Opinion
BOARD No. 53044-90
Filed: January 31, 1997
REVIEWING BOARD DECISION
(Judges Fischel, Kirby, and Wilson)
APPEARANCES
William N. Batty, Esq., for the employee.
Austin Powell, Esq., for the insurer at hearing and on brief.
Joyce E. Davis, Esq., for the insurer on brief.
The employee appeals from the administrative judge's decision, contending that the judge erred in his findings as to fraud, recoupment, earning capacity, and fees. We find merit in the employee's arguments.
The employee is a fifty year old man who began working for Trans World Airlines ("TWA") in 1978. (Dec. 3.) In July or August of 1990, he applied for a night position as a prison guard at the New Hampshire Department of Corrections while still employed full-time at TWA. (Dec. 4.) His intent was to maintain both jobs, working days at TWA and nights at the prison. Id. On September 18, 1990, the employee injured his right shoulder at TWA when a cargo door fell on him. He stopped working and was paid temporary total incapacity benefits under § 34 voluntarily by the insurer. (Dec. 3, 4.)
Three days after this industrial injury, the employee began working at his new job at the prison. (Dec. 4.) The job required little physical exertion beyond walking. Id. The employee did not disclose this employment to TWA. (Dec. 5.)
During his employment at the prison, the employee underwent shoulder arthroscopy in December 1990 and open shoulder surgery in 1991. (Dec. 5.) The second surgery caused him to miss a few days of work at the prison. (Dec. 5.) The insurer's rehabilitation nurse interviewed Murphy on several occasions in 1991 to discuss his vocational, medical, and financial condition and work history. He did not disclose his prison job or earnings at those meetings, (Dec. 5). On May 28, 1991, the employee was terminated from his prison job for alleged misconduct unrelated to his physical disability. (Dec. 5) TWA terminated the employee in November 1991 when it learned that he worked as a prison guard in New Hampshire while on Workers' Compensation leave from TWA. (Dec. 5.)
The insurer filed a request to discontinue benefits and after a conference the judge authorized discontinuance of § 34 total incapacity benefits and the commencement of § 35 partial incapacity compensation. (Dec. 3.) The briefs of the parties indicate that at the August 2, 1993 conference the employee disclosed his past employment at the New Hampshire prison from September 21, 1990 to May 29, 1991 (Self-insurer's brief, p. 2-3; Employee's brief, p. 10.) The insurer appealed this conference order to a hearing de novo.
Although the decision filed on December 13, 1994 states that the employee appealed from the conference order (Dec. 3), the Addendum to the decision filed on March 6, 1995 confirms that "in fact it was the insurer who appealed" the conference order. (Addendum, p. 230.)
At the hearing on May 31, 1994, the employee claimed continuing partial incapacity compensation pursuant to § 35, and medical benefits. (Dec. 1.) The insurer raised issues of extent of incapacity, causal relationship and fraud under § 14. Id.
A § 11A impartial physician examined the employee on January 13, 1994. (Dec. 6.) He diagnosed an impingement syndrome of the right shoulder with large calcific tendonitis causally related to the job at TWA which required much overhead work, which was complicated by the September 18, 1990 industrial injury. (Dec. 7.) As a result of the shoulder injury the doctor considered the employee restricted for overhead work with his right arm, but not restricted from walking, sitting, pushing, pulling, standing, or lifting up to his waist. (Dec. 7.) Adopting the § 11A report, the judge found the employee partially disabled since the date of his injury on September 18, 1990. (Dec. 9.)
When questioned at hearing as to why he never disclosed his prison job while collecting total incapacity benefits, the employee answered that he was not aware of "what the rules were" and that he did not realize that the receipt of total incapacity payments in Massachusetts was inconsistent with his employment full time in New Hampshire. (Dec. 6.) The judge found this testimony "completely lacking in credibility." (Dec. 6, 9.) He concluded that "the employee committed fraud by applying for and accepting temporary total disability compensation, while working full time at another job." (Dec. 9.) He found the employee's "fraud was compounded by his failing to reveal his other full time job to his employer, the insurer, the rehabilitation counsellor . . . and the impartial medical examiner." (Dec. 9.) In his Addendum the judge noted the employee argued "that 'during the course of aproceeding', the conference and hearing, he was honest and forthright, admitting his full time New Hampshire employment while on total disability in Massachusetts." (Addendum, p. 233.) The judge rejected this argument and found that "the 'proceeding' in this case began when he filed his claim, and will not end until he ceases to be involved in the worker's compensation system." Id.
