11-1900-8006-1
STATE OF MINNESOTA
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE MINNESOTA DEPARTMENT OF LABOR AND INDUSTRY
In the Matter of the Proposed Permanent
Rules Relating to Workers' Compensation: THIRD_REPORT_OF_THE
Managed Care; Independent Medical Examination ADMINISTRATIVE_LAW_JUDGE
Fees; Rules of Practice; Relative Value Medical RELATING_TO_WORKERS'
Fee Schedule and Medical Rules of Practice; and COMPENSATION_RULES_OF
Independent Contractors (Minnesota Rules PRACTICE
Chapters 5218, 5219, 5220, 5221, and 5224.)
The above-entitled matter came on for hearing before Administrative Law
Judge Barbara L. Neilson on July 27, 1993, at 9:00 a.m. in Rooms C-14 and C-15
of the St. Paul Civic Center, 144 West Fourth Street, St. Paul, Minnesota. The
hearing continued on July 28, 29, and 30, 1993.
This Report is part of a rulemaking proceeding held pursuant to Minn.
Star. ̃14.131 to 14.20 (1992) to hear public comment, determine whether the
Minnesota Department of Labor and Industry (hereinafter referred to as "the
Department") has fulfilled all relevant substantitve and procedural
requirements of law applicable to the adoption of the rules, assess whether the
proposed rules are needed and reasonable, and determine whether or not
modifications to the rules proposed by the Department after initial publication
are substantially different from those originally proposed.
Six separate sets of rules were consolidated for consideration in this
rulemaking proceeding. The rules relate to the following subjects:
1. Independent Contractor Rules (Minn. Rules pt.
5224.0010):
2. Independent Medical Examination Fees (Minn. Rules pt.
5219.0500);
3. Managed Care Plans for Workers' Compensation (Minn.
Rules pts. 5218.0010 through 5218.0900);
4. Relative Value Medical Fee Schedule (Minn. Rules pt.
5221.4000 through 5221.4070);
5. Medical Rules of Practice (Minn. Rules pts. 5221.0100
through 5221.0700); and
6. Workers' Compensation Rules of Practice (Minn. Rules
pts. 5220.0105 through 5220.2960).
Although, for convenience, the proposed rules were heard in a continuous
proceeding, each set of rules is independent of and severable from the others.
This Third Report of the Administrative Law Judge relates to the Workers'
Compensation Rules of Practice.
Gilbert S. Buffington, Assistant Attorney General, 520 Lafayette Road,
Suite 200, St. Paul, Minnesota 55155, and Penny Johnson, assistant General
Counsel, Department of Labor and Industry, 443 Lafayette Road, St. Paul,
Minnesota 55155, appeared on behalf of the Department. The Department's
hearing panel for the Workers' Compensation Rules of Practice consisted of
Deputy Commission and General Counsel Gary Bastian, Assistant General Counsel
Penny Johnson, Brian Zaidman, Research Analyst with the Department's Research
and Education Unit, and Dale Kinnunen, Qualified Rehabilitation Consultant with
the Department's Vocational Rehabilitation Unit.
Approximately 150 persons attended the hearing and 138 signed the hearing
register. Many of the attendees gave testimony about these rules. The
Department submitted changes to the proposed rules at the hearing. The
Administrative Law Judge received 20 agency exhibits and 5 public exhibits as
evidence during the hearing. The hearing continued until all interested
persons, groups or associations had an opportunity to be heard concerning the
adoption of these rules.
The record remained open for the submission of written comments until
August 19, 1993, twenty calendar
days following the date of the hearing. Pursuant to Minn. Stat. ̃14.15, subd.
1 (1992), five w
The Administrative Law Judge received numerous written comments from
interested persons during the comment period. The Department submitted written
comments responding to matters discussed at the hearing and comments filed
during the twenty-day period. In its written comments, the Department proposed
further amendments to the rules.
The Department must wait at least five working days before taking any
final action on the rules; during that period, this Report must be made
available to all interested persons upon request.
Pursuant to the provisions of Minn. Stat. ̃14.15, subd. 3 and 4, this
Report has been submitted to the Chief Administrative Law Judge for his
approval. If the Chief Administrative Law Judge approves the adverse findings
of this Report, he will advise the agency of actions which will correct the
defects and the agency may not adopt the rule until the Chief Administrative
Law Judge determines that the defects have been corrected. However, in those
instances where the Chief Administrative Law Judge identifies defects which
relate to the issues of need or reasonableness, the agency may either adopt the
Chief Administrative Law Judge's suggested actions to cure the defects or, in
the alternative, if the agency does not elect to adopt the suggested actions,
it must submit the propsoed rule to the Legislative Commission to Review
Administrative Rules for the Commission's advice and comment.
If the agency elects to adopt the suggested actions of the Chief
Administrative Law Judge and makes no other changes and the Chief
Administrative Law Judge determines that the defects have been corrected, then
the agency may proceed to adopt the rule and submit it to the Revisor of
Statutes for a review of the form. If the agency makes changes in the rule
other than those suggested by the Administrative Law Judge and the Chief
Administrative Law Judge, then it shall submit the rule, with the complete
hearing record, to the Chief Administrative Law Judge for areview of the
changes before adopting it and submitting it to the Revisor of Statutes.
When the agency files the rule with the Secretary of State, it shall give
notice on the day of filing to all persons who requested that they be informed
of the filing.
Based upon all the testimony, exhibits and written comments, the
Administrative Law Judge makes the following:
FINDINGS OF FACT
Procedural_Requirements
1. The Procedural Findings set forth in paragraphs 1 to 4 of the First
Report of the Administrative Law Judge are hereby incorporated herein by
reference.
Small_Business_Considerations_in_Rulemakinq
2. Minn. Stat. ̃ 14.115, subd. 2 (1992), requires state agencies
proposing rules that may affect small business to consider methods for reducing
adverse impact on those businesses. The proposed rules will have an impact on
workers' compensation insurers and self-insured employers. Because of their
size, these entites do not meet the statutory definition of a "small business."
Small employers are not directly affected by the proposed rules because they
are represented in the workers' compensation system by insurance companies.
The proposed rules regarding attorney's fees will affect small law firms.
Because law firms are service businesses regulated by government bodies for
stnadards and costs within the meaning of Minn. Stat. ̃ 14.115, subd. 7(3),
however, the Department argues that the impact on law firms need not be
considered. The Department nevertheless considered m
ethods for reducing the impact on the rules on small law firms. The Department
determined that no changes to the proposed rules for small law firms are
warranted because the need for the proposed rules does not change because of
the size of the law firms and because attorneys, whether in large firms or
small firms, are well able tocomply with the rules. Furthermore, while many
commentators objected to the proposed amendments governin
Fiscal_Note
3. Minn. Stat. ̃14.11, subd. 1 (1992), requires state agencies
proposing rules that will require the expenditure of public funds in excess of
$100,000 per year by local public bodies to publish an estimate of the total
cost to local public bodies for the two years immediately following adoption of
the rules. The Department has determined that the proposed rules will not
require the expenditure of public monies by local public bodies. No contrary
evidence was presented at the hearing or during the comment period.
Therefore, the Administrative Law Judge finds that the Department was not
required to prepare a fiscal note with respect to the proposed rules.
Impact_on_Agricultural_Land
4. Minn. Stat. ̃14.11, subd. 2 (1992), requires state agencies
proposing rules that have a direct and substantial adverse impact on
agricultural land in the state to comply with the requirements set forth in
Minn. Stat. ̃̃17.80-17.84. Because the proposed rules will not have a direct
and substantial adverse impact on agricultural land within the meaning of Minn.
Stat. ̃14.11, subd. 2, these statutory provisions do not apply in this
rulemaking proceeding.
Outside_Information_Solicited
5. During the past three years, the Department has published several
notices in the State Register soliciting outside information and opinions.
Three comments were received addressing the Workers' Compensation Rules of
Practice. Ex. F-3. The Department also held open meetings in Richfield,
Minnesota, on July 16 and 17, 1992, to obtain input on changes or additions to
any aspect of the workers' compensation rules. More than 25 members of the
public made presentations at the open meetings. Ex. L.
Thirteen members of the Minnesota House of Representatives submitted a
comment during the rulemaking process indicating, inter alia, that none of the
proposed rules had been considered by the Advisory Council on Workers'
Compensation. The Department responded that the Council was informed
concerning the Department's proposed rules at several of its meetings during
1992 and 1993. The Department indicated that the Council elected to focus on
the review of legislation and did not seek to conduct a detailed review of the
proposed rules. Department's August 19, 1993, submission at 14-15. The duties
of the Advisory Council include advising the Department and carrying the
purposes of Chapter 176, and the input of Council members could obviously be of
assistance in establishing rule requirements. The Commissioner is not,
however, required by statute to submit proposed rules to the Advisory Council.
See Minn. Stat. ̃ 175.007 (1992).
