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Honesty is the Best Policy

Cronin HS Touched-Up CROP 10-14-14

“Honesty is the best policy” is a saying used by teachers and parents on a daily basis.  Until recently, North Carolina workers’ compensation law had no consequences for an employee making a false representation on an employment contract when the employee subsequently injures himself.  However, in the Workers’ Compensation Reform Act, North Carolina enacted an affirmative defense when a claimant makes a false representation regarding his physical condition when entering into employment.

Under N.C. Gen. Stat. § 97-12.1, which became effective for injuries occurring after June 24, 2011, a claimant is not entitled to any benefits under the Act for an injury by accident or occupational disease if the defendants can establish the following:

At the time of hire or in the course of entering into employment:

  1. The employee knowingly and willfully made a false representation as to the employee’s physical condition;
  2. The employer relied upon one or more false representations by the employee, and the reliance was a substantial factor in the employer’s decision to hire the employee; and
  3. There was a causal connection between the false representation by the employee and the injury or occupational disease.

The misrepresentation defense was primarily used by defendants during settlement negotiations after the enactment of N.C. Gen. Stat. § 97-12.1 until the North Carolina Court of Appeals decided Purcell v. Friday Staffing, NO. COA13-1252 (August 2014).  In Purcell, the claimant indicated in her employment application that she could lift and carry more than fifty pounds and that she had never sustained an injury or filed a workers’ compensation claim.  However, it was found that the claimant had a prior workers’ compensation injury to her back where she had received permanent work restrictions of no lifting greater than twenty pounds.  The claimant subsequently sustained an injury to her back while working for Employer-Defendant while constantly lifting products in excess of her permanent restrictions.

The Commission found the claimant in Purcell had knowingly and willfully made false representations regarding her physical condition and that the employer relied on the claimant’s misrepresentations in hiring her.  The Court of Appeals determined that a “causal connection” exists when the misrepresented/undisclosed prior condition increases the risk of the employee sustaining the subsequent injury at issue in the current claim.

It is critical to investigate every claim to determine whether the misrepresentation defense can be utilized.  During the initial investigation of a new claim, conduct a claims review to determine whether the claimant has previously filed previous a workers’ compensation claim. Additionally, try to obtain a claimant’s pre-injury medical records to identify any prior injuries or permanent work restrictions.

In addition to investigating prior claims and injuries, contact the employer to discuss the hiring process of the claimant.  It is important to review the employment application and contract to determine whether the claimant was asked about prior injuries or work restrictions.  It is also important to ask the employer whether the claimant made any assertions regarding his/her ability to perform certain duties.

Employers can play a pivotal role in asserting a misrepresentation defense.  In employment contracts, it may be helpful to ask prospective employees to assert that they are physically capable of performing specific physical requirements of a job.  Additionally, employers should confirm that the employee is being hired for the position based on the employee’s assertion that he can perform the physical requirements of the job.

However, bear in mind that your work is not finished after gathering evidence showing a false representation and reliance.  To successfully assert an affirmative misrepresentation defense under N.C. Gen. Stat. § 97-12.1, you will also need expert medical testimony to meet your burden of showing that the undisclosed medical condition increased the claimant’s risk of re-injury.

Like any affirmative defense, it is important to thoroughly investigate whether a misrepresentation defense is applicable during the initial investigation of a new claim.  With the favorable ruling in Purcell, your thorough initial investigation could produce quicker settlements for less money.