Illegal Employment Contracts Will Not Protect Employer with Regard to Compensability
of Workers Compensation Injuries
April 2003
Some employers have attempted to limit workers
compensation benefits to their employees. Recent case law shows that where employers
want to waive their employee's workers compensation benefits, or where interstate
companies attempt to restrict workers compensation payments to one state, these
actions will probably not be upheld by the court system.
by Jim
Pocius
Marshall, Dennehey,
Warner, Coleman & Goggin
From time to time, this author is called on to interpret employment contracts
with regard to whether or not workers are employees under the workers compensation
system. In some cases, the issue is whether or not the worker is an independent
contractor or employee. But in other cases, the employer, by contract, has attempted
to influence whether or not an injured worker is actually involved in an employee-employer
relationship.
Employer Claims of Worker Ineligibility
In one recent case, a college student was hired for the summer to assist
the maintenance department doing work around the campus. He was laboring at
the time of the injury and suffered an injury when he was lifting at the direction
of the employer. No dispute existed over the actual injury, but the employer
took the position that since the Claimant was not registered for classes the
following fall, he was not a student, which was a precondition of employment
for work in the summer program. As such, since the contract was void, the Claimant
could not have been an employee.
In a similar case, an employer took the position that an illegal alien could
not receive workers compensation benefits since the illegal alien had lied on
the employment contract and indicated U.S. citizenship. On its face, it would
appear that these contract provisions could preclude the issuance of workers
compensation benefits. However, the courts have taken a different view. The
Pennsylvania Supreme Court stated:
A distinction must be drawn between a contract which is illegal, on the
sense that the making of the contract violates some statutory prohibition,
and a contract which is illegal because it calls for the performance of
acts which are in themselves violations of the law.
If the contract does not call for a violation of the law, and the worker
was operating within the scope of his employment and pursuing the interests
of the employer, the courts have determined that workers compensation benefits
should be paid. Reinforced Earth v WCAB, 810
A2d 99 (2003).
Employer Restriction of Benefits to a Certain State
Another interesting development which has recently been determined by the
Pennsylvania Supreme Court and which this author believes will be copied in
other jurisdictions involved the case of a truck driver. The case is McIlvaine Trucking Inc. v WCAB (Pa S Ct 2002).
The Claimant was an 18-wheeler truck driver. His company was an interstate carrier.
The Claimant signed an agreement as a condition of employment, which stated:
We the undersigned employees of the above employer, a subscriber to the
West Virginia Workers’ Compensation Fund, do hereby agree to be bound by
the Workers’ Compensation Act of the laws of the state of West Virginia
while working in the states on the continental United States as well as
the state of West Virginia.
In 1992, the Claimant suffered an injury while driving a truck. The injury
occurred in Pennsylvania. He was paid benefits voluntarily under the West Virginia
Act and he returned to work. His injury recurred in 1994, and he then filed
a Claim Petition under the Pennsylvania Act. The employer acknowledged the injury
but argued that the Claimant was not entitled to Pennsylvania workers compensation
benefits because of the contract that he had signed.
The Pennsylvania Supreme Court held that since the laws in Pennsylvania noted
that any injury which occurred in Pennsylvania would be covered by the Pennsylvania
Workers’ Compensation Act, this contract was a violation of the Pennsylvania
Workers’ Compensation Law. The Supreme Court argued that the contract provision
limiting claims to West Virginia could not supercede Pennsylvania’s intraterritorial
which indicated that any accidents or injuries occurring within the confines
of Pennsylvania would be covered by the Pennsylvania Workers’ Compensation Act.
Conclusion
It is clear from all of these cases that contract provisions where employers
want to waive their employee's workers compensation benefits, or where interstate
companies attempt to restrict workers compensation payments to one state, will
probably not be upheld by the court system. It would be wise for any employers
who are involved in these practices to reassess their risk with regard to workers
compensation.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
is needed, consult with your attorney, accountant, or other qualified adviser.