Kimberly Coffee v. McCreary County Fiscal Court

RENDERED: SEPTEMBER 25, 2020; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-0088-WC
KIMBERLY COFFEY APPELLANT
PETITION FOR REVIEW OF A DECISION
v. OF THE WORKERS’ COMPENSATION BOARD
ACTION NO. WC-16-91920
MCCREARY COUNTY FISCAL COURT;
HON. GRANT S. ROARK, ADMINISTRATIVE
LAW JUDGE; AND WORKERS’ COMPENSATION
BOARD APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE: CLAYTON, CHIEF JUDGE; ACREE AND LAMBERT, JUDGES.
ACREE, JUDGE: Kimberly Coffey appeals from an opinion of the Workers’
Compensation Board which upheld an administrative law judge’s (ALJ) order
awarding her permanent total disability benefits and medical benefits, but limited
her award according to the newly-enacted Kentucky Revised Statute (KRS)
342.730(4). We affirm.
BACKGROUND
On November 27, 2018, a defective hydraulic lift was lowered onto
Coffey’s foot. She alleged a safety violation by her employer, McCreary County
Fiscal Court. Subsequently, McCreary County alleged a safety violation by
Coffey. Before the final hearing, Coffey filed a “Notice of Constitutional
Challenge” on February 26, 2019, asserting the retroactive application of the
current version of KRS 342.730(4) is unconstitutional. A final hearing was held on
June 4, 2019.
The ALJ issued an opinion on August 5, 2019. In that opinion, the
ALJ determined Coffey sustained a permanent total disability stemming from
McCreary County’s violation of a safety regulation. Regarding Coffey’s
constitutional challenge, the ALJ stated it had no authority to rule on constitutional
issues, limited her award based on the statute, and preserved the issue for appellate
review. The Board made the same determination, and this appeal followed.
STANDARD OF REVIEW
The Court reviews questions of law, such as the constitutionality of
statutes, using the de novo standard. U.S. Bank Home Mortgage v. Schrecker, 455
S.W.3d 382, 384 (Ky. 2014).
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ANALYSIS
Coffey argues the retroactivity of the current version of KRS
342.730(4) is unconstitutional and that she is entitled to full benefits for life
because the retroactivity provision is an unconstitutional ex post facto law. We
disagree.
Our Supreme Court in Holcim v. Swinford held that the statute is
retroactive but did not address the constitutionality of the statute’s retroactive
application. 581 S.W.3d 37, 44 (Ky. 2019) (“the constitutionality of the statute is
not at issue before us”). Coffey places the issue squarely before this Court.
Coffey claims the statute is unconstitutional because it violates the
Contract Clauses of the United States and Kentucky Constitutions. This is the
second time the issue was raised in this forum. Adams v. Excel Mining, LLC, No.
2018-CA-000925-WC, 2020 WL 864129 (Ky. App. Feb. 21, 2020).1 We believe
that Opinion, albeit unpublished, adequately addresses this issue, and we repeat
that analysis here.
The prohibition against ex post facto laws found in the United States
Constitution and the Kentucky Constitution only applies to criminal matters.
Nicholson v. Judicial Ret. & Removal Comm’n, 562 S.W.2d 306, 308 (Ky. 1978).
However, Section 19(1) of the Kentucky Constitution and Article 1, Section 10,
1
This case is currently on appeal to the Kentucky Supreme Court, No. 2020-SC-0137-WC.
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Clause 1 of the United States Constitution prohibit laws which impair the
obligation of contracts. This is Coffey’s argument. She claims retroactive
application of this statute infringes on her rights to recover workers’ compensation
benefits pursuant to the statute in effect at the time of her injury. In other words,
she agreed to take part in Kentucky’s workers’ compensation scheme and demands
she receive the benefits to which she was entitled at the time she was injured, not
pursuant to the new retroactive regulation.
[A] constitutional prohibition against impairing the
obligation of contracts . . . is not an absolute one to be read
with literal exactness. The Contract Clause does not
prevent a state from enacting regulations or statutes which
are reasonably necessary to safeguard the vital interests of
its people.
Maze v. Bd. of Directors for Commonwealth Postsecondary Educ. Prepaid Tuition
Tr. Fund, 559 S.W.3d 354, 368 (Ky. 2018) (citation omitted). When determining
whether a legislative act violates the contract impairment clause, we utilize the
following standard:
(1) whether the legislation operates as a substantial
impairment 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
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conditions and of a character appropriate to the public
purpose justifying its adoption.”
Id. at 369.
“The first step . . . is determining ‘whether the state law has, in fact,
operated as a substantial impairment of a contractual relationship.’” Id. at 369-70
(citations omitted).
