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Workers Compensation
University of North Carolina School of Law
Ballance, Michael W.

Ballance, Fall 2014
I. History and Purposes of WC
·         Historical Development of Workers’ Compensation Acts
o         Prior System—Civil Court (1850-early 1900s)
§  You had to sue your employer directly for injuries suffered at work
§  Trial by jury—no administrative procedure, no quickened process
§  Theories:
·         Negligence of employer
·         Intentional tort by employer
§  Defenses—“The Three Horsemen of the Apocalypse”
·         1. Contributory Negligence
·         2. Assumption of the Risk
·         3. Fellow Servant Rule (can’t sue your employer for negligence of co-worker)
o         Practical Results—Pre-Compensation
§  Most injured workers received no compensation at all
§  Either destitute or thrown on the charity of family, church, or community
§  Those who did win, usually won very little
o         Impetus for Change?
§  Judicial limitation of common law defenses
§  Legislative abrogation
§  Mutual intolerability—too many uncompensated injuries for employees; too little predictability for employers
§  Labor/Socialist/Communist movements started gaining speed—employers could see that something needs to be done about this because the people are going to get mad
§  Beginning of progressive movement—we are a civilized society, and we shouldn’t be doing this
§  Workers Comp was a compromise—meet in the middle in terms of figures
§  Philosophy underlying WC—an enlightened society would feel obligated to pay for their worker
§  The employer has to pay insurance premiums that is then passed onto the consumer—spreads the risk and categorizes items—the riskier the product, the more expensive it will be
§  System: laws that require employers to have workers comp; also built in that if you get too many injured workers, then you cannot get insurance—so built-in system to incentive employers to make the workplace safe
Conrad v. Cook-Lewis Foundry Co. (NC) = P and colored man (Squires) were employees at D—Squires said something to P that he took offensive/insulting; P then struck Squire with a shovel—Squires left shop, went to employer’s office, and received wages—1/2 hour later, went back to shop, put barrel of a shotgun through a hole in the wall, and shot the P in the back—inflicting serious and permanent injury
·         in order to be compensated: must be an occurrence of an (1) injury by accident (2) arising out of and (3) in the course of the employment
·         “injury” and “personal injury” = only injury by accident arising out of and in the course of the employment, and shall not include a disease in any form, except where it results naturally and unavoidably from the accident
·         “out of”= refer to the origin or cause of the accident, and the words “in the course of” refer to the time, place, and circumstances under which it occurred
·         “in the course of employment”= one which occurs while “the employee is doing what a man so employed may reasonably do within a time during which he is employed and at a place where he may reasonably be during that time” to do that thing; or one which “occurs in the course of the employment and as the result of a risk involved in the employment, or incident to it, or to conditions under which it is required to be performed”
·         Holding= the injury arose out of and in the course of employment—REMANDED for a definite determination of the question of whether the P’s injury was occasioned by his willful intention to injure his assailant
II. Overview of Benefits
·         Compensates injured workers for injuries resulting from employment only
·         Provides compensation to employee for:
o         Loss of actual wage-earning capacity
o         Medical rehabilitation and palliative care
·         Awards are defined by statute
·         No awards for “pain and suffering”
·         Negligence is largely irrelevant
o         No punitive damages against employer
o         No bar against employee for contributory negligence
III. Explanation of Industrial Commission System
·         Industrial Commission—appointed board (politically oriented)
·         Administrative Proceeding= somewhat relaxed rules
·         Trial before an administrative law judge (no jury)
·         Appeal to the full commission—usually de novo review; dry record—no witnesses, only transcript and oral testimony
·         Appeal to appellate courts on errors of law only
·         Who is required to carry Workers Comp?  And who is covered by it?
o    Coverage Generally
§  WC law applies to injuries to “employees” hurt during “employment” with “employers”
o    To which “Employers” do WC laws apply?
§  Which employers are required to either (1) obtain WC insurance, (2) self-insured, or (3) face the consequences of not doing either?
§  A lot of people just go ahead and get it through their carriers
§  Self-Insured= Wal-Mart, GE, aka big companies—they post a bond with the industrial commission and prove that they’re big enough to self-insure
§  Otherwise, there are consequences
o    “Employers”
§  N.C. Gen Stat § 97-2: “employer” means the State and all political subdivisions thereof, all public and quasi-public corporations therein, every person carrying on any employment
§  Basic rule of thumb: if an employer regularly employs 3 or more employees in the same business or establishment
§  Key is regularly employ: even if business has high and low seasons, as long as there’s more than 3 employees then they have to have coverage
·         Agricultural and domestic services, where 10 or more full-time non-seasonal agricultural workers are regularly employed by the employer
o    MOST mom and pop farms are seasonal—legislative nods to small family farms—if agricultural/domestic pops up on exam, don’t forget its DIFFERENT than other employers
o    What is “Employment?”
§  N.C. Gen Stat § 97-2(1): in which three or more employees are regularly employed in the same business/establishment
o    “Employee”
§  every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written
·         doesn’t have to involve a signed employment K—can be farmer who pulls guys from the convenience store to work for him
·         very encompassing
§  including aliens, and also minors, whether lawfully or unlawfully employed
§  but excluding persons whose employment is both casual AND not in the course of the trade, business, profession or occupation as his employer
·         statutory language that defines what an independent contractor is
·         casual= not all the time
§  § 97-2(2): every executive officer elected or appointed and empowered in accordance with the charter and bylaws of a corporation SHALL be considered as an employee—may be exempt from coverage of the corp’s insurance K
·         if dealing with small business and non-coverage issues as P’s attorney= ask how the business is set up?  Is it a corporation?—go to Secretary of State’s office which will list the officers and the registered agent—if it’s a corp, then dig more
§  § 97-2(2): any sole proprietor or partner of a business or any members of an LLC may elect to be included as an employee under WC coverage of such business if he is actively engaged in the operation of the business and if the insurer is notified of his election to be so included
·         Employees v. Independent Contractors
o    Primary Area of Dispute
o    Significance:
§  Employees= Covered by the Act
§  Independent Contractors= NOT covered by the Act
o    How do you decide?