The judge ordered the insurer to pay § 35 partial incapacity compensation at the rate of $120 per week from September 18, 1990 and continuing, based upon an average weekly wage of $801.03, and an earning capacity of $621.03 per week, (Dec. 10) and to pay for continuing medical treatment pursuant to § 30. (Dec. 10.) He also directed the employee to pay to the insurer the whole costs of the proceeding and attorney's fees, and a penalty of $3259.80, pursuant to § 14 (2). (Dec. 10.) Finally, he ordered that the insurer "may recoup overpayment, costs, attorney's fees, and penalties, with a weekly recoupment of not more than $100. (Dec. 10.) The parties argued motions for the reconsideration of various issues, and, as previously noted, the judge filed an Addendum to his Decision on March 6, 1995.
The employee raises several arguments on appeal: first, that the administrative judge did not have jurisdiction to assess costs and penalties under § 14 (2) because any act of fraud was committed prior to the 1991 amendment; second, that the order for recoupment in the amount of $100 out of the employee's $120 weekly benefits was not warranted under G.L.c. 152, § 11D(3); third, that the judge's determination of his earning capacity was arbitrary and capricious; and fourth, that it was error to charge him with his own attorney's costs under G.L.c. 152, § 13 (5). We address each contention in turn.
I. Section 14 (2)
The employee contends that the administrative judge did not have jurisdiction to address the issue of costs and penalties under § 14 (2) because the applicable version of the statute places exclusive jurisdiction in the superior court. The employee relies on the language of the pre-1991 version of § 14 (2), which states in pertinent part:
If it is determined that any party has brought, prosecuted, or defended proceedings with the intent to defraud, the party shall be assessed, in addition to the whole costs of such proceedings and attorney's fees, a penalty. . . . Any action . . . shall be brought by an employee, employer or insurer in the superior court. . . .
G.L c. 152, § 14 (2), as amended by St. 1985, c. 572, § 29. (Emphasis added). A 1991 amendment expanded the scope of § 14 (2) and gave concurrent jurisdiction to the department. Section 14 (2) now reads:
If it is determined that in any proceeding within the division of dispute resolution, a party . . . concealed or knowingly failed to disclose that which is required by law to be revealed knowingly used perjured testimony or false evidence, knowingly made a false statement of fact or law participated in the creation or presentation of evidence which he knows to be false, or otherwise engaged in conduct that such party knew to be illegal or fraudulent . . . the party shall be assessed, in addition to the whole costs of such proceedings and attorney's fees, a penalty. . . . Any action . . . shall be brought by an employee or insurer in the department, or by an employee, employer or insurer in the superior court. . . .
G.L.c. 152, § 14 (2), as amended by St. 1991, c. 398, § 37. (Emphasis added). This new amendment was deemed substantive, applying only to "all fraudulent activity occurring after the effective date of this act [December 23, 1991]." St. 1991, c. 398, § 104. Thus, application of § 14 (2) under either version turns on whether the fraudulent conduct occurred in a "proceeding" in the department.
The employee argues that the superior court had exclusive jurisdiction because the alleged fraudulent activity (collecting total incapacity benefits while being gainfully employed) occurred before the 1991 amendment. Second, Murphy contends that the term "proceeding" refers to conferences and hearings and he was forthright about his prison employment at the conference and again at hearing. (Employee's Brief, 10-13.) This raises a two pronged issue: what is the scope of the term "proceeding" and what constitutes a violation under the applicable version of § 14 (2)?
A. Jurisdiction — Scope of the Term "Proceeding."
The judge's decision rejected the employee's contention that "proceeding" referred to either the actual period he was working at the prison (September 21, 1990 through May 28, 1991) or to the post-1991 conference and hearing. Instead, the judge ruled that "[t]he 'proceeding' [as that term is used in § 14 (2)] in this case began when he filed his claim, and will not end until he ceases to be involved in the worker's [sic] compensation system." (Addendum to Decision, 5.)
