Court Opinion

ID: 4878974
Source: CourtListenerOpinion
Date Created: 2021-08-26 15:09:09.155889+00
Date Added: 2024-06-11T08:12:35.336706
License: Public Domain

RENDERED: AUGUST 26, 2021
                                             TO BE PUBLISHED

           Supreme Court of Kentucky
                       2020-SC-0170-WC

GLORIA DOWELL, WIDOW OF                             APPELLANT
WILLIAM BRUCE DOWELL

               ON APPEAL FROM COURT OF APPEALS
V.                     NO. 2018-CA-1075
                WORKERS’ COMPENSATION BOARD
                       NO. WC-11-86079

MATTHEWS CONTRACTING;                               APPELLEES
COMMONWEALTH OF KENTUCKY EX REL.
DANIEL J. CAMERON, ATTORNEY
GENERAL; HONORABLE JOHN B.
COLEMAN, ADMINISTRATIVE LAW JUDGE;
AND WORKERS’ COMPENSATION BOARD

                            AND

                       2020-SC-0137-WC

TERRY ADAMS                                         APPELLANT

               ON APPEAL FROM COURT OF APPEALS
V.                     NO. 2018-CA-0925
                WORKERS’ COMPENSATION BOARD
                       NO. WC-13-64729

EXCEL MINING, LLC.; COMMONWEALTH                    APPELLEES
OF KENTUCKY EX REL. DANIEL J.
CAMERON, ATTORNEY GENERAL;
HONORABLE CHRIS DAVIS,
ADMINISTRATIVE LAW JUDGE; AND
WORKERS’ COMPENSATION BOARD
           OPINION OF THE COURT BY CHIEF JUSTICE MINTON

                                  AFFIRMING

      We combined these two workers’ compensation appeals to address the

issue common to both: whether the 2018 amendment to Kentucky Revised

Statute (KRS) 342.730(4) violates the Contracts Clause of the federal and state

constitutions. Terry Adams and Gloria Dowell contest the constitutionality of

this statutory amendment that terminates workers’ compensation income

benefits when the benefit-recipient reaches the age of 70 or four years from the

date of injury or last injurious exposure, whichever event occurs last. For

reasons explained below, we reject Adams’s and Dowell’s arguments and affirm

the decision of the Court of Appeals upholding the statutory amendment.

                I. FACTUAL AND PROCEDURAL BACKGROUND

   A. Terry Adams

      In 2013, at age 63, Terry Adams suffered a work-related injury while

working for Excel Mining. He filed for workers’ compensation benefits, and in

February 2016, an ALJ awarded benefits for permanent total disability. At the

time Adams’s claim was before the ALJ, the 1996 version of KRS 342.730(4)

was the controlling law. Under that statute, Adams’s benefits would end when

he became eligible for Social Security retirement benefits. Adams

unsuccessfully argued before the ALJ that the statute was unconstitutional,

and he appealed to the Workers’ Compensation Board.

                                       2
      The Board held Adams’s claim in abeyance until we decided Parker v.

Webster County Coal, LLC,1 the case in which we ultimately invalidated the

1996 version of KRS 342.730(4) as violative of federal and state constitutional

equal protection and the state’s constitutional prohibition against special

legislation.2 Following Parker, the Board decided Adams’s appeal and resorted

to application of the 1994 version of KRS 342.730(4). Under that version,

Adams’s benefits would be reduced by 10% at age 65 and then an additional

10% every year until he reached age 70, at which point his benefits would

remain stable.3 Adams appealed the Board’s decision to the Court of Appeals.

