the duration of benefits has been a part of the workers' compensation system since 1996. Parker, supra, found the limitation which applied at that time to be unconstitutional. The Kentucky Legislature had to act quickly to return the workers' compensation system to the status quo. Had the legislature not acted, employees who still had workers' compensation claims which were not final between the rendering of Parker and the effective date of the current version of KRS 342.730(4) would be entitled to some amount of benefits for life. This would have placed a large financial burden on the workers' compensation system, employers, and insurers. Holcim, supra, holds that the Kentucky Legislature specifically intended that the current version of KRS 342.730(4) apply retroactively. As we have found it is constitutional, we conclude that it applies in this case.
CONCLUSION
Based on the foregoing, we reverse and remand this case to the Board. This case was still pending on appeal when the new version of KRS 342.730 became effective; therefore, pursuant to Holcim, it applies here. We hold that the retroactive application of KRS 342.730(4) does not infringe on the contract impairment clauses of the Kentucky and United States Constitutions. On remand, we instruct the Board to award Appellant benefits subject to the current version of KRS 342.730(4).
ALL CONCUR. BRIEF FOR APPELLANT: C. Phillip Wheeler, Jr.
Pikeville, Kentucky BRIEF FOR APPELLEE EXCEL
MINING, LLC: Terri Smith Walters
Pikeville, Kentucky