262 Kan. 840
(942 P2d 591)
No. 77,142
INJURED WORKERS OF KANSAS, et al., Appellants, v. WAYNE L. FRANKLIN, Secretary of Human Resources, and PHILIP S. HARNESS, Director of Workers Compensation, Appellees.
No. 77,561
OLIVER GETTLE, Appellant, v. WAL-MART, Appellee, and NATIONAL UNION FIRE INSURANCE COMPANY, Insurance Carrier.
SYLLABUS BY THE COURT
1. Determining whether a statute violates the constitution is a question of law. When determining a question of law, this court may exercise an unlimited de novo standard of review. A statute is presumed constitutional, and all doubts must be resolved in favor of its validity. If there is any reasonable way to construe a statute as constitutionally valid, the court must do so. A statute must clearly violate the constitution before it may be struck down. This court not only has the authority, but also the duty, to construe a statute in such a manner that it is constitutional if the same can be done within the apparent intent of the legislature in passing the statute.
2. The rational basis standard is stated and applied.
3. Equal protection law is reviewed and applied.
4. Due process law is reviewed and applied.
5. When the legislature must draw a line and there is no mathematical or logical way of fixing it precisely, the decision of the legislature must be accepted unless the court can say that it was very wide of any reasonable mark.
6. The social security offset and private pension provision in K.S.A. 44-501(h) is rationally related to the valid state interest of preventing the duplication of wage loss replacement benefits. The offset does not unconstitutionally violate equal protection.
7. A substantive statute will operate prospectively rather than retrospectively unless its language clearly indicates that the legislature intended the latter.
8. The graduated contingency fee rates in the 1993 amendments to the Workers Compensation Act do not interfere with the court's inherent power to regulate the practice of law or unconstitutionally violate the separation of powers doctrine.
9. Major statutory enactments establishing a broad, comprehensive statutory remedy or scheme of reparation in derogation of a previously existing common-law remedy may be subsequently amended or altered without each subsequent change being supported by an independent and separate quid pro quo. In considering the adequacy of the quid pro quo of comprehensive legislation which substitutes a statutory remedy for one that formerly existed at common law, and its sufficiency to support subsequent amendments or modifications which diminish the substitute remedy originally granted, no hard and fast rule can apply to all cases. We recognize that all such legislation may need periodic modification; the proper test to apply is whether the substitute remedy would have been sufficient if the modification had been a part of the original act.
10. The 1993 amendments to the Workers Compensation Act are examined and it is held that the amendments as a whole and individually are constitutional.
No. 77,142, appeal from Shawnee district court; CHARLES E. ANDREWS, JR., judge. No. 77,561, appeal from Workers Compensation Board. Opinion filed July 18, 1997. Affirmed.
Timothy A. Short, of Spigarelli, McLane & Short, of Pittsburg, argued the cause, and Patrick R. Nichols, of Topeka, Kelly W. Johnston, of The Johnston Law Offices, P.A., of Wichita, and Thomas E. Hammond, of Render, Kamas and Hammond, of Wichita, were with him on the briefs for appellants.
Fred J. Logan, Jr., of Logan & Logan, of Prairie Village, argued the cause, and A. J. Kotich, of Kansas Department of Human Resources, was with him on the brief for appellees Franklin and Harness.
Christopher J. McCurdy, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, of Wichita, argued the cause, and Michael D. Streit, of the same firm, was with him on the brief for appellee Wal-Mart.
The opinion of the court was delivered by
ABBOTT, J.: The 1993 Kansas Legislature passed sweeping changes to the Workers Compensation Act (Act). Five of those amendments are challenged in this appeal, as well as the Act as a whole. The plaintiffs contend the amendments and the Act as a whole unconstitutionally violate due process, equal protection, and the separation of powers doctrine. The plaintiffs are a variety of individuals, groups, and labor organizations. The standing of the plaintiffs and the procedure they used to reach this court (declaratory action) are not an issue. The trial court held the Act and the amendments are constitutional, and this appeal followed.
