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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. Expert Commentary articles and other IRMI Online content do 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.

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