Opinion ID: 2083424
Heading Depth: 2
Heading Rank: 1

Heading: The Purposes of Section 176.1812

Text: I view the enactment of section 176.1812 as an appropriate effort by the legislature to redirect the workers' compensation system to its original purpose of providing a timely and cost-effective process for the determination and payment of workers' claims. That effort was not undertaken in isolation, but reflects the recognition in many states that the formal claims process has grown overly complex, adversarial and expensive. At stake is the ability of employers to remain competitive within their region, which in turn benefits workers and their unions by adding or retaining jobs.
Beginning in the early 1990's, major reform efforts were undertaken in several states to introduce or expand alternate dispute resolution mechanisms in the workers' compensation system. These efforts, often referred to as the privatization of workers' compensation, were designed to reduce the cost of the system without decreasing benefits, by offering an alternative to the formal hearing process. [2] The formal process was perceived to be too complex, too expensive and too slow. [3] Although there were some variations in the several state reform measures, all shared a common format of introducing ADR mechanisms to streamline the process. Some states provided broadly for voluntary mediation or arbitration when agreed to by an individual claimant and the employer. See, e.g., Mass. Gen. Laws Ann. ch. 152, §§ 10B-10C (2004); Mo.Rev.Stat. § 287.460 (2004); S.D. Codified Laws § 62-7-37 (2004). [4] Other states more narrowly authorized workers to opt out of the formal claims process by creating ADR systems in collective bargaining agreements made by the workers' union with qualified employers. To date, eleven states, including Minnesota, have adopted this latter mechanism. [5] Until today, none of these states has upheld any challenge to the authority of its legislature to enact such a reform or to the constitutionality of the private ADR mechanisms that have been created by the various collective bargaining agreements. For example, in California, a claimant alleged that the denial of access to the formal claim process violated the state constitution by creating an encumbrance on the workers' compensation system. Costa v. Workers' Comp.App. Bd., 65 Cal.App.4th 1177, 77 Cal.Rptr.2d 289 (1998). The court rejected that challenge, holding that the legislature's broad powers to create a compensation system included the power to reform the system by authorizing the creation of ADR systems in collective bargaining agreements. Costa, 77 Cal.Rptr.2d at 294.
Prior to the enactment of section 176.1812, Minnesota was reported to have one of the highest workers' compensation cost structures in the upper Midwest, with insurance rates of 30 to 40 percent higher than neighboring states like Wisconsin. See Dennis J. McGrath, Workers' Comp Bill Passes; 13 DFLers Cross Line in Senate Plan, Star Tribune, May 20, 1995, at 1A; Scott Carlson, Minnesota Companies' Workers' Comp. Costs Expected to Drop in 1996, Saint Paul Pioneer Press, September 9, 1995, at 1C. Faced with this competitive disadvantage, the legislature enacted section 176.1812 to offer workers who were members of unions that bargained with qualified employers the opportunity to opt out of the formal claims system in favor of a more streamlined, less costly ADR system. Section 176.1812 is narrow. It does not apply to all workers' compensation claims. Instead, it only authorizes the creation of ADR systems in collective bargaining agreements made by unions with qualified employers or qualified groups of employers, (essentially those who are self-insured or whose annual premiums exceed high threshold levels). Minn.Stat. § 176.1812, subd. 1. Section 176.1812 is also optional. It provides that the parties to collective bargaining agreements may continue to use the formal process or may choose to establish an ADR system that will supplement, modify, or replace the formal claims' process. Minn.Stat. § 176.1812, subd. 1(a).
One of the important cost-reducing features of section 176.1812 is that it authorizes the parties to streamline appellate review of a claim by limiting it to one review, to be provided: either by the workers' compensation court of appeals in the same manner as an award or order of a compensation judge or, in lieu of review by the workers' compensation court of appeals, by the office of administrative hearings, by the district court, by the Minnesota court of appeals, or by the supreme court, in the same manner as the workers' compensation court of appeals   . Minn.Stat. § 176.1812, subd. 1(a). This language authorizes the parties to provide for appellate review by selecting any one of the listed bodies and, conversely, to waive the right to appellate review by any of the other listed bodies. Kline's union opted to waive appellate review by this court when it entered into a collective bargaining agreement that adopted Rule 6.5 of the Fund. By doing so, Kline's union selected the WCCA as the body to provide appellate review and waived the right to appellate review by any other body.
The decision of Kline's union to select an executive branch court to provide the single appellate review, and to waive a second appellate review by any judicial branch court, does not mean that there could be no judicial review of an arbitration award. Separate judicial review is always available to a worker under the Minnesota Uniform Arbitration Act (MUAA). The MUAA, which applies to all voluntary arbitration agreements, provides for judicial review to affirm, vacate, modify or correct an arbitration award. Minn.Stat. § 572.18-.20 (2002). The MUAA applies to an arbitration that is conducted under an arbitration clause contained in a collective bargaining agreement. Eisen v. State, 352 N.W.2d 731, 734 (Minn.1984). Of course, the scope of judicial review under the MUAA is narrow. The MUAA authorizes a court to vacate an award only where it (1) was procured by corruption, fraud or other undue means; (2) the arbitrator was partial or corrupt or engaged in prejudicial misconduct; (3) the arbitrators exceeded their powers; (4) [t]he arbitrators refused to postpone the hearing upon sufficient cause    or refused to hear evidence material to the controversy or conducted the hearing to prejudice substantially the rights of a party; or (5) [t]here was no arbitration agreement   . Minn.Stat. § 572.19. subd. 1. Further, the procedure for seeking review under the MUAA is a petition to the district court, which generally is to be filed within 90 days after receiving a copy of the award. Minn.Stat. § 572.19, subds. 1, 2. Thus, the precise issue before this court is not whether the rules of the Fund can preclude judicial review. Judicial review was available to Kline in the district court under the MUAA and the rules of the Fund do not purport to override the MUAA. The issue before this court is only whether the parties to a collective bargaining agreement can voluntarily adopt ADR rules that waive a second, broader form of judicial review by limiting direct appellate review to the WCCA. That issue turns on the scope of the authorization of private ADR systems granted by the legislature in section 176.1812, which in part depends on whether there are any constitutional impediments to a broad grant of authority.