Under the judge's rationale, the term "proceeding," as used in both versions of § 14 (2), refers to all periods of time wherein an employee receives workers' compensation. The judge set forth his reasoning for his expansive approach:
To hold otherwise would create a perverse anomaly in the law. It would allow anyone, once receiving worker's [sic] compensation weekly benefits, to commit fraud with impunity, until such time as the insurer files a claim. An astute employee, could then cease the fraudulent activity, and be immune from prosecution.
(Addendum to Decision, 5.) We disagree with the judge's interpretation. Under both versions of § 14 (2), the Legislature limited the fraudulent activity to a "proceeding" at the department. The judge's interpretation of the statute would render all compensation recipients subject to the amended version of § 14 (2), regardless of whether fraudulent activities were committed after 1991. This interpretation would effectively negate St. 1991, c. 398, § 104, which deemed the post-December 23, 1991 version of § 14 (2) substantive, and applicable only to "all fraudulent activity occurring after the effective date of th[e] Act."
For guidance in interpreting the language of § 14 (2), we follow the familiar path of statutory construction described inIndustrial Fin. Corp. v. State Tax Comm'n., 367 Mass. 360, 364 (1975):
The general and familiar rule is that a statute must be interpreted according to the intent of the Legislature ascertained from all its words construed by the ordinary and approved usage of the language, considered in connection with the cause of its enactment, the mischief or imperfection to be remedied and the main object to be accomplished, to the end that the purpose of its framers may be effectuated.
Id. at 364, quoting Hanlon v. Rollins, 286 Mass. 444, 447 (1934). Both versions of the statute refer to fraud in a "proceeding" at the department. "Proceeding" is defined as "the form and manner of conducting judicial business before a court or judicial officer." Black's Law Dictionary. The new language of § 14 (2) confines the inquiry to "any proceeding within the division of dispute resolution." See G.L.c. 152, § 14 (2) (1991 version). (Emphasis added). There are four stages of proceedings at the Department: conciliations, conferences, hearings, and appeals at the reviewing board. The fraud under § 14 (2) must occur at one of these events. A party alleging fraud at a pre-hearing proceeding must place the evidence of the alleged activity on the record at hearing. A developed record at hearing, of the prehearing-proceeding actionable activities is thus necessary to support a finding that § 14 (2) violations took place in any such prior proceeding.
The prior version of § 14 (2) referred to "any proceeding" at the department, which thus included all four stages of proceedings. The amended version of § 14 (2) limits inquiry to "any proceeding within the division of dispute resolution. As a result of statutory changes in 1991, conciliation proceedings now fall within the department of dispute resolution.
The employee argues that any fraud stemming from the fact of his New Hampshire employment is governed by the pre-1991 § 14 (2) because he ceased to work at the prison prior to the 1991 amendment. Under the definition of "proceeding" as discussed above, however, a finding of a § 14 (2) violation in this case would not include the period when the employee actually worked at the prison while collecting benefits, nor would "proceeding" refer to the entire period of collecting benefits, as the administrative judge suggests. Instead, "proceeding" in this case refers to the first proceedings in the division of dispute resolution, the August 2, 1993 conference and the May 31, 1994 hearing. Because all "proceedings" in this case for purposes of § 14 (2) occurred after 1991, only the new amended version of § 14 (2) applies. Moreover, because fraud is not a creation of this statute but is drawn into the statute from existing law, for it to be actionable it also must influence the outcome of a proceeding. While the influence on outcomes of pre-hearing proceedings could be determined at hearing, it follows that any fraud that influenced the outcome at hearing itself would not be discernible until the outcome (i.e. the decision) indicated that influence. Therefore, a separate claim and proceeding would be required.
B. Findings of § 14 (2) Fraud
Pursuant to the amended version of § 14 (2), the judge was required to determine whether the employee, at each relevant post-1991 proceeding, 1) concealed or knowingly failed to disclose that which is required by law to be revealed; 2) knowingly used perjured testimony or false evidence; 3) knowingly made a false statement of fact or law; 4) participated in the creation or presentation of evidence which he knew to be false; or 5) otherwise engaged in conduct that such party knew to be illegal or fraudulent. See G.L.c. 152, § 14 (2), as amended by St. 1991 c. 398, 37.
Though § 14 (2) comes under the title "illegal or fraudulent conduct"; it actually incorporates several closely related areas of law going to the issue of truthfulness.
