An Historical Analysis of North Carolina’s Extended Benefits Cap and Potential Constitutional Challenges to N.C. Gen. Stat. § 97-29
The 1972 Report of the National Commission on State Workmen’s Compensation Laws and the Elimination of North Carolina’s Cap on Extended Benefits
Created in 1929 as a compromise between the state’s employers and its workers, the North Carolina Workers’ Compensation Act originally contained a 400-week cap on indemnity benefits. On July 31, 1972, the National Commission on State Workmen’s Compensation Laws, a 15-member Commission appointed by President Nixon under the Occupational Safety and Health Act of 1970, published a report on the inadequacies of state-administered workers’ compensation programs around the country. The Commission issued its report after holding hearings over the course of a year and conducting an intensive analysis of each state’s respective workers’ compensation programs. The report concluded that the programs were, in general, “neither adequate nor equitable.” The Commission issued several recommendations it described as “essential,” including a recommendation for states to remove limits on the payment of benefits for permanent total disability or death. Characterizing the limits as “arbitrary,” the Commission recommended benefits be paid “for the duration of the worker’s disability or for life and, in case of death, should be paid to a widow or widower for life or until remarriage.”
The Commission’s report laid the groundwork for reform that would take place in North Carolina the following year. In 1973, N.C. Gen. Stat. § 97-29, the statute governing compensation rates for total incapacity, was amended to remove the 400-week cap on indemnity benefits such that there was no longer any cap on indemnity benefits for cases arising on or after July 1, 1975. In 1977, N.C. Gen. Stat. § 97-29.1 was added, which increased weekly compensation payments by five percent for all permanent and total disability claims arising prior to July 1, 1973. Not surprisingly, these statutory changes resulted in significantly increased indemnity exposure for employers and their insurance carriers, as well as an increase in litigation over claimants’ entitlement to indemnity benefits.
One of the first litigated issues was over which version of the law to apply when a claimant alleged he was permanently and totally disabled. In Smith v. American & Efird Mills, 305 N.C. 507, 290 S.E.2d 634 (1982), the Supreme Court of North Carolina examined this question in the context of an occupational disease claim. In that case, the claimant was forced to quit his employment with the defendant-employer in 1968 due to breathing difficulties. He returned to work elsewhere earning less wages. The claimant filed a workers’ compensation claim in 1978 and obtained expert testimony that he was permanently and totally disabled. The Deputy Commissioner and the Full Commission awarded the claimant 300 weeks of compensation beginning January 1, 1970, which was when his average weekly wage first began to decline. The North Carolina Court of Appeals remanded the case to the Industrial Commission for a finding in accordance with the evidence that claimant was permanently and totally disabled as of 1978. As such, the Commission should apply N.C. Gen. Stat. § 97-29 as it existed in 1978, not 1970. The North Carolina Supreme Court agreed that the claimant’s indemnity benefits vested when the evidence established the claimant was totally disabled. Here, medical evidence established the claimant was permanently and totally disabled as of 1978, so claimant was entitled to lifetime indemnity benefits under N.C. Gen. Stat. § 97-29.
In 1983, the Supreme Court of North Carolina decided Taylor v. J.P. Stevens Company, 307 N.C. 392, 298 S.E.2d 681 (1983). The claimant in this case argued the legislature’s reform of the Act was intended to increase the total benefits to all persons who were entitled to receive benefits prior to July 1, 1973, and who were receiving or would receive benefits after July 1, 1977, when N.C. Gen. Stat. § 97-29.1 went into effect. The Court disagreed, holding the claimant was limited to compensation as provided by the Act at the time of his total incapacity. The claimant’s incapacity was stipulated to having started on August 2, 1963, so the Court held that the claimant’s compensation was governed by the version of the Act in effect on that date. The claimant’s request for benefits in excess of the maximum amount allowed by N.C. Gen. Stat. § 97-29 as written in August of 1963 was properly denied.
In 1986, the Supreme Court of North Carolina analyzed whether an employee who suffered an injury to a body part that was scheduled pursuant to N.C. Gen. Stat. § 97-31, the statute governing schedule of injuries, rate, and period of compensation, may recover compensation under N.C. Gen. Stat. § 97-29 instead if he was deemed totally and permanently disabled. In Whitley v. Columbia Lumber Mfg. Co., 318 N.C. 89, 348 S.E.2d 336 (1986), the claimant suffered severe injuries to his arm and hand and could not return to his previous employment. Since he was illiterate and sixty years old, his return-to-work potential was virtually nonexistent. The Court held N.C. Gen. Stat. § 97-31 was not an exclusive remedy, and therefore did not prohibit an award of lifetime compensation to an employee who was deemed totally and permanently disabled.
