Tag Archives: bankruptcy

Navigating a workers’ compensation claim amid mass layoffs and economic uncertainty

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Skyrocketing unemployment and economic uncertainty due to the coronavirus is delivering another load of fear to already anxious injured workers. Fears about how the sudden downturn in the economy can affect a workers’ compensation claim are legitimate fears.

So, what happens to workers’ compensation claims when an employer closes or lays off workers in mass or goes bankrupt? What happens when a workers’ compensation insurer becomes insolvent? How does a mass layoff or plant closing affect a workers with already an already accepted workers’ compensation claim?

Bankrupt employer

The worst-case scenario is a bankrupt employer. While employers are required to carry workers’ compensation insurance, financially unstable employers tend to carry cheap high deductible insurance that shits the cost of an injury away from an insurer onto an employer. Bankruptcy can stay the payment of workers’ compensation benefits for an injured worker.

An injured worker with a bankrupt employer needs to contact an attorney. An injured worker is a creditor of a bankrupt employer and the law tends to favor creditors who file first. A lawyer can also go to court and sometimes force an otherwise solvent insurer to pay workers’ compensation benefits for a bankrupt employer.

Insolvent insurer

Recessions hit workers compensation insurers with a vicious one-two punch. Layoffs reduce the insurance premiums the insurance companies rely on and declines in the stock market cut into the investment profits from those premiums.

In Nebraska, like most states, workers compensation insurers pay into guaranty funds to take over claims from insolvent insurers. 

Unfortunately, at least two prominent state governors, Steve Bullock of Montana and Chris Christie of New Jersey, raided guaranty funds in order to balance state budgets. We will probably find out if guaranty funds will serve as an effective backstop in the next few years.

Laid off on “light duty”

Jonathan Louis May of Morgan and Morgan in Memphis raised concerns on Twitter about what happens to injured workers on light duty who get laid off due to a plant closure or mass lay-off. I agree with May that many insurers will probably use layoffs to deny temporary disability.

In Nebraska, a lay-off should not impact a worker’s eligibility for temporary total disability. But it may take a court order to have back due temporary disability benefits paid after a lay off.

Collecting workers compensation and unemployment benefits

Workers laid off in a mass lay-off may have their employer file unemployment for them. Under the recently passed CARES Act, workers can get their weekly unemployment benefit plus $600 for up to four months.

Injured workers who aren’t already collecting temporary disability in Nebraska should be able to collect unemployment and back due temporary disability.

But injured workers in Nebraska who are already collecting temporary disability may not be able to collect these enhanced unemployment benefits. Normally a worker who is collecting temporary total disability benefits is not eligible to receive unemployment under Neb. Rev. Stat. 48-628.02(c). I am not aware if the CARES Act has modified that rule or if the state has eliminated that requirement during the crisis.

When in doubt employees receiving temporary disability under workers compensation ought to file an application for unemployment if they have lost their job due to a coronavirus related layoff. The state of Nebraska has eliminated job search requirements for employees laid off during the coronavirus crisis. Workers normally must be able to and available for work and be looking for work to receive unemployment benefits.  Workers who are temporarily totally disabled for workers compensation aren’t able to work. But if work eligibility isn’t a requirement to receive unemployment if you lose your job due to coronavirus, injured workers who are receiving temporary total disability would have a decent argument to receive unemployment in addition to temporary total disability benefits.

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

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How workers’ compensation policy makers should respond to the threat of recession

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Fears of a recession emerged recently as long-term interest rates dropped below short-term interest rates leading to a so-called inverted yield curve.

This is Nebraska Workers’ Compensation Watch not CNBC, so I’m not going to play Mario Bartirehmo and go into the why and how of the inverted yield curve or make economic forecasts. (Blogger Joe Paduda wrote a good post about how a recession could impact workers’ comp. if you want to read about that sort of thing.)

Instead I will write about how workers’ compensation policy makers and regulators should respond to the threat of a recession and lower long-term interest rates.

The importance of state regulation

Workers’ compensation is first and foremost a form of insurance. Insurance is regulated at the state level. (You can read about the why of that here) In Nebraska, workers’ compensation insurance is regulated by the Department of Insurance and the Nebraska Workers’ Compensation Court. State regulators and lawmakers need to be doing two things to protect injured workers in any future recessions.

Preserve Guaranty funds – Guaranty funds pay out for claims from insolvent insurers. In Nebraska insurance companies need to pay into a guaranty fund. Insurance companies are financial institutions who make their money by collecting premiums and investing those premiums. In a recession, those investments can go bad. If bad investments lead to insolvency, a guaranty company can pay out claims from an insolvent insurer. Even if the economy doesn’t tip into a recession, low interest rates can lead to bad investment decisions and create problems for financial institutions like insurance companies.