In addition, the Assistant Chief Administrative Law Judge of the Workers'
Compensation Division of the Office of Administrative Hearings asserted that
the Division was not consulted by the Department prior to the publication of
the proposed rules. The Workers' Compensa
tion Division of the Office of Administrative Hearings could have provided
valuable assistance in formulating the proposed rules. It is unfortunate that
the Department did not invite the comments of the Division during the process
of drafting the rules. However, the Commissioner is not required by statute to
engage in such consultation.
Analysis_of_the_Proposed_Rules
6. The Administrative Law Judge must determine, inter_alia,_whether the
need for and reasonableness of the proposed rules has been established by the
Department by an affirmative presentation of fact. The Department prepared a
Statement of Need and Reasonableness ("SONAR") in support of the adoption of
each of the proposed rules. At the hearing, the Department primarily relied
upon the SONAR for that rule as its affirmative presentation of need and
reasonabless for each rule. Each SONAR was supplemented by the comments made
by the Department at the public hearing and in its written post-hearing
comments.
The question of whether a rule is reasonable focuses on whether i
This Report is generally limited to the discussion of the portions of the
proposed rules that received significant critical comment or otherwise need to
be examined. Because some section of the proposed ruleswere not opposed and
were adequately supported by the SONAR, a detailed discussion of each section
of the proposed rules is unnecessary. The Administrative Law Judge
specifically finds that the Departmenthas demonstrated the need for and
reasonableness of the provisions of the Workers' Compensation Rules of Practice
that are not discussed in this Report by an affirmative presentation of facts,
that such provisions are specifically authorized by statute, and that there are
no other problems thatprevent their adoption.
Where changes are made to the rule after publication in the State Register
the Administrative Law Judge must determine if the new language is
substantially different from that which was originally proposed. Minn. Stat. ̃
14.15, subd. 4 (1992). The standards to determine if the new language is
substantially different are found in Minn. Rules pt. 1400.1100. Any language
proposed by the Department in the Workers' Compensation Rules of Practice which
differs from the rules as published in the State Register and is not discussed
in this Report is found not to constitute a substantial change.
Format_of_Rule_Report
7. As discussed above, the proposed rules involved in this rulemaking
proceeding are actually divisible into six disparate rules within five discrete
rule sections. To retain some degree of control over the voluminous comments
and myriad issues raised by these rules, both the Department and the Judge have
treated each rule separately within this proceeding. This Third Report of the
Administrative Law Judge will address only those proposed
rules relating to the Workers' Compensation Rules of Practice.
Statutory Authority
8. The Department cites as statutory authority for its adoption of the
proposed rules numerous provisions in Chapters 175 and 176 of the Minnesota
Statutes. In particular, the Department relies on the general authority set
out in Minn. Stat. ̃̃ 176.83, subds. 1 and 7, and 175.171 (1992). Minn. Stat.
̃ 176.83, subd. 1 (1992), provides that, "[i]n addition to any other section
under this chapter giving the commissioner the authority to adopt rules, the
commissioner may adopt, amend, or repeal rules to implement the provisions of
this chapter. The rules include but are not limited to the rules listed in
this section." Minn. Stat. ̃ 176.83, subd. 7, empowers the Commissioner to
adopt "[r]ules necessary for implementing and administering the provisions of
sections . . . 176.251." Section 176.251 in turn provides that the
Commissioner "shall actually supervise and require prompt and full compliance
with all provisions of this chapter relating to the payment of compensation."
Finally, Minn. Stat. ̃ 175.171(2) (1992) authorizes the Department "[t]o adopt
reasonable and proper rules relative to the exercise of its powers and duties,
and proper rules to govern its proceedings and to regulate the mode and manner
of all investigations and hearings . . . ." The Administrative Law Judge finds
that the Department has the statutory authority to adopt workers' compensation
rules of practice.
9. Although the general subject matter of proposed rules may be within
the Department's statutory authority, it is also necessary to determine whether
specific rule provisions conflict with enabling legislation or exceed the
Department's statutory authority. A rule that is contrary to the language of
the statute or to legislative intent is invalid. State v. Hopf, 323 N.W.2d 746
(Minn. 1982); Can Manufacturers Institute, Inc. v. State, 289 N.W.2d 416 (Minn.
1979). While the legislature may afford an agency discretion in implementing
or administering a law, the legislature may not give the agency authority to
determine what the law should be or to supply a substantive provision of the
law which
Nature of the Proposed Rules
10. Chapter 5220 of the Minnesota Rules governs the administration
ofworkers' compensation claims. In this rulemaking proceeding, the Department
has proposed substantial revisions to the existing rules. Among other things,
the proposed rules seek to incorporate more specific criteria to determine
economically suitable employement, permanent total disability and removal of an
employee from the job market; require additional reporting and disclosure of
attorneys' fees; modify the penalty rules; and amend other procedural
requirements of the existing rules. The portions of the proposed rules that
received substantial critical comment will be discussed below.
Modifications to the Proposed Rules Made by the Department
11. At the time of and subsequent to the hearing on this matter, and
after a review of all of the written submissions, the Department made several
additional modifications to the proposed rules. These modifications are as
follows:
5220.2540 PAYMENT OF TEMPORARY TOTAL, TEMPORARY PARTIAL, OR
PERMANENT TOTAL COMPENSATION.
Subpart 1. Time of payment. Payment of compensation must
be commenced within 14 days of:
C. an order by the division, compensation judge, or
workers' compensation court of appeals requiring
payment of benefits which is not appealed. . . .
With the initial payment of temporary total or
permanent total disability benefits, the insurer must
notify the employee in writing of the day of the week
that further payments will be made and the frequency
with which payments will be made. If_the_initial
payment_is_a_first_and_final_payment,_then
notification_need_not_be_sent.
* * *
F. has diligently searched for employment for a
period of at least two years and_has_received_all
other_appropriate_services_under_Minn._Stat._Section
176.102, and has been unable to secure anything more
than sporadic employment resulting in an
insubstantial income.
* * *
Subpart 3. Notice to division. The insurer must keep the
division advised of all payments of compensation and
amounts withheld and amounts directly paid for attorney
fees by the filing of interim status reports 60 days after
commencement of payment or an R 1 form, and thereafter each
year on the anniversary of the date of injury unless
another time interval is specified and_upon_specific
request by the division.
5220.2630 DISCONTINUANCE OF COMPENSATION.
Subpart 1. Generally. When an insurer proposes or intends
to reduce, suspend, or discontinue an employee's benefits,
it shall file one of the following documents described in
this part. A form need not be filed when an insurer
increases or decreases an employee's periodic temporary
partial benefit due to changes in the employee's earnings
while employed,_provided_that_a_payment_continue_to_be_made
based_on_the_employee's_actual_earnings.
* * *
Subpart 4. Notice of intention to discontinue benefits.
* * *
B. A notice of intention to discontinue benefits
must be fully completed and on the form prescribed by
the commissioner, containing substantially the
following:
* * *
(5) the legal reason or reasons for the
proposed
discontinua
* * *
C. The liability of the insurer to make compensation
payments continues at least until the notice of
intention to discontinue benefits is received by the
division and served on the employee and the
employee's attorney, except that benefits may be
discontinued on the date the employee returned to
work and temporary partial benefits may be
discontinued as of the date the employee ceased
employment. Where benefit amounts are difficult to
determine because the employee's circumstances have
changed, payments up to the date of the notice may be
averaged based on benefit payments in the 26 weeks
before the change. . . .
5220.2640 DISCONTINUANCE CONFERENCES.
Subpart 3. Continuation of benefits.
A. If an employee requests an administrative
conference within the time set out in this part,
benefits must be paid through the date of the
conference unless:
* * *
(3) the employee fails to appear at the
conference
without good cause and no continuance is
allowed; . . . .
5220.2760 ADDITIONAL AWARD AS PENALTY.
Subpart 1. Basis. Penalties under Minnesota Statutes,
section 176.225, subdivision 1, in an amount up to 25
percent of the total amount of the compensation award may
be assessed by the division on the grounds listed in that
section, including:
A. underpaying, delaying payment of, or refusing to
pay within 14 days of the filing of an order by the
division
or a compensation judge, the workers' compensation
court of appeals or the Minnesota Supreme Court
unless the order is appealed within the time limits
for an appeal. . . . Payments made after the 14th day
must include interest pursuant_to_Minn._Stat._̃
176.221,_subd._7_or_176.225,_subd.«5 to the payee; .
. . .
5220.2780. FAILURE TO PAY UNDER ORDER; PENALTY.
* * *
Subpart 2. Amount. . . . Penalties under Minnesota
Statutes, section 176.221, subdivision 3a, shall be
assessed as follows:
A. 17 to 30 days late, $500 1_to_15_days_late,_$250;
B. 31 16 to 60 days late, $750 $500; and
C. over 60 days late, $1,000.
5220.2810 FAILURE TO RELEASE MEDICAL DATA; PENALTY.
* * *
Subpart 3. Amount.
A. If a collector or a possessor of medical data was
not issued a warning under this part in the preceding
year 12-month_period, the division must send a
warning letter before a monetary penalty is assessed.
