Missouri employers scored a major victory when the state overhauled its workers compensation law in 2005. Concerned about an avalanche of claims and soaring business insurance rates, the state’s Republican-dominated legislature decided to narrow the types of injuries compensable under the workers compensation scheme. The controversial new law mandated that only those injuries in which work was the “prevailing factor” qualify for workers compensation. Under the old law, any injury in which work was a “substantial factor” was compensable under workers comp.

The amendments had their intended effect almost immediately. Citing anticipated positive effects of the new law, Missouri Employers Mutual, the state’s largest workers compensation carrier, announced a 5 percent, across-the-board rate cut at the beginning of 2006. And workers compensation claims in the state also decreased in 2006 for the first time in several years.

But almost as soon as employers began reaping the benefits of the new law, labor groups went to court to challenge it. The first major challenge to the amended law made its way to the state supreme court in February.

For now, most of the law will stay in place. In a Feb. 24 en banc decision in Missouri Alliance for Retired Americans v. Department of Labor, the court rejected eight of the nine claims the labor groups asserted, ruling that the claims were not ripe for adjudication because the plaintiffs had not brought forward a worker whose rights had been affected by the law.

“It’s a victory for the business community,” says Marc Ellinger, a member at Blitz, Bardgett & Deutsch. Ellinger represented the Independent Business Legal Foundation and the Missouri Federation of Builders as amici in the case.

But despite the generally positive outcome for employers, the court’s ruling has a few wrinkles that may have unintended consequences for employers in the state.

Unintended Consequences

The purpose of workers compensation is to provide speedy compensation for employees injured at work, while in turn limiting employers’ liabilities. These dual purposes can only be achieved if workers compensation is the sole remedy for work-related injuries. Otherwise, some employees might elect to sue their employers on a negligence theory in court, in hopes of getting a large damages award. Indeed, every state except Oregon makes workers compensation employees’ exclusive avenue for recovery against their employers.

The Missouri Supreme Court ruling could undermine those core purposes of the workers compensation scheme. The one claim the court agreed was ripe for review was the labor organizations’ contention that the exclusivity provision violates the state constitutional guarantee of “open courts,” which provides that “certain remedy” shall be afforded for personal injury. The labor organizations argued that a worker whose injury is partly related to work, but does not fall within the narrowed categories of compensable injuries, would be left without any remedy if workers compensation is their exclusive avenue for recovery against an employer.

The Supreme Court agreed, ruling that workers whose injuries weren’t covered under the statue could sue their employers under common law tort theories of liability, such as negligence. Under a negligence theory, the employee could recover if he proved his job caused or contributed to the injury.

“Companies need to watch what they wish for,” says Alan Mandel, who represented the Missouri Alliance for Retired Americans and other labor organizations in the suit. “This could open up a floodgate of litigation.”

Mandel, a member of Schlueter, Mandel & Mandel, points out that the exclusivity decision may pit workers compensation carriers against the companies they insure. It’s beneficial for the insurer to decide work was not the “prevailing factor” and deny benefits. That in turn exposes the company to a tort claim. Mandel warns that the plaintiff’s bar is poised to exploit this problem. His office is already preparing to file suits involving worker exposure to lead and asbestos under state tort law.

But some in the business community say the exclusivity decision doesn’t really change anything. If a person’s injury occurs on the job, he still cannot file a lawsuit against the employer if he has a remedy in workers compensation, Ellinger points out.

The Next Round

More challenges to the law are already percolating through Missouri courts, and Mandel thinks it’s only a matter of time before other aspects of the pro-employer law are overturned.

“With the right case, [the statute] will be thrown out,” he says.

Mandel points to Judge Richard B. Teitelman’s dissent as a “roadmap” for future challenges to the law. Teitelman attacks numerous provisions of the amended statute, arguing that they deny workers access to legal remedies for their injuries. For instance, he points out that the “prevailing factor” analysis is similar to a “major contributing cause” test that Oregon courts recently rejected as unconstitutional.

Ellinger says future changes to the workers compensation law are unlikely to be so employer friendly.

“With the election of a Democratic governor, any changes going forward will probably be more pro-employee,” he says. “Given the change in the legislature, the business community is thankful that we were able to fight to keep this law in place.”