State News : Arkansas

The Arkansas Court of Appeals recently dealt a blow to what’s known as the “Shipper Transport defense” when it found that a claimant was not barred from receiving workers compensation benefits for a torn bicep tendon even though he lied about having preexisting neck, back and shoulder issues on his post-offer/pre-placement health questionnaire which may have led to him being placed in a position which the employer likely would not have placed him in if they had been given an accurate medical history. Int'l Paper Co. v. Steward, 2024 Ark. App. 465, 700 S.W.3d 204. In 1979, the Arkansas Supreme Court established the Shippers Transport defense when it held that a workers compensation claimant would be barred from receiving workers compensation benefits if Respondents proved (1) that the employee knowingly and willfully made a false representation as to his/her physical condition, (2) that the employer relied upon the employee’s false representation, with such reliance playing a substantial factor in the hiring of the employee, and (3) that there was a causal connection between the false representation and the claimant’s injury.  Shippers Transp. of Ga. v. Stepp, 265 Ark. 365, 369, 578 S.W.2d 232, 234 (1979). In affirming the Full Commission’s and Administrative Law Judge’s narrow interpretation of Shippers Transport, the Arkansas Court of Appeals found that the Respondent Employer failed to satisfy the second prong of the test in establishing that they relied on the claimant’s false misrepresentations in hiring the claimant because the claimant had already been hired when he filled out the health questionnaire and lied about his preexisting conditions. Int'l Paper Co., 2024 Ark. App. 465 at 11.

Although the rationale behind the rulings of the Commission, Administrative Law Judge and Court of Appeals was fairly straightforward, it leaves employers beholden to the representations of newly hired workers regarding their physical limitations and preexisting injuries. At first glance, an Arkansas employer may want to avoid the dilemma that International Paper Company found itself in by having a job applicant fill out a health questionnaire before any employment offer is made so that the employer can figure out whether they have any open jobs that are suitable for the applicant’s physical condition while still being able to fall back on the Shippers Transport defense in case the applicant lies about their medical conditions. However, the Americans with Disabilities Act prohibits employers from asking a job applicant if they are disabled, asking about the severity or nature of any impairment, or having the applicant fill out a medical questionnaire before the employer makes a job offer. This leaves Arkansas employers in a legal Catch-22 because on one hand they are barred under federal law from asking applicants about their physical condition prior to making a job offer, and on the other hand, they are required to prove that they relied on the claimant's pre-offer misrepresentations about their physical condition in deciding to hire the claimant to successfully assert the Shippers Transport defense.

As suggested by Arkansas Workers Compensation Commissioner Michael Mayton in his dissenting opinion, “[t]he rule of law in the Shippers Transport case should be expanded beyond the actual moment of hiring to encompass the entire hiring process, including job placement.” Ronald Steward, Emp., Claimant v. International Paper Co., Emp., Respondent & Sedgwick Claims Mgmt. Servs. Inc., Carrier/TPA, Respondent, No. H109777 (Ark. Work. Comp. Com., May 2, 2023), at *13. Employers like International Paper Company should be able to rely on the representations of new employees completing post-offer medical questionnaires and undergoing medical examinations in determining which job most safely suits those employees’ medical conditions and physical restrictions without worrying that they’ll be stuck footing the bill for an aggravation of a preexisting injury that could have been avoided if the employee was honest about their medical history in the first place. 

Unfortunately, we do not know how the current Arkansas Supreme Court would have applied the Shippers Transport defense to the facts of this case because the case was not appealed after the Court of Appeals issued its opinion affirming the award of benefits to the claimant. Therefore, Arkansas employers should ensure that they ask one of the few questions allowed under the Americans with Disabilities Act during the interview process, which is whether the applicant can perform the specific duties of a job with or without reasonable accommodation. Arkansas courts have not yet considered whether an employer would satisfy the second prong of the Shippers Transport test if they proved that they relied on the claimant’s dishonest answer to the foregoing question in hiring the claimant. However, employers would undoubtedly have a better chance of successfully asserting the Shippers Transport defense in the above scenario than if they continued to only have new employees fill out post-offer health questionnaires or undergo medical examinations where the employee will be able to lie about their preexisting health condition and physical restrictions without the risk of being barred from receiving workers compensation benefits. When inquiring about the applicant’s ability to perform job duties though, it’s imperative that employers avoid asking if the applicant is disabled or probing further by asking about the nature or severity of that applicant’s disability because such questions would leave the employer at risk of being sued for violating the applicant’s civil rights by discriminating against them in the hiring process on the basis of their disability. 