At the start of the 1993 legislative session, legislators had before them the reports of the Governor's Task Force on Workers Compensation, the Insurance Commissioner's Workers Compensation Task Force, and the Legislative Post Audit Committee, all of which suggested areas of the workers compensation system that the various committees determined needed reform. Over the course of the session, the House Committee on Labor and Industry and the Senate Committee on Commerce conducted hearings and heard from witnesses representing employees, employers, trial lawyers, labor organizations, and business associations. S.B. 307, which dealt with safety issues, was used as the vehicle for workers compensation reform. The legislation passed unanimously in both the House and Senate, and Governor Finney signed the bill into law.
Once the bill passed in 1993, several parties filed a petition for declaratory judgment in Shawnee County District Court, asking the trial court to declare nine of the Act's amendments unconstitutional and void. These plaintiffs filed their declaratory judgment action against George Gomez, then the Director of the Division of Workers Compensation, and against Joe Dick, then the Secretary of Human Resources, who oversaw the Division of Workers Compensation and the implementation of the Act. Wayne L. Franklin is now the Secretary of Human Resources, and Philip S. Harness is the Director of Workers Compensation. These parties are now the named defendants in the declaratory judgment case.
The trial court heard oral arguments on summary judgment motions filed by both the plaintiffs and the defendants. On June 4, 1996, the trial court filed a memorandum decision and order. The court denied the plaintiffs' motion for summary judgment and granted the defendants' motion for summary judgment, finding that all nine challenged amendments to the Act withstood constitutional scrutiny. The plaintiffs timely filed a notice of appeal with the Court of Appeals. This court granted the plaintiffs' motion to transfer the case to the Supreme Court.
On appeal, the plaintiffs raised only five issues instead of the nine issues that they raised at the trial court level. The four issues which were abandoned raised the constitutionality of certain amendments that were the only amendments affecting some of the individual plaintiffs. These plaintiffs still have standing in this appeal because they also challenge the constitutionality of the entire Act, not just certain amendments.
In a separate action, plaintiff Oliver C. Gettle filed a workers compensation claim with the Division of Workers Compensation on March 8, 1994. Gettle was a 64-year-old Wal-Mart employee who injured his right hand, right arm, and right shoulder while he was moving paint cans to overhead shelving. Upon treatment, it was discovered Gettle had partially torn the rotator cuff in his shoulder. Based on the American Medical Association Guides to the Evaluation of Permanent Impairment (4th ed. 1995) (AMA Guides), Gettle's doctor found that Gettle had a partial permanent impairment to the right shoulder of 15%, which was equivalent to 9% of the whole body.
The Division of Workers Compensation heard Gettle's workers compensation claim and awarded him compensation. The issue at the hearing was whether "K.S.A. 44-510d(a)(13), stating that the loss of an arm, including the shoulder joint, shoulder girdle, shoulder musculature or any other shoulder structures is a scheduled injury with recovery limited to 225 weeks [,is] constitutional?" The administrative law judge found that he had no jurisdiction to determine whether K.S.A. 44-510d was constitutional. Thus, following the statute, the judge limited Gettle to a 15% scheduled impairment to his right shoulder with benefits calculated for 225 weeks. The judge awarded Gettle compensation for 25.5 weeks at a rate of $101.88 per week, or $2,597.94, followed by 29.92 weeks at $101.88 per week, or $3,048.24, making a total award of $5,646.18.
Gettle filed an application for review with the Workers Compensation Board (Board). Gettle asked the Board to review the administrative law judge's award and challenged the constitutionality of K.S.A. 44-510d(a)(13), which classifies shoulder injuries as scheduled injuries. On August 28, 1996, the Board ruled that it was not a Kan. Const. art. III court and that it did not have the authority to hold an act of the Kansas Legislature unconstitutional. Thus, the Board found that it was obligated to enforce the provisions of K.S.A. 44-510d(a)(13), as enacted, and treat Gettle's shoulder injury as a scheduled injury. The Board affirmed the award entered by the administrative law judge.
Gettle appealed to the Court of Appeals and filed a motion to consolidate his case with this declaratory judgment case. This court granted Gettle's motion. Pursuant to K.S.A. 20-3018(c), Gettle's case, No. 77,561, was transferred to this court and consolidated for review and determination under case No. 77,142. See Supreme Court Rule 2.06 (1996 Kan. Ct. R. Annot. 16).
