As previously reported on August 5, 2011, the Alabama Court of Civil Appeals held in the case of Cascaden v. Winn-Dixie Montgomery, LLC that an employer need not rely upon an employee’s misrepresentation of his physical or mental condition in order to prevail on the misrepresentation defense contained in § 25-5-51 of The Alabama Workers’ Compensation Act. In Cascaden, the Court recognized that Alabama law actually provides for two separate defenses that involve an employee’s misrepresentation of his or her physical or mental condition: (1) a judicially created defense arising out of the Alabama Supreme Court’s decision in Ex parte Southern Energy Homes, Inc., 603 So.2d 1036 (Ala.1992), and (2) the defense created by § 25-5-51. According to the Court in Cascaden, the judicial misrepresentation defense applies only if the employer has relied on the false representation when making the decision to hire the employee, while the statutory misrepresentation defense, on the other hand, does not expressly require reliance on the part of the employer.

While the § 25-5-51 statutory defense relieves the employer of its obligation to pay compensation benefits (indemnity and vocational benefits), the Alabama Courts have not directly addressed whether medical benefits must still be paid when the employer successfully asserts the judicially created misrepresentation defense. However, based on the judicial history of that defense, it only stands to reason that medical benefits would not be owed. To arrive at this conclusion, we need to look no further than the Court’s opinion in Ex parte Southern Energy Homes. In that case, the employer’s core argument was that the Court should extend to cases involving accidental injuries the application of the workers’ compensation statute providing that an employee who misrepresents his physical condition regarding an occupational disease is barred from recovering all benefits. That statute, which is currently codified at § 25-5-115, is clear that an employee who falsely represents to his employer that he has never been compensated for an occupational disease will be barred from recovering compensation or other benefits under the Act or at common law. The Court in Ex parte Southern Energy Homes reasoned that it would not be a usurpation of the legislature to extend this defense to accidental injury cases, since it has long been a part of the common law that fraud in the inducement is a good defense to an action on a contract by one of the contracting parties, and that workers’ compensation is founded on the contractual relationship of the employer and employee. From this, one can infer that the Court found that when the employee is guilty of fraud in the inducement to the employment relationship (i.e., misrepresents his physical condition and he would not have been hired but for the misrepresentation), the employment contract between the employer and employee is voidable by the employer. Since The Alabama Workers’ Compensation Act only applies to employers and their employees, as those terms are defined in § 25-5-1, no benefits of any kind would be owed if there is no employer-employee relationship.

This of course leads to other interesting scenarios. Notwithstanding an employee’s misrepresentation providing a defense for the employer, an employer could also assert the employee’s fraud as a counterclaim to a lawsuit against the employer or even pursue that claim as a stand-alone action. While The Alabama Workers’ Compensation Act provides that an action for benefits is to be decided by a judge, an employer can demand a jury trial on its fraud claim. Additionally, in an action for fraud, punitive damages may even be available if a jury finds that the employee acted in a willful manner with the intent to defraud the employer.

MY TWO CENTS:

When facts are discovered that support a misrepresentation defense, it is important to determine, early on, whether or not the employer relied on the fraudulent representation. Although the § 25-5-51 affirmative defense, with no reliance element, is easier to prove, the common law defense offers more potential reward.

On October 7, 2011, the Alabama Supreme Court upheld the Alabama Court of Civil Appeals’ decision in Ex parte Scott A. Cascaden (see August 5, 2011 blog article). The Supreme Court denied Cascaden’s Petition for Writ of Certiorari, with no opinion. This ruling confirmed that an employer is not required to prove that it relied upon an employee’s written misrepresentation as to his physical condition in order to prevail on the misrepresentation defense defined in § 25-5-51 of the Alabama Workers’ Compensation Act. Instead, the employer only has the burden of showing that (1) at the time of or in the course of entering into employment or at the time of receiving notice of the removal of conditions from a conditional offer of employment, the employee knowingly and falsely misrepresents, in writing, his physical or mental condition; (2) the condition is later aggravated or reinjured in an accident arising out of and in the course of his employment; and (3) the employer provided the employee with the following written warning in bold type print, "Misrepresentations as to preexisting physical or mental conditions may void your workers' compensation benefits." However, it is important to point out that this defense does not relieve the employer of its liability to provide reasonably necessary medical treatment for an otherwise compensable accident, because the misrepresentation defense only applies to "compensation", which encompasses indemnity and vocational retraining benefits.