On May 1, 2025, the Chief Administrative Law Judge of the Arkansas Workers’ Compensation Commission (“AWCC” or the “Commission”) held that the federal Airline Deregulation Act (“ADA”) preempts the AWCC’s authority to regulate reimbursement rates for air ambulance services provided to injured workers. Claimant Timothy Johnson, Emp., Respondent Ark. Dept. of Corr., Emp., Respondent Public Employee Claims Div., Carrier, Intervenor Survival Flight, Inc., No. H303158 (Ark. Work. Comp. Com., May 1, 2025). The ruling reversed an Order issued by a former Administrator of the AWCC’s Medical Cost Containment Division (“MCCD”) which compelled the Arkansas Public Employee Claims Division (“PECD”) to pay an air ambulance provider, Survival Flight, nearly double the amount that PECD had initially paid Survival Flight for the air ambulance services they provided to a state employee.  

Pursuant to A.C.A. §11-9-517 and Rule 30, the MCCD was established to implement a medical cost containment program. One of the MCCD’s primary functions is to review and resolve disputes regarding bills between carriers and providers. The AWCC’s Official Fee Schedule lists the maximum allowable payment for the majority of medical services provided to treat injured workers; however, in instances where the AWCC has not specified the maximum allowable fee for a medical service, the MCCD is responsible for determining what constitutes a reasonable reimbursement rate. For administrative review of disputed bills for air ambulance services, which are not addressed in the AWCC’s Official Fee Schedule, the MCCD has historically determined reasonable ambulance rates by conducting annual surveys of the rates charged by Arkansas emergency medical services (“EMS”) providers for individual procedure codes and determining the average charged for each code which constitutes the reasonable allowable amount.

At issue in this case was Survival Flight’s bill for the air ambulance services provided to the claimant after a compensable work accident. Because PECD’s bill review company had advised PECD to only pay 3x the Medicare reimbursement rate for the air ambulance services provided rather than the $44,130.66 that Survival Flight had charged them, Survival Flight asked the MCCD to perform an administrative review of the disputed bill and to determine the reasonable payable amount for the air ambulance services they had provided. After reviewing the amounts charged for each procedure code that was listed in Survival Flight’s bill and comparing those amounts with the average amounts charged by Arkansas EMS providers for the same procedure codes, the MCCD’s Administrator ruled that it was reasonable for PECD to be required to pay an additional $22,188.17 on top of the $21,273.00  they had already paid to Survival Flight for its ambulance services. When PECD filed an appeal of the Administrator’s Order, Judge Fine carefully considered the statutory preemption language in the ADA and opinions filed by the U.S. Supreme Court and the Eighth Circuit Court of Appeals in which they repeatedly found that state laws and state causes of action which attempted to regulate or otherwise impose limitations upon prices charged by air carriers for air transportation services were preempted under the ADA  because they effectively attempted to undo federal deregulation that Congress had enacted to promote efficiency, innovation, and low prices in the airline industry. After reviewing the law and the MCCD Administrator’s Order, Judge Fine ultimately found that the authority of the AWCC and MCCD to regulate the allowable rates for air ambulance services is preempted by the Airline Deregulation Act and therefore reversed the MCCD’s Administrative Review Order that attempted to compel PECD to pay an additional $22,188.17 to Survival Flight. 

An Arkansas Court of Appeals recently made an important distinction between the causation evidence required to establish a natural consequence of a compensable injury/illness as opposed to the evidence required to establish that a claimant’s primary compensable illness/injury was the major cause of the permanent impairment resulting from the compensable consequence. Booneville Hum. Dev. Ctr. v. Foster v. Foster, 2024 Ark. App. 618. 

