By Jane Salem, staff attorney, Nashville

Workers’ compensation and tort law are two very different “animals,” so to speak.

A recent opinion involving serious injuries to a maintenance worker on a farm, released by the Court of Appeals in January, illustrates that point. The case also demonstrates the perils to employers of letting a workers’ comp insurance policy lapse or not having one at all.

The opinion presents myriad issues, but this article focuses mostly on its relevance to workers’ comp practitioners. Please read the opinion here.

Facts

In Raul Martinez v. Davids Group, Martinez worked at “Starstruck Farm,” owned by Davids Group. Davids Group purchased the property, which was formerly owned by Reba McIntire, in 2019. (Reba plays no role in this case. But the Court of Appeals mentioned her, so I did, too—because who doesn’t love Reba?!)

Davids Group had big plans to improve the property and change the nature of the business, transforming it from a small horse stable and pastures, to growing and selling produce, pet-boarding, use for camping/hiking, Airbnb stays, hayrides, a wedding/event space, and a concert venue.

This required a massive build-out, done largely by Martinez and his brother. Martinez was working on construction of a restaurant when he was on a ladder that collapsed, causing his fall.

Martinez argued that at the time of the accident, Davids Group was legally required to have workers’ compensation insurance but didn’t do so. Therefore, he brought a tort claim instead. He alleged sustaining serious and permanent injuries, physical and mental pain and suffering, loss of enjoyment of life, lost earnings and income earning capacity, and substantial medical expenses.

Among other contentions, Davids Group agreed it didn’t have workers’ compensation insurance on the date of injury but said it wasn’t required to carry it. Davids Group denied that Martinez was an employee and said he was an independent contractor. It also claimed immunity under section 43-39-102 because the injuries were a result of “agritourism” activity.

After a bench trial, a Wilson County judge found that Martinez was an employee and Davids Group failed to provide a safe workplace. The trial court also found that section 50-6-406(b) applies because Davids Group was required to have workers’ compensation insurance but failed to do so. Under that statute, an employer can’t raise the common-law defenses of comparative fault, that the injury was caused by another employee’s negligence, or that Martinez assumed the risk.

The judge awarded damages but opted to “follow the worker’s compensation law” in doing so. She awarded $31,200 for lost wages; $281,200 for future lost earning capacity; $169,838.36 for reasonable and necessary medical expenses; and $20,000 for future medical expenses. Per the opinion, the total was $471,038.36 (If you add those numbers up, it’s over $500K—so for unknown reasons, that’s the total.).

Davids Group appealed, and Martin appealed as well on the calculation of damages issue.

The opinion

The appellate judges began with a reminder about the so-called “grand bargain” dating back to 1919: “Generally, workers’ compensation is the exclusive remedy for an employee who is injured during the course and scope of his employment, meaning the employee is precluded from seeking tort damages for the injury.”

Further, the Workers’ Comp Law requires that “certain” employers purchase workers’ comp insurance. If they don’t, and an accident occurs, an injured employee may seek tort damages under section 50-6-406(b)—and significantly, an employer’s defenses are limited, as the trial judge did in this case.

The first step, however, was to decide whether Martinez was an employee or independent contractor.

The court applied the familiar test in section 50-6-102(10) of the workers’ comp law and cases interpreting that provision to conclude that Martinez was an employee. As the caselaw instructs, they focused largely on the “right to control.” Davids Group asserted “significant” control. It had the right to terminate Martinez at any time; he was paid an hourly wage and weekly; he had no freedom to hire helpers; and the farm furnished tools and equipment to complete the work.

The court additionally considered whether the trial court erred in finding that Martinez wasn’t a “farm or agricultural laborer,” which would exempt Davids Group from the Workers’ Comp Law.

Davids Group argued it was a farm engaged in “agritourism.” But the court pointed out that the test isn’t whether some farming or agricultural activities occurred but rather the character of the work the employee was required to perform. This was construction and maintenance work.

Notably, on an Employer Questionnaire for the Bureau of Workers’ Compensation completed by Davids Group fewer than three months after the accident, it marked “not applicable (N/A)” when asked whether it had any “employees that are farm or agricultural laborers.” Also, at trial, Davids Group’s sole owner admitted that Martinez wasn’t at Starstruck “for agritourism business.”

Lastly, the court considered damages.

Martinez argued that the trial court erred by applying the Workers’ Compensation Law to reduce his damages. The trial court found that Davids Group was required to carry workers’ compensation insurance and didn’t do so. But when calculating lost wages and future lost earning capacity, the judge “followed the worker’s compensation law and determined same to be two thirds of Plaintiff’s average weekly wage[.]”

The court again harkened to principles dating back to 1919: One of the fundamental purposes of workers’ compensation law is to compensate employees for work-related injuries irrespective of fault. In exchange, employees have limited recovery and relinquish certain common-law rights of action against their employers, which they might’ve otherwise had.

But, the Court reasoned, the plain language of section 50-6-406(b) “makes clear” that when an employer doesn’t comply with the requirements of section 50-6-405, an injured employee isn’t limited to the exclusive remedy of workers’ compensation, “nor is the employee’s recovery limited by the compensation schedule set forth in the Workers’ Compensation Law.”

So, the trial court erred in reducing Martinez’s damages based on workers’ comp law: $312,400. The appellate court calculated damages for lost wages and future lost earning capacity of $483,600.00 and modified the judgment for that amount, in addition to the medical benefits for a total of $672,438.36. (Remember the trial court awarded a total of $471,038.36.)

The trial court also held that the Workers’ Comp Law prohibited it from awarding Martinez economic damages, including for his pain and suffering. So, the appeals court remanded for the trial court to determine whether he was entitled to damages for pain and suffering.

On remand, the trial judge considered the medical proof and found “ample testimony … that these conditions were quite painful,” so Martinez was awarded an additional $100,000.

Parting thoughts

The appeal resulted in an over $300,000 increase from the trial court award.

The case serves as a stark reminder to employers to purchase workers’ compensation insurance, and don’t let it lapse for even one second.

If this employer had had insurance, its losses would be at least one-third less with regard to lost wages. As to “future earnings,” well, we don’t do that in comp. Instead, permanent disability benefits are paid, based on an impairment rating and compensation rate that’s one-third less than the actual earnings.

And, Davids Group wouldn’t be on the hook for “pain and suffering,” as that’s not a basis for recovery under workers’ comp. Also, rather than damages for future medical care, in comp law Davids Group would instead furnish lifetime medical care with a physician chosen from a panel.

Moreover, this case required a two-day trial. Had it been a comp case, neither party would’ve offered proof on “fault,” so it probably would’ve been a shorter trial (or maybe they would’ve settled). It bears repeating that by statute, the employer couldn’t invoke the standard defenses in tort cases that don’t involve an employment relationship. This hamstrung Davids Farm quite a bit.

Finally, employers, those forms you complete for the Bureau about matters like the nature of your business really do matter. They’re not “sworn,” but their contents are considered to be your version of the truth. Sometimes an attestation clause is next to the signature line. Take time when filling them out. This applies to injured workers, too.

If future appellate proceedings occur in this case, we’ll let you know in this blog.

Photo by Kim Weaver, Paralegal, Knoxville.