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Reinstatement After Modification or Suspension due to Economic Layoffs and Plant Closings

Workers' Compensation Alert | June 30, 2015
By: Anthony Salvino and Max Kimbrough

Statistically, workers’ compensation litigation increases in times of economic hardship, as some employees may attempt to protect their financial statuses when threatened with layoffs or plant closings by filing workers’ compensation claims. The increase in litigation is also, in part, due to workers’ compensation claimants feeling automatically entitled to a reinstatement of wage loss benefits when they lose their jobs due to economic layoffs or plant closings. Over the past decade, Pennsylvania Courts have rendered decisions which appear to be contradictory and confusing for employers and insurers. The following is intended to provide guidance and outline changes in the law over the past fifteen years with respect to job-loss due to economic issues. Each case should be reviewed carefully as small changes in facts can render very different outcomes in litigation.

The General Rule of Thumb

In 1990, the Supreme Court of Pennsylvania laid out the “general rule of thumb” for claimants seeking a reinstatement of benefits following an economic layoff. In Pieper v. Ametek Thermox Instruments, 584 A.2d 301 (Pa. 1990), the Court established a two-prong test which claimants are required to pass in order to receive wage loss benefits following a job loss.

The Pieper Court established a fairly low burden of proof for an individual seeking a reinstatement of benefits due to economic reasons. Essentially, the Court established that a claimant under these circumstances must show: (1) through no fault of his own, the claimant’s earning power is once again adversely affected and (2) the injury which gave rise to the original claim continues.

The practical effect of Pieper was that claimants were no longer required to present medical evidence to establish a connection between the original work injury and the loss of earning power. The Court noted that in cases where the claimant’s benefits are suspended prior to a layoff, this connection is presumed, making it much easier for claimants to receive a reinstatement of benefits.

Following the Supreme Court’s decision in Pieper, workers’ compensation judges began applying the “general rule of thumb” to all cases of economic layoffs and plant closings where an individual’s benefits had previously been suspended. Over the subsequent years, however, the Courts have limited the application of Pieper to the benefit of employers.

To Be With Or Without Restrictions, That Is The Question: Teledyne Mckay

Following seven years of broad application, the Commonwealth Court had an opportunity to explain when the “general rule of thumb” in Pieper was applicable. In Teledyne McKay v. WCAB (Osmolinski), 688 A.2d 259 (Pa. Commw. Ct. 1997), the Commonwealth Court noted that in order to determine whether a claimant is entitled to a reinstatement of benefits merely due to an economic layoff, it must first be determined whether the individual was working “with restrictions” or “without restrictions.” The Court noted that individuals working “with restrictions” are entitled to a “presumption” that their loss of earnings is connected to the work injury.

The Court further explained that individuals working “without restrictions” are not entitled to the same presumption and therefore must prove that the work related injury was causing the loss of earnings. Thus, it is very important to monitor an employee’s work status after a return to work. If an employee can return to his full-duty job (with medical permission), it places the employer in a much stronger position in the event that the employee is laid off/fired in the future.

From a practical standpoint, the Teledyne Court established that a claimant who had returned to work without restrictions must present medical testimony to establish his loss of earnings is due to the work injury. Moreover, courts have further elaborated that even when there is a presumption that a claimant is entitled to a reinstatement of benefits following a layoff/firing, employers can rebut by demonstrating that the claimant’s present loss of earnings is unrelated to the work injury. See Budd Co. v. WCAB (Kan), 858 A.2d 170 (Pa. Commw. Ct. 2004); Weber v. WCAB (Shenango, Inc.), 729 A.2d 1249 (Pa. Commw. Ct. 1999). Thus, Teledyne and subsequent court decisions have made it more difficult for claimants who had been working without restrictions to receive a reinstatement of benefits merely due to an economic layoff.

After the Teledyne decision, whether a claimant is entitled to a resumption of benefits following an economic layoff or plant closing is dependent on whether that individual was working “with or without restrictions.” However, over the next few years, the Pennsylvania Courts further limited Pieper and Teledyne to the benefit of employers.

A “Restriction” By Any Other Name. . .

After years of reviewing whether or not a particular individual had “restrictions,” the Commonwealth Court further limited situations where workers’ compensation claimants are entitled to a reinstatement of benefits merely due to an economic layoff or plant closing. In 2002, the inquiry of a claimant’s post-injury status was narrowed in Folk v. WCAB, 802 A.2d 1277 (Pa. Commw. Ct. 2002).

The Folk Court noted that the inquiry applicable in cases of economic layoffs or plant closings is whether the claimant had returned to his pre-injury position following the work injury, regardless of whether he had restrictions. The Court explained that an individual who can perform his time of injury position without significant disabling impairment (even if there are restrictions in place) is not entitled to a resumption of wage loss benefits, unless able to prove a change in physical condition though medical evidence. In other words, if the restrictions are not relevant to the claimant’s ability to perform the pre-injury position, there is no presumption that a loss of earnings upon layoff is causally related to the work injury.

Thus, the Folk Court has eliminated the requirement to review whether a claimant has physical restrictions; rather, the only necessary inquiry is whether the individual returned to his pre-injury position following the work injury. Even if the injury resulted in physical restrictions, they are irrelevant if they did not prevent the claimant from returning to his position at the time of the injury.

All's Well that Ends Well

The issue of a claimant with restrictions who returns to his regular pre-injury job, a modified job, or to only a portion of a job will be fact sensitive. Claimants’ attorneys will argue these cases should be treated as though the claimant is working light duty with restrictions. Defense attorneys should argue that these scenarios fall under Folk, supra.

For questions or further information, please contact Anthony Salvino (610.782.4949; or another member of the Workers' Compensation Group.

This correspondence should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation and legal questions.
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