5220.2920 ATTORNEY FEES.
Subpart 6. Waiver of objection period. The parties may
not waive by stipulation for settlement or mediation
agreement the right to object within ten days to the
requested attorney fee. An agreement by a party in a
stipulation for settlement, mediation agreement, or similar
document to waive the ten-day period in which to object to
an attorney's fee is not binding on the party. The party
may, despite the agreement, file an objection to the
requested fee in any manner provided by Minnesota Statutes,
section 176.081. The objection to attorney fees does not
render the party's consent
Subpart 7. Defense attorney fees. . . . The insurer or
self-insuredemployer must include defense fees and costs
incurred by itself and its agents and representatives,
including but not limited to adjusting companies, and
third-party administrators, and. Costs_include_charges_for
contract service providers such as surveillance companies
and transcription service organizations.
The Department made these modifications to clarify the proposed rules. Several
were made in response to hearing testimony and post-hearing comments. The
Administrative Law Judge finds that the need for and rasonableness of these
modifications has been demonstrated and that none of these modifications
constitutes a substantial change from the rules as initially proposed.
Proposed_Rule_Part_5220.2510_-_Scope_and_Purpose
12. The existing language of Minn. Rules pt. 5220.2510 provides that the
rules govern all workers' compensation matters before the Department except
matters governed by the Joint Rules of Practice of the Department's Workers'
Compensation Division and the Office of Administrative Hearings. The proposed
rule amends the existing language of the rule to provide that the Workers'
Compensation Rules of Practice govern all workers' compensation matters before
the Department and the Office of Administrative Hearings, noting, however, that
the Joint Rules of Practice set out in Minn. Rules Chapter 1415 also govern
workers' compensation matters. The Department indicated in its SONAR that the
proposed rules "clarify that the Department's rulemaking authority extends
beyond decisions by the Department and includes promulgation of substantive
rules which bind the workers' compensation courts as well." SONAR at 4. The
Department further states that the proposed rules "do not supersede the Joint
Rules in any way, but are applicable in situations where the joint rule
provisions do not address an issue contained in these rules, such as time
periods for payment of benefits and standards for change of doctor." Id.
Several commentators, including Daniel C. Berglund, Falsani, Balmer,
Berglund & Merritt; Steven B. Creason, Quinli
van, Sherwood, Spellacy & Tarvestad, P.A.; Timothy J. McCoy, Sieben, Grose, Von
Holtum, McCoy & Carey, Ltd.; Steven D. Hawn, Sieben Polk LaVerdiere Jones &
Hawn; and John C. Wallraff, Assistant Chief Administrative Law Judge, Office of
Administrative Hearings, Workers' Compensation Division, argued that the
Workers' Compensation Rules of Practice should not be applicable to proceedings
before the Office of Administrative Hearings, particularly insofar as the
proposed amendments were offered without consultation with the Office of
Administrative Hearings and establish substantive as well as procedural
requirements. The Department argued in response that it is authorized by Minn.
Stat. ̃̃«176.183, 175.171, and 176.251 (1992), to adopt substantive rules to
govern workers' compensation matters and that such rules are applicable to all
workers' compensation matters, whether handled through informal Department
processes or through formal hearings before the Office of Administrative
Hearings. Department's Aug. 19, 1993, submission at 5-9; Department's Aug. 26,
1993, submission at 4-5.
13. The Minnesota Supreme Court has defined the circumstancesunder which
an agency is authorized to adopt rules. Minnesota-Dakotas Retail Hardware
Association v. State, 279 N.W.2d 360 (Minn. 1979), involved rules adopted by
the Consumer Services Section of the Department of Commerce. The agency's
enabling legislation authorized it to adopt rules "to implement" the statute
which, among other provisions, involved enforcement of consumer fraud laws.
The Court differntiated between procedural, legislative, and interpretative
rules as follows:
[I]nterpretative rules are those rules«.«.«.«which are
promulated to make specific the law enforced or
adminis
Id. at 364-365. The Court concluded that the rules, which related to
deceptive sales practices, were within the agency's statutory authority to
promulgate interpretative rules. In response to the Minnesota-Dakotas_Retail
Hardware case, Minn. Stat. ̃ 14.38, subd. 1, was amended to provide that "every
rule, regardless of whether it might be known as a substantive, procedura, or
interpretative rule," has the force and effect of law as long as it has been
adopted in compliance with applicable requirements. See also Mammenga_v.
Department_of_Human_Services, 442 N.W.2d 786 (Minn. 1989); Manufactured_Housing
Institute_v._Pettersen, 347 N.W.2d 238 (Minn. 1984); Stasny_v._Department_of
Commerce, 474 N.W.2d 195 (Minn. Ct. App. 1991); Vang_v._Commissioner_of_Public
Safety, 432 N.W.2d 203 (Minn. Ct. App. 1988).
The Department has broad general authority to adopt rules to implement the
provisions of the workers' compensation law. See, e.g., Minn. Stat. ̃«176.83,
subd. 1 (1992). This broad general authority is in contrast to the specific
authority of the Department to adopt procedural rules. See, e.g., Minn. Stat.
̃ 176.83, subd. 10 (1992). Therefore, the Administrative Law Judge finds that
the Department has the authority to adopt "substantive" as well as "procedural"
rules.
Consistent with Finding No. 39 in the Second Report of the Administrative
Law Judge, however, the Judge finds that the Department has not established the
need for including in the rules the statement that Chapter 5520 "governs all
workers' compensation matters before . . . the Office of Administrative
Hearings." Pursuant to Minn. Stat. ̃ 176.371 (1992), the decisions of
Compensation Judges must "include a determination of a
ll contested issues of fact and law and an award or disallowance or other order
as the pleadings, evidence, this chapter and rule require." To the extent a
rule is relevant in a particular case, the statute thus requires that it be
applied. The statement in the proposed rules is superfluous under these
circumstances. The Department has not shown that Compensation Judges have
failed to apply its rules in appropriate situations or that the rule is needed
for some other reason. To correct this defect in the rules, the Department may
modify this section of the proposed rules by modifying the provision to state
as follows: "Chapter 5220 and the Joint Rules of Practice of the Workers'
Compensation Division and the Office of Administrative Hearings in chapter 1415
govern workers' compensation matters." In the alternative, the Department may
correct the defect by referring to "chapter 5220" and "chapter 1415" but
otherwise retaining the existing rule language.«1
______________
1 Because it is a well-established principle that an agency is bound by
itsown rules, see G. Beck, L. Bakken, and T. Muck, Minnesota_Administrative
Procedure, ̃ 16.3 (1987), it is unnecessary for the rules to state that chapter
5220 governs all workers' compensation matters before the Commissioner.
However, this provision is contained in the existing rules and thus may be
retained if the Department wishes.
Proposed_Rule_Part_5220.2540_-_Payment_of_Temporary_Total,_Temporary_Partial‡
or_Permanent_Total_Compensation
Subpart_1_-_Time_of_Payment
13. Subpart 1C of the proposed rule provides that a party's
consideration of an appeal does not excuse payment beyond the 14-day time limit
and that payments made after the 14th day are subject to interest and penalties
when no appeal has been filed. The Department has proposed this rule as a
means of resolving frequent disagreements regarding the allowable time period
for payments which arise because Minn. Stat. ̃ 176.221, subd. 8 (1992),
requires payment within fourteen days of a decision, while the appeal period
from a decision and order is generally thirty days. SONAR at 5-6. Peter J.
Pustorino, Pustorino, Pederson, Tilton & Parrington, argued that this rule
attempted to make a change in the substantive law and exceeded
Subpart 1C of the proposed rule also provides that the insurer must notify
the employee in writing of the day of the week that payments will be made and
the frequency with which payments will be made. Andrea J. Linner, Chief
Corporate Counsel for State Fund Mutual Insurance Company, suggested that
language be added to prove that notification need not be sent if the initial
payment is a first and final payment. The Department agrees that no notice is
necessary if ongoing payments are not anticipated and has incorporated the
commentator's suggestion into the Department's post-hearing amendments to the
proposed rules. Department august 19, 1993, submission at 9; see Finding 11
above. The Administrative Law Judge finds that the proposed amendment is
needed and reasonable and does not result in a substantial change.
Subpart_2a_-_Suitable_Employment
13. Subpart 2a of the proposed rule provides that:
If a rehabilitation plan has been completed, the employee
is ineligible for rehabilitation services, or the employee
has not requested rehabilitation services, a job which
pays at least 50 percent of the gross weekly wage on the
date of injury is economically suitable under Minnesota
Statutes, section 176.101, subdivision 3e, if the job
represents the employee's current earning
capacity and that earning capacity cannot reasonably be
expected to significantly change.
The Department stated that this proposed rule is intended to clarify Minn.
Stat. ̃ 176.101, subd. 3e, by providing a method for determining whether
employment offered to the employee is "economically suitable." SONAR at 6-7.