"Determining whether a statute violates the constitution is a question of law. When determining a question of law, this court may exercise an unlimited de novo standard of review. See State v. Mertz, 258 Kan. 745, 748, 907 P.2d 847 (1995). 'A statute is presumed constitutional, and all doubts must be resolved in favor of its validity. If there is any reasonable way to construe a statute as constitutionally valid, the court must do so. A statute must clearly violate the constitution before it may be struck down.' State v. Scherzer, 254 Kan. 926, Syl. ¶ 6, 869 P.2d 729 (1994); Boatright v. Kansas Racing Comm'n, 251 Kan. 240, 243, 834 P.2d 368 (1992). 'This court not only has the authority, but also the duty, to construe a statute in such a manner that it is constitutional if the same can be done within the apparent intent of the legislature in passing the statute.' State v. Durrant, 244 Kan. 522, 534, 769 P.2d 1174, cert. denied 492 U.S. 923 (1989)." Lemuz v. Fieser, 261 Kan. 936, 943, 933 P.2d 134 (1997).
I. 10-DAY NOTICE OF INJURY RULE
Prior to 1993, the Act required a worker to file a workers compensation claim within 200 days of an injury and to give notice of such injury to his or her employer within 10 days of the injury as a condition precedent to filing a valid workers compensation claim, unless the employer or its agent had actual knowledge of the injury. K.S.A. 44-520 (Ensley 1986); K.S.A. 44-520a (Ensley 1986). This notice of claim requirement specifically provided:
"Proceedings for compensation under the workmen's compensation act shall not be maintainable unless notice of the accident, stating the time and place and particulars thereof, and the name and address of the person injured, shall have been given to the employer within ten (10) days after the date of the accident: Provided, That actual knowledge of the accident by the employer or his duly authorized agent shall render the giving of such notice unnecessary: Provided further, That want of notice or any defect therein shall not be a bar unless the employer prove that he has been prejudiced thereby. " K.S.A. 44-520 (Ensley 1986). (Emphasis added.)
Under this notice of claim requirement, if the worker did not give notice of an injury within 10 days of the injury, lack of notice was not a bar to the workers compensation claim unless the employer could prove that such lack of notice was prejudicial to it.
In 1993, the legislature amended the Act so that the failure to provide an employer with notice of an injury within 10 days of the injury acts as a bar to a workers compensation claim unless the employer or its agent had actual notice of the injury or the employee had "just cause" in failing to provide notice. Further, this 1993 amendment bars a workers compensation claim if an employee fails to give notice of an injury to the employer within 75 days of the injury, even if the employee had just cause for such failure, unless the employer or its agent had actual notice of the accident, the employer was unavailable to receive notice, or the employee was physically unable to give notice. L. 1993, ch. 286, § 42. Specifically, this amendment provided:
"Except as otherwise provided in this section, proceedings for compensation under the workers compensation act shall not be maintainable unless notice of the accident, stating the time and place and particulars thereof, and the name and address of the person injured, is given to the employer within 10 days after the date of the accident, except that actual knowledge of the accident by the employer or the employer's duly authorized agent shall render the giving of such notice unnecessary. The ten-day notice provided in this section shall not bar any proceeding for compensation under the workers compensation act if the claimant shows that a failure to notify under this section was due to just cause, except that in no event shall such a proceeding for compensation be maintained unless the notice required by this section is given to the employer within 75 days after the date of the accident unless (a) actual knowledge of the accident by the employer or the employer's duly authorized agent renders the giving of such notice unnecessary as provided in this section, (b) the employer was unavailable to receive such notice as provided in this section, or (c) the employee was physically unable to give such notice." K.S.A. 44-520.
Under the 1993 amendment, the employer does not have to prove that lack of timely notice prejudiced it in order for the lack of timely notice to act as a bar to an employee's workers compensation claim. Based on this new notice of claim requirement, workers compensation plaintiffs have to notify the employer of an injury within 10 days of the occurrence of an injury, or within 75 days at the most, while typical tort victims have to file suit and notify the defendant of the injury within 2 years of the discovery of an injury, or in some cases within 8 years of the occurrence of the injury.
