Preparing a workplace dispute resolution policy is not difficult, but it does require some thought by the employer and HR professional.

First and foremost, there needs to be some thought put into the decision regarding whether to even have such a policy. The primary motivating factor for nearly all employers is the time and cost of employment litigation versus handling workplace disputes internally. This internal dispute resolution is either handled by HR or through the use of an outside mediator or arbitrator. The latter has proven time and again to be a better and more efficient system.

Once the decision is made to adopt a workplace dispute resolution policy, the employer must determine what claims made by the employee will be covered by the policy and what claims will not be covered. While the list of claims that will be covered is quite lengthy, there are generally only a few claims that a policy will exclude. For example, claims for workers’ compensation and unemployment benefits must be pursued through a state administrative agency and are not properly governed by an internal dispute resolution policy. Often times ERISA/pension plans have their own internal dispute resolution plans which must be followed.

Further considerations in drafting such policies includes identifying the circumstances under which an outside mediator will be retained. Most sample policies provide that if a matter cannot be resolved satisfactorily by the HR professional, an outside mediator will be hired, at the employer’s expense, to attempt resolution of the claims. Should that effort fail, many policies then provide for binding arbitration by an arbitrator knowledgeable in employment law. The American Arbitration Association has a list of trained employment arbitrators and can assist the employer in developing the rules for arbitration and the administrative handling of the claims. As with mediation, the employer will bear all the expense of any arbitration.

Although adopting a dispute resolution policy proves to be beneficial, identifying those employment situations requiring dispute resolution, either internally or through the use of a mediator, is more of an art than a science. I am always here to provide assistance, so please let me know if there are questions or if you would like to explore this topic further.

My role as a “neutral”, to use the official jargon, necessitates that I am balanced in order to resolve conflict in the workplace and elsewhere. Some may joke that I am far from balanced, however, I take pride in my ability to be balanced when it comes to the subject of mediation or other forms of alternative dispute resolution in the workplace. The simple truth is this: Mediation works. It saves an organization time and money, and it is not something that should only happen when a formal complaint or lawsuit has been filed. Indeed, the closer to the origin of the conflict or dispute matters can be addressed, the higher chances there are to save both time and money.

The cost of conflict to an organization is high. Defending an employment-related lawsuit can easily approach $100,000 in legal costs alone. While employment practices coverage is fairly common these days, many cases (an estimated 81% by some sources) result in no payment by the insurance carrier. In other words, it is the EMPLOYERS deductible/retention money that is the first to go towards resolution or defense costs. The time spent by HR and other upper management can be staggering and have significant impact on the company. The average duration of an employment matter has been estimated to be 275 days.

The good news is that the vast majority of organizations recognize the cost-control effectiveness of alternative dispute resolution – a number on the rise since 1997, according to a study by Cornell University and Price Waterhouse. Nearly 90% of organizations responding to the 1997 study reported having used mediation as a means of resolving conflict in the prior three years. In addition to saving time and money, organizations have learned that allowing parties to resolve disputes themselves, with the assistance of a mediator, preserves working relationships, results in more satisfactory settlements, and was all-in-all a more satisfactory process.

Trained HR professionals can and should mediate disputes in the workplace, particularly those involving: personality conflicts, poor communication, strong emotions, misunderstandings, employee leave, benefits and pay are at issue. As always, however, if you are in doubt about you or your organization’s ability to mediate a particular conflict at hand, I urge you to seek the advice of your organization’s employment attorney.

When is it risky for the mediation to be handled by internal HR professionals? Because mediation is a voluntary process between the participants, when one participant refuses to allow HR to mediate, then it is time to see if an outside mediator would be a viable alternative. Another situation would be when HR cannot be balanced, or neutral, due to an obvious conflict of interest, or when HR’s impartiality is called into question on the particular matter at issue. Perhaps most importantly are those situations which have triggered the organization’s legal duty to investigate, or when the complaint/dispute is between the employee and the organization. In those situations, the organization is better off enlisting the services of an outside neutral mediator to work towards an amicable resolution.

Please feel free to contact me for further questions or discussion to learn how mediation can benefit your organization – saving your organization both time and money.