Minn. Stat. ̃ 176.101, subd. 3e(a) (1992), provides that the employee's
temporary total compensation shall cease ninety days after an employee has
reached maximum medical improvement and the required medical report has been
served on the employee, or ninety days after the end of an approved retraining
program, whichever is later. Minn. Stat. ̃ 176.101, subd. 3e(b) provides:
If at any time prior to the end of the 90-day period
.«.«.«the employee retires or the employer furnishes work
to the employee that is consistent with an approved plan
or rehabilitation . . . or, if no plan has been approved,
that the employee can do in the employee's physical
condition and that job produces an economic status as
close as possible to that the employee would have
enjoyedwithout the disability . . . temporary total
compensation shall cease and the employee shall, if
appropriate, receive impairment compensation. . . . This
impairment compensation is in lieu of economic recovery
compensation. . . .
(Emphasis supplied.) Thus, whether an employee receives impairment
compensation or economic recovery compensation depends upon whether or not the
employee's job is "suitable." This determination makes an economic difference
to employees since economic recovery compensation is higher than impairment
compensation. Cassem_v._Crenlo,_Inc., 470 N.W.2d 102 (Minn. 1991).
The Department acknowledges that the workers' compensation courts have
addressed the issue of "suitable employment" on a case-by-case basis and that
the question not yet addressed by the Minnesota Supreme Court is whether or not
the post-injury job need only provide an economic status "as close as possible"
to that of the pre-injury job or whether the post-injury job must in fact
produce an income "close" to pre-injury income. SONAR at 6. The Department
contends that the proposed rule, which sets fifty percent of the employee's
former earnings as the "floor" for consideration as a suitable job, is
supported by case law, although the Department cites no authority for this
assertion. SONAR at 7. At the hearing, the Department asserted that the
appellate court has "genera
Several commentators, including Daniel Berglund, Peter Pustorino, Steven
Creason, Timothy McCoy, Steven Hawn, Christopher Roe (Associate Counsel for the
American Insurance Association), John G. Engbert (Peterson, Engberg &
Peterson), David R. Vail (Sieben, Grose, Von Holtum, McCoy & Carey, Ltd.) and
thirteen members of the House of Representatives (Patrick Beard, Irv Anderson,
Jim Farrell, Alice Johnson, Walter Perlt, Tom Rukavina, Kathleen Sekhom, David
Battaglia, Thomas Huntley, Mary Murphy, James Rice, John Sarna, and Stephen
Wenzel), disagreed with the Department and objected to the proposed rule as
being in excess of the Department's statutory authority or as being in conflict
with the underlying statute and case law interpreting that statute.
In its post hearing comments, the Department acknowledges that there are
two contradictory lines of cases concerning the applicable standard todetermine
economic suitability, one of which focuses on the economic disparity between
the employee's income post-injury an
d pre-injury, and the second of which focuses on the specific facts of the case
to ascertain whether the employee's post-injury employment produces an economic
status "as close as possible" to pre-injury income. Department's Aug. 19,
1993, submission at 13-14; Department's Aug. 26, 1993, submission at 12. The
Department argues that, while the proposed rule sets an income "floor," the
rule also requires a determination that the post-injury job represents the
employee's earning capacity and that earning capacity cannot reasonably be
expected to significantly change. Id. The Department contends that its
proposed rule "reconciles" conflicting case law on the "suitable job" issue to
produce greater certainty in workers' compensation cases.
14. The "two-tier" benefit system was enacted as part of the 1983
amendments to the workers' compensation statutes. Since the enactment of the
statute, courts have determined the "suitable job" issue under Minn. Stat.
̃176.101, subd. 3e as a factual matter on a case-by-case basis. In Jerde_v.
Adolfson_and_Peterson, 484 N.W.2d 763 (Minn. 1992), the Minnesota Supreme Court
addressed the issue of whether an employee was entitled to receive economic
recovery benefits because his post-injury employment did not meet the
requirements of Minn. Stat. ̃ 176.101, subd. 3e. The employee in Jerde had a
pre-injury job that paid $675 per week plus fringe benefits. The post-injury
job, which was the best economically the employee could do at that time in his
partially disabled condition, paid $170 per week and provided neither fringe
benefits nor opportunity for future income. There was no evidence as to past
or future rehabilitation efforts. The Compensation Judge found that the
employee's post-injury employment did not satisfy the requirements of
subdivision 3e and awarded economic recovery compensation. On appeal, the
Workers' Compensation Court of Appeals reversed. The Supreme Court found that
the Compensation Judge had "quite properly considered all of those factors
typically relevant in rehabilitation matters, such as pre-injury economic
status, age, education, skills, disability, etc." and determined that "there
was sufficient evidence to support the determination that employee was entitled
to receive economic recovery compensation because his post-injury employement
did not meet the requirements of subdivision 3e of section 176.101." Id. at
795. The Court thus reversed the Workers' Compensation Court of Appeals and
reinstated the Compensation Judge's award of economic recovery compensation.
Cases decided subsequent to Jerde emphasize that wage disparity is just
one factor to be considered in deciding whether a job is economically suitable
under subdivision 3e. For example, in in Rogholt_v._Knight_Electric, No.
472-56-9556 (WCCA April 2, 1993), the Workers' Compensation Court of Appeals
considered a situation in which the employee had a pre-injury income of $760
per week plus fringe benefits and
The test under section 176.101, subd. 3(e), or section
176.102, subd. 1, is not the relative disparity in
economic status or whether the employee's post injury
status is "close" or "not close" to his pre injury
non-disabled economic status. The statutory test is
whether the post-injury economic status is "as close as
possible" to his non-disabled economic status.
Id. The Court went on to state that, by
focusing solely on the degree of wage disparity, the Compensation Judge did not
undertake the deliberation process endorsed in Jerde, under which "the court
should evaluate the job by using the 'factors typically relevant in
rehabilitation matters.'" Jerde, 484 N.W.2d at 794. The Court indicated that
the factors to be considered in deciding the "suitable job" issue are:
1) the employee's former employment,
2) the employee'qualifications, including but not
limited to, the employee's
a. age,
b. education,
c. previous work history,
d. interests, and
e. skills.
Rogholt, citing Minn. Rules pt. 5220.0100, subp. 13. The Rogholt Court also
noted that the Legislature may wish to address the wage disparity issue:
While the "wage disparity" method is easily quantified, it
does not answer the "close as possible" issue. It does,
however, raise the issue of whether the employee's
post-injury wage is "close" or "not close" to the
pre-injury wage. The practical problem with the "close"
or "not close" method is that it is not subject to
consistent application and is not predictable. These
issues, however,_are_not_legal_issues_raised_by_the
statute,_but_are_ones_the_legislature_may_wish_to_wrestle
with_in_drafting_a_statute.__They_are_not_ones_related_to
the_interpretation_of_the_language_currently_in_the
statute.
(Emphasis supplied.)
The approach taken in Rogholt is consistent with several other recent
decisions of the Workers' Compensation Court of Appeals. For example, the
Court of Appeals determined in Klayman_v._Metropolitan_Transit_Commission, No.
472-46-3030 (W.C.C.A. March 5, 1991), that many factors may be relevant in
determining whether a post-injury job produces an "economic status as close as
possible to that the employee would have enjoyed without the disability,"
including wage disparity; comparison of fringe benefits both pre- and
post-injury; the employee's opportunity for future income; the status of the
current job market; and the employee's disability, age, qualifications,
education, interests, skills, and general employment history. Accord Sarber_v.
Russnick_Contractors, No. 469-88-0124 (W.C.C.A. April 24, 1991) (question of
whether a job meets the economic status requirement of subd. 3e(b) is one of
fact, citing Klayman; affirmed Compensation Judge's finding that post-injury
job was not suitable, noting that, while Compensation Judge dwelled on
disparity in wages between pre- and post-injury jobs, proceedings contained
other evidence regarding the circumstances and progress of the employee's
rehabilitation and job search that also provided support for the Judge's
findings on the suitability issue); Kantorowicz_v._East_Side_Beverage, No.
470-32-7154 (W.C.C.A. April 1, 1991) (numerous factors should be considered
when determining whether a job meets the suitability standard, citing Klayman);
see also Root_v._Special_School_District_1, No. 500-40-1303 (W.C.C.A. Feb. 8,
1993) (the "[s]uitability of a post-injury job is a fact question, and as with
medical opinions, the compensation judge's choice of vocational opinions is
given great deference").
Several past decisions issued by the Workers' Compensation Court of
Appeals suggested that it was appropriate to rely solely or primarily upon
relative wage d
de_Beverage_Co., 43 W.C.D. 497 (W.C.C.A. 1990) (job paying $160 per week not
suitable where pre-injury wages were $845 per week); Wark_v._Franchise
Services,_Inc., 43 W.C.D. 126 (W.C.C.A. 1990) (job paying $260 per week not
suitable where pre-injury earnings were $754 per week); Machacek_v._George_A.
Hormel_&_Co., 41 W.C.D. (W.C.C.A. 1988) (job paying about half of pre-injury
job not suitable). As noted in the Rogholt decision, however, these rulings
predated the Supreme Court's decision in Jerde and the Court of Appeals'
decision in Wageman_v._Apple_Valley_Health_Center, 47 W.C.D. 340 (W.C.C.A.
