Opinion
NO. 2020-CA-000287-WC
05-29-2020
ARAMINTA GILL APPELLANT v. MAR-CONE APPLIANCE PARTS CO.; HONORABLE JOHN H. MCCRACKEN, ADMINISTRATIVE LAW JUDGE; and WORKERS' COMPENSATION BOARD APPELLEES
BRIEF FOR APPELLANT: Christopher P. Evensen Louisville, Kentucky BRIEF FOR APPELLEE MAR-CONE APPLIANCE PARTS CO.: John S. Harrison Louisville, Kentucky
NOT TO BE PUBLISHED PETITION FOR REVIEW OF A DECISION OF THE WORKERS' COMPENSATION BOARD
ACTION NO. WC-15-61007 OPINION
AFFIRMING
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BEFORE: COMBS, KRAMER, AND L. THOMPSON, JUDGES. COMBS, JUDGE: This case is on appeal from a decision of the Workers' Compensation Board (the Board). The issue before us is a challenge to the constitutionality of KRS 342.730(7), which involves retroactive application and allows for an offset against temporary total disability benefits (TTD). After our review, we affirm the Board.
Kentucky Revised Statutes.
Appellant, Araminta Gill (Gill), alleged a November 5, 2015, injury to her upper extremities/shoulders in the course and scope of her employment with the Appellee, Mar-Cone Appliance Parts Co. (Mar-Cone).
On November 21, 2018, the ALJ rendered an opinion, award, and order. The ALJ awarded Gill an additional period of TTD from October 10, 2016, to January 17, 2017. The ALJ also found that Mar-Cone was entitled to an offset for wages that it paid to Gill during that period of time pursuant to KRS 342.730(7). That provision of the statute became effective on July 14, 2018, and provides as follows:
As Gill notes in her Brief, the ALJ amended the opinion, award, and order on reconsideration to reflect that the credit against TTD is limited to what Mar-Cone paid Gill for actual hours worked, less taxes withheld.
Income benefits otherwise payable pursuant to this chapter for temporary total disability during the period the employee has returned to a light-duty or other alternative job position shall be offset by an amount equal to the employee's gross income minus applicable taxes during the period of light-duty work or work in an alternative job position.
Gill appealed to the Board, arguing that retroactive application of KRS 342.730(7) is unconstitutional. By an order entered on February 6, 2019, the Board held the appeal in abeyance pending a final decision in Holcim v. Swinford, 581 S.W.3d 37 (Ky. 2019), then pending before the Kentucky Supreme Court. Holcim was decided on August 29, 2019, and the appeal was removed from abeyance by an order of the Board entered on November 14, 2019.
On January 31, 2020, the Board rendered an opinion affirming as follows in relevant part:
On appeal, Gill argues the 2018 amendment to KRS 342.730(7) is unconstitutional. We determine the ALJ properly applied the revision of KRS 342.730(7) effective July 14, 2018 to Gill's claim, pursuant to . . . Holcim v. Swinford, 581 S.W.3d 37, 41-44 (Ky. 2019). We also note we cannot determine the constitutionality of a statute, and therefore affirm.
. . .
While this statutory provision differs from that concerned in Holcim . . . , House Bill 2 noted that this statutory provision [KRS 342.730(7)] is also retroactive. In Holcim . . . , the Kentucky Supreme Court determined the amended version of KRS 342.730(4) regarding the termination of benefits at age seventy has retroactive applicability. However, the Court declined to address the constitutionality of the amended version of KRS 342.730(4) since it had not been properly raised as an issue before the Court and the Attorney General had not been timely notified of a constitutional challenge. Id. at 44. Based upon that decision, we find the ALJ properly applied the amended version of KRS 342.730(7).
On February 28, 2020, Gill filed a petition for review in this Court. Before us, Gill submits that retroactive application of KRS 342.730(7) violates the Contracts Clause of the Constitutions of the United States and of Kentucky and that it is an exercise of arbitrary power in contravention of Section 2 of the Kentucky Constitution.
As the Board noted, Holcim held that the amended version of KRS 342.730(4) regarding the termination of benefits at age seventy has retroactive applicability, and that although this case involves a different subsection of the statute, House Bill 2 noted that this provision of the statute is also retroactive. We agree.
In Holcim, the Court explained that although there was no mention of retroactivity in the express language of KRS 342.730(4), "the Legislative Research Commission note following the statute references the Act from which the statute was enacted and, as discussed, is exempt from the codification requirements, as it is temporary in nature. Thus, the legislature has made a declaration concerning retroactivity in this case." Id. at 44.
The Legislative Research Commission note following the statute also reflects that:
This statute was amended in Section 13 of 2018 Ky. Acts ch. 40. Subsection (2) of Section 20 of that Act reads, "Sections 2, 4, and 5 and subsection (7) of Section 13 of this Act are remedial and shall apply to all claims irrespective of the date of injury or last exposure, provided that, as applied to any fully and finally adjudicated claim, the amount of indemnity ordered or awarded shall not be reduced and the duration of medical benefits shall not be limited in any way."
The precise issue that Gill raises on appeal -- whether retroactive application of the amendments to KRS 342.730 is unconstitutional -- was not addressed in Holcim. However, Mar-Cone draws our attention to a recent decision of this Court holding that retroactive application of KRS 342.730(4) does not infringe on the contract impairment clauses of the Kentucky and United States Constitutions. In Adams v. Excel Mining, LLC, No. 2018-CA-000925-WC, 2020 WL 864129 (Ky. App. Feb. 21, 2020), another panel of this Court explained as follows:
Adams is currently pending on appeal before the Kentucky Supreme Court in Terry Adams v. Excel Mining, LLC, No. 2020-SC-000137-WC. --------
[Appellant] claims that the retroactive application of [KRS 342.730(4)] 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.
. . .
[W]e 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 [v. Webster Cty. Coal, LLC (Dotiki Mine), 529 S.W.3d 759, 768 (Ky. 2017)]. 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."
Id. at *2-3.
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 are compelled to agree with Mar-Cone that the analysis here is the same. KRS 342.730(7) serves a legitimate public purpose -- preventing the duplication of benefits. Other sections of the statute also provide for a credit or offset to that end. "Effective December 12, 1996, the legislature enacted KRS 342.730(6) to prevent workers from receiving duplicate private disability and workers' compensation benefits." Dravo Lime Co., Inc. v. Eakins, 156 S.W.3d 283, 290 (Ky. 2005). Also effective on December 12, 1996, KRS 342.730(5) provides that TTD and permanent total disability benefits shall be offset by unemployment insurance benefits. Moreover, as in Adams, the contracts at issue here are not between individuals and the state -- but among an employee, an employer, and a workers' compensation insurance provider.
Accordingly, consistent with our decision in Adams, we affirm the opinion of the Workers' Compensation Board.
ALL CONCUR. BRIEF FOR APPELLANT: Christopher P. Evensen
Louisville, Kentucky BRIEF FOR APPELLEE
MAR-CONE APPLIANCE PARTS
CO.: John S. Harrison
Louisville, Kentucky
(Emphases added.)