      In 2018, while Adams’s case was pending before the Court of Appeals,

the General Assembly enacted the current version of KRS 342.730(4), which

became effective July 14, 2018. The Court of Appeals held Adams’s appeal in

abeyance until we decided Holcim v. Swinford4 in which we held that the

General Assembly intended the 2018 version of the statute to apply

retroactively to all claims that had not been then fully adjudicated, including

claims on appeal.5 Following Holcim, the Court of Appeals applied the current

version of KRS 342.730(4) to Adams’s award. In doing so, the Court of Appeals’

panel held the amendment did not violate the Contracts Clause of the United

      1   529 S.W.3d 759, 767-69 (Ky. 2017).
      2   Id. at 767-69.
      3   1994 Kentucky Laws Ch. 181 (H.B. 928).
      4   581 S.W.3d 37 (Ky. 2019).
      5   Id. at 44.

                                          3
States and Kentucky Constitutions. Even though its application substantially

reduces Adams’s entitlement to benefits, the appellate panel found the General

Assembly had a justifiable purpose for enacting the statute and the statute is

reasonable. Adams’s appeal to this Court followed.

   B. William Dowell6

      Dowell sustained two work-related injuries while working for Matthews

Contracting. In 2009, he injured his right shoulder, in 2011 he re-injured his

right shoulder and knee. He filed for workers’ compensation benefits; and the

ALJ awarded him permanent total disability benefits but made them subject to

the limitations applicable under the 1994 version of KRS 342.730(4) in

recognition of the fact that this Court in Parker invalidated the 1996 version of

the statute. In the interim, the General Assembly enacted the current version

of KRS 342.730(4).

      Both Dowell and Matthews Contracting appealed to the Board. Dowell

argued that he was entitled to a lifetime of benefits because this Court had

invalidated the 1996 version of the statute. Matthews Contracting argued

Dowell’s claim should be remanded to the ALJ for application of the 2018

      6  Dowell separately contends that the Court of Appeals erred by failing to
approve his motion to add the Attorney General as a party to his appeal in that court.
The Court of Appeals correctly rejected the argument, as do we. Under Kentucky Civil
Rule of Procedure (CR) 76.25(8), the Attorney General must be notified of appeals
raising a constitutional challenge to statute. While not a named party to this appeal,
the Attorney General clearly had timely notice of this appeal and the constitutional
issues raised, having submitted a brief addressing the constitutionality of the
amended statute. See Cates v. Kroger, 2020-SC-0275-WC which was rendered the
same day as this opinion.

                                          4
amendment. The Board affirmed the ALJ’s award of benefits under the 1994

version of the statute because the 2018 amendment had not yet become

effective. Matthews Contracting then appealed to the Court of Appeals.

      The Court of Appeals concluded that our holding in Holcim confirmed

that the 2018 amendments to KRS 342.730(4) applied to Dowell’s claim. The

Court of Appeals then remanded the case to the ALJ for a new determination of

benefits. Dowell appealed to this Court arguing that the 2018 amendment to

KRS 342.730 was unconstitutional because it is an ex post facto law that

violates the Contracts Clause of the United States and Kentucky Constitutions.

                                    II. ANALYSIS

   A. The Workers’ Compensation Act does not act as a contract between
      employees and the state or their employer.

      Adams and Dowell both argue that applying the current version of KRS

342.730(4) to their claims violates the Contracts Clause of both the United

States and Kentucky Constitution. Article 1, Section 10, Clause 2 of the

United States Constitution reads:

      No State shall enter into any Treaty, Alliance, or
      Confederation; grant Letters of Marque and Reprisal; coin
      Money; emit Bills of Credit; make any Thing but gold and
      silver Coin a Tender in Payment of Debts; pass any Bill of
      Attainder, ex post facto Law, or Law impairing the Obligation
      of Contracts, or grant any Title of Nobility.

Similarly, Section 19 of the Kentucky Constitutions provides, “No ex post facto

law, nor any law impairing the obligation of contracts, shall be enacted.”

                                        5
         We begin our analysis with the firm understanding that the challenged

statute enjoys a “strong presumption of constitutionality.”7 This means a

“violation of the Constitution must be clear, complete and unmistakable in

order to find the law unconstitutional.”8

         In addressing whether the current version of KRS 342.730(4) impaired a

contractual right of Adams, a panel of the Court of Appeals relied on our

holding in Maze v. Board of Directors for Commonwealth Postsecondary

Education Prepaid Tuition Trust Fund,9 which provides a roadmap for analyzing

whether a statute violates the Contracts Clause.10 Following the Maze pattern,

the Court of Appeals found the present statute constitutional because while it

impaired Adams’s benefits, the state was justified in enacting the law.