1992), and thus should not be followed. Rogholt at n.2.
15. Based upon an analysis of the language of Minn. Stat. ̃176.101,
subd. 3e (1993), and cases interpreting the statute, the Administrative Law
Judge finds that subpart 2a of the proposed rules is in conflict with the
language of the statute. The more recent decisions cited by the Department and
commentators, particularly those decided subsequent to Jerde, are not based
primarily on wage disparity but rather upon a consideration of many factors.
By focusing solely upon wage disparity, the proposed rule diverges from the
analysis approved in recent cases. Although the wage disparity approach taken
in the proposed rule would have the benefit of being easily quantified, it does
not provide for consideration of all of the factors necessary to determine
whether the job provides an economic status "as close as possible to that the
employee would have enjoyed without the disability." The Legislature
presumably is aware of the current case-by-case, multi-factor determination of
the "suitable job" issue and has not chosen to adopt a more objective standard
for defining when a job is to be deemed suitable. While the Department has the
authority to interpret the law administered or enforced by it, the Department
is not authorized to supply a substantive provision of the law which the
Department thinks the Legislature should have included in the first place.
Wallace_v._Commissioner_of_Taxation, 184 N.W.2d 588, 594 (Minn. 1971). Subpart
2a is thus found to exceed the statutory authority of the Department. To
correct this defect, subpart 2a must be deleted from the proposed rules. 2
_______________
2 Those opposing the proposed rule pointed out that the Legislature failed
to enact a bill that was introduced during the 1993 legislative session which
involved the "suitable job" issue. H.F. 53 would have defined "suitable job"
as a job that the injured employee is reasonably able to perform in the
employee's physical condition and that restores the employee to employment
paying no less than 70 percent of the employee's wage at the time of the
work-related injury. The bill would have precluded consideration of other
factors in determining whether a job is suitable. Because there is no evidence
regarding what, if any, serious condsideration was given to the bill by the
Legislature and because the standard proposed in the bill varies in any event
from that contained in the proposed rule, the Administrative Law Judge has not
given this factor any weight in determining the statutory authority issue.
Subpart_5_-_Removal_From_Labor_Market
16. Subpart 5 of the proposed rule provides that "[a]n employee who
voluntarily removes himself or herself from the labor market is no longer
entitled to emporary total, temporary partial, or permanent total disability
benefits." Under the provisions of the rule, a removal from the labor market
is deemed to have occurred "when the employee is released to return to work by
a health care provider and the employee retires or the employee's opportunities
for gainful employment or suitable employment are significantly diminished due
to the employee's move to another labor market." The Department states that
the proposed rule summarizes current case law on this issue. SONAR at 7.
Daniel Berglund, John Engberg, Steven Hawn, Peter Pustorino, David Vail,
and Dean
In Paine_v._Beek's_Pizza, 323 N.W.2d 812 (Minn. 1982), the Minnesota
Supreme Court addressed the issue of an employee's voluntary withdrawal from
the labor market. The Court in that case denied benefits to an employee who
moved from the Twin Cities to Roseau County based upon its determination that
the employee effectively and voluntarily withdrew from the labor market by
voluntarily leaving the metropolitan area for a sparsely populated area where
substantially no employment opportunities for him existed. Compare Kurrell_v.
National_Con_Rod,_Inc., 322 N.W.2d 199 (Minn. 1982).
17. The Administrative Law Judge finds that the proposed rule is
consistent with applicable case law and within the scope of the Department's
statutory authority. The Department has demonstrated that the rule is needed
and reasonable to provide guidance regarding the applicable standards.
Subpart__6_-_Permanent_Total_Disability
18. Subpart 6 of the proposed rule provides as follows:
An employee shall not be found to be permanently and
totally disabled within the meaning of Minnesota Statutes,
section 176.101, subdivision 5, clause (2), unless the
employee has not refused a suitable job under Minnesota
Statutes, section 176.101, subdivision 3e, and the
employee:
A. has a permanent partial disability rating of at least
20 percent of the whole body;
B. has a permanent partial disability rating of at least
17 percent of the whole body, and:
(1) is over 45 years old;
(2) has not earned a high school diploma or its
equivalent; or
(3) has been employed during the three years
preceding the disability only in jobs classified by
the Dictionary of Occupational Titles, fourth
edition, 1991, at specific vocational preparation
level three or below;
C. has a permanent partial disability rating of at 14
percent of the whole body and has two of the following
three characteristics:
(1) is over 45 years old;
(2) has not earned a high school diploma or its
equivalent; or
(3) has been employed during the three years
immediatelypreceding the disability only in jobs
classified . . . at specific vocational preparation
level three or below;
D. has a permanent partial disability rating of at least
10 percent of the whole body, and:
(1) is over 45 years old;
(2) has not
earned a high school diploma or its equivalent; and
(3) has been employed during the three years
immediately preceding the disability only in jobs
classified . . . at specific vocational preparation
level three or below;
E. has been evaluated by the vocational rehabilitation
unit of the division and it has been found by that unit
that the employee would be unlikely to be able to secure
anything more than sporadic employment resulting in an
insubstantial income even after the employee had received
all appropriate services under Minnesota Statutes, section
176.102; or
F. has diligently searched for employment for a period
of at least two years and_has_received_all_other
appropriate_services_under_Minn._Stat._̃_176.102 and has
been unable to secure anything more than sporadic
employment resulting in an insubstantial income . . . .
The underlined text was proposed by the Department after the hearing. See
Department's Aug. 19, 1993, submission at 20; Finding 11 above.
Many commentators, including Daniel Berglund, Steven Creason, John
Engberg, Steven Hawn, Timothy McCoy, Peter Pustorino, David Vail, the American
Insurance Association, Russell G. Sundquist of Russell G. Sundquist Ltd., and
Reps. Beard, Anderson, Farrell, Johnson, Perlt, Rukavina, Sekhon, Battaglia,
Huntley, Murphy, Rice, Sarna, and Wenzel, objected to the proposed rule,
arguing that it conflicts with existing statutory and case law. In particular,
opponents of the rule contended that the statutory definition does not specify
any numerical level of permanent partial disability an employee must suffer
before the employee may be eligible for permanent total disability and that,
therefore, paragraphs A, B, C, and D are in conflict with the statute.
Likewise, these commentators asserted that nothing in the statute authorizes an
evaluation of an employee by the vocational rehabilitation unit as a condition
of eligibility, as contemplated by paragraph E of the proposed rule. The
commentators also argued that paragraph F of the proposed rule is contrary to
case law since a job search is not prerequisite if the job search would be
futile. Several individuals objecting to the rule disputed the reasonableness
of the proposed numerical categories, arguing that they are arbitrary. The
American Insurance Association stated that the proposed rule would increase the
frequency of permanent total disability cases.
19. The Administrative Law Judge finds that the proposed rule does not
exceed the statutory authority of the Department. The underlying statute, like
the case law it codified, defines "totally and permanently incapacitated" to
occur when the employee's physical disability, in combination with other
factors (age, education, training, and experience), causes the employee to be
unable to secure anything moire than sporadic employment resulting in an
insubstantial income. Paragraphs A, B, C, and D of the
proposed rule interpret the general terms of the underlying statute by
providing specific impairment percentages which, in combination with specific
age, education, and skill levels, correlate with the inability to secure and
maintain suitable employment. The specific impairment percentages as well as
the specific age, education, and skill levels are based upon information in the
Diqest of Data on Persons with Disabilities, Science Management Corporation
(for the U.S. Department of Education, National Institute on Disability and
Rehabilitation Research), 1992, as well as theDepartment's experience and
expertise. SONAR at 8-12.
The Department acknowledges that the specific threshholds established by
paragraphs A through D of the proposed rule may fail to include all employees
who, because of their disability, are unable to secure suitable employment.
Accordingly, paragraph E of the proposed rule provides for an evaluation of the
employee by the Department to determine whether the employee is likely to
obtain suitable employment after rehabilitation and paragraph F allows a
finding of permanent total disability if the employee is unable to secure
suitable employment following a diligent two-year job search. The Department
has broad general authority to administer and enforce the provisions of the
workers' compensation law and, therefore, the provisions of paragraph E are
authorized. The Department agrees that, under paragraph F, an employee is not
required to conduct a job search if one would be futile. In such cases, the
Department notes that, if the employee does not otherwise qualify under
paragraphs A through D, an evaluation could be performed under paragraph E.
The Administrative Law Judge thus finds that subpart 6 of the proposed
rules is within the statutory authority granted to the Department and is found
to be a needed and reasonable interpretation of the statute. There is no
evidence that the approach taken by the proposed rules conflicts with current
case law. The modifications proposed by the Department would not result
Subpart__7_-_Apprentices,_Temporary_Partial_Disability_Benefits
20. Subpart 7 of the proposed rule provides that "[a]n apprentice, upon
return to the same apprenticeship program in the same position or a similar
position to that held on the date of injury, has not suffered a loss of earning
capacity where the wage upon return to the apprenticeship program is the same
or greater than the wage on the date of injury." The rule also provides that
the employee is not eligible for temporary partial disability benefits if there
is no loss in earning capacity. The Department states that the proposed rule
codifies existing case law regarding minors to make it applicable to
apprentices as well. SONAR at 12.
