The Proper Procedure for Employees to Controvert an Employer's Right to Safe Harbor Protection

Posted on: May 19 2015 | Posted in: Committees

Since its enactment, the Louisiana Workers’ Compensation Act’s (LWCA) Safe Harbor provision has been a source of constant dispute between plaintiff and defense attorneys. The latest issue concerns the proper procedure a plaintiff must employ to controvert an employer’s right to a preliminary determination hearing. Before delving into the dispute’s details, an overview of the Safe Harbor provision and its effect is necessary.

At the urging of the business community, the Legislature in 2012 amended the LWCA’s penalty statute to create a “safe harbor” for employers from the imposition of penalties and attorney fees.[3] Originally, the Safe Harbor only protected employers from penalties resulting from errors in calculating the average weekly wage and the consequent underpayment of indemnity benefits.[4] In 2013, the Legislature expanded the Safe Harbor to include other issues that involve the termination, modification, or reduction of benefits.[5]

Currently, employers can only invoke the Safe Harbor protections if they have followed all of the procedures laid out by the statute. First the employer must prepare and send a “Notice of Payment” (OWC Form 1002) to the injured employee by certified mail upon the first payment of any indemnity benefits, and then must also send subsequent notices upon every modification, suspension, or termination.[6] If the injured employee is represented, the employer must also send a copy of the notice to the employee’s attorney on the same date the employer sends the notice to the injured employee.[7] Finally, the employer must also provide a copy of the notice to the OWC.[8]

If an injured employee disagrees with the employer’s actions and initiates litigation, the employer can invoke Safe Harbor to attempt to avoid an award of penalties and attorney’s fees. The employer must request a “preliminary determination hearing” in its answer.[9] At the preliminary determination hearing, the workers’ compensation judge (WCJ) will issue a recommendation either agreeing with the employee or the employer.[10] If the WCJ agrees with the employee, the employer can avoid penalties and attorney’s fees by complying with the recommendation within ten days of the hearing.[11] If the employer disagrees with the WCJ’s recommendation, it can reject the determination and proceed to a full trial. Rejection of the determination, however, brings with it the possibility of penalties and attorney’s fees.[12]

With this basic understanding of how the Safe Harbor operates, we can now explore the details of the current dispute, which involves the proper timing and procedure for an employee to controvert an employer’s right to Safe Harbor protections.

As stated above, employers are not entitled to Safe Harbor protection unless they comply with all of the statute’s notice requirements. When the employee does not believe the notice requirements have been satisfied, the statute gives the employee the right to controvert the employer’s request for a preliminary determination hearing. The dispute between plaintiff and defense lawyers concerns when – and how – the employee can controvert the right to the hearing. Plaintiff’s lawyers have taken the position that proof of compliance with the notice provisions is an essential element of an employer’s burden of proof at the hearing.[13] Thus, some plaintiff’s attorneys have raised noncompliance with the notice provisions at the preliminary determination hearing. Additionally, plaintiff’s attorneys have also argued that they often are unsure if the proper notices have been sent until the employer offers copies of the notices as exhibits at the hearing. It would be improper, they argue, to force them to assert noncompliance with the statute prior to the hearing when they often do not know until the close of the employer’s case whether the employer has complied.

Defense attorneys, on the other hand, have argued that the employee must controvert the employer’s right to the hearing through a rule to show cause. They argue that advance notice of the controversion is required to allow the employer to put on proper proof that it complied with the statute. Employers, and the attorneys representing them, argue that the employee waives the right to controvert their right to Safe Harbor unless they file a rule to show cause prior to the hearing.

