What's Next For Alabama's Workers' Compensation Statute?

Posted by Danielle Jaffee on May 25, 2017 8:15:00 AM

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Earlier this month, an Alabama circuit judge struck down all of the Alabama Workers' Comp statute.  So why such a dramatic ruling? Well, when ruling on the case the judge found two specific provisions from the statute unconstitutional, the cap on attorney’s fees and the $220/week cap on compensation for an injured worker and because of how Alabama’s law is structured, if a single part is unconstitutional, the entire statute fails.

The case stirring this all up is Nora Clower v. CVS Caremark, which has been making its way through the Alabama judicial system since November 2013.  In the case, Clower was injured while working her job at CVS. 

The first challenge brought by Clower and her attorneys was based on the $220 weekly cap on compensation.  At the time of her injury she reported earning $335 a week, but once she fell under the workers’ comp statute the highest her compensation could be was $220 a week.  The rate was set by the Alabama legislature in 1987 and has not been adjusted since.  Clower made two arguments against the cap. First, setting a cap creates two classes of workers in Alabama, one of which is being unfairly punished without a rational basis, i.e. injured workers are restricted to a significantly lower wage purely because they are claiming workers comp.  And second, the cap set back in 1987 was no longer a sufficient remedy to meet the requirements of the workers’ comp law, i.e. the number was too low to justify preventing an injured worker from seeking a civil charge against their employer rather than a workers’ comp claim.

The judge agreed with Clower’s argument, $220 was unconstitutional.  The figure of $220 was set back in 1987, and was established in light of 1980’s economics.  But times have changed, and while $220 was once 69% of the average weekly wage, in 2017 its only 26.4%.  Not only did the judge find that basing 2017 compensation off of 1980’s metrics unconstitutional, but argued it was unconstitutional since its passage. The legislature should have been indexed, allowing for adjustments for changes to prevailing wages and cost of living each year.

The second challenge was against the cap on attorney’s fees, which under Alabama law meant an attorney can only collect 15% of the compensation paid in the workers’ comp proceeding.  The judge once again agreed, it was unconstitutional.  He explained that when the statute went into effect, workers’ comp was elective, meaning at that time if a party decided to proceed under the workers’ comp statute instead of a civil case all parties were electing “to operate under and abide by the act, the parties waived the right to raise constitutional objections” – they agreed to the 15% cap.  However, times have changed, and workers' compensation is not elective - employers cannot “opt-out” of providing coverage under Alabama law and an employee injured on the job is forced to seek all their remedies through the workers’ comp system. 

The judge also found that nowhere else in Alabama law is there a cap placed on attorney’s fees, with the exception of areas involving public funds.  The rest of Alabama law states an attorney is paid “reasonable attorney’s fees.”  In fact, under the concept of separation of powers, regulating attorney’s fees is not a legislative matter, it has always been up to the judicial branch, and such a cap in the workers’ comp statute contradicts that.

Understanding the magnitude of the decision, the judge originally stayed the holding for 120 days - avoiding a complete failure of the workers’ comp system and giving the legislature time to sort it out.  But there was still a small problem, the legislature is scheduled to adjourn at the end of this month, just three weeks after the ruling, and as we’ve seen in other states and in other times, reforming workers’ comp takes some time.  Two weeks after the initial decision, the judge stayed the ruling indefinitely, giving the legislature the off-session and next legislative session to correct it.

Related: California Workers' Comp Not Meeting Needs of Injured Workers

Topics: Legislative, Workers' Compensation