         The appellate panel in Dowell’s appeal did not address the Contracts

Clause issue but held the 2018 amendment applicable to Dowell’s claim based

on our holding in Holcim. On appeal to this Court, Dowell raises Contracts

Clause arguments regarding application of the amended statute to his

         7   Winn v. Ibold, Inc., 969 S.W.2d 695, 696 (Ky. 1998).
         8   Ky. Indus. Util. Customers, Inc. v. Ky. Utils. Co., 983 S.W.2d 493, 499 (Ky.
1998).
         9   559 S.W.3d 354 (Ky. 2018).
          Id. at 369 (“(1) whether the legislation operates as a substantial impairment
         10

of a contractual relationship; (2) if so, then the inquiry turns to whether there is a
significant and legitimate public purpose behind the regulation, such as the
remedying of a broad and general social or economic problem; and (3) if, as in this
case, the government is a party to the contract, we examine ‘whether that impairment
is nonetheless permissible as a legitimate exercise of the state’s sovereign powers,’ and
we determine if the impairment is ‘upon reasonable conditions and of a character
appropriate to the public purpose justifying its adoption.’”).

                                                6
compensation claim. We agree with the panels in both appeals that the 2018

amendment to KRS 342.730(4) applies to these claims.

        Importantly, we find that a complete Contracts Clause analysis is

unnecessary because the Workers’ Compensation Act (WCA) does not

constitute a contract between Kentucky workers and their employers or the

state. Instead, the WCA is a statutory scheme that may be amended as the

General Assembly chooses, provided it fits within our constitutional framework.

The language in some of our prior precedent may be misleading, and we choose

today to clarify that the WCA provides only statutory rights, not contractual

ones.

        We have referred to the rights provided by the WCA as contractual in the

past, but that was oversight.11 Instead, we find that the benefits an employee

may receive following a work-related injury are not a result of a bargained-for

exchange following an offer, acceptance, and consideration, but are the result

of a statutory scheme intended to provide a form of insurance for Kentucky

employees in case of injury. Because the WCA does not form a contract, there

are no contractual rights that the amendment to KRS 342.730(4) could

infringe; thus, the fundamental premise of a Contracts Clause analysis—the

existence of a contract—is absent, and our analysis ends.

       11 See Krahwinkel v. Commonwealth Aluminum Corp., 183 S.W.3d 154, 157 (Ky.

2005) (“Workers’ compensation coverage is a voluntary contract between employer and
employee, the terms of which are defined by the provisions of the Act.”); M.J. Daly Co.
v. Varney, 695 S.W.2d 400, 403 (Ky. 1995) (“In Kentucky, the Workers' Compensation
Law is optional or elective in character, rather than compulsory, and the relationship
is contractual in nature.”).

                                          7
      We join other jurisdictions today and hold that our workers’

compensation laws do not create a contract.12 We find the current

circumstances comparable to those in Gen. Motors Corp. v. Romein.13 In

Romein, the United States Supreme Court addressed whether the retroactive

application of a Michigan workers’ compensation statute violated the federal

Contracts Clause. The statute required employers to reimburse injured

employees for amounts that the employers had withheld from workers’

compensation benefits based on a previous statute that permitted employers to

offset workers’ compensation benefits with benefits received from another

source.14 The employers sued and argued that the new statute impaired their

contractual rights under a contract between them and their employees as

created by the previous statute.15 The Supreme Court disagreed, and held that

because the employer and employee did not assent to specific statutory

provisions, there was no contract for the Contracts Clause to protect.16

      The same can be said of the circumstances before us. Instead of having

each employee and employer enter into a contractual arrangement, the

workers’ compensation system serves as a statutory system that entitles

Kentucky workers to benefits if they are injured while working. Adams and

      12   Those states include West Virginia, Nevada, and Michigan.
      13   503 U.S. 181, 190 (1992).
      14   Id. at 184–86.
      15   Id. at 186.
      16   Id. at 188–190.