1. Concealing or Knowingly Failing to Disclose
The first area of those combined under the rubric of § 14 (2), is concealment or knowing failure to disclose that which was required by law to be revealed at proceedings occurring after the December 23, 1991, effective date of the amendment.
The judge did not find that the employee used perjured testimony or false evidence at conference or hearing. The judge did find that "the employee demonstrat[ed] a clear purpose to defraud the insurer, by claiming total disability, and collecting total disability from September 18, 1990 to August 16, 1993 when he knew that he had a significant capacity to work." (Dec. 7.) (Dec. 8.) Only activity occurring within a "proceeding" triggers § 14 (2).
The plain meaning of the term "conceal" is "[t]o hide, secrete, or withhold from the knowledge of others . . . with hold from utterance or declaration . . . cover or keep from sight . . . hide or withdraw from observation, or prevent discovery of." Black's Law Dictionary 288 (6th ed. 1990). The plain meaning of the term "disclose" is "[t]o bring into view by uncovering; to expose; to make known; to lay bare; to reveal to knowledge; to free from secrecy or ignorance, or make known." Id. at 464. The inclusion of these terms in the new § 14 (2) indicates the Legislature's interest in addressing fraudulent utterances about deeds and their concealment — but only during proceedings in the department. As for fraud outside of proceedings in the division of dispute resolution, the amended version of § 14 (2) continues to provide for jurisdiction in the superior court, and further provides that § 14 (2) findings of fraudulent activity by a party "shall be reported to the general counsel of the insurance fraud bureau. § 14 (2).
In his decision, the judge concluded that the employee knowingly failed to disclose 1) the fact of his employment at the prison and 2) information regarding his working capacity, which he should have been aware of under his specific circumstances. (Dec. 7-8; Addendum to Decision, 5-6.) The dispositive question, however, is whether the employee disclosed his work activity after the industrial incident, at proceedings in the division of dispute resolution occurring after 1991?
As noted, the parties agree in their briefs that the fact of the prison employment was disclosed at conference. (Self-insurer's brief, pp. 2-3; Employee's brief, p. 10) With such disclosure, and absent record evidence as to any § 14 (2) violation at conference, there is no basis for a finding of § 14 (2) fraud at the conference level.
Additionally, there was no fraudulent concealment committed during the employee's lay testimony at hearing. The record reflects that at the hearing, the employee made full disclosure with regard to his prison job upon direct and cross-examination. He also had amended his claim to seek only § 35 partial incapacity benefits, which constitutes formal acknowledgment of an earning capacity.
2. Perjury
A second and closely related area itemized in § 14 (2) is perjury. Knowingly using perjured testimony or false evidence at a "proceeding" would be a violation of § 14 (2). Perjury in a judicial or adjudicatory proceeding occurs whenever one willfully and intentionally makes false statements while under oath or affirmation in a matter "material to the issue or point in question", and the false statement has a "reasonable and natural tendency to influence the pertinent determination". Commonwealth v. Giles, 350 Mass. 102, 110-111 (1966); G.L.c. 268, § 1; seeCommonwealth v. McDuffee, 379 Mass. 353, 360-361 (1979);Commonwealth v. Geromini, 350 Mass. 61, 63-66 (1970). The test of materiality is objective, but the test of willfulness is subjective, and depends on whether the witness in good faith knew the statement to be false. Germoni, supra at 64-65. If one believes his statement was true or was honestly mistaken, there is no perjury.Commonwealth v. Giles, 353 Mass. 1, 13-14 (1967); Geromini, supra at 64; Giles, 350 Mass. at 112-113. One statement alone is not sufficient, the testimony as a whole must be considered, along with subsequent disclosures, corrections, and modifications.Geromini, supra at 64-65.
The judge did not find that the employee used perjured testimony or false evidence at conference or hearing. Indeed, the facts in this case would not support such a finding. In light of the employee's entire testimony and his full disclosure, both at conference and hearing, regarding his full-time prison employment while collecting § 34 benefits, his statement at hearing that he "didn't know what the rules were" in regard to the same, would not be "material" or have a "reasonable and natural tendency" to influence the outcome of the proceeding. See Giles, 350 Mass. at 110-111.