The plaintiffs challenge the new notice of claim requirement as a violation of equal protection and due process.
A. Equal Protection
The plaintiffs contend that K.S.A. 44-520 unconstitutionally violates the Equal Protection Clause of the United States Constitution. The principle of equal protection relevant to the plaintiffs' claim is embodied in § 1 of the Kansas Constitution Bill of Rights. See Stephens v. Snyder Clinic Ass'n, 230 Kan. 115, 127-28, 631 P.2d 222 (1981). This section provides: "All men are possessed of equal and inalienable natural rights, among which are life, liberty, and the pursuit of happiness."
The equal protection provision of the United States Constitution is found in the 14th Amendment, which provides:
"All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges and immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws." (Emphasis added.)
"'"'Equal protection' . . . emphasizes disparity in treatment by a State between classes of individuals whose situations are arguably indistinguishable."'" Ernest v. Faler, 237 Kan. 124, 129, 697 P.2d 870 (1995) (quoting Ross v. Moffitt, 417 U.S. 600, 41 L. Ed. 2d 341, 94 S. Ct. 2437 [1974]). Thus, equal protection is only implicated when a statute treats "arguably indistinguishable" classes of people differently. Smith v. Printup, 254 Kan. 315, 321, 866 P.2d 985 (1993). People injured on the job and people injured elsewhere are arguably indistinguishable in a legal sense. Neither party argues otherwise. Since K.S.A. 44-520 treats these two arguably indistinguishable groups differently in regard to the notice of claim requirement, K.S.A. 44-520 implicates equal protection.
The rational basis standard (sometimes referred to as reasonable basis test) is applied to laws which result in a shorter statute of limitations or a shorter notice of claim statute for a certain nonsuspect class of citizens. Stephens, 230 Kan. at 130; see Ernest, 237 Kan. at 129-30. Under this standard, a law is constitutional, despite some unequal classification of citizens, if the "classification bears some reasonable relationship to a valid legislative objective." Farley v. Engelken, 241 Kan. 663, Syl. ¶ 3, 740 P.2d 1058 (1987).
Leiker v. Gafford, 245 Kan. 325, 363-64, 778 P.2d 823 (1989), explains the rational basis standard as follows:
"The 'reasonable basis' test is violated only if the statutory classification rests on grounds wholly irrelevant to the achievement of the State's legitimate objective. The state legislature is presumed to have acted within its constitutional power, even if the statute results in some inequality. Under the reasonable basis test, a statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it."
In Peden v. Kansas Dept. of Revenue, 261 Kan. 239, 258-59, 930 P.2d 1 (1996), cert. denied __ U.S. __ (May 22, 1997), this court elaborated on the rational basis standard:
"The rational basis standard is a very lenient standard. All the court must do to uphold a legislative classification under the rational basis standard is perceive any state of facts which rationally justifies the classification. Kellems v. Commissioner of Internal Revenue, 58 T.C. 556, 558 (1972), aff'd 474 F.2d 1399 (2d Cir.), cert. denied 414 U.S. 831 (1973). 'Relevance is the only relationship required between the classification and the objective.' Stephenson, 250 Kan. at 774. See also Stephens v. Snyder Clinic Ass'n, 230 Kan. 115, 129, 631 P.2d 222 (1981) (stating that a classification which may result in some inequality only violates equal protection if the classification is 'irrelevant' to the goals the State intended to achieve through passage of the statute). A classification is 'relevant' to its intended goal if it is rationally related to the legitimate legislative purpose behind the statute. Thompson v. KFB Ins. Co., 252 Kan. 1010, 1018, 850 P.2d 773 (1993). However, a statute cannot classify persons into groups based on a criteria which is 'wholly unrelated' to the goal of the statute. Henry, 213 Kan. at 753-54. A classification '"'must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike.'"' Thompson, 252 Kan. at 1018 (quoting Royster Guano Co. v. Virginia, 253 U.S. 412, 415, 64 L. Ed. 989, 40 S. Ct. 560 [1920]).
