2016 Worker’s Compensation Act Changes: Temporary Disability Liability in Discharge or Suspension Cases

Posted on Thu Oct 27th, 2016 at 2:50 pm

2016 Worker's Compensation Act Changes: Temporary Disability Liability in Discharge or Suspension Cases

This year has brought more significant changes than usual to the Wisconsin worker's compensation system. The addition of explicit apportionment to the system was discussed previously; another notable change for 2016 is a statutory revision that affects liability for temporary disability in certain cases where the employee has been terminated or suspended. As with the previous article, the change reflects the increased influence of employer's concerns on the current agreed bill process.

Section 102.43 of the Wisconsin Statutes concerns payment of temporary disability, and sub (9) provided four exceptions to the obligation to pay temporary disability to an employee in the healing period who has been returned to restricted duty work. With the recent revisions, a new fifth exception has been created. Under the new §102.43(9)(e), temporary disability can be denied when an employee is released to light duty work and is suspended or terminated due to "misconduct" or "substantial fault," both of which adopt the definition from the unemployment insurance statutes at §108.04(5) and §108.04(5g)(a), respectively. While the obligation to pay temporary disability may be eliminated, PPD and medical expenses are still payable in such cases.

This provision is further reaction to the 1997 Brakebush decision. Brakebush is one of the least popular worker's compensation decisions amongst Wisconsin employers and carriers. Brakebush involved an employee who misrepresented his activities to his physician and employer during a period of TTD and was subsequently terminated when his physician released him to limited duty. The carrier was obligated to pay benefits as the court determined that the employee continued to be limited by the work injury, and that the injury, not the termination, was the cause of the employee's economic loss. Dissatisfaction with this decision led to the 2010 addition of sub (d) to §102.43(9) to limit recovery when an employee is convicted of a crime and is incarcerated; the 2016 addition of sub (e) further limits the impact of the Brakebush decision.

With its explicit reference to §§108.04(5) & 108.04(5g)(a), this new provision imports concepts and case law from unemployment insurance into worker's compensation determinations. Interestingly, the statutory definitions of misconduct and substantial fault in the unemployment insurance statutes have themselves undergone recent revision. Statutory changes enacted in 2013 codified the definition of misconduct as "actions or conduct evincing ... willful or wanton disregard of an employer's interests" or "carelessness or negligence of such degree...as to manifest culpability, wrongful intent, or evil design" that shows an "intentional and substantial disregard of an employer's interests." The revisions also set out seven specific courses of conduct which were de facto misconduct as well, including violation of drug policies, theft, criminal conviction, harassment and other activities. Similarly, substantial fault is statutorily defined as "acts or omissions of an employee...which violate reasonable requirements of the...employer," excluding minor infractions of rules, inadvertent errors, or failure due to lack of skill, ability, or equipment.

Both misconduct and substantial fault have a vast body of associated law defining and interpreting the relevant statutory sections. However, the Division has taken the position that unemployment insurance decisions are inadmissible under §108.101(1), though ALJs can consider evidence admitted at UI hearings to assess the credibility of witnesses. Given this, ALJs for the unemployment insurance division and the worker's compensation division could come to conflicting conclusions on whether a worker was terminated due to misconduct or substantial fault; thus a finding by UI of no misconduct is not automatically applicable to proceedings in a worker's compensation matter. In other words, a finding of no misconduct in a UI proceeding would not negate a carrier's ability to deny temporary disability pending a decision in a worker's compensation hearing on the issue of misconduct.

It is important to keep in mind that this new exception to Brakebush only applies for periods where the employee has been released to light duty; TTD benefits are still payable if the employee is unable to work altogether; again, the obligation to pay permanent disability and medical expenses remain as well. Also note that there are potential conflicts between existing worker's comp statutory provisions relating to termination for violations of alcohol and drug policies and commission of a crime versus provisions in the unemployment insurance statutes and cases. Given that this is a change to the Act that employers have long sought, it is expected that there will continue to be notable evolution in the interpretation of this new provision as cases begin working their way through the system. Employers: stay tuned.

There are many nuances to the interpretation and application of new statutory provisions. If you have questions or are interested in a presentation on the 2016 statutory changes, please contact Kurt Anderson.

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