3. False Statements of Fact or Law
A third area of veracity related law under § 14 (2) is where the witness "knowingly made a false statement of fact or law" during a proceeding. To show deceit or misrepresentation, there must be "a false statement of a material fact made to induce [another] to act, together with reliance on the false statement . . . to [another's] detriment. Zimmerman v. Kent, 31 Mass. App. Ct. 72, 77 (1991); see Ravosa v. Zais, 40 Mass. App. Ct. 47, 52 (1996); VMark Software, Inc. v. EMC Corp., 37 Mass. App. Ct. 610, 617 and n. 9 (1994). The statement must be one of fact and not opinion. McEneaney v. Chestnut Hill Realty Corp. 38 Mass. 573, (1995). While the line is difficult to draw, "a representation is one of opinion if it expresses only (a) the belief of the matter, without certainty, as to the existence of a fact; or (b) his judgement as to quality, value, authenticity, or other matters of judgment." Id., quoting Restatement (Second) of Torts, § 538A (1997).
The judge found that the employee's assertion that he "didn't know what the rules were" while working in another state while collecting § 34 total benefits in Massachusetts to be completely incredible. (Dec. 8.) A finding of no credibility alone, however, would not rise to the level of a fraudulent statement or misrepresentation, unless the statement precipitated some future action in reliance on the untruthful statement to the point of a legal detriment. McEvoy Travel Bureau Inc. v. Norton Co., 408 Mass, 704, 709 (1990). In the present case, these elements would not be satisfied. Where the employee gave complete disclosure in the board proceedings about the New Hampshire employment, there was no inducement or reliance resulting in a future detrimental action.
4. Participation in the Creation of False Evidence
There are no findings or evidence that the employee participated in the creation of evidence he knew to be false in the course of proceedings that would rise to the level of this § 14 (2) violation.
5. Otherwise Engaging in Illegal or Fraudulent Conduct
Section 14 (2) is also triggered where a party otherwise engages "in conduct that such party knew to be illegal or fraudulent". But again the conduct known to be illegal or fraudulent must occur "in any proceeding with in the division of dispute resolution". See G.L.c. 152, § 14(2). The employee's conduct in collecting worker's compensation while working did not occur in a "proceeding" and, therefore, would not trigger the penalty provisions of § 14 (2). The insurer's remedy for fraudulent activities occurring outside of the division of dispute resolution would be elsewhere. See Anaesy v. The Flatley Co., 10 Mass. Workers' Comp. Rep. 322, 323 (1995) (remedy for fraud in Superior Court if conduct took place prior to the 1991 amendments to G.L. c. 152; G.L.c. 266, § 111A (action for false insurance claims).
Although not applicable to the facts of this case, employees are currently required to report earnings by way of an earning statement. G.L.c. 152, § 11D (1) provides:
Any employee entitled to receive weekly compensation under this chapter shall have an affirmative duty to report to the insurer all earnings, including wages or salary earned from self-employment. Insurers shall notify employees of said duty on a form approved by the department. Such form shall indicate that failure to report any earnings may subject the employee to civil or criminal penalties, and shall further indicate that failure to file an earnings report on a form approved by the department within thirty days of an insurer's request for such filing may result in the insurer's suspension of the employee's weekly benefits; provided however, that no employee shall be required to file an earnings report more often than once every six months.
St. 1991, c. 398, § 32, was approved December 23, 1991, and by § 111 made effective upon passage. It is procedural in character, applicable to statements concerning earnings after December 23, 1991.
We conclude that the judge erred in his findings as to fraud pursuant to § 14 (2), because under that section the judge was limited to find fraud in any proceeding within the division of dispute resolution, to wit, the conciliation, the August 2, 1993 conference, or the May 13, 1994 hearing. Here the judge's findings of fraud are based upon the employee's deeds throughout the entire period he collected benefits, and on his finding that the employee also failed to disclose relevant information to TWA and the insurer's rehabilitation nurse, among others. (Dec. 8.) These omissions did not take place in a "proceeding" in the division and thus fall outside the purview of § 14 (2). The judge also found "the employee committed fraud by applying for and accepting temporary total disability compensation, while working full-time at another job." (Dec. 9.) Again, the collection of benefits is not a proceeding and does not trigger § 14 (2).
We reverse the judge's findings and order pursuant to § 14 (2). See G.L.c. 152, § 11C.
