the constitutionality of alabamas workers compensation statute

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The Constitutionality of Alabama’s Workers’ Compensation Statute

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Written By: Charlie Smith

Member, American Journal of Trial Advocacy

On May 8, 2017, in Clower v. CVS Caremark Corp.,[1] Judge Pat Ballard of the Circuit Court of Jefferson County, Alabama, struck down the current Alabama Workers’ Compensation Act (“the Act”) as unconstitutional.[2] In so ruling, Judge Ballard found two specific provisions of the act unconstitutional. The sections in question were: (1) the maximum compensation of $220 per week for permanent partial disability benefits,[3] and (2) the limitation of attorneys’ fees to a fifteen percent contingency.[4] Interestingly, the Act contains a non-severability clause requiring the entire act to be stricken if one or more parts are stricken.[5] In light of the non-severability clause, Judge Ballard acknowledged the “magnitude” of his decision and recognized the ruling would have a material impact on medical providers, insurers, and others.[6] Initially, the order was stayed for 120 days to allow the Alabama legislature to address the matter.[7] However, after only nine days, the judgment was stayed indefinitely by Judge Ballard.[8]  Although Clower eventually settled in November,[9] Clower v. CVS Caremark Corp., highlights an area of Alabama law that will be subject to heightened judicial and legislative scrutiny moving forward.[10] Any or all of the arguments made in Clower could potentially be brought forward in a future case, and an affirmative ruling risks jeopardizing the entire Act, assuming the legislature does not act before a case is brought.[11]

In the case at bar, the court found section 25-5-68 of the Alabama Code unconstitutional under the Fourteenth Amendment of the United States Constitution on Equal Protection grounds and under the Alabama State Constitution as an insufficient remedy.[12] Under Equal Protection, the plaintiff argued the maximum payout punishes a separate class of workers with no rational basis whatsoever.[13] The court agreed.[14] Under section 25-5-68 of the Alabama Code, those who qualify for permanent partial disability benefits may only recover $220 per week while others are entitled to indexed benefits, which are benefits that grow over time.[15] For example, those entitled to permanent total disability benefits receive compensation based on the Alabama average weekly wage, and not a statutorily fixed weekly rate.[16] Additionally, the court found under Article 1, section 13 of the Constitution of Alabama (1901) that the statutory cap is unconstitutional. [17] Judge Ballard went further and stated that the true failure was when the 1987 Alabama legislature failed to index the benefits for people on partial disability.[18] Also, Judge Ballard correctly recognized that the lowest earners in the state who are totally disabled stand to recover more weekly compensation than a higher earner who is 99% disabled under the current laws.[19] In sum, the court ruled $220 per week was an insufficient remedy because costs have gradually increased since the legislation was drafted and the benefits are not indexed to match the average weekly wage, like other benefits.[20]

On the issue of attorneys’ fees, the court found section 25-5-90 of the Alabama Code unconstitutional for two reasons, (1) Due Process, and (2) separations of powers.[21] While Clower was a case of first impression for Alabama, other states have tried similar constitutional arguments.[22] For instance, the court cited Castellanos v. Next Door Co.,[23] where the Supreme Court of Florida struck down the Florida Workers’ Compensation Statute because the attorneys’ fees provision gave litigants insufficient Due Process.[24] In Castellanos, the attorney for the plaintiff received a mere $1.53 per hour after 107.2 hours of work.[25] In finding section 25-5-90 of the Alabama Code unconstitutional, Judge Ballard adopted the opinion expressed by the Florida Supreme Court in Castellanos.[26] In addition to Due Process issues, Judge Ballard found the provisions were in violation of separation of powers.[27] The court determined section 25-5-90 of the Alabama Code was legislative overstep because the determination of attorneys’ fees has historically been reserved for the judicial branch.[28] The court cited numerous Alabama cases illustrating the judicial role in the determination of “reasonable attorneys’ fees.”[29] Moreover, Alabama is not alone in the judicial approach to attorneys’ fees; other states have stricken their attorneys’ fees caps on similar grounds.[30]

Moving forward, the Alabama Workers’ Compensation Statute is likely to face judicial and/or legislative challenges in the future. Furthermore, any one or all of the arguments made in Clower v. CVS Caremark Corp., could be raised in a future workers compensation case.[31]  Given the non-severability clause, the Act will have to be re-written in the event any changes are made.[32] Workers’ compensation funds, insurance companies, and related entities should be prepared to absorb additional costs if the Act is struck down and subsequently re-written to include higher permanent partial disability benefits, or if the partial disability benefits are moved to an index based compensation system.[33] Moreover, the plaintiff’s bar may see a renewed interest in workers compensation litigation if the fifteen percent attorneys’ fees requirement is lifted or changed entirely. The Alabama legislature could preemptively prevent these constitutional challenges by passing a bill to amend the Act in the 2018 legislative cycle. However, it is unclear at this time if they plan to do so.