                                           8
Dowell point to no contract or place within the statutory scheme where they

are guaranteed certain benefits that were mutually assented to and bargained

for.17 The rights of those subject to the workers’ compensation system are

governed by statute and are granted to Kentuckians through statutory

enactments.

      As of 1972, this statutory scheme requires employers to enroll.18

Therefore, as in Romein, an employer does not bargain with each employee to

avoid a lawsuit if the employee is injured while working and guarantee certain

payment if injured. Instead, the employer is required by law to ensure an

employee is protected in case of injury by enlisting in the workers’

compensation system. Once an employer is enrolled, its employees may opt in

or out of the system. But that is quite different from an employer “bargaining”

with employees to forego lawsuit should they be injured. Because employers

have no choice but to enroll, it cannot be said they have “assented” to specific

provisions within the statutory scheme, such as the amendment at issue here.

Further, unlike in Maze where the plaintiff could ask a court for relief under

her contractual rights, here the plaintiffs have filed a claim in an

administrative tribunal—not asking for relief under an employment contract—

but for benefits granted to them by statute and through their enrollment in the

workers’ compensation system.

      17 Maze, 559 S.W.3d at 363 (“Our review requires the interpretation of various

KAPT statutory provisions contained in KRS Chapter 164A and contractual provisions
contained in the Master Agreement.”).
      18   Davis v. Turner, 519 S.W.2d 820, 822 (Ky. 1975).

                                            9
      The workers’ compensation system is controlled by the state and is

governed by legislative enactments. It is not a contract on between employers

and their employees. Changes to the relevant statutes, therefore, do not create

a Contracts Clause issue. While changes to statutes may result in other

constitutional issues, such as a violation of due process or constitute special

legislation, a Contracts Clause issue is impossible in this matter because there

is simply no contract or contractual right for the statutory amendment to

impair.19

      Additionally, this Court recently held in Kentucky Employees Retirement

System v. Seven Counties Services., Inc.20 that a contract should only be found

in a statute if there is a “clear indication that the legislature intended that

result.”21 We refer to this as the unmistakability doctrine.22 So for Adams’s

and Dowell’s argument to succeed they must show that the legislature

expressly intended to make a contract on behalf of Kentucky employers that

binds the state and employees in the workers’ compensation system before we

can assess whether the 2018 amendment to KRS 342.730(4) infringes on an

employee’s contractual rights. But we conclude that they have failed to point

to language that would suggest that legislature clearly intended a contract.

      19 Additionally, this statute has been recently challenged on many
constitutional grounds and this Court has found it valid on the issues raised.
      20   580 S.W.3d 530, 542 (Ky. 2019).
      21   Id.
      22   Id.

                                             10
      In fact, applying the unmistakability doctrine as applied here further

leads us to conclude the legislature did not intend for the WCA to serve as a

contract. If we were to interpret the WCA to provide contractual rights, the

legislature’s hands would be tied in many instances, unable to modify statutes

or enact new laws without infringing existing contractual rights. This would

not only affect its ability to control the workers’ compensation system but

would limit its ability to change many areas of state funding. The more logical

conclusion is that the legislature did not intend for the WCA to provide

contractual rights. We find, then, that the workers’ compensation system does

not serve as a contract between employees and employers for certain benefits.

But instead is a state-created and governed system that provides protection for

both Kentucky employers, as required by law, and for those employees who

wish to enroll.