Steven Creason, John Engberg, Peter Pustorino, and Scott Soderberg of
Sieben, Grose, Von Holtum, McCoy & Carey argued that the proposed rule
conflicts with the underlying statutory provisions and redefines benefits for
apprentices without statutory authority. Mr. Soderberg asserted that, under
applicable case law, earning capacity cannot be equated with the actual
pre-injury wage.
Subpart 7 of the proposed rule relates to Minn. Stat. ̃176.101, subd. 6
(1992), which provides as follows:
(a) If any employee entitled to the benefits of this
chapter is an apprentice of any age and sustains a
personal injury arising out of and in the course of
employment resulting in permanent total or a compensable
permanent partial disability, for the purpose of computing
the compensation to which the employee is entitled for the
injury, the compensation rate for temporary total,
temporary partial, a permanent total disability or ec
onomic recovery compensation shall be the maximum rate for
temporary total disability under subdivision 1.
(b) If any employee entitled to the benefits of this
chapter is a minor and sustains a personal injury arising
out of and in the course of employment resulting in
permanent total disability, for the purpose of computing
the compensation for which the employee is entitled for
the injury, the compensation rate for a permanent total
disability sha11 be the maximum rate for temporary total
disability under subdivision 1.
The provisions of subdivision 6(a) applicable to apprentices were the same as
those applicable to minors until the statute was amended in 1992 to provide
that this benefit calculation for minors would apply only in cases of permanent
total disability. Minn. Laws 1992, Ch. 510, Art. 1, ̃ 6.
Prior to the enactment of the 1992 amendments, the Minnesota Supreme
Court in Woodwick_v._Shamp's_Meat_Market, 435 N.W.2d 816 (Minn. 1989),
interpreted the provisions of Minn. Stat. ̃ 176.101, subd. 6, as they related
to minors. Woodwick involved an injured minor who sought benefits under the
provisions of the statute. The Court held that the purpose of subdivision 6
was to compensate for lost earning capacity by ensuring that benefits received
while an adult are not determined by a wagerate earned as a minor. Id. at 818.
The Court found that a comparison of pre-injury and post-injury wages is
insufficient and that, additionally, it must be determined whether the employee
has suffered any loss of earning capacity.
Mr. Soderberg asserted that the proposed rule incorrectly equates earning
capacity with actual wages earned at the time of the injury. The Department in
its post-hearing comments agreed that it would be incorrect to measure the
earning capacity solely on the basis of the wages earned at the time of the
injury. However, the Department points out that the proposed rule requires
both a comparable wage and the return of the employee to the same
apprenticeship program in the same or similar position. Thus, the Department
argues that the rule is consistent with Woodwick and simply
21. The Administrative Law Judge finds that the proposed rule is within
the statutory authority of the Department and is not in conflict with the
statute. While the Administrative Law Judge does not agree that the rule
"codifies" existing case law, the rule does not conflict with the Woodwick
holding. The rule reasonably interprets Minn. Stat. ̃ 176.101, subd. 6 (a)
(1992), by providing that an apprentice has not suffered a loss in earning
capacity under the defined circumstances.
Proposed_Rule_Part_5220.2550_-_Payment_of_Permanent_Partial_Disability,_
Includinq_Impairment_Compensation_and_Economic_Recovery_Compensation
Subpart_2a_-_Inability_to_Return_to_Former_Employment
22. Subpart 2a of the proposed rule provides that an employee is not
"unable to return to former employment" within the meaning of Minn. Stat. ̃
176.101, subd. 3t(b) when the employee returns to suitable employment with the
employer. Minn. Stat. ̃ 176.101, subd. 3t(b) (1992), provides as follows:
Where an employee has suffered a personal injury for which
temporary total compensation is payable but which produces
no permanent partial disability and the employee is unable
to return to former employment for medical reasons
attributable to the injury, the employee shall receive 26
weeks of economic recovery compensation . . . .
Th
e Department states that the purpose of the statute is to provide permanent
partial disability benefits for the employee who is unable to return to former
employment because of the injury, but who is otherwise unable to collect
permanent partial disability benefits because the disability does not fit any
of the categories of permanent partial disabilities. The Department further
asserts that the purpose of the statute is best fulfilled by limiting the
payment of economic recovery compensation benefits to situations involving loss
of suitable employment with the date of injury employer. In the Department's
view, the proposed rule will encourage employers to offer alternative
employment to injured workers and will correct inequities in the current
system. SONAR at 13-14. John Engberg, Timothy McCoy, Peter Pustorino, and
Scott Soderberg contend that the proposed rule is in conflict with the
provisions of the statute and case law and is in excess of the Department's
statutory authority.
23. Prior to 1984, Minn. Stat. ̃ 176.101, subd. 3t(b) provided:
An employee who has suffered a personal injury for which
temporary total compensation is payable but which produces
no permanent partial disability shall receive twenty-six
weeks of economic recovery compensation if no job is
offered within the time limit specified in and meeting the
criteria of subdivision 3e.
In 1984, the statute was amended to its present form. Minn. Laws 1984, Ch.
432, Art. 2, ̃ 12. Thus, the Legislature eliminated the 3e "suitable job"
condition from the statute and included instead the condition that the employee
be "unable to return to former employment."
Minn. Stat. ̃ 176.101, subd. 3t(b) was interpreted by the Workers'
Compensation Court of Appeals in Hansen_v._George_A._Hormel_&_Co., No.
475-46-2927 (W.C.C.A. 1988). The court considered the effect of the 1984
statutory amendment and found that the amendment deleting the "no suitable job
criterion" and providing for 26 weeks of economic recovery compensation in
cases where the employee is "unable to return to former employment" evidenced
the Legislature's intent that the primary consideration not be whether the
employee has been returned to an otherwise suitable 3e job but whether the
employee has been returned to the actual type of work being performed at the
time of injury. The court also rejected the employer's argument that the
statute should be construed as limited to employees who do not return to work
with their former employer.
The Department argue
Proposed_Rule_Part_5220.2555_-_Retraining_Compensation
24. Proposed rule part 5220.2555 governs retraining compensation. The
Department states that the provisions of the proposed rule are, in substance,
the same as the provisions of an existing rule contained in the Department's
Rehabilitation Rules and that the rule has simply been moved to t
he Workers' Compensation Rules of Practice from the Rehabilitation Rules. John
Engberg and Timothy McCoy asserted that the proposed rule made substantive
changes in law not authorized by statute. The commentators are mistaken. The
proposed rule is identical to Minn. Rules pt. 5220.0750, subp. 4 (1991), which
has been shown to be needed and reasonable in a previous rulemaking proceeding.
Proposed_Rule_Part_5220.2570_-_Denials_of_Liability
25. Subpart 2 of proposed rule part 5220.2570 provides that a denial of
primary liability under Minn. Stat. ̃ 176.221, subd. 1, must contain a specific
reason for the denial and a clear statement of the facts forming the basis for
the denial. A similar requirement is set out in subparts 4E and 5E regarding
letter denials. Subpart 10 of the proposed rule establishes penalties for
frivolous denials and subpart 11 sets forth penalties for nonspecific denials.
Steven Creason and Peter Pustorino objected that subparts 10 and 11 were beyond
the Department's statutory authority. State Fund Mutual Insurance Company
objected to subpart 11 of the proposed rule because it imposes a penalty for a
nonspecific denial without regard to the substantive validity of the denial of
benefits.
Minn. Stat. ̃ 176.221, subd. 3a (1992), provides that the Department may
assess a penalty of up to $1,000 for each instance in which an employer or
insurer does not pay benefits or file a notice of denial of liability within
the time limits prescribed by the statute. Minn. Stat. ̃ 176.225, subd. 1
(1992), provides that up to 25 percent of the total amount of compensation
ordered may be awarded as a penalty where an employer or insurer has, among
other things, interposed a defense which is frivolous. Minn. Stat. ̃ 176.84,
subd. 2 (1992), provides that a penalty of $300 may be imposed for denials of
liability which are not "sufficiently specific to convey clearly, without
further inquiry, the basis upon which the party issuing the notice or statement
is acting." The Administrative Law Judge finds that the Department has
statutory authority to adopt proposed rule part 5220.2570, subps. 10 and 11.
The Administrative Law Judge also finds that subpart 11 is needed and
reasonable as proposed since the Legislature, through the enactment of Minn.
Stat. ̃ 176.84, subd. 2, made clear its intention to penalize employers and
insurers for failing to provide specifically required information, regardless
of whether the underlying denial is valid.
Proposed_Rule_Part_5220.2605_-_Disposition_of_Coverage_Issues
26. Proposed rule part 5220.2605 provides an alternate method for
resolving the issue of whether an injured worker is an employee or an
independent contractor. The proposed rule would allow a party to move to
bifurcate the issue and have it resolved upon affidavit or oral hearing. The
Department states that the proposed rule will allow the parties to obtain an
expedited decision on a dispositive issue. SONAR at 17-18. The proposed rule
was supported by Kent Eggleston of Schanno Transportation, Inc., Donavan J.
