My Thoughts on the Alabama Constitutionality Debacle

| | Utilization Review

On May 8, 2017 Alabama Jefferson County Circuit Court Judge Pat Ballard declared the entire Alabama Workers’ Compensation Act unconstitutional. Judge Ballard heard the case of Clower v. CVS Caremark Corporation. In the case, Nora Clower suffered a back injury while working for CVS. She claimed she was entitled to more permanent partial disability (PPD) benefits. Her attorneys made the constitutional law argument that because the PPD amount had been capped at $220 per week for 30 years, and not indexed for inflation, as was Temporary Total Disability Benefits (TTD), this was a violation of equal protection. Also, they argued that the 15 percent attorney’s fees cap constituted a violation of the separation of powers doctrine.

Judge Ballard said of the PPD issue that this was “arbitrary, capricious, irrational” and “a clear violation of equal protection of the laws” under the U.S. Constitution. He added that he agreed the attorney’s fees cap of 15 percent violated the separation of powers doctrine. He declared the entire Alabama Workers’ Compensation Act unconstitutional. However, recognizing the severity of his ruling, Judge Ballard stayed enforcement of his order for 120 days, then he later made the stay indefinite. This was to give lawmakers a chance to cure the deficiencies he identified. As you might expect, this ruling sent shock waves through the industry. Insurance carriers, TPAs, URAs, providers, hospitals and facilities, along with other system participants, wondered what to do next.

Just recently the case settled in its entirety. So all system participants can breathe a sigh of relief. Looking at this case in the rear view mirror, my first major question is, “Why was the entire Alabama Workers’ Comp Act unconstitutional?” The answer is because Alabama Code §25-5-17 has a non-severability provision. It basically says that if one part of the Act is stricken, the entire Act is stricken. Because of this, Judge Ballard did not believe he could just strike the sections regarding the attorney’s fees cap and PPD benefits. He had to strike the entire Act.

As I look at the situation with an eye to the future, I believe the Alabama Legislature needs to act to address several issues. To start, they should revisit the 30 year old rule whereby PPD has been capped at $220 per week for 30 years, and not indexed for inflation. They should probably bring that up to date, and bring it into congruence with TTD. Also, capping attorney fees at 15 percent is arguably a job for the judiciary branch, not the legislative branch. So the Alabama Legislature should set forth a change that will defer that portion to the judiciary. Lastly, the Alabama Legislature should seriously consider getting rid of the non-severability provision. This one provision, by itself, forced Judge Ballard’s hand to declare the entire Act unconstitutional.

Claimants’ attorneys have been complaining about the cap on PPD and the 15 percent cap on attorney’s fees for a long time (over 20 years). And apparently their claims did not fall on deaf ears this time around. Going forward, it is imperative to remove this possible stumbling block for the Alabama workers’ compensation system. Otherwise another irate judge may strike the Act as unconstitutional again in 2018. And the consternation system participants will feel, the second time around, will be the same.

Tom Swiatek

Tom Swiatek

As Assistant Vice President of Regulatory Services, General Counsel, and Editor in Chief of UR Nation, Tom Swiatek draws on his experience as an insurance attorney on both the general liability side, as well as on workers’ compensation matters. As a California Workers’ Compensation Section Member, Tom is leading the discussion with respect to the regulatory challenges and opportunities facing the workers’ compensation system.