II. Recoupment Calculation.
The judge's retroactive assessment of an earning capacity in excess of that which he assigned at the modification conference created an overpayment. In his decision the judge ordered recoupment, sua sponte. The employee challenges the judge's order allowing the insurer to recoup overages in the amount of $100 per week out of the employee's $120 § 35 weekly benefits.
An order for recoupment must be "pursuant to the filing of a complaint pursuant to section ten or by bringing an action against the employee in superior court." G.L.c. 152, § 11D(3). Hence, the judge did not have authority to order recoupment sua sponte without the filing of a complaint by the insurer. It was thus error.
In the absence of an insurer's filing of a complaint pursuant to §§ 11D(2)(3) a judge is without authority to order such recoupmentsua sponte. We thus reverse the judge's findings under § 11D.
III. Earning Capacity Analysis.
It is argued on appeal that the assessment of the employee's earning capacity was arbitrary and capricious. The employee was awarded § 35 benefits in the amount of $120 based upon an earning capacity of $621.03 with a pre-injury average weekly wage of $801.03. The judge assigned this new earning capacity reasoning:
The employee's average weekly wage prior to the injury was $801.03. Had he not been injured on September 18, 1991, his wages would have exceeded $1,200 as the New Hampshire prison wages would have counted. . . . The New Hampshire prison job paid $400-420 per week. He lost that job for non-medical reasons, and but for his termination for misconduct, he would still be employed there. . . . The employee testified to a desire to work two jobs, the day job at TWA and the night job at the prison. His injury precludes him from working at the TWA job. But it does not preclude him from working at another, lighter duty day job, earning $5-$6 an hour, during the hours he would have worked at TWA. That would generate another $200-$240 per week, placing his earning capacity at approximately $621.03.
(Addendum to Decision, 7.) As the employee was terminated from his prison job due to non-medical reasons and had filed a grievance, the judge had the discretion to find that the employee would have continued to work at the prison but for the termination resulting from alleged misconduct. The judge found that the employee did earn $400-$420 per week working forty hours per week at the New Hampshire prison. He then found the employee's injury "precludes him from working at the TWA job" where he had earned $801.03 per week. Id. Based on the employee's pre-injury "desire to work two jobs", the judge then assumed that post injury, and despite it, the employee could nonetheless work at both jobs. That is, the judge found the employee could work the equivalent of his full time weekly job at TWA and a second job earning an additional $200 to $240 per week at an hourly rate of between $5 and $6 per hour. At $6 per hour, the employee would have to work another forty hours to make the additional $240 per week. It appears that the judge expected the employee to work two jobs, full time at up to 80 hours per week. Considering that the judge found the employee remained partially incapacitated, and could no longer do the TWA job at all, we are hard pressed to find a rational basis for the notion that the employee could work up to 80 hours per week, or how the judge determined that such employment was "[not] beyond his physical capabilities." Id. We recommit the matter for further findings on the issue of earning capacity. G.L.c. 152, § 11C.
IV. Employee Attorney's Fees.
The employee's last contention charges the judge committed a legal error in ordering him to pay his own attorney's fee when he prevailed in the insurer's appeal to discontinue weekly benefits. (Addendum to Decision, pp. 232, 236.) Section 13A(5) states in pertinent part: "Whenever an insurer files a complaint or contests a claim for benefits and then . . . the employee prevails at such hearing the insurer shall pay a fee to the employee's attorney . . . ." G.L.c. 152, § 13A(5). Because the judge did not grant the insurer's request to discontinue, and did find the employee continued to be partially incapacitated and entitled to some § 35 benefits, the employee did prevail for purposes of § 13A(5). The insurer is directed to pay a fee to employee's counsel pursuant to § 13A(5).
Accordingly, we reverse the judge's finding of fraud and his orders pertaining to payment of costs, penalties and fees. We reverse his findings as to recoupment, which was beyond the judge's authority. We cannot understand the judge's rationale for assigning an earning capacity based upon nearly eighty hours per week of post injury employment at two full time jobs. We recommit this matter for further findings as to extent of earning capacity.
_________________________ Carolynn N. Fischel Administrative Law Judge
_________________________ Edward P. Kirby Administrative Law Judge
_________________________ Sara H. Wilson Administrative Law Judge
Filed: January 31, 1997