• Oregon Supreme Court Rules Exclusive Remedy of Workers' Compensation Unconstitutional
  • May 6, 2003
  • Law Firm: Miller Nash LLP - Portland Office
  • In a long-awaited, landmark decision, the Oregon Supreme Court profoundly impacted the state's workers' compensation system. ORS 656.018, as amended in 1995, provides that workers' compensation is the exclusive remedy for an injured worker-whether or not the claim is compensable. The court has ruled that the statute violates Article I, section 10, of the Oregon Constitution for all denied workers' compensation claims in which major contributing cause is the standard of proof. Smothers v. Gresham Transfer, Inc., __ Or __ (May 10, 2001). Major contributing cause (greater than 50 percent) is the standard of proof in about 50 percent of all workers' compensation claims, including all occupational-disease claims and injury claims in which a preexisting condition combined with the injury. Under the 1995 amendment, a worker who was subject to the major-contributing-cause test but could not meet it lost his workers' compensation claim and was prevented from suing his employer for negligence. Thus, according to the Supreme Court, the worker was unconstitutionally denied an absolute common-law remedy for personal injury.

    Article I, section 10, guarantees that "every man shall have remedy by due course of law for injury done him in his person, property, or reputation." The court determined that limiting Smothers' sole remedy to the workers' compensation major-contributing-cause standard for his work-related condition violated his right to an adequate remedy, which existed in 1857 in the form of a common-law negligence action, against his employer. The court interpreted the remedy clause as protecting "absolute common-law rights respecting person, property, and reputation that existed when the drafters wrote the constitution. If the legislature constitutionally cannot abolish or alter those rights directly, then it cannot abolish them indirectly by defining narrowly what constitutes an injury to those rights." Slip at 20.

    Smothers claimed that he had developed a lung condition caused by fumes and acid mist at work. The denial of his workers' compensation claim was affirmed by an administrative law judge because Smothers had not established that work was the major contributing cause of his claimed occupational disease. Smothers then filed a negligence action in circuit court against his employer, contending negligence by the employer for failing to divert the mist and fumes from his work area. The trial court dismissed the complaint because ORS 656.018 made workers' compensation the exclusive remedy for all work-related injuries, whether compensable or not. The Oregon Court of Appeals affirmed. Smothers contended that work had "contributed" to his condition, even if it was not the major factor, and that he had no effective remedy as guaranteed by the Oregon Constitution since his only available remedy was the denied workers' compensation claim. The supreme court, after a lengthy review of the development of common-law rights and remedies and after reviewing its own inconsistent rulings regarding the remedy clause, agreed that for workers' compensation claims subject to the major-contributing-cause standard, there is no compensation for work incidents/exposures that have only a "contributing cause" AND in which the employer has been negligent. Therefore, present-day workers' compensation law "no longer provides a remedy for some wrongs or harms occurring in the workplace for which a common-law negligence cause of action had existed when the drafters wrote the Oregon Constitution in 1857." Slip at 29.

    The court stated that determining whether a violation of the remedy clause has occurred would involve a case-by-case analysis. If the workers' compensation claim is accepted and benefits thereunder provided, then there is an effective remedy, and no court remedy exists. Also, those workers' compensation claims that cannot establish "contributing cause" are not deprived of a remedy since that standard must be established in a common-law action for negligence. In those cases in which workers' compensation is denied under the major-contributing-cause standard and contributing cause exists, however, then the exclusive-remedy provisions of the statute are "unconstitutional under the remedy clause, because they leave the worker with no process through which to seek redress for an injury for which a cause of action existed at common law." Slip at 27.

    While legal observers debate the appropriateness of the court's decision, Oregon employers are faced with the reality of a markedly changed landscape in workers' compensation. Employers stand in "double jeopardy" with respect to workers' compensation claims. The major-contributing-cause standard has been effectively eliminated in those cases in which the work at least "contributes" to an occupational-disease claim or to an injury claim with a preexisting condition, and the employer has negligently produced that contribution. Now, if an employer "wins" a workers' compensation claim on a major-contributing-cause defense, it may "lose" if the worker brings an unlimited-damages claim in circuit court if the work contributed to the condition and the employer is shown to have breached a common-law duty to the employee.

    The legislature will probably consider legislation to amend the workers' compensation statutes to return to a "material contribution" standard for all claims. This will obviously have the effect of creating more compensable claims with resultant higher workers' compensation costs and higher premiums. In the interim, uncertainty and confusion will reign about existing claims and insurance coverage. Each workers' compensation claim involving the major-contributing-cause standard in which compensability has not yet been finally determined will have to be analyzed to determine (1) whether material contributing cause exists to support the claim and (2) whether the employer was negligent in the resulting injury/disease. If the answer is "yes" to both questions and there are significant potential "damages," an employer will want to carefully consider accepting the workers' compensation claim or risking a lawsuit.