FAVORED WORK: in favor no more?

On March 29, the Michigan Supreme Court issued three anxiously-awaited opinions regarding favored work for employees who have suffered work-related injuries. Surprisingly, the opinions of the Justices were virtually unanimous in all three cases. These opinions greatly altered the law with regard to favored work in Worker’s Compensation matters. Unfortunately, the opinions were not at all favorable to employers and worker’s comp insurance carriers in this state.

These cases involved employees who were admittedly disabled as a result of a work-related condition and had been offered or provided “reasonable favored work.” Generally, favored work is any work provided to accommodate limitations in the employee’s ability to perform work, due to a work-related injury.

The Michigan Worker’s Compensation Disability Act, Section 301(5)(a), in pertinent part, provides that an employee who refuses a valid offer of favored work “without good and reasonable cause … shall be considered to have voluntarily removed himself or herself from the work force and is no longer entitled to any wage loss benefits under this Act during the period of such refusal.”

In McJunkin vs. Cellasto Plastic Corp., the employee had suffered a back injury and was provided favored work he could perform. However, the employee claimed he was unable to perform that work. Approximately seven months after being offered the favored work, he agreed to perform it, only to be told the job was no longer available.

The Michigan Supreme Court held that when the employee ended his period of unreasonable refusal, he was entitled to benefits even though the job was no longer available. The Court also rejected a prior holding of the Court of Appeals that the employer only had to keep a favored work offer open for a “reasonable period of time.”

Under the Supreme Court holding, it appears an employee can end his or her refusal at any time–even several years later. The employer then has to either pay the disabled employee worker’s compensation benefits or offer favored work once again.

The case of Perez vs. Keeler Brass Co. also involved an employee with a back injury. In this case, the employee was performing favored work which he was capable of doing, but voluntarily quit that employment and moved out of state. The employee refused to sign a “quit slip,” however. The employer terminated the employee, pursuant to the company policy of three days of no show/no call.

Almost two years after quitting his employment, the employee filed a petition for worker’s compensation benefits and almost three-and-a-half years after he last worked for the Keeler Brass Co., he offered to return to the favored work.

A substantial amount of prior case law had held that an employee who voluntarily quits while on favored work permanently forfeits his or her right to wage loss benefits. However, the Supreme Court held that a “disabled worker who quits or otherwise refuses reasonable employment does not permanently forfeit benefits.”

Once the employee ends the period of unreasonable refusal, he or she can be entitled to benefits. In this case, the employee was found to be no longer disabled before ending his “unreasonable refusal” and, therefore, was not entitled to additional wage loss benefits.

A disabled employee who “unreasonably refuses favored work” by either not performing work he/she is able to do or by voluntarily quitting that employment, will be entitled to worker’s compensation benefits when he or she ends the “period of unreasonable refusal.”

There is no time limit as to when the employee must end this refusal. An employee could claim several years after quitting favored work that he or she is willing to perform that work, even knowing that the plant has closed, etc. The employee would then be entitled to a resumption of worker’s compensation wage loss benefits. This obviously presents a tremendous hardship to employers.

Section 301(5)(e) of the Michigan Worker’s Disability Compensation Act provides, in part, that an employee who has performed favored work “for less than 100 weeks (and) loses his or her job for whatever reason … shall receive compensation based upon his or her wage at the original date of injury.”

In the case of Russell vs. Whirlpool Financial Corp., a disabled employee performed favored work for a period of time. The employee eventually stopped coming to work altogether. Per company policy, the employer then requested that the employee provide documentation from a physician as to why she could not work. She failed to provide the documentation, but did express “a willingness to return to work.”

The employee was terminated for violating company policy requiring documentation for absences exceeding five days. The Worker’s Compensation Appellate Commission and the Michigan Court of Appeals held that the employee was not entitled to benefits because she was terminated for “just cause.”

The Supreme Court reversed the two former decisions, holding that the employee ended her unreasonable refusal and the statute provides that the employee is entitled to benefits, if still disabled, because she lost her job “for whatever reason.”

The Supreme Court specifically held that when the employee ended her unreasonable refusal, “the employer became required to provide a reasonable offer of favored work or to provide benefits.” A substantial amount of prior case law had clearly established that an employee on favored work who was fired for “just cause” was not entitled to worker’s compensation wage loss benefits.

Obviously, this is no longer the case. Employees who are on favored work for less than 100 weeks and do not want to work can be expected to be disruptive, thereby leading to termination of their employment for “whatever reason,” and a resumption of worker’s compensation wage loss benefits.

There are several things an employer should do in light of these recent developments. Favored work can still be a very valuable tool for an employer. Sometimes, an injured employee who returns to favored work can be very productive. The problem with the law as it now stands as interpreted by the Michigan Supreme Court is that the employer has a more difficult time with the problem employee. The following are some suggestions regarding this type of employee:

1. Evaluate whether you want to offer an employee favored work, pay benefits, institute vocational rehabilitation or attempt to settle the claim altogether. A final settlement in worker’s compensation, with these new cases, becomes more valuable than ever and resolves all claims against the employer (not just the worker’s compensation claim).

2. If an employee unreasonably refuses an offer of favored work or voluntarily quits while on favored work, do not terminate the employment of that employee. Remember, it is up to the employee to eventually end the period of “unreasonable refusal.”

3. If an employee that has unreasonably refused favored work ends that refusal after a substantial period of time by stating a desire to return to work, a thorough investigation should be conducted with regard to subsequent employments, activities, etc.

4. Suspend, but do not terminate, an employee who has performed favored work for less than 100 weeks even if there is “just cause,” for the termination. This may not always be desirable with regard to the troublesome employee and may not be possible due to the existence of a collective bargaining agreement.

5. It appears that if an employee performs favored work for more than 100 weeks, the employee can be discharged for “just cause” and not entitled to further wage loss benefits. Therefore, if an employer is considering discharging an employee on favored work who is nearing the 100 weeks, it would be best to allow that employee to perform the favored work for more than 100 weeks and than discharge that employee for “just cause.”

Robert Faulkner is President of Faulkner & Williams, PC, of Traverse City. He is a former Worker’s Compensation Magistrate and specializes in worker’s compensation defense litigation. This article is for informational purposes only. If you have any questions, call him at (231) 941-9280. BIZNEWS