On August 5, 2011, the Alabama Court of Civil Appeals released its decision in the case of Cascaden v. Winn-Dixie Montgomery, LLC. The appellate Court affirmed the ruling of the Circuit Court of Mobile County, Alabama, which held that the injured employee was barred from receiving workers’ compensation benefits because he misrepresented his physical condition, in writing, at the time he was hired.

Scott Cascaden, who began working for Winn-Dixie in 1999, allegedly suffered injuries to his lower back and neck in 2001 when he was involved in an automobile accident while returning home from a Christmas party hosted by some of the Winn-Dixie store managers. Cascaden was treated by two different doctors for his injuries, and subsequently underwent physical therapy. He then left his employment at Winn-Dixie in 2002. In 2007, Cascaden went back to work at Winn-Dixie as a meat cutter. As part of the re-hiring process, he completed a medical questionnaire wherein he stated that he had never injured his back or neck, and had not received medical treatment for any injuries within the last five years. Cascaden filed an action against Winn-Dixie on January 5, 2010, seeking workers’ compensation benefits. Cascaden claimed that he suffered a back injury as a result of lifting boxes at Winn-Dixie. Winn-Dixie subsequently filed a Motion for Summary Judgment, relying on § 25-5-51 of the Alabama Workers’ Compensation Act, which provides that no compensation shall be allowed if the employee knowingly and falsely makes written misrepresentations at the time of or in the course of entering into employment, the employee is warned in writing that such misrepresentations will void his workers’ compensation benefits, and the condition is aggravated or reinjured in an accident arising out of and in the course of his employment.

When asked why he denied the previous injuries at his deposition, Cascaden testified that he feared that he would not have been hired as a meat cutter if he had been truthful in answering the questionnaire. Cascaden admitted that he knew that his representations were false at the time he completed the questionnaire. However, Cascaden argued that Winn-Dixie could not have relied upon his misrepresentations, because Winn-Dixie was already aware of the prior injuries since they occurred during his previous employment there. Winn-Dixie argued that its reliance on Cascaden’s misrepresentations was not a material element of the defense, and it was therefore entitled to judgment as a matter of law. The trial Court agreed, and Cascaden appealed.

In its decision, the Alabama Court of Civil Appeals pointed to the difference between the statutory defense created in § 25-5-51 of the Alabama Workers’ Compensation Act, and the judicially-created defense crafted by the Alabama Supreme Court in Ex Parte Southern Energy Homes, Inc; 603 So.2d 1036 (Ala. 1992). In Ex Parte Southern Energy Homes, the Supreme Court created a defense similar to that in § 25-5-51 of the Act, that required the employer to prove slightly different elements. The Supreme Court’s ruling in that case held that the employer has no obligation to pay workers’ compensation benefits when (1) the employee knowingly and willfully made a false representation as to his physical condition; (2) the employer relied upon the false representation and said reliance was a substantial factor in the hiring; and (3) there is a causal connection between the false representation and the injury. While the judicially created defense requires reliance upon the misrepresentation by the employer, the statutorily created defense in § 25-5-51 does not. When comparing the language of the statutorily created defense to language in other statutes pertaining to civil actions based on misrepresentation, such as deceit, the appellate Court stated that if the legislature intended for reliance to be a required element, it would have stated so in the statute. Since the legislature did not intend for reliance to be an element of the defense, employers are not required to prove that they relied on the employee’s misrepresentations. Therefore, the judgment of the trial Court was affirmed.