The issue of independent contractor versus employer has been litigated in South Dakota. There is a presumption that the worker was an employee and it is the employer’s burden to establish the worker is an independent contractor. The Department of Labor and the South Dakota Supreme Court have provided a set of factors to consider when determining whether a worker is an independent contractor or an employee.

The following factors have been used by the Department of Labor as considerations when determining whether a worker is an independent contractor or employee:

1. The extent of control which, by the agreement, the master may exercise over the details of the work;

1. One must look at whether the employer has the ability to hire, fire, and lay off the worker. It is also important how much control the master has over the workers’ functions.

2. Whether the one employee is engaged in a distinct occupation or business.

1. Here it is important to see whether the worker operated a separate business or under a separate trade name. It is also important whether the worker worked solely for this master, on a full time basis.

3. The kind of occupation with reference to, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.

4. The skill required for that particular occupation.

5. Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;

1. Here, “when the employer furnishes valuable equipment, the relationship is almost invariably that of employment.” SeeLarson on Worker’s Compensation §44.43(a).

6. The length of time for which the person is employed.

7. The method of payment, whether by the job or by the hour.

8. Whether the work is part of the regular business of the employer.

9. Whether the parties believe they are creating the relationship of master and servant.

The South Dakota Supreme Court has essentially adopted these factors although it has grouped certain factors into a two-part test. InEgemo v. Flores, 470 NW2d 817 (SD 1991) the employer argued the servant was an independent contractor. The court noted there was an important distinction as an independent contractor is not covered by workers’ compensation. The court stated there is a two factor test: (1) whether the individual has been and will continue to be free from control or direction over the performance of the services, both under contract or service and fact, and (2) whether the individual is customarily engaged in an independently established trade, occupation, profession or business.

In evaluating the “right of control test” the important considerations include direct evidence of the right of control, the method of payment, furnishing major items of equipment, and the right to terminate the employment relationship at will and without liability. In Egemo, the court noted the employer did not exercise control or supervision over the method or manner in which the servant completed his task. Furthermore, the master did not direct the hours of work, breaks, or even the days off. The court also noted the servant did not withhold any amounts for income tax, social security, or unemployment insurance. The employer also filed a Form 1099 as a non-employee compensation form. The court noted the servant was required to supply all of his own tools, and his own maintenance and transportation to the work sites. Furthermore, the employment relationship could not be terminated without liability.

The significant considerations in the test of “independently established trade” are that:

The requirement that the employee’s occupation be independently established and that he be customarily engaged and it calls for an enterprise created and existing separate and apart from the relationship with the particular employer; an enterprise that will survive the determination of that relationship. The individual must have a proprietary interest in the enterprise to the extent that he can operate without hindrance from any other individual.

However, it is not skill alone which determines whether an individual is established in a trade or business, but whether that individual by reason of such skill engages himself in an economic enterprise such that he bears the risk of his own unemployment. Whether or not he is unemployed is solely a function of market forces and a demand for skills, not the response of his master to similar economic realities.

The South Dakota legislature has also addressed this issue and stated the difference between an employer and an independent contractor in SDCL 61-1-11. That statute states “service performed by an individual for wages is employment subject to this title unless and until it is shown to the satisfaction of the Department of Labor that: (1) the individual has and will continue to be free from control or direction over the performance of the service, both under his contract of service and in fact; and (2) the individual is customarily engaged in an independently established trade, occupation, profession, or business. The South Dakota legislature defined employee in SDCL 62-1-3 for the purposes of worker’s compensation. The definition is roughly the same as that set forth above.