A significant consideration in this step of the analysis is
the extent to which the industry subject to the contract has
been regulated in the past. The rationale for this rule is
thusly stated: “One whose rights, such as they are, are
subject to state restriction, cannot remove them from the
power of the State by making a contract about them.”
Id. at 370 (citations omitted). Here, we conclude the new law substantially
impairs Coffey’s benefits. Although the workers’ compensation scheme is heavily
regulated, past versions of KRS 342.730(4) have allowed a benefit recipient to
receive benefits for life. In fact, the 1994 version of the statute would have
allowed Coffey to receive benefits for life, although they were subject to reduction
from time to time. The current version terminates benefits once Coffey reaches 70
years of age.
The second stage of the . . . analysis involves a
determination of whether the newly-imposed conditions
that impair the contract can be justified by a significant
and legitimate public purpose. Among the purposes that
justify such impairment is legislation aimed at the
remedying of a broad and general social or economic
problem.
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Id. at 371 (citations omitted). Significantly, the Kentucky Supreme Court found
that limiting the duration of benefits is justified by a legitimate public purpose.
The Court concluded that limiting the duration of benefits solves two economic
problems: “(1) it prevents duplication of benefits; and (2) it results in savings for
the workers’ compensation system.” Parker v. Webster County Coal, LLC (Dotiki
Mine), 529 S.W.3d 759, 768 (Ky. 2017). This is evident from the fact that a
duration limitation of benefits has been in effect in Kentucky since the 1996
version of KRS 342.730(4).
The third stage of the . . . analysis examines whether the
adjustment of “the rights and responsibilities of
contracting parties [is based] upon reasonable conditions
and [is] of a character appropriate to the public purpose
justifying [the legislation’s] adoption.” Analysis under
this prong varies depending upon whether the State is a
party to the contract. When the State itself is not a
contracting party, “[a]s is customary in reviewing
economic and social regulation, . . . courts properly defer
to legislative judgment as to the necessity and
reasonableness of a particular measure.”
Maze, 559 S.W.3d at 372 (citations omitted). The contracts at issue here are not
between individuals and the state, but between an employee, an employer, and a
workers’ compensation insurance provider. We, therefore, defer to the judgment
of the legislature.
We believe retroactive application of KRS 342.730(4) is reasonable
and appropriate. As previously stated, limiting the duration of benefits has been a
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part of the workers’ compensation system since 1996. Parker, supra, found the
particular manner of limitation which applied at that time to be unconstitutional.
The Kentucky Legislature had to act quickly to return the workers’ compensation
system to the status quo. Had the legislature not acted so, employees with pending
workers’ compensation claims between the rendering of Parker and the effective
date of the current version of KRS 342.730(4) could have claimed entitlement to
some amount of benefits for life. This would have placed a great financial burden
on the workers’ compensation system, employers, and insurers. Holcim v.
Swinford holds that the Kentucky Legislature specifically intended that the current
version of KRS 342.730(4) apply retroactively. 581 S.W.3d at 44. And this Court
is bound by that decision. Crittenden County Fiscal Court v. Hodge, 591 S.W.3d
424, 426 (Ky. App. 2019). Consequently, the statute’s limitation as to duration
applies to Coffey.
Coffey makes one additional argument challenging the
constitutionality of the statute, which has also been addressed previously by this
Court. She contends the age limitation is unconstitutional.
This issue is currently pending before the Kentucky Supreme Court as
a matter of right appeal from this Court’s decision in Donathan v. Town and
Country Food Mart, No. 2018-CA-001371-WC, 2019 WL 6998653, (Ky. App.
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Dec. 20, 2019). In that case, this Court applied the rational basis test to the statute
and concluded the statute was constitutional. We held as follows:
The legislators enacted this version in response to Parker.
We are also cognizant of the strong presumption of
constitutionality afforded to legislative acts. Brooks v.
Island Creek Coal Co., 678 S.W.2d 791, 792 (Ky. App.
1984) (citations omitted). Accordingly, we find the
statute, as enacted, does not treat similarly situated persons
differently. The statute allows for the benefits to terminate
upon reaching the age of 70, or four years after the
employee’s injury, whichever occurs last. This stipulation
rationally relates to the government’s basis for the
legislation – to save taxpayer dollars allocated to the
workers’ compensation system. It places a limit on the
amount of benefits every person is awarded, not just a
select group of individuals. Therefore, we find the statute
constitutional.
Id. at *3. For these same reasons, we conclude the current version of KRS
342.730(4) is constitutional.
CONCLUSION
Based on the foregoing, we affirm the Board’s final opinion in this
case.
ALL CONCUR.
BRIEF FOR APPELLANT: BRIEF FOR APPELLEE:
Mark D. Knight Marcel Smith
Somerset, Kentucky Frankfort, Kentucky
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