§  Apply ordinary common law tests= ALL ISSUE OF “CONTROL”
·         An independent contractor “exercises an independent employment and contracts to do certain work according to his OWN JUDGMENT AND METHOD, without being subject to his employee except as to the result of his work”
o    Ex: Picasso
·         In contrast, an employer-employee relationship exists “where the party for whom the work is being done retains the RIGHT TO CONTROL and direct the manner in which the details of the work are to be executed”
o    Ex: commercial house painter—their boss tells them everything
§  8 Factors in NC Test (if yes to these= independent contractor)
·         1. Is engaged in an independent business, calling, or occupation
·         2. Is to have the independent use of a special skill, knowledge, or training in the execution of the work
·         3. Is doing a specified piece of work at a fixed price or for a lump sum or upon a quantitative basis
·         4. Is not subject to discharge because he or she adopts one method of doing the work rather than another
·         5. Is not in the regular employ of the other contracting party
·         6. Is free to use such assistants as he or she may think proper
·         7. Has full coverage over such assistants
·         8. Selects his or her own time
§  No one factor is determinative—all the factors are not required—CONTROL is the ultimate deciding factor
§  Each factor must be considered along with all other circumstances to determine whether the claimant possessed the degree of independence necessary for classification as an independent contractor
·         What are the Consequences of Failure to Obtain WC Insurance?
o    The employer is primarily liable (corporation or individual)—NO CORPORATE VEIL
o    Individuals with the “power to bring the company into compliance” may also be personally liable—several partners with equal shares, 2 are silent partners and 1 actually runs the business—if that company doesn’t carry WC insurance and someone gets hurt, potentially, the silent shareholders had the power to bring the company into compliance and thus could be personally liable
o    May give up protection of “exclusivity”= they might give up the protection of WC
I. Exclusivity and Exceptions
§ 97-10.1: if the employee and the employer are subject to and have complied with the provisions of this Article (= aka actually an employer and employee; and they’ve complied with the statute—gotten insurance), then the rights and remedies herein granted to the employee, his dependents, next of kin, or personal representative shall exclude all othe

h result is accomplished
·         If evidence is disputed= matter of fact; if undisputed=matter of law
·         Label placed by the parties on their relationship is NOT dispositive, and subterfuges are not countenanced
·         One seeking to avoid liability has the burden of proving that persons whose services he has retained are independent contractors rather than employees
·         Distinction between independent contractors and employees arose at common law to limit one’s vicarious liability for the misconduct of a person rendering service to him—“the extent to which the employer had a right to control activities was …highly relevant to the question whether the employer ought to be legally liable for them”à the “control of details” test became the principal measure of the servant’s status for common law purposes
·         The principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired
·         Other relevant factors in support of an employment relationship:
o    Right to discharge at will
o    Whether the one performing services is engaged in a distinct occupation or business
o    Kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision
o    The skill required in the particular occupation
o    Whether the principal of the worker supplies the instrumentalities, tools, and the place of work for the person doing the work
o    The length of time for which the services are to be performed
o    The method of payment, whether by the time or by the job
o    Whether or not the work is a part of the regular business of the principal
o    Whether or not the parties believe they are creating the relationship of employer-employee
·         Purposes of the Act
o    Seeks to ensure that the cost of industrial injuries will be part of the cost of goods rather than a burden on society
o    To guarantee prompt, limited compensation for an employee’s work injuries, regardless of fault, as an inevitable cost of production
o    To spur industrial safety
o    In return, to insulate the employer from tort liability for his employees’ injuries
·         “employment”= service to an employer; general presumption that any person in service to another is a covered employee
·         5-factor test to determine independent contractorship= 1) alleged employee’s opportunity for profit or loss depending on his managerial skill; 2) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; 3) whether the service rendered requires a special skill; 4) the degree of permanence of the working relationship; and 5) whether the service rendered is an integral part of the alleged employer’s business
·         workers made no capital investment beyond simple hand tools; they performed manual labor requiring no special skill; their remuneration did not depend on their initiative, judgment, or managerial abilities; their service, though seasonal, was rendered regularly and as an integrated part of the grower’s business; and they were dependent for subsistence on whatever farm work they could obtain
·         harvest takes place on grower’s premises, at a time determined by the crop’s maturity; supplies the sorting bins/boxes, removes the harvest from the field, transports it to market, sells it, maintains documentation on the workers’ proceeds, and hands out their checks—all meaningful aspects of this business relationship: price, crop cultivation, fertilization and insect prevention, payment, and right to deal with buyers are controlled by growers
·         protections conferred by the Act have a public purpose beyond the private interests of the workers themselves
·         Dissent:
o    It’s been this way forever, why fix it?
o    Workers can’t be discharged/terminated; if the crop fails, is destroyed or for any reason cannot be marketed, the workers will not be compensated for their labors, no matter how many hours they have worked