The moment all of you have been waiting for….
The fifth prong of the five-part test provides: The employee must actually pursue the reasonable program of rehabilitation.
This part likely seems pretty self-explanatory, and, frankly, it is. If the Claimant can satisfy all of the other elements of the retraining benefits test, then he/she needs to actually pursue the reasonable program of rehabilitation in order to receive the benefits. How the retraining benefits work is that the Claimant is given their workers’ compensation indemnity benefit payment during the period of time that they are in the rehabilitation program. Accordingly, it seems quite clear that they need to actually pursue that program. SDCL 62–4–5.1 specifically allows rehabilitation benefits while a claimant is “engaged in a program of rehabilitation which is reasonably necessary to restore the employee to suitable, substantial and gainful employment.” This statute allows rehabilitation benefits while the claimant is engaged in a “program” of rehabilitation, not simply a “period” of rehabilitation. Chiolis v. Lage Development Co., 512 N.W.2d 158, 160 (SD 1994).
The rehabilitation program may be a two-year program or a four-year program, depending on what is determined to be a “reasonable means of rehabilitation” and a four-year program although more rare, can be reasonable in certain situations. See A. Larson, The Law of Worker’s Compensation § 61.22 (1992). The fifth part of the rehabilitation test is not complicated, but it is necessary in order for the Claimant to be entitled to the benefits. A Claimant cannot simply find a suitable rehabilitation program and receive the rehabilitation benefits without actually pursuing the program.
I imagine that all of you will undergo a brief grieving process now that this 5-part series is over, but rest assured that we will continue to provide everyone with up-to-date information on the changes you need to know about in South Dakota workers’ compensation and employment law. Until next time.

Part four of the five-part test states that an employee must file a claim with his employer requesting the benefits in order to be entitled to the same. The South Dakota Supreme Court, in Chiolis v. Lage Dev. Co., 512 N.W.2d 158, 161-162 (S.D. 1994), stated:

“Even recognizing that the primary purpose of rehabilitation benefits is to restore the injured employee to substantial and gainful employment, the worker may not unilaterally decide what training he or she may want to pursue and proceed to do so at the employer’s expense. To approve such an independent approach to rehabilitation training by a claimant would result in untold administrative and economic chaos and a total breakdown of the legislatively intended benefits to the injured worker of rehabilitation training. While such self-improvement is highly laudable, particularly in view of the claimant’s independent quest for it, unaided by the employer or carrier, it is outside the range of benefits provided by South Dakota law. To approve a procedure which allows an injured employee to select a rehabilitation program before petitioning Department or reaching an agreement with the employer would be putting the cart before the horse.”

The Court in Chilois denied retraining benefits, in part, due to the claimant’s unilateral decision to enter into a rehabilitation program.

The Department addressed a similar factual scenario in Shellie Holvig v. Rent-a-Center and Specialty Risk Services, HF No. 130, 2004/05, when the claimant therein moved to Phoenix and began her retraining program without alerting her employer and insurer of the same. The Department held that the acts of the claimant deprived her employer and insurer or a reasonable opportunity to evaluate her vocational situation properly and demonstrate the necessity of element four of the retraining test. Id. at 6. The Department also noted that the claimant had decided long before the denial to assume financial responsibility for her bachelor’s degree, and that there was no evidence that employer and insurer therein led the claimant to believe she would receive benefits for the program and she took no actions to her detriment based on any actions of the employer and insurer. Id.

All seemed pretty clear on this issue until Koval v. City of Aberdeen and SDML Workers’ Compensation Fund, HF No. 142, 2014/15. In Koval, the claimant had completed his claimed retraining program before petitioning or otherwise requesting retraining benefits from the Employer/Provider. On a motion for summary judgment, the Department stated:

“However, there is nothing in SDCL 62-4-5.1 or the five part test established by the Supreme Court which dictates when such a claim must be made. It is merely required that a claim be made. That such a claim could later be denied is merely a risk the Claimant makes by not getting preapproval. “A claimant may enroll in a rehabilitation program without the consent of employer, but he does so at his own risk; that is, rehabilitation benefits will not be guaranteed for a particular program simply because the program is one the claimant wishes to pursue.” Kurtenbach v. Frito-Lay, 1997 S.D. 66, ¶ 23, 563 N.W. 2d 869, 875. “It is [claimant’s] right to seek a college education, but [employer] cannot be compelled to pay for such a program if it is not necessary.” Chiolis v. Large Dev. Co., 512 N.W.2d 158, 161 (S.D. 1994) (emphasis added) (quoting Cozine v. Midwest Coast Transport Inc., 454 N.W.2d 548, 554 (S.D. 1990)).

Pursuing a rehabilitation program without first filing a claim and receiving approval does not guarantee the receipt of benefits. However, not seeking preapproval does not preclude the application of the rest of the test to establish if claimant is entitled to the rehabilitation benefits. Therefore, since Claimant’s claim satisfactorily fulfills step four of the test, and Claimant and Employer disagree on his fulfillment of the rest of the five-part test requirements, issues of material fact remain regarding Claimant’s petition for retraining benefits.”