The problem with guaranty funds is that politicians like to use them to balance state budgets instead of cutting programs or  raise taxes. A quick Google search reveals that such bi-partisan paragons of fiscal responsibility such as  Montana Governor (and Democratic Presidential Candidate) Steve Bullock and former New Jersey Governor (and former GOP presidential candidate) Chris Christie raided guaranty funds to balance state budgets. Cutting a workers’ compensation guaranty fund is essentially cutting benefits if the fund can’t pay legitimate workers’ compensation claims.

Strict scrutiny for self-insureds: Nebraska allows companies to self-insure for workers’ compensation. NWCC Rules 70-76 spell out the rules for self-insurance. The rules require yearly approval of for self-insurance and only a small number of employers are self-insured. I am not aware of a guaranty fund for self-insureds in Nebraska. Nebraska Workers’ Compensation Court rules requires a showing of financial responsibility in order to self-insure which should give workers’ some reassurance. But in the worst case scenario an injured worker would become a creditor in a bankruptcy proceeding if a self-insured went bankrupt.

The challenge of high deductible insurance – Financially unstable companies tend to have high deductible insurance for workers’ compensation. Those companies are more vulnerable to bankruptcy. In those cases, as Iowa law firm Gilloon, Wright and Haeml points out on their blog, insurance companies may want to delay payment until the bankruptcy is settled. Injured workers should retain counsel to preserve their rights in that situation.

Settlement value and interest rates

Last year I wrote how Nebraska’s mandated 5 percent discount rate lead to the undervaluing of permanent total disability claims. Long-term interest rates are good measure about the safe return on a long-term investment. The higher those rates the less an insurance company needs to put aside in order to meet their obligation to pay out an award of permanent total disability. The lower the rate of return the more they need to set aside to meet that obligation.

Traditionally the Nebraska workers’ compensation court would approve the settlement of litigated permanent total disability claims for 80 percent of the present value of the claim. In the last few years, the court has not been willing to follow the 80 percent rule. I suspect the difference between long-term interest rates and the mandated 5 percent discount rate is part of the reason that the court won’t follow that custom.

In the wake of low interest rates, the United Kingdom lowered their settlement discount rate. I believe jurisdictions in the United States need to follow suit. Long term interest rates have reached a historic low and are even negative in many countries. A 5 percent discount rate doesn’t make sense in these economic conditions.

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

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Can I Get Fired For Filing Bankruptcy?

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Low and middle income people are the last people to benefit from any economic recovery. For many economic recovery means a return to work the opportunity to put their household finances in order with steady income provided by a job. Unfortunately unpaid debts often mean that employees get garnished  or even having to file bankruptcy.

Congress intended for bankruptcy to allow for people to get a fresh start so they prohibited discrimination based on bankruptcy and even let employees sue employers for such discrimination. But this law is not as strong as other laws prohibiting discrimination on factors such as race or sex for two reasons.

First of all, your status as a debtor in bankruptcy must by the sole cause of job loss. Discrimination is difficult enough to prove already under either a motivating factor or proximate cause standardsole cause is more exacting than even the difficult proximate cause standard. If your employer has any other legitimate reason to fire you besides your bankruptcy, then a court will likely find the termination was lawful. The only way for an employee to preserve any type of discrimination case is not to give the employee a reason to terminate them because of their poor performance , attendance or poor attitude. But even good employees can get fired legitimate reasons such as restructuring and economic reasons.

Secondly most courts do not believe that bankruptcy discrimination prohibits employers from failing to hire employees based on bankruptcy.

Title VII and most state anti-discrimination laws state that a failure to hire based on certain protected categories is unlawful activity.

Finally in any discrimination claim, the employer needs to be aware of your protected status. In a bankruptcy discrimination case this means that your employer had to have known about your bankruptcy status prior to firing you. Some employees get fired because  employer doesn’t want to deal with a garnishment.  Most people, me included, think that such an action is wrong or unfair. But unless your employer knows that garnishment is linked to your bankruptcy status, then firing you based on that garnishment is legal  — unless the garnishment is a cover or pre-text for another unlawful reason.

I would encourage anyone reading this post to contact their U.S. Senator or Congressperson and ask them to change the bankruptcy discrimination statute to mirror other federal anti-discrimination laws such as Title VII.

The offices of Rehm, Bennett, Moore & Rehm, which also sponsors the Trucker Lawyers website, are located in Lincoln and Omaha, Nebraska. Five attorneys represent plaintiffs in workers’ compensation, personal injury, employment and Social Security disability claims. The firm’s lawyers have combined experience of more than 95 years of practice representing injured workers and truck drivers in Nebraska, Iowa and other states with Nebraska and Iowa jurisdiction. The lawyers regularly represent hurt truck drivers and often sue Crete Carrier Corporation, K&B Trucking, Werner Enterprises, UPS, and FedEx. Lawyers in the firm hold licenses in Nebraska and Iowa and are active in groups such as the College of Workers’ Compensation Lawyers, Workers' Injury Law & Advocacy Group (WILG), American Association for Justice (AAJ), the Nebraska Association of Trial Attorneys (NATA), and the American Board of Trial Advocates (ABOTA). We have the knowledge, experience and toughness to win rightful compensation for people who have been injured or mistreated.

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