[1] 01-CV-2013-904687, 2017 WL 1948883 (Ala. Cir. Ct., May 8, 2017).

[2] Clower, 2017 WL 1948883 at *27.

[3] Ala. Code § 25-5-68(a) (“[T]he maximum compensation payable for permanent partial disability shall be no more than the lesser of $220.00 per week or 100 percent of the average weekly wage.”).

[4] Ala. Code § 25-5-90 (“[N]o part of the compensation payable under this article . . . of this chapter shall be paid to an attorney for the plaintiff for legal services, unless upon the application of the plaintiff, the judge shall order or approve of the employment of an attorney by the plaintiff; and in such event, the judge, upon the hearing of the complaint for compensation, either by law or by settlement, shall fix the fee of the attorney for the plaintiff for his or her legal services and the manner of its payment, but the fee shall not exceed 15 percent of the compensation awarded or paid.”).

[5] Ala. Code § 25-5-17 (“The provisions of this act are expressly declared not to be severable. If any provision of this act shall be adjudged to be invalid by any court of competent jurisdiction, then this entire act shall be invalid and held for naught.”).

[6] Clower, 2017 WL 1948883 at *27.

[7] Id. at *28.

[8] See Amy O’Connor, Alabama Workers’ Compensation Act to Remain in Place, For Now, Insurance Journal (May 18, 2017)

[9] William Thorton, Case that Briefly Struck Down Alabama’s Workers’ Comp Law Settled, Alabama Local News (Nov. 8, 2017), 1/case_that_briefly_struck_down.html.

[10] See generally Judge Strikes Down Alabama Workers’ Compensation Act as Unconstitutional, LexisNexis Legal Newsroom (May 12, 2017, 4:24 PM)

[11] Ala. Code § 25-5-17.

[12] U.S. Const. amend. XIV § 1; Ala. Const. of 1901, art. I § 13; Clower, 2017 WL 1948883 at *3.

[13] Clower, 2017 WL 1948883 at *3 (“with no identifiable rational basis § 25-5-68 effectively classifies those entitled . . . into the ‘$220 group’ and the ‘sub-$220’ group. The gross irrationality of that classification is seen by understanding that (1) a worker who earned $350 per week and is 99% disabled . . . gets $220 per week . . .  and (2) a worker who earned $3,000 per week and is found 99% disabled . . . also gets $220 per week”).

[14] Clower, 2017 WL 1948883 at *5.

[15] Ala. Code § 25-5-68.

[16] Ala. Code § 25-5-57.

[17] Ala. Const. of 1901, art. I § 13; Clower, 2017 WL 1948883 at *27.

[18] Clower, 2017 WL 1948883 at *6.

[19] Id. at *4.

[20] Id.

[21] Id. at *3.

[22] See e.g., Castellanos v. Next Door Co., 192 So. 3d 431 (Fla. 2016).

[23] 192 So. 3d 431 (Fla. 2016).

[24] Id. at 449.

[25] Id. at 433.

[26] Clower, 2017 WL 1948883 at *9; Castellanos, 192 So. 3d at 433.

[27] Clower, 2017 WL 1948883 at *10-12.

[28] Id. at *12 (citing Diamond Concrete & Slabs, LLC. v. Andalusia-Opp Airport Auth.,

181 So. 3d 1171, 1075-76 (Ala. Civ. App. 2015)).

[29] Carver v. Foster, 928 So. 2d 1017, 1026-27 (2005); Diamond, 181 So. 3d at 1075; Edelman & Combs v. Law, 663 So. 2d 957, 959 (Ala. 1995) (discussing the bases for judicially setting attorney fees in class-action common-fund cases); Ex parte Peck, 572 So. 2d 427, 428 (Ala. 1990) (in approving pro ami settlements, judicial function to set reasonable attorneys’ fee);  General Motors Corp. v. Lucas, 530 So. 2d 224, 226 (Ala. 1988) (determination of “reasonable attorney’s fee” prescribed by Alabama Code § 8-20-8 in breach of warranty cases was judicial function); Lewis v. Haleyville Mobile Home Supply, Inc., 447 So. 2d 691, 693 (Ala. 1984) (determination of “reasonable fee” was judicial function); King v. Keith, 60 So. 2d 47, 53 (1952) (determining reasonable fee for lawyer of estate administrator was judicial function); Harlow v. Sloss Indus. Corp., 813 So. 2d 879, 889 (Ala. Civ. App. 2001) (reasonableness of attorney fee determined as judicial function where protected by lien).

[30] See e.g., Injured Workers’ Ass’n of Utah v. Utah, 374 P.3d 14 (2016).

[31]  01-CV-2013-904687, 2017 WL 1948883 (Ala. Cir. Ct., May 8, 2017).

[32]Ala. Code § 25-5-17.

[33] See Clower, 2017 WL 1948883 at *15 (stating ruling the statute unconstitutional would impact workers compensation funds, self-insurers, employers and medical providers because their work is interdependent with the current worker’s compensation scheme).

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