The Koval decision was settled before hearing and consequently there have been no appeals from this curious decision that clearly allows a claimant, contrary to Chiolis, to “…put the cart before the horse”.

Summer is upon us and the 4th of July is just around the corner. Almost as exciting as fireworks is the third prong of the five-part rehabilitation test for South Dakota workers’ compensation claims. As Laura mentioned in last week’s blog post, I have the honor of discussing the third prong and what it means to you in evaluating your work comp claim. The third prong of the five-part test provides: The program of rehabilitation must be a reasonable means of restoring the employee to employment.

When determining whether a rehabilitation program is reasonable, the South Dakota Supreme Court has declared that the Claimant bears the burden of establishing the reasonableness of the program. Chiolis v. Lage Development Co., 512 N.W.2d 158, 161 (SD 1994). In considering an appropriate rehabilitation program, the Department “must not lose sight of the fact the employer has a stake in the case” and “the employer is required to ‘underwrite’ the expenses of rehabilitation.” Id. An injured worker cannot insist upon a college education if other suitable employment opportunities exist that do not require college training. Id. at 160, (quoting Barkdull v. Homestake Mining Co., 411 N.W.2d 408, 410 (S.D. 1987).

When reviewing requests for rehabilitation, the parties must look at the claimant’s underlying career and wages to determine the reasonableness of the requested/suggested rehabilitation program. For instance, it is probably unreasonable for a forty-five year old, over-the-road truck driver (who has been driving truck since he was 18), with a high school education, to get a four-year accounting degree when a two-year vocational program for bookkeeping would provide sufficient income to restore him to employment. As with the other prongs of the rehabilitation test, use of a vocational expert to address the third prong is a valuable tool to help determine whether the rehabilitation program is a reasonable means of restoring the employee to employment. The vocational expert will be able to analyze the job market, identify the average income for a variety of positions, and provide invaluable insight to evaluate the claim properly.

Stay tuned for further discussion of a rehabilitation claim in South Dakota in next week’s blog post, and the riveting discussion by Mike about the fourth prong of the five-part test. As always, feel free to contact us if you have any questions.

In connection with the last two weeks of the Boyce Work Comp and Employment Blog Insight, it is my turn to explain the second prong of the five-part rehabilitation test. I am sure that you have been waiting with baited breath to learn more about retraining benefits, so here it goes:

The second prong of the five-part test provides: Rehabilitation must be necessary to restore the claimant to suitable, substantial and gainful employment. What exactly does that mean, you ask?

SDCL 62-4-55 addresses the definition for “suitable, substantial, and gainful employment”, and states that employment is considered to fit this definition if it: (1) Returns the employee to no less than eighty-five percent of the employee’s prior wage earning capacity; or (2) It returns the employee to employment which equals or exceeds the average prevailing wage for the given job classification for the job held by the employee at the time of injury as determined by the Department of Labor.

An analysis of this second prong entails figuring out the employee’s prior wage earning capacity, and then determining what eighty-five percent (85%) of that wage would be. Our Courts have said that, “Before the burden of establishing the existence of suitable employment shifts to the employer, the employee must make a prima facie showing that he is unable to find suitable employment.” Kurtenbach v. Frito-Lay, 1997 SD 66, ¶ 17, 563 N.W.2d 869, 874. “In order to meet this second element of the test, Claimant must show that he is unable to “obtain employment following [his] injury.” Cozine v. Midwest Coast Transport, Inc., 454 N.W.2d 548, 554 (S.D. 1990).

Once a claimant has made such a showing, the burden shifts to the employer to show that the claimant would be capable of finding such employment without the need for rehabilitation. South Dakota case law has established that a claimant cannot insist upon rehabilitation benefits if other suitable employment opportunities exist which do not require training. In other words, a claimant cannot simply seek retraining benefits because they no longer believe they can perform their prior job. The use of a vocational expert in retraining cases can be key because the expert may be able to provide a list of positions available to the injured worker that would not require retraining. Keep in mind that failure to make a reasonable search for employment calls into question whether or not the claimant has shown that they are unable to obtain employment, and, without such showing, the claimant has not met the burden of proof sufficient to shift the burden to the Employer and Insurer under the second prong.