Likewise, the North Carolina Supreme Court in Gupton v. Builders Transport, 320 N.C. 38, 320 N.C. 38 (1987), referring to Whitley, held that an injured worker who suffered an eye injury resulting in a blind spot covering seven percent of his field of vision could receive an award of benefits under either N.C. Gen. Stat. § 97-31’s schedule of permanent partial disability benefits or N.C. Gen. Stat. § 97-30, whichever was more munificent to the injured worker. While the claimant could not recover under both provisions, he could select the more favorable remedy. The Court noted that, if the power or capacity to earn is totally obliterated, the claimant is entitled to lifetime total and permanent disability benefits under N.C. Gen. Stat. § 97-29.
The 2011 Amendments and Reinstatement of a Cap on Extended Benefits
There remained no statutory cap on indemnity benefits until 2011, when the North Carolina General Assembly enacted sweeping legislative reform to the North Carolina Workers’ Compensation Act. The reform marked the first major legislative changes to the Workers’ Compensation Act since 1973. N.C. Gen. Stat. § 97-29(b) was amended to limit the duration an employee could receive temporary total disability compensation to no more than 500 weeks from the date of first disability unless the employee qualified for extended compensation.
Pursuant to N.C. Gen. Stat. § 97-29(c), after 425 weeks have passed since the first date of disability, an employee is permitted to apply to the Commission for an award extending his indemnity benefits beyond the 500-week cap. A claimant has the burden of proving by a preponderance of the evidence that he has sustained a “total loss” of wage-earning capacity. If extended benefits are awarded by a Deputy Commissioner, the decision will not be stayed unless the decision is reversed by the Full Commission or an appellate court. An extended benefits award can also be re-reviewed by the Commission at a later time. If defendants can prove by a preponderance of the evidence that the claimant no longer has a total loss of wage-earning capacity, the Commission can terminate the extended benefits.
It should be noted that there are certain claims which allow for automatic permanent and total disability benefits, such as catastrophic cases where a claimant loses two or more limbs. Claimants in these cases are entitled to lifetime benefits without having to show a total loss of wage-earning capacity. Three other categories of claims create a rebuttable presumption of permanent and total disability benefits: (1) spinal injuries involving severe paralysis of both arms, both legs, or the trunk; (2) severe brain or closed-head injuries evidenced by severe and permanent motor or communication disturbances; and (3) second- or third-degree burns to 33% or more of the total body surface. N.C. Gen. Stat. § 97-29(d). Under these three categories of claims, defendants can rebut the presumption by showing the claimant is capable of returning to suitable employment.
Claimants could begin filing Form 33 Requests for Hearing to request extended benefits as of August 2019, so extended benefits appeals are just starting to make their way through the North Carolina court system. The claimants’ bar contends the standard for extended benefits is the same standard as within the initial 500 weeks. The defense bar, however, contends claimant have the burden of proving a total and complete loss of any wage-earning capacity. In other words, claimants must show that their wage-earning capacity has been totally obliterated. If a claimant has at least some wage-earning capacity, they should not be entitled to extended benefits. The decisions from the Full Commission to date have ruled in defendants’ favor, but several of the cases have been appealed to the North Carolina Court of Appeals.
Recent Constitutional Challenges in Florida and Kentucky, and Potential Impact on the North Carolina Extended Benefits Cap
As more and more extended benefits cases make their way through the court system, the constitutionality of North Carolina’s 500-week cap on indemnity benefits could be challenged, like we recently saw in Florida and Kentucky.
In 2016, Florida’s highest court determined that Florida’s 104-week cap on temporary total disability benefits was unconstitutional. In Westphal v. City of St. Petersburg, 194 So.3d 311 (2016), the claimant suffered a severe low back injury in December 2009 and began receiving temporary total disability benefits. Under § 440.15(2)(a) of the Florida Statutes, an injured worker’s entitlement to temporary total disability benefits ended after he reached maximum medical improvement or after 104 weeks, whichever occurred earlier. The claimant in this case did not reach maximum medical improvement prior to the expiration of the 104-week cap on temporary total disability benefits, although he was still incapable of working or obtaining employment according to his medical providers and vocational experts. The claimant requested additional temporary total disability benefits or permanent total disability benefits pursuant to § 440.15(1). The claimant also challenged the statute on the grounds that the statute as plainly written resulted in a denial of access to the courts under Article 1, section 21 of the Florida Constitution, which “guarantees every person access to the courts and ensures the administration of justice without denial or delay.” It provides that the state’s courts “shall be open to every person for redress of any injury, and justice shall be administered without sale, denial, or delay.” Id. Prior case law held that workers’ compensation provided a “reasonable alternative” to tort litigation and thus did not violate the access to courts provision, “so long as it provides adequate and sufficient safeguards for the injured employee.” Id. at 322 (quoting Kluger v. White, 281 So.2d 1, 4 (1973)).