Olson of Fortune Transportation, Edmund D. Rydeen of Minn-Dak Transport, Inc.,
and the Minnesota Trucking Association on the grounds that it will permit this
issue to be resolved in a more expeditious and cost-effective manner. Judge
Wallraff contended that the proposed rule constitutes a substantive change in
the law that it outside the statutory authority of the Department. Steven
Creason commented that the proposed rule would encourage bifurcated hearings.
The proposed rule does not make any change in the substantive law, but
merely provides an expedited procedure f
ted since the resolution of this threshold issue may render any further
proceedings unnecessary. The Administrative Law Judge finds that the proposed
rule is within the statutory authority of the Department and is a needed and
reasonable procedure for resolving the issue of an injured worker's status.
Proposed_Rule_Part_5220.2640_-_Discontinuance_Conferences
27. Proposed rule part 5220.2640 governs administrative conferences to
determine whether reasonable grounds exist for a discontinuance of weekly
benefits. Subpart 3 of the proposed rule provides that, if an employee
requests an administrative conference, benefits must be paid through the date
of the conference except in certain specified circumstances. The Department
states that the circumstances identified in the proposed rule involve
situations in which the basis for discontinuance is fairly obvious and does not
include situations which are often disputed. SONAR at 28-30.
In a letter submitted on behalf of thirteen members of the Minnesota House
of Representatives, Rep. Patrick Beard argued that the proposed rule imposes an
unnecessary burden on injured workers and should not be adopted. Daniel
Berglund stated that the proposed rule was a reasonable approach but urged that
the rule be amended to ensure that the due process rights of injured workers
are protected. The Department did not respond to these comments and
recommendations and did not make any modifications to the proposed rule
following the hearing.
Pursuant to Minn. Stat. ̃ ̃176.239, subd. 3, when an administrative
conference is conducted, compensation is required to be paid through the date
of the administrative conference unless the employee has returned to work, the
employee fails to appear at the scheduled administrative conference, or the
Commissioner so orders "due to unusual circumstances or pursuant to the rules
of the division." The Administrative Law Judge finds that subpart 3 of the
proposed rule is within the Department's statutory authority and is needed and
reasonable to delineate circumstances under which benefits may be terminated
prior to the date of the administrative conference. The rights of injured
workers are adequately protected by other provisions of the proposed rules
which, among other things, require the insurer to file appropriate notices
prior to any discontinuance of benefits and impose penalties for improper
discontinuance of benefits. See proposed rule parts 5220.2630 and 5220.2720.
Proposed_Rule_Parts_5220.2720;__5220.2740;__5220.2750;_5220.2760;__5220.2770;_
5220.2780;__5220.2790;__5220.2810;_5220.2820;_5220.2830;_5220.2840;_5220.2850;
5220.2860;_5220.2870_-_Penalty_Provisions
28. Proposed rule parts 5220.2720 through 5220.2870 govern penalties
which may be imposed for various violations of statute or rule. Ronald M.
Holbach, Vice President, Berkley Administrators, objected that many of the
penalty provisions in the proposed rules (as well as in the existing rules)
were keyed to the number of violations with a given time frame without regard
to the volume of business being conducted. The Department responded that,
although a large insurer may, by virtue of the volume of business, incur a
greater number of violations, such an insurere should also have the expertise
to avoid such violations. The Department noted that, while it is willing to
consider other options, a rule which ties penalties to the volume of business
would be difficult to administer. Department's Aug. 26, 1993, submission at
24. The Administrative Law Judge finds that the Department has shown that the
approach taken in these provisions of the proposed rules under which the
penalty depends upon the number of violations is both needed and reasonable.
Proposed_Rule_Part_5220.2810_-_Failure_to_Release_Medical_Data;_Penalty
Subpart_3_-_Amount
29. Minn. Ru
le 5220.2810, subp. 3, requires that a warning letter be issued before a
penalty is assessed for failure to release medical data. The pro
The provisions of the proposed rule are adequate to provide fair notice of
the requirements regarding the release of medical data and the penalties for
violation of these requirements, and are not violative of due process. Those
affected by the proposed amendment to the rule will already be on notice of the
requirement because they will already have received a warning letter during the
past year. The Department has demonstrated that the proposed rule is needed
and reasonable to eliminate unnecessary paperwork burdens and encourage release
of the necessary data.
Proposed_Rule_Part_5220.2920_-_Attorney_Fees
30. Proposed rule part 5220.2920 governs attorney fees paid in workers'
compensation matters, both to plaintiff's attorneys and defense attorneys. The
proposed rule implements the provisions of Minn. Stat. ̃ 176.081 (1992).
Several commentators, including Mary M. Morin, Theodore Dooley, Michael Lander,
James A. Reichert, Thomas G. Lockhart, Steven Creason, Ronald Holbach, Timothy
McCoy, Jeffrey W. Jacobs of Steffens, Wilkerson & Lang, and Philip C. Warner,
Dudley and Smith, objected to the proposed rule, arguing that the provisions
exceeded the scope of the underlying statute or that the provisions are not
needed or reasonable. These comments are discussed more specifically in the
Findings below.
Subpart_1_-_Applicable_Principles
31. Subpart 1 of the proposed rule provides among other things that an
attorney who enters into a retainer agreement with an employee under which the
attorney agrees to accept a fee that is less than the fee presumed reasonable
by Minn. Stat. ̃ 176.081, subd. 1, may not claim a higher fee unless a new
retainer agreement providing a higher fee is executed. The rule further
provides that, if the attorney requests that the client sign a new retainer
agreement, the attorney must notify the client by conspicuous notice in the new
retainer agreement that the client is not required by law to agree to a fee
higher than a fee already negotiated. Jeffrey Jacobs, Timothy McCoy, Mary
Morin, Theodore Dooley, Michael Lander, James Reichert, and Thomas Lockhart
objected to these provisions as being unauthorized by the underlying statute,
in conflict with applicable case law, and an interference with the
attorney-client relationship.
Minn. Stat. ̃ 176.081, subd. 9 (1992), requires retainer agreements in
workers' compensation cases:
An attorney who is hired by an employee to provide legal
services with respect to a claim for compensation made
pursuant to this chapter shall prepare a retainer
agreement in which the provisions of this section are
specifically set out and provide a copy of this agreement
to the employee. The retainer agreement shall provide a
space for the signature of the employee. A signed
agreement shall raise a conclusive presumption that the
employee has read and understands the statutory fee
provisions. No fee shall be awarded . . . in the absence
of a signed retainer agreement.
One commentator cited Enqman_v._Metalcote_Grease_&_Oil, No.
(W.C.C.A. February 26, 1993), for the proposition that a new retainer
agreement is not required if higher fees are sought. The A
dministrative Law Judge does not agree with this view. The Engman case
involved the issue of whether the 1992 amendment to Minn. Stat. ̃ 176.081,
subd. 1, increasing the maximum contingency fee from $6,500 to $13,000, should
be retroactively applied. The court held that the statute was procedural,
rather than substantive, and that, therefore, it applied to fees determined
following its effective date. The court noted, however, that contingent fees
awarded from the employee's compensation are limited to those permitted under
the statute or those called for by the retainer agreement between the employee
and the employee's attorney, whichever is less. (In the Engman case, the
retainer a
The Administrative Law Judge finds that proposed rule part 5220.2920,
subp. 1 is within the statutory authority of the Department and does not
conflict with the underlying statute. The provision of the rule requiring a
new retainer agreement if higher fees are sought and requiring a notice ot the
employee are needed and reasonable to ensure that the employee knowingly
consents to the new agreement. These requirements ar particularly appropriate
since a signed retainer agreement creates a conclusive presumption that the
employee has read and understands the statutory fee provisions.
Subpart_1_-_Applicable_Principles
Subpart_5_-_Genuinely_Disputed_Portions_of_Claims
32. Subpart 1 of the proposed rule also provides that a contingent fee
must be based on the amount awarded to a client which was "genuinely in
dispute." See Minn. Stat. ̃ 176.081, subd. 1(c) (1992). Subparts 5A and 5B of
the rule set out principles by which the determination of whether the benefit
paid or payable was genuinely disputed for the purpose of calculation of a
contingent fee. Mary Morin, Theordore Dooley, Michael Lander, James Reichert,
and Thomas Lockhart suggested that the definition of "genuinely disputed" in
the proposed rule is not broad enough to cover all cases in which fees may
properly be awarded under the statute. These commentators further argued that
the rule does not accommodate situations such as when legal services are
necessary to ensure that an employee's rights are not compromised by litigation
between two insurers. The Department did not address the general concern
raised by the comment but did state that employee's attorney's fees arising
from disputes between two employers or insurers would not fall within the scope
of the rule because the fees would be awarded under Minn. Stat. ̃̃ 176.081,
subd. 8, and 176.191 (1992). Department's Aug. 26, 1993, submission at 30. No
specific examples were provided by any commentator which could not be
adequately addressed by the provisions of the proposed rule.