"Although the rational basis standard requires that the discriminatory classification . . . be rationally related to valid state interests or goals, the standard does not require that the classification be the perfect solution to achieve such goals. See Thompson, 252 Kan. at 1021 (When the legislature must draw a line and '"'there is no mathematical or logical way of fixing it precisely, the decision of the legislature must be accepted unless [the court] can say that it was very wide of any reasonable mark.'"'); Liggett, 223 Kan. at 619 ('Establishment of classifications with mathematical precision is not required.')."
The State's espoused purpose of K.S.A. 44-520 is to speed up the claim process and to reduce fraudulent claims. The defendants point to the Legislative Post Audit Committee Report, which identified the five most significant workers compensation problem areas as stated by insurers, employers, attorneys, judges, and officials. The report stated that two of these five concerns were the length of the workers compensation claim process and the frequency of fraudulent claims. In listing these concerns, the report cited the New York Times, which estimated that as much as 30% of all workers' compensation claims could be fraudulent. These two concerns are valid legislative objectives.
The new notice of claim requirement is rationally related to these valid state objectives. The amendment speeds up the claim process because it requires the entire claim process to begin earlier than it otherwise would have. K.S.A. 44-520 does not require a worker to actually file a claim earlier than previously required (200 days after injury). However, K.S.A. 44-520 does strongly encourage a worker to provide an employer with timely notice of an injury by imposing harsher consequences if timely notice is not provided. A worker will more likely give timely notice of an injury, and the employer can begin investigations, medical treatment, and settlement evaluations earlier than it previously would have. Thus, even though K.S.A. 44-520 does not require an employee to actually file a claim earlier than previously required, the new notification requirement does require the entire claim "process" to begin earlier than it otherwise would have, thereby speeding up the claim process.
Since K.S.A. 44-520 encourages employees to give timely notice, an employer will typically have notice of any injury sooner than it otherwise would have. This early notification allows an employer to investigate claimed injuries while the work place is still set up the same way and while the facts of the incident are still fresh. This early investigation will allow an employer an opportunity to discover fraudulent claims and to defend against them. The new notification requirement should lead to a reduction in the number of fraudulent claims, if there are any. Thus, the new notice requirement is rationally related to two valid state objectives--speeding up the claim process and reducing fraudulent claims.
There has always been a 10-day notice of claim requirement in the Act. The original notice of claim statute did not bar a claim for workers compensation if the notice was untimely unless the employer could prove it was prejudiced by the untimely notice. The original purpose of this notice requirement was to "afford the employer an opportunity to investigate the accident and to furnish prompt medical treatment." Pike v. Gas Service Co., 223 Kan. 408, 409, 573 P.2d 1055 (1978). This court considered this to be a valid purpose for the notice requirement. As such, the original notice statute was rationally related to valid legislative objectives--allowing an employer the opportunity to investigate an accident and furnish prompt medical treatment.
Based on Ernest v. Faler, 237 Kan. 125, the plaintiffs argue that the similar notice of claim statute at issue herein violates equal protection because it is not rationally related to the legislative objectives sought of speeding up the claim process time or reducing fraudulent claims. The plaintiffs point out that neither the Legislative Post Audit Committee Report nor any other material submitted suggests that barring claims after 10 days will reduce fraud or speed up the claim process.
The plaintiffs point out that, according to the Kansas Workers Compensation Handbook § 14.01, p. 14-2 (rev. ed. 1990), no cases were reported where an employer was able to show prejudice from an employee's untimely notice under the original notification requirement. The plaintiffs apparently interpret this information as indicating that no fraudulent claims were filed or allowed to proceed; thus, no prejudice to the employer occurred under the old notification statute. Since fraud was not encouraged by the original notice provision, the plaintiffs claim it will not be discouraged by the new provision. Thus, the plaintiffs assert that the new notice requirement is not rationally related to the legitimate State interest of reducing fraudulent claims.