   B. Dowell and Adams have no vested right to a certain duration of
      benefits.

      Dowell and Adams argue that applying the new version of KRS

342.730(4) is unconstitutional because they have a vested right to the benefits

assigned to them by the ALJ and Workers’ Compensation Board. We have also

briefly addressed this argument in a companion opinion, also rendered today,

Cates v. Kroger.23 We will address it here to clarify that litigants like Adams

and Dowell do not have a vested right to certain benefits. While they have a

vested right to some benefits by statute, they do not have a vested right to

      23   Cates v. Kroger, 2020-SC-0275-WC.

                                         11
“certain” benefits until their claim for benefits has been determined by final

order.

         A benefits-recipient’s right to compensation becomes fixed and vests on

the date of the injury.24 The right to receive benefits is a substantive issue and

the injury date is controlling under substantive law.25 We have long held “that

where a suit has been instituted under a statute giving a cause of action and a

right to maintain such action, and once the action has been prosecuted to final

judgment, and the rights of the parties fixed, such rights then become vested in

the judgment, and thereafter a legislature can pass no law which impairs the

validity of the vested right thus obtained.”26 So, Dowell and Adams have a

vested, substantive right to litigate their benefits, a right that cannot be taken

away by statutes that have since come into existence since filing their claim.27

But in contrast, their right to a certain duration or amount of benefits has not

vested and will not do so until they receive a final decision of their claims. So,

the 2018 amendment to KRS 342.730(4) “[does] not create new or take

         24   Schmidt v. South Cent. Bell, 340 S.W.3d 591, 594 (Ky. App. 2011).
         25Louisville
                    Shopping Ctr. Inc. v. City of St. Matthews, 635 S.W.2d 307, 313 (Ky.
1982) (“A right, in order to be vested (in the constitutional sense) must be more than a
mere expectation of future benefits or an interest founded upon an anticipated
continuance of existing general laws.”) (citing16B Am. Jur. 2d Constitutional Laws §
669 (2021)).
       26 City of Paris v. Kentucky Utils. Co., 133 S.W.2d.559, 561 (Ky. 1939).

         Id. (“The Legislature may not, under the guise of an act affecting remedies
         27

annul, set aside or impair final judgments obtained before the passage of the Act. A
judgment is a vested right of property that the Legislature cannot, by a retroactive law,
either destroy or diminish its value in any respect.”) (internal citations omitted).

                                              12
away vested rights” of plaintiffs like Adams and Dowell, and its retroactive

application is constitutional.

       Because Adams’s and Dowell’s benefits have not been completely

litigated, their potential awards must conform with the changes in the

applicable law effective during the litigation process. And in Holcim we found

that the legislature intended the law to apply to all claims currently pending.28

So the 2018 amendment applies to Dowell and Adams even though the only

issue left to litigate is the effect of the 2018 amendment on the duration of their

benefits. While we agree with Adams that the 2018 amendment impairs his

benefits award, Adams had no vested right in the outcome of his claim before

the ALJ or the Board. As we stated in Martin v. Warrior Coal, LLC,29 the

legislature intended for the 2018 amendment of KRS 342.730(4) to apply to all

pending appeals, and Adams’s appeal was pending when the Court of Appeals

ruled. In fact, the case is still not fully litigated.

       Likewise, Dowell’s benefits claim was decided after we had invalidated

the 1996 amendment and the ALJ and the Board resurrected the 1994 version

of the statute as applicable to Dowell’s claim. By the time Dowell’s appeal

reached the Court of Appeals, the 2018 amendment had become effective, and

       28 Holcim, 581 S.W.3d at 42 (“This statute was amended in Section 13 of 2018
Ky. Acts ch. 40 . . . . Subsection (3) of Section 20 of that Act reads, ‘Subsection (4) of
Section 13 of this Act shall apply prospectively and retroactively to all claims: (a) For
which the date of injury or date of last exposure occurred on or after December 12,
1996; and (b) That have not been fully and finally adjudicated, or are in the appellate
process, or for which time to file an appeal has not lapsed, as of the effective date of
this Act.’”).
       29   617 S.W.3d. 391, 397-98 (Ky. 2021).

