Legal and Regulatory

A Look at Trending Legislative Changes Impacting Workers' Comp

Could three recently enacted changes in New York State affect workers' compensation cases across the country for the construction industry?
By Rosanna Shamash
February 7, 2024
Topics
Legal and Regulatory

The tides are shifting in the construction industry when it comes to legal matters—and business owners could feel the brunt of it.

Recent legislative changes in the state of New York could signal how workers’ compensation cases move forward across the country and impact business owners in the space. Arguably, New York has historically laid the groundwork for workers’ compensation law in numerous other states. Now, we’re seeing a clear shift in favor of workers with some of the recent legislative changes. Owners, operators and executives in the construction space have increasingly found themselves facing costly claims that in years prior carried a smaller dollar value and were largely viewed as inconsequential.

So, what’s the best way for business owners in the construction industry to protect their businesses for the future? Start by gaining a basic understanding of changes in the legal landscape, by securing defense attorneys who know the construction space and by taking steps to protect your business before an incident happens.

LEGISLATIVE CHANGES AFOOT

These three recently enacted legislative changes in the state of New York could signal increased difficulties for owners and operators across the U.S. construction industry:

1.Doing away with collateral estoppel: New York is aiming to do away with collateral estoppel, or the use of one court decision in another case, with the recent passage of Senate Bill S9149. Under this measure, if a workers’ compensation defense attorney litigates a fraud finding in a case, an attorney would not be able to use that decision in any other case. Historically attorneys would be able to pass that decision to their partners in the general liability space negating the need for the general liability attorney to litigate the same issue.

This change raises clients’ concern about the increased exposure they will assume due to a perceived lack of collaboration between workers’ compensation and general liability. While attorneys can no longer use a past court decision in their case, the cases are still tied, and teams can still collaborate. However, general liability teams will now have to relitigate a case from a workers’ compensation perspective.

Senate Bill S9149, will increase the opportunity for an ease of workers’ compensation fraud. To combat this construction executives should seek legal counsel that have relationships with and access to specialists such as doctors, investigators and more. Such relationships will help defend against claims, fraud and more.

2. Disqualification of workers’ benefits due to misrepresentation: Where legislation like SB S9149 can open the doors to fraud, recently passed Section 114a can benefit employers and workers’ compensation defense attorneys alike.

Under Section 114a, employees can be disqualified from receiving workers’ compensation benefits if an individual makes a material misrepresentation that causes them to receive benefits. Workers can either be penalized with a mandatory penalty in which a judge will disqualify a worker for a set period of time, or a discretionary penalty which disqualifies a worker from all future indemnity benefits. Construction executives should take caution and be sure when making fraud claims, as they could be deemed uncredible if claims are raised too often.

Unfortunately, misrepresentations and fraud in general are rampant throughout the construction industry, costing insurers and business owners significant sums. A worker who claims their injuries are more severe than they are or purposely misleads doctors could void their benefits under this new law. Additionally, a worker who alleges to be out of work and then does other work on the side could have their benefits suspended as well, saving business owners and their insurers from having to pay out fraudulent claims.

3.Carrier rights to lien recovery: In workers’ compensation, a lien is used by the insurance provider to recoup what it has paid out when a worker files a claim with a construction executive. In such instances, the insurance carrier will automatically pay for the injuries of a worker, regardless of fault. Carriers are given the right to lien recovery through Section 29. Meaning carriers can ask for compensation back if a third party is found negligent in the general liability matter.

In most construction cases, workers’ compensation claims are settled with the general liability claim, or globally rather than on their own. A good defense attorney who knows the space will utilize a lien waiver to reduce future liability on the business owner. This can benefit both the business owner and insurance carrier. When the lien is waived, all proceeds come out of the general liability side. There is a zero-sum settlement on the workers’ compensation side and the case is closed with no future exposure to the business owner. Ultimately there is less recoverable capital, but more protection for the business in the long run.

SAFE SITES WILL SAVE ON CLAIMS

While these legislative changes may cause waves across the nation, construction executives and general contractors who maintain a safe construction site will minimize the potential for unnecessary litigation and feel less of an impact by such changes. Consider how the following tips can help safeguard your construction organization:

Document everything: On every site where there is a general contractor it is important to have a list of all subcontractors for each day. A sign-in sheet should be required for every subcontractor, so all workers and site visitors sign in and out. Each log should be filed and saved for reference. In the instance of claims, employers should document the site with photographs and by collecting physical evidence as soon as a claim is filed. Collecting documentation quickly can mean the difference between success and major litigation.

Gather the right evidence: Have cameras onsite. Though this is not always feasible, it is important for bigger construction companies to have cameras. If someone indicates they were injured by something at a certain time, executives can determine if it’s true immediately through time stamped video footage. Camera footage can also prove valuable as physical evidence in litigation. Keep in mind it is important to have measures in place to determine how long you keep the recordings as many systems will automatically delete videos after a certain number of days.

Track the traffic: Have turnstiles at the front of construction sites and provide ID cards to workers and subcontractors to keep track of who is and is not allowed to be onsite.

Maintain regular training: Stay up to date with OSHA requirements and ensure employees undergo annual OSHA training. Construction executives can enlist the help of third-party vendors who understand the nuances of the industry to assist with OSHA training.

Enforce protective gear wear: Ensure everyone onsite has the proper PPE including but not limited to hard hats, boots, goggles and vests. This commonly understood industry standard can protect employees and minimize the number of claims a company experiences.

With legislative changes on the horizon employers and defense attorneys alike may see a shift in the way they conduct business. Construction executives should consider partnering with defense attorneys who know the space and have existing procedures in place to go above and beyond. Working with such partners will help construction executives navigate the complexities and legalities of today’s workers’ comp landscape.

by Rosanna Shamash
Rosanna Shamash - Supervising Partner, Jones Jones LLC

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