Proposed rule part 5220.2920, subp. 5B(12) provides that benefits that ha
ve not yet become due and are not in dispute may not be used to compute the
attorney fees. Jeffrey Jacobs, Mary Morin, Theodore Dooley, Michael Lander,
James Reichert, and thomas Lockhart contended that this provision could be
interpreted to require litigation before attorney fees could be paid out of
future benefits. As the Department noted in its post-hearing response, there
is nothing in the rule to suggest that litigation is a condition for the award
of fees for future benefits. Department's August 26, 1993, response at 31.
The only requirement is that the benefits are genuinely in dispute. Therefore,
the Administrative Law Judge finds that subparts 1 and 5 of the proposed rules
relating to genuinely disputed portions of claims have been shown to be needed
and reasonable.
Subpart_3_-_Statement_of_Fees,_Petition_for_Disputed_or_Excess
Attorney_Fees
33. Proposed rule part 5220.2920, subp. 3B provides that, under
specified circumstances, the attorney must complete and file a petition for
disputed or excess attorney fees. Paragraph (19) of this subpart provides
that, when all or a portion of the fee may be payable by the employee, the
notice to the employee must request that the employee return the attached form
within ten days. Jeffrey Jacobs suggested that this provision is unreasonable
since the employee may not return the form as requested. Nothing in the
proposed rule suggests that the award of fees is dependent upon the employee's
return of the form. Therefore, the Administrative Law Judge finds that the
proposed rule is reasonable. If, however, the Department chooses to amend the
proposed rule to expressly provide that the award of fees is not dependent upon
the employee's return of the form, the amendment would not be a substantial
change.
Subpart_5_-_Statement_of_Attorney_Fees_or_Petition_for_Excess_Attorney_
Fees -
34. Proposed rule part 5220.2920, subp. 5 specifies the information
which must be included in the statement of attorney fees or petition for excess
fees. Mr. Jacobs argued that the provisions imposed an unreasonable burden on
attorneys and courts. In response, the Department asserted that the
information required under the rule, while detailed, is necessary to provide
sufficient information to employees and fee determiners about the requested
fees. The Administrative Law Judge finds that the Department has demonstrated
that subpart 5 of the proposed rule is needed and reasonable.
Subpart_6_-_Waiver_of_Objection_Period
35. As originally proposed, subpart 6 specified that the parties could
not waive the ten day period for objecting to attorney fees. Several
commentators objected to this provision and it has been withdrawn by the
Department. Department Response at 21-22. The withdrawal of this proposed
rule provision does not result in a substantial change.
Subpart_7_-_Defense_Attorney_Fees
36. Subpart 7 of the proposed rule governs defense attorney fees and
requires every insurer and self-insured employer to file with the Department an
annual statement of attorney fees containing the information required in the
rule. Steven Creason, Ronald Holbach, Philip Warner, and the American
Insurance Association objected that the proposed rule exceeded the statutory
requirements and imposed an unreasonable burden on insurers and employers.
Minn. Stat. ̃ 176.081, subd. 1(e) and (f) (1992), govern defense attorney
fees:
(e) Employers and insurers may not pay attorney fees or
wages for legal services of more than $13,000 per case
unless the additional fees or wages are approved. . . .
(f) Each insurer and self-insured employer shall file
annual statements with the commissioner detailing the
total amount of legal fees and other legal costs incurred
by
the insurer or employer during the year. The statement
shall include the amount paid for outside and in-house
counsel, deposition and other witness fees, and all other
costs relating to litigation.
The Department acknowledges that detailed information must be provided by
insurers and employers, but argues that the rule simply implements the
requirements of the stlatute. Department's Aug. 26, 1993, submission at 25-27.
The Department also notes that, unlike plaintiff attorney fees, defense
attorney fees have not been regulated prior to the 1992 amendments to the
statute. Therefore, data provided under this rule will provide the first
comprehensive analysis of the defense costs in workers' compensation matters.
TheAdministrative Law Judge finds that subpart 7 is authorized by the statute
which requires insurers and self-insured employers to file statements
"detailing" the total amount of legal fees and other legal costs. The rule is
needed and reasonable for the reasons stated by the Department in its SONAR and
responses.
37. The American Insurance Association contended that the rule is
drafted so broadly that it could be read to include claims administration costs
and costs associated with informal claims. In its response, the Department
stated that the rule is not intended to apply to general claims adjusting costs
or information claims costs, other than legal fees. The intent of the rule is
to require reporting of all legal fees but reporting of only those costs
relating to litigation. A rule that is ambiguous is impermissibly vague.
CITATIONS The Administrative Law Judge finds that subpart 7 of the proposed
rule is defective due to this ambiguity. To correct the defect, the Department
may amend subpart 7 to read as follows:
On August 1 of each year, every insurer and self-insured
employer must file with the department its annual
statement of attorney fees containing the informatio
The suggested amendment serves to clarify the application of the rule and would
not result in a rule that is substantially different from the rules as
originally proposed. As modified, subpart 7 is needed and reasonable.
38. The American Insurance Association also noted that subpart 7B of the
proposed rule used the term "insurer" without including the term "self-insured
employer." In response, the Department stated that the term "insurer" was
intended to include "self-insured employer." Department's Aug. 26, 1993,
submission at 26. The proposed rule is also ambiguous in this regard and,
therefore, unduly vague. To correct this defect, the Administrative Law Judge
finds that proposed rule part 5220.2920, subp. 7.B. must be amended to read as
follows:
The insurer and_self-insured_employer must collect and
make available for review by the department as needed
individual case information relating to defense attorney
fees and defense costs as provided in this item . . . .
The suggested amendment would not result in a substantial change.
Proposed_Rule_Part_5220.2960_-_Commissioner_Interim_Notices_and_Orders
39. Proposed rule part 5220.2960 provides that the Department may publish
interim notices and orders, which do not have the force and effect of law, to
provide information and guidance to the publ
ic. The interim notices and orders are binding upon the Department until a
statute, appellate court decision, rule or subsequent notice or order
conflicts, until the end date stated in the notice or order, or until one year
after publication. Rep. Beard and other members of the House of
Representatives suggested that one year is too long for such notices and orders
to be in existence and that six months would be preferable. the Department
stated in response that six months was an insufficient period of time since the
issues which may be the subject of the interim notice or order may require
judicial or legislative clarification. Department's Aug. 19, 1993, submission
at 18. an agency is entitled to make choices between possible standards as
long as the choice it makes is rational. The Administrative Law Judge finds
that the proposed rule has a rational basis and is, therefore, reasonable.
Based upon the foregoing Findings of Fact, the Administrative Law Judge
makes the following:
CONCLUSIONS
1. The Department gave proper notice of this rulemaking proceeding.
2. The Department has fulfilled the procedural requirements of Minn.
Star. ̃14.14, subd. 1, la, and 2 (1992), and all other procedural
requirements of law or rule so as to allow it to adopt the proposed rules.
3. The Department has demonstrated its statutory authority to adopt the
proposed rules, and has fulfilled all other substantive requirements of law or
rule within the meaning of Minn. Stat. ̃ 14.05, subd. 1, 14.15, subd. 3, and
14.50 (i) and (ii) (1992), except as noted in Findings .
4. The Department has demonstrated the need for and reasonableness of
the proposed rules by an affirmative presentation of facts in the record within
the meaning of Minn. Stat. ̃̃ 14.14, subd. 2 and 14.50 (iii) (1992), except as
noted in Findings .
5. The additions, deletions and amendments to the proposed rules which
were suggested by the Department after publication of the proposed rules in the
State Register do not result in rules which are substantially different from
the proposed rules as published in the State Register within the meaning of
Minn. Stat. ̃ 14.15, subd. 3 (1992), and Minn. Rules pts. 1400.1000, subp. 1
and 1400.1100 (1991).
6. The Administrative Law Judge has suggested action to correct the
defects cited at Conclusions as noted at Findings .
7. Due to Conclusions , this Report has been submitted to the
Chief Administrative Law Judge for his approval pursuant to Minn. Stat.
8. Any Findings which might properly be termed Conclusions and any
Conclusions which might properly be termed Findings are hereby adopted as such.
9. A Finding or Conclusion of need and reasonableness in regard to any
particular rule section does not preclude and should not discourage the
Department from further modification of the proposed rules based upon an
examination of the public comments, provided that no substantial change is made
from the proposed rules as originally published, and provided that the rule
finally adopted is based upon facts appearing in this rule hearing record.
Based upon the foregoing Conclusions, the Administrative Law Judge makes
the following:
RECOMMENDATION
IT IS HEREBY RECOMMENDED that the proposed rules be adopted except where
specifically otherwise noted above.
Dated this ______ day of October, 1993
__________________________________
BARBARA L. NEILSON
Administrative Law Judge
Reported: Transript prepared by Angela D. Sauro
Court Reporter
Kirby A. Kennedy & Associates
(Workers' Compensation Rules of Practice - one volume)