                                            13
we had determined the statute applied retroactively. So Dowell’s benefits were

not final then and are not now. Because Dowell’s award is still being litigated,

we find the 2018 amendment to KRS 342.730(3) controls.

      As we stated in Cates v. Kroger, “we reiterate our holding in Holcim that

the legislature intended for the new amendment to apply to all pending appeals

with injury dates occurring after December 1996.”30 We are bound by the text

of the statute and unless it conflicts with a constitutional provision, we must

uphold the laws the legislature has enacted. Neither Adams nor Dowell had a

vested right to certain benefits, only a right to some benefits that are to be

determined under current law.

                                 III.   CONCLUSION

      For the reasons explained above, we hold that 2018 amendment to KRS

342.730(4) does not violate the Contracts Clause of the Federal or Kentucky

Constitutions. We affirm the holdings of the Court of Appeals in both cases.

      All sitting. All concur. Nickell, J., concurs by separate opinion.

NICKELL, J., CONCURRING: I concur with the majority’s holding but write

separately to briefly address what could be seen as an inconsistency in my

position in the companion opinion, Cates v. Kroger, rendered this same date. In

Cates, I dissented in part based on my belief the plain language of CR 73.03(1),

as interpreted by City of Devondale v. Stallings, 795 S.W.2d 954 (Ky. 1990),

required dismissal because of the failure to name the Attorney General in the

      30   Cates v. Kroger, 2020-SC-0275.

                                            14
notice of appeal. My vote in this matter should not be read to diminish the

position I espoused in Cates. Although not fully addressed in the lead opinion,

the particular facts of this case do not mandate such a result. Here, Dowell

attempted to add the Attorney General as a party in the Court of Appeals. This

was following rendition of our decision in Holcim. Holcim definitively determined

the amended KRS 342.730(4) applied retroactively to pending cases but

declined to reach the constitutionality of the amendment. Only then did Dowell

have grounds to raise a constitutional challenge. This was nearly eighteen

months after filing the petition for review of the Board’s decision. The Court of

Appeals denied the request, a decision I believe was correct given the

circumstances. Our civil rules simply do not contemplate a situation such as

the one presented here where the basis of a challenge does not arise until after

the notice of appeal has been filed and the time limit for its amendment has

long 2 since passed. Dowell had no valid reason to name the Attorney General

as a party to this appeal at the time it was initiated. Thus, CR 73.03(1) is

inapplicable, and no mechanism exists to add a party to an action after the

passage of such a length of time, even if that party is—or has become—

ostensibly indispensable. As this situation is likely to recur in the future,

perhaps our rules are ripe for amendment.

                                        15
COUNSEL FOR APPELLANT,
GLORIA DOWELL:

Wayne Charles Daub

COUNSEL FOR APPELLANT,
TERRY ADAMS:

Charles Phillip Wheeler, Jr.

COUNSEL FOR APPELLEE,
MATTHEWS CONTRACTING:

Douglas Anthony U’Sellis
U’Sellis Mayer & Associates, PSC

COUNSEL FOR APPELLEE,
EXCEL MINING, LLC:

James Gregory Allen
Jones & Walters, PLLC

COUNSEL FOR APPELLEE COMMONWEALTH
OF KENTUCKY EX REL. ATTORNEY GENERAL
DANIEL J. CAMERON:

Stephen Chad Meredith
Matthew Franklin Kuhn
Office of Solicitor General
Office of the Attorney General

ADMINISTRATIVE LAW JUDGES:

Hon. John Barry Coleman
Hon. Chris Davis

WORKERS’ COMPENSATION BOARD:
Michael Wayne Alvey

                                   16
AMICI KENTUCKY CHAMBER OF COMMERCE,
KENTUCKY ASSOCIATION OF COUNTIES,
KENTUCKY COAL ASSOCIATION,
KENTUCKY LEAGUE OF CITIES:

Brent Robert Baughman
Kyle W. Miller
R. Clay Larkin
Dentons Bingham Greenbaum LLP

                                17