Stay tuned, for more riveting information next week, when you will get to hear from TJ Von Wald and his thoughts on the third prong of the five-part rehabilitation test. As always, call us with any questions.

As we discussed in last week’s blog post, a claimant must satisfy five elements before becoming eligible to receive rehabilitation benefits. The first element is that a claimant is required to show they are unable to return to their usual and customary line of employment. In other words, the claimant must prove that they are unable to return to the type of work they were doing at the time of, or before, the work injury. For example, if the claimant previously worked as a truck driver, they must show that, because of the work injury and its accompanying restrictions, they will be unable to return to work as a truck driver. Often times, this element is satisfied when there is a claimant that has spent their entire life working in manual labor with job duties that require lifting and repetitive motion, and now they have permanent restrictions limiting them from doing ever again.

Often, this first element does not receive much attention or discussion because it is so closely tied to the premise underlying a claimant’s need for rehabilitation or retraining benefits. In fact, by the time retraining benefits are being disputed, the parties have likely already agreed whether or not the claimant can perform his usual and customary line of employment. Nonetheless, if there is some dispute regarding whether a claimant can return to their previous line of work, the claimant will need to show that the restrictions limit them from performing the previous work, often times through the testimony of a vocational expert. Please note that although this element is often undisputed and therefore not thoroughly discussed, insurers and self-insurers should remain vigilant to ensure that claimant’s satisfy this element before becoming eligible for retraining benefits.  It is important to remember that simply because a claimant states that they cannot return to their usual and customary line of employment, those statements alone are not sufficient to satisfy the first element of a claim for retraining benefits.

Look out for our upcoming blog posts over the following weeks for more detailed explanations of the remaining elements for proving entitlement to rehabilitation benefits. Of course, if you have any questions about a claimant’s eligibility for retraining benefits, we’re only a phone call away.

Claims for retraining benefits in South Dakota are one of the more difficult claims for a claimant to prove.  One would think that encouraging a claimant to return to school to learn a new trade or occupation should be one of the easier claims to establish, but in practice, that has simply proven not to be true.

Claims for retraining or rehabilitation are governed by SDCL 62-4-5.1.  This statute provides:

“Compensation during period of rehabilitation–Procedure. If an employee suffers disablement as defined by subdivision 62-8-1(3) or an injury and is unable to return to the employee’s usual and customary line of employment, the employee shall receive compensation at the rate provided by § 62-4-3 up to sixty days from the finding of an ascertainable loss if the employee is actively preparing to engage in a program of rehabilitation as shown by a certificate of enrollment. Moreover, once such employee is engaged in a program of rehabilitation which is reasonably necessary to restore the employee to suitable, substantial, and gainful employment, the employee shall receive compensation at the rate provided by § 62-4-3 during the entire period that the employee is engaged in such program. Evidence of suitable, substantial, and gainful employment, as defined by § 62-4-55, shall only be considered to determine the necessity for a claimant to engage in a program of rehabilitation.

            The employee shall file a claim with the employee’s employer requesting such compensation and the employer shall follow the procedure specified in chapter 62-6 for the reporting of injuries when handling such claim. If the claim is denied, the employee may petition for a hearing before the department.”

Judicially, it has been determined that a claimant must meet five requirements before receiving rehabilitation benefits:

(1)       The claimant must be unable to return to his usual and customary line of employment;

(2)       Rehabilitation must be necessary to restore the claimant to suitable, substantial and gainful employment;

(3)       The program of rehabilitation must be a reasonable means of restoring the claimant to employment;

(4)       The claimant must file a claim with the employer requesting these benefits; and

(5)       The claimant must actually pursue a reasonable program of rehabilitation.

Kurtenbach v. Frito-Lay, 563 NW2d 869 (SD 1997).

Each of the above elements will be discussed separately in blog posts in the upcoming weeks.  Please take note, however, that the obligation of the insurer/self-insurer is only to pay the weekly benefit rate during the entire time that the employee is engaged in a program of retraining or rehabilitation.  The cost of schooling, tuition, fees, books, etc. are not the obligation of the insurer/self-insurer.