Cost Containment Strategy:
Utilizing The Misrepresentation
Defense (N.C.G.S. §97-12.1)
Jennifer Morris Jones
jjones@cshlaw.com
Today’s presentation will focus on Cost
Containment during the beginning of the
claim
 Initial or background investigation
►
Initial or background investigation
BEFORE there is a Workers’
Compensation claim
– Initial or background investigation
BEFORE the Employee-Employer
relationship is finalized
As part of the June 14, 2011, Legislative
Reform, North Carolina Employers now have
an additional defense available for workers’
compensation claims arising on or after June
24, 2011 - if they do their homework BEFORE
an alleged work accident happens.
An Employer may plead an
affirmative “Misrepresentation
Defense” when an employee
intentionally misrepresents his/her
physical condition to the Employer at the time the
Employee is entering into the employment relationship,
and the Employee alleges a work injury with a causal tie
or connection to the misrepresentation.
N.C.G.S. §97-12.1
An Employer bears the burden of proving each and
every element of the “Misrepresentation Defense”
by a preponderance of the evidence.
What does “by a preponderance of the evidence”
actually mean?
By the greater weight of the evidence
this preponderance is based on the
more convincing evidence and its
probable truth or accuracy and not the
amount of evidence. Simply put, it
means more likely true than not.
Pursuant to NCGS §97-12.1, an Employer must prove
ALL of the following elements to succeed on the
defense:
1) The Employee knowingly and willfully made a false
representation as to the Employee’s physical
condition;
2) The Employer relied upon one or more false
representations by the Employee and that reliance
was a substantial factor in the Employer’s decision to
hire the Employee; and
3) There was a causal connection between the false
representation and the Employee’s injury or
occupational disease.
To satisfy the first and second elements of the
Misrepresentation Defense, an Employer may
gather information on a prospective Employee’s
physical condition to determine whether he/she
can safely perform the job BEFORE finalizing the
employment relationship. Timing is vital.
When can an Employer ask
about the prospective
Employee’s physical condition?
To preserve the Misrepresentation Defense
AND to ensure compliance with employment
laws/regulations such as the Americans with
Disabilities Act, an Employer should ask
about the Employee’s physical condition to
determine whether he/she can safely
perform the job:
1) At the time of hire;
2) At the time of receiving notice of the
removal of conditions from a conditional
offer of employment;
or
3) During the course of a post-offer
medical examination.
The key to successful
implementation of the
Misrepresentation Defense
is a top-notch hiring
program.
Comprehensive Hiring Program –
What Does One Look Like?
An Employer may find it useful to:
1) Prepare accurate Job Descriptions detailing with
specificity the essential functions and physical
demands of their positions.
**Have the prospective Employee sign off on the Job
Description, thus confirming both his/her
understanding of the requirements and functions of
the position, as well as his/her affirmative
representation that he/she is physically capable of
performing the essential functions of the job - with
or without reasonable accommodation;
2) Utilize a Post-Offer, Pre-Hire Questionnaire to ask
for information such as prior work injuries,
medication usage, work restrictions, surgeries,
and permanent partial disability ratings.
**The time to utilize this tool is once a conditional
offer of employment has been extended. Successful
completion of the Post-Offer, Pre-Hire Questionnaire
is a condition precedent to the employment offer
being finalized.
3) Utilize a Post-offer, Pre-Hire Physical to
determine the prospective Employee’s fitness for
duty.
**Much like with the Post-Offer, Pre-Hire
Questionnaire, the time to utilize this tool is once
a conditional offer of employment has been
extended. Successful completion of the Post-Offer,
Pre-Hire Physical is a condition precedent to
employment being finalized.
By utilizing these practices, an Employer is
clarifying the nature of the position and the
importance of securing an Employee who is
able to perform the essential functions and
responsibilities of the job.
These practices give a prospective
Employee the opportunity to reveal
that he/she is physically capable of
performing the job, and the
Employer’s reliance on these
disclosures is inferred and expected.
As for the third and final element of “The
Misrepresentation Defense,” an Employer must
prove there is a causal connection between the
alleged work injury and the physical conditions
falsely represented to the Employer by the
Employee at the time of his/her hire.
Specifically, the question is
whether the Employee’s
undisclosed physical condition
increased his/her risk for injury.
By developing a comprehensive hiring program,
not only will an Employer ensure prospective
Employees are physically capable of performing
the job, but an Employer also protects itself
against potential future workers’ compensation
claims should a prospective Employee
misrepresent his/her physical abilities.
How Has the Industrial Commission
Interpreted/Applied
The Misrepresentation Defense
(N.C.G.S. §97-12.1)?
• 9 Deputy Commissioner Decisions,
• 3 Appealed to the Full Commission,
And
• Only 1 Appealed to the Court of Appeals
Deputy Commissioner Decisions:
• 7 Decisions Held The Misrepresentation
Defense Barred Benefits
• 2 Decisions Held The Misrepresentation
Defense Did Not Apply/Did Not Bar Benefits
Full Commission Decisions:
• All 3 decisions held The Misrepresentation
Defense barred benefits
Court of Appeals Decisions:
• The Court of Appeals affirmed the Opinion
and Award of the Full Commission, which
held The Misrepresentation Defense barred
benefits.
Purcell v. Friday Staffing
(August 2014)
• Plaintiff appealed decision denying her
benefits under The Misrepresentation Defense
• Big Question – Did the IC utilize the proper
causation standard?
Important Facts of the Case
• 8/6/1999 – Plaintiff suffered a prior work-related back
injury
• Plaintiff underwent a microdiscectomy
• Plaintiff assigned 7% PPD rating to her back
• Plaintiff assigned restrictions of no lifting greater than 20
pounds but was encouraged to find sedentary work
• Plaintiff reached settlement via clincher agreement for
$50,000.00
• Plaintiff worked for subsequent employers and continued
to receive treatment for her back
Important Facts of the Case (cont.)
• 1/23/2008 – Plaintiff told her PCP she was seeing a
neurosurgeon and might need back surgery
• 5/28/2010 – Plaintiff applied for employment
through defendant, a company that fills the labor
needs of its clients, employers
Employment Application Process
• “Friday Essential Functions Questionnaire” AND
“Medical History Questionnaire”
• Plaintiff represented she COULD:
– Lift more than 50 pounds;
– Carry more than 50 pounds;
– Frequently bend, pull, push, kneel, squat, and twist;
– Stand for long periods of time; and
– Sit for long periods of time
Employment Application Process (cont.)
• Plaintiff represented that she NEVER:
– Filed a workers’ compensation claim;
– Suffered any injury or undergone surgery; or
– Received treatment or consultation about back
pain or possible back injuries.
Plaintiff was hired, and Defendant-Employer
matched her with a company that
manufactures automotive parts
• Plaintiff began working as an assembly line worker,
where she was required to constantly lift trailer arms
weighing between 20 – 25 lbs
• On July 18