The Florida Supreme Court concluded that the 104-week cap did not provide a reasonable alternative to tort litigation and thus denied the claimant his constitutional right of access to the courts. The Court reasoned the law lacked adequate and sufficient safeguards and could not be said to continue functioning as a system of compensation without contest. The provision did not stand as a reasonable alternative to tort litigation since injured workers, like the claimant in this case, were denied their constitutional right to seek redress when they were not yet legally entitled to assert a claim for permanent total disability benefits at the conclusion of the 104 weeks of temporary total disability benefits. The Court expanded the limit on indemnity benefits to 260 weeks.
Kentucky has also seen constitutional challenges to its statute governing the payment of indemnity benefits. In 2017, the Supreme Court of Kentucky struck down Kentucky Revised Statute (KRS) § 342.730(4) as unconstitutional in Parker v. Webster County Coal, LLC, 529 S.W.3d 759 (2017). At the time, KRS § 342.730(4) allowed termination of disability benefits as of the date the employee qualified for normal Social Security retirement benefits, or two years after the employee’s injury or last exposure, whichever occurred last. The Kentucky Supreme Court initially found this statute constitutional in McDowell v. Jackson Energy RECC, 84 S.W.3d 71 (2002) and Keith v. Hopple Plastics, 178 S.W.3d 463 (2005), as corrected (Dec. 13, 2005). However, the Court in Parker found that the statute resulted in older workers being treated differently from their younger counterparts. Furthermore, not everyone was entitled to Social Security retirement benefits, such as teachers. As there was no rational basis or substantial and justifiable reason for the disparate treatment, the statute violated the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution.
In response to the Parker decision, a 2018 amendment to the Kentucky Workers’ Compensation Act was passed, which terminated an injured worker’s right to indemnity compensation when the worker reached 70 years of age, or four years from the date of injury or last injurious exposure, whichever event occurred last. KRS § 342.730(4) (2018). The constitutionality of the revised statute was again challenged in Cates v. Kroger, 627 S.W.3d 864 (2021). The Supreme Court of Kentucky held that the amendment did not violate equal protection, noting that preventing a duplication of wage-loss protection programs and promoting the solvency of the state’s workers’ compensation system were legitimate state interests. Since the statute’s classification was no longer directly related to Social Security eligibility but was instead based only on age, it did not violate the Equal Protection Clause since the age classification was rationally related to a legitimate state purpose.
Ultimately, we anticipate any constitutional challenges to N.C. Gen. Stat. § 97-29 would not be successful, as North Carolina’s extended benefits cap is distinguishable from the caps established in Florida and Kentucky. Whereas Florida’s cap on temporary total benefits created a statutory gap for employees who had received 104 weeks of benefits but were not yet at maximum medical improvement and not yet deemed permanently and totally disabled, North Carolina’s statute allows claimants to begin the process of requesting extended benefits beyond the 500-week cap once 425 weeks have elapsed from the first date of disability. Presumably, claimants would be able to have their request for extended benefits heard at the Industrial Commission well before the 500-week cap was reached and their temporary total disability benefits were terminated. In addition, North Carolina’s statute allows defendants to take a credit for all primary Social Security retirement benefits the claimant receives. Therefore, North Carolina’s N.C. Gen. Stat. § 97-29 does not permit termination of benefits once claimant reaches a certain age or upon receipt of Social Security retirement benefits, unlike Kentucky’s statute.
In addition, N.C. Gen. Stat. § 97-29 as amended in 2011 still allows an injured worker multiple ways to prove entitlement to lifetime indemnity benefits for permanent and total disability, as well as yet another method to prove entitlement to receive extended benefits beyond 500 weeks if they can prove a total loss of wage-earning capacity.
Finally, the 2011 amendments in North Carolina were the result of a bipartisan effort to pass balanced legislation that provided additional positive benefits for both injured workers and the business community. In addition to the 500-week limitation of benefits under N.C. Gen. Stat. § 97-29, injured workers received increased benefits in several areas. Specifically, temporary partial disability benefits under N.C. Gen. Stat. § 97-30 were increased from 300 weeks to 500 weeks, death benefits under N.C. Gen. Stat. § 97-38 were increased from 400 weeks to 500 weeks and burial expenses were increased from $2,500 to $10,000. The amendments to N.C. Gen. Stat. § 97-29 were part of a large cooperative effort between all North Carolina workers’ compensation stakeholders. The 2011 Amendment passed 46 to 0 in the Republican-controlled State Senate and 110 to 3 in the Republican-controlled State House and was signed into law by the then-Democratic governor.