In Booneville v. Foster, the Court found substantial evidence supported the Full Commission’s determination that the claimant’s atrial fibrillation was a natural consequence of his compensable COVID-19 illness based on Foster’s testimony that he had not been diagnosed with atrial fibrillation before contracting COVID-19 along with a medical report from Foster’s family physician which stated he had a complicated course of COVID-19 that resulted in a deterioration of his health including diastolic heart failure, respiratory failure and atrial fibrillation among other complications. However, the Court did not find substantial evidence supporting the Commission’s finding that Foster was entitled to a 10% impairment rating for his atrial fibrillation because no additional evidence was proffered to establish that Foster’s COVID-19 illness was the major cause of his atrial fibrillation as opposed to other potential causes such as his preexisting history of hypertension and obesity. Therefore, the Court reversed the Commission’s 10% permanent impairment award and held that “evidence of a causal connection between Foster's COVID-19 illness and his atrial fibrillation [did] not automatically resolve the issue of Foster's entitlement to permanent benefits for atrial fibrillation.” Id. at 10. 

On November 6, 2024, the Arkansas Court of Appeals ruled that the Arkansas Workers’ Compensation Commission does not have authority under Ark. Code Ann. §11-9-511(a) to compel a claimant to undergo a Functional Capacity Evaluation (“FCE”) at the sole request of respondents when work restrictions and impairment ratings had already been provided by the claimant’s treating physician at the time the claimant was released at maximum medical improvement (“MMI”). Leaf Home Solutions v. Kunkel, 2024 Ark. App. 547. 

In Leaf Home Solutions, the respondents filed a Motion to Compel with the presiding Administrative Law Judge (“ALJ”) requesting that he use his authority under A.C.A. §11-9-511(a) to compel the claimant to submit to a post-operative FCE which respondents argued was reasonable and necessary to objectively assess and validate physical restrictions and impairment ratings provided by Claimant’s treating physician. The ALJ reviewed the limited medical records and ultimately determined he would need to gather more information regarding the Claimant’s physical restrictions and impairment because he felt that Claimant’s treating physician failed to sufficiently explain the basis for the assigned impairment ratings, and that such ratings were therefore conclusory. In his Order compelling the claimant to submit to the FCE, the ALJ stated it was well settled that the Commission could require a claimant “to submit to such examinations as may be necessary to assist the trier of fact in determining the extent of a claimant's permanent impairment as well as his entitlement to wage-loss disability benefits.” Id. at 4.

Claimant appealed the ALJ’s Order, which the Commission reversed and vacated upon finding that A.C.A. §11-9-511(a) does not grant the Commission authority to compel a claimant to undergo an FCE at the sole request of respondents. In its Opinion affirming the Commission’s decision, the Arkansas Court of Appeals applied a strict construction analysis and found: (1) that the ALJ exceeded his authority under A.C.A. §11-9-511(a) when he ordered the claimant to submit to an FCE that had neither been recommended nor requested by the Claimant’s treating physician, the ALJ or the Commission; and, (2) that an FCE performed by a functional testing center does not constitute the type of physician-performed medical examination or medical treatment contemplated in §511. Further, after reviewing the two cases, North Hills Surgery Center v. Otis, 2021 Ark. App. 468, 638 S.W.3d 323, and Eldridge v. Pace Industries, LLC, 2021 Ark. App. 245, 625 S.W.3d 734, which the ALJ had cited in arguing that FCE’s are commonly used to assess permanent impairment and physical restrictions where medical evidence is conclusory, the Court of Appeals rejected the ALJ’s interpretation and stated that both cases were distinguishable because the parties were not disputing the necessity of an FCE in either case.

In Melton v. Clarksville Sch. Dist., 2023 Ark. App. 282, the Arkansas Court of Appeals considered an appeal and cross-appeal from a decision by the Arkansas Workers' Compensation Commission to award Judy Melton permanent disability benefits for a four percent impairment to her cervical spine and five percent wage-loss disability. On appeal, the claimant contended the Commission should have credited her treating orthopedist’s opinion that she suffered an eight percent cervical impairment, nine percent to her lumbar spine, and five percent for a brain injury. Her employer accepted the four-percent neck impairment, but controverted everything else, including the wage-loss award.

As to the wage-loss award, the Court noted that it reviews the Commission's findings about wage-loss disability for substantial evidence. It also noted that determining wage-loss disability is a “fact intensive” inquiry that calls for the Commission to consider a number of factors.  “As the number of factors the Commission can consider increases, the number of unique combinations of factors increases exponentially. Determining that "no fair-minded person" could have made the wage-loss award requires us to consider every combination of factors the Commission could have weighed and every combination of ways it could have weighed them.”  As such, the Court of Appeals found that unless the Commission recites an improper basis for its award, “the appropriateness of a particular award is beyond meaningful review.”