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Wednesday, April 8, 2020

North Dakota Workers' Comp ruling leaves company in 'worst of both worlds'

By Angela Underwood | Aug 30, 2017

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BISMARCK, N.D. (Legal Newsline) – The North Dakota Supreme Court has answered seven questions in a Workers' Compensation case that one of the attorneys involved says will have a "significant impact" on these types of cases.

Robert Stock argued on behalf of the defendant in Vail v. S/L Services, a claim by plaintiff Dawn Vail to file a common law tort action against the company S/L Services Inc. for alleged injuries she sustained on the job under Workforce Safety Insurance (WSI).

Stock told Legal Newsline his client is "now in the worst of both worlds – having paid WSI premiums yet still being subjected to a lawsuit for a workplace injury."

The case that dates back to 2012 when Vail performed work as a welder helper for S/L Services and was allegedly injured in 2013 as an independent contractor. 

She filed a claim with WSI, which required S/L Services to complete a questionnaire to determine if Vail was an independent contractor or employee, the court's opinion states. 

"In July 2013, WSI determined S/L Services was an employer of Vail and any similarly situated workers and awarded Vail related benefits," the opinion states.

In 2014, WSI audited S/L Services for Vail’s reported employment from 2012 to 2013 and the company’s current reporting, ultimately deciding the company still an additional premium “for other welder's helpers was due for the period when Vail was injured and for the current period,” Justice Lisa McEvers wrote in the opinion.

Vail filed a lawsuit in January 2014 against S/L Services for the injuries in federal court, and S/L Services later moved for summary judgment, according to the opinion. This led to the federal court sending the seven questions to the North Dakota Supreme Court.

Stock said in exchange for the payment of premiums, employers are given immunity from suit.

“The purpose of the dual remedy provisions are penal in nature. They are meant to punish an employer for purposefully and willfully misrepresenting to WSI the amount of their payroll or willfully failing to secure WSI coverage for employees,” he said.

“The function of the courts is to interpret the law as written. That being said, we do not believe the Legislature intended for the dual remedy provisions to apply to the facts of our case. 

"I expect the North Dakota Legislature to take up the issue during the next legislative session and we will work closely with legislators to make sure employers are protected from suit when there was a good faith basis to treat someone as an independent contractor under North Dakota law."

Stock said it was previously unclear what type of conduct would be considered a willful misrepresentation to WSI regarding the amount of payroll upon which a premium is based. 

“It was especially important to address N.D.C.C. § 65-04-33(2)’s scienter requirement in terms of what must be proved by Vail to make out a claim of violation of the statute, particularly in the context of when an employer had purposefully treated a person who lawfully was an employee as an independent contractor,” he added.

He said the opinion will have a "very significant' impact on how employers treat independent contractors in the state with respect to Workers' Compensation.

"It is clear from the court’s opinion the injured employee may proceed with the personal injury lawsuit against her employer even though there was a good faith dispute whether the employee was an independent contractor or employee," said Stock, adding the employer later paid all premiums due for the injured employee after WSI found that she was an employee and not an independent contractor.

Stock said the opinion clearly states that there is no scienter requirement for “willfully misrepresenting” to WSI the amount of payroll or for “willfully” failing to procure workers' compensation coverage.

“I would advise all clients that they use the safe harbor provisions found in NDCC 65-09-01 and seek a determination from WSI and file an annual statement for all workers being treated as independent contractors,” he said.

“This case is a prime example of the peril an employer puts themselves in by misclassifying workers as independent contractors.”

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