Further, even if the new notice of claim statute does actually reduce fraudulent claims more than the original notice of claim statute did, the plaintiffs argue that the new notice of claim statute must have a rational reason for only applying to one particular class of people. According to the plaintiffs, there must be a reason to constitutionally justify why workers compensation plaintiffs have a different notice requirement applied to them than the notice requirement applied to all other tort plaintiffs, and such a reason does not exist here. The plaintiffs claim that the mere fact a plaintiff is injured at work does not create such a potential for fraud that a worker's notification time period should be reduced from 2 years, as allowed for most torts, to 10 days. The plaintiffs claim that the new notice of claim requirement, applied only to claimants injured on the job, is not rationally related to the legitimate state interest of reducing fraudulent claims.
Finally, even if there is a justification to apply the new notice of claim statute only to injured workers, the plaintiffs claim that there is no basis for the 10-day/75-day rule as opposed to a 20-day/100-day rule. According to the plaintiffs, there is no rational reason why the new 10-day/75-day rule reduces fraudulent claims or speeds up the claim process any better than a 20-day/100-day rule would. As such, the plaintiffs assert that the new notification requirement is not rationally related to the valid state objectives of speeding up the claim process or reducing fraudulent claims.
The plaintiffs have attacked the new notice statute as facially unconstitutional; thus, the plaintiffs must establish that no set of circumstances exist under which the amendment would be valid. Simply pointing out that the amendment might not be rationally related to the state objectives sought under one set of facts is not enough to declare the amendment unconstitutional on its face. See United States v. Salerno, 481 U.S. 739, 745, 95 L. Ed. 2d 697, 107 S. Ct. 2095 (1987).
The new notice requirement can cut off nonfraudulent claims. However, this does not take away from the fact that the notice requirement also cuts off fraudulent claims and is rationally related to this goal. The mere fact that the notice requirement is overbroad in achieving its goals is not a reason to find that it violates equal protection. See Peden, 261 Kan. at 258 ("Although the rational basis standard requires that the discriminatory classification . . . be rationally related to valid state interests or goals, the standard does not require that the classification be the perfect solution to achieve such goals."). Further, the new notice requirement includes provisions to prevent the statute from being applied in an overbroad manner and barring nonfraudulent claims. For instance, the new notice requirement does not bar a claim for untimely notice (after 10 days) if the employee can show just cause. While the requirement does bar a claim if notice is not given within 75 days of injury, even with just cause, the statute does provide exceptions for a few of the most common reasons for such a delay in notice--the employer already knew about the accident, the employer was unavailable to receive notice, or the employee was unable to give notice. Thus, the legislature has taken care to make sure the new notice requirement is not applied in an unreasonably overbroad manner.
Further, even if the statute could be applied in an unreasonably overbroad manner by dismissing numerous nonfraudulent claims, this does not mean that it will be. "Under the reasonable basis test, a statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it." Leiker, 245 Kan. at 363-64. Such a state of facts can be conceived here in which the amendment will be applied narrowly with a focus on dismissing untimely filed fraudulent claims.
The plaintiffs also claim that the amendment is not rationally related to the goal of reducing fraudulent claims because the original notification requirement already did a good job of cutting off fraudulent claims. The plaintiffs base this contention on the fact that few, if any, employers could show prejudice from untimely notice under the old provision. Thus, the plaintiffs argue fraudulent claims must not have been filed, or the employers could have proven prejudice. The very fact that few, if any, employers could prove prejudice for untimely notice under the old notification requirement indicates how difficult it is for an employer to discover a fraudulent claim and prove prejudice from it. To believe, as the plaintiffs do, that simply because prejudice (i.e., fraudulent claims) cannot be proven under the original notice provision means that fraudulent claims do not exist is not a justified conclusion. Even if the old notice requirement does a great job of discouraging fraudulent claims, this does not mean that a new, stricter notice requirement could not do an even better job.
Next, the plaintiffs question why the new notice requirement is only applied to injured workers and not to all injured plaintiffs and how this classification is rationally related to the objectives sought. The new notice provision is only applied to workers compensation plaintiffs because it is more important to achieve the goals sought by the notice requirement in the workers compensation area than in any other area of compensable injury. In 1911, the legislature abolished a plaintiff's right to sue an employer for damages caused by the negligence of the employer. In place of this right, the legislature gave employees the Workers Compensation Act, which is supposed to provide a quick, set amount of money, without proof of employer negligence, for all employe