A close examination of the Safe Harbor statute and its language provides the answer. The statute reads: “If disputed by the parties, upon a rule to show cause held prior to the preliminary determination or any hearing held pursuant to this Section, the workers’ compensation judge shall determine whether the employer is in compliance.”[14] Thus, it appears that the plain language of the statute dictates that employee waives the right to challenge the employer’s right to a preliminary determination hearing unless the employee controverts that right prior to the hearing through a rule to show cause.[15]

Requiring a rule to show cause also furthers two judicial interests. First, it places the employer on notice that its compliance with the statute is being challenged.[16] This allows the employer to gather the documents needed, including an affidavit from the adjustor or client, proving that it gave proper notice to the proper parties. Second, requiring the injured employee to controvert the preliminary determination hearing through a rule to show cause preserves judicial economy. A preliminary determination hearing is a time-consuming affair that can involve live witness testimony, voluminous exhibits, and argument from counsel.[17] On the other hand, determining compliance with the Safe Harbor’s notice provisions is a relatively simple affair that only requires the employer to produce the certified mail receipts,[18] fax confirmations,[19] and an affidavit from the adjuster. The rule to show cause requirement allows the courts to avoid time consuming hearings if the employer is unable to prove its compliance.

How will injured employees and their attorneys know when the rule to show cause is necessary? The Safe Harbor statute also contains the solution to that issue. “Upon the filing of the request for a preliminary determination hearing, the workers' compensation judge shall initiate a telephone status conference with the parties to schedule the discovery deadlines and to facilitate the exchange of documents.  The scope of the discovery will be limited to the issues raised in the disputed payment, suspension, modification, termination, or controversion of benefits.”[20] At the conference, the workers’ compensation judge should require the parties to exchange documents supporting their positions. This order can include a requirement that the employer produce proof of compliance with the notice provisions to the employee. If the employer does not comply, the court can order the exclusion of that evidence from any contradictory hearing challenging the right to a preliminary determination.[21] This should alleviate any concerns about employers hiding the ball from employees.

In conclusion, the employee who wishes to challenge his employer’s right to a preliminary hearing must do so through a rule to show cause filed prior to the hearing. Failure to file a rule to show will result in a waiver of any objection the employee may have regarding the employer’s compliance with the statute’s notice provisions.

[1] Associate Attorney, Juge, Napolitano, Guilbeau, Ruli & Frieman

[2] Judge, Louisiana Office of Workers’ Compensation District 8

[3]1 Denis Paul Juge, Louisiana Workers' Compensation, § 5:7A (2d ed. 2013).  

[4] Id.

[5] Id.

[6] La. Rev. Stat. Ann. 23:1201.1(A) (2014).

[7] La. Rev. Stat. Ann. 23:1201.1(D) (2014).

[8] La. Rev. Stat. Ann. 23:1201.1(A) (2014).

[9] La. Rev. Stat. Ann. 23:1201.1(H) (2014).

[10] La. Rev. Stat. Ann. 23:1201.1(J) (2014).

[11] La. Rev. Stat. Ann. 23:1201.1(K) (2014).

[12] Id.

[13] See Bowie v. Westside Habilitation Ctr.,14-617 (La. App. 3 Cir. 11/05/14), 150 So.3d 671 (finding WCJ committed manifest error by not requiring employer to prove compliance with notice provisions of Safe Harbor statute). 

[14] La. Rev. Stat. Ann. 23:1201.1(I)(2) (2014) (emphasis added).

[15] La. Rev. Stat. Ann. § 1:4 (2014) (When a law is clear and unambiguous and its application does not lead to absurd consequences, it shall be applied as written, with no further inquiry made in search of the legislative intent.).

[16] This aligns with Civil Procedure article 963’s requirement that any relief “that the mover is not clearly entitled to” be requested through a rule to show cause served upon the opposing party.

[17] See La. Rev. Stat. Ann. 23:1201.1(J)(2) (2014).

[18] La. Rev. Stat. Ann. 23:1201.1(A) (2014).

[19] La. Rev. Stat. Ann. 23:1201.1(D) (2014).

[20] La. Rev. Stat. Ann. 23:1201.1(J)(1) (2014).

[21] See Wolford v. Joellen Smith Psychiatric Hosp., 96-2460 (La. 05/20/97), 693 So.2d 1164, 1167 (trial court has broad discretion over discovery matters).  

Written by: Christopher Whelen[1]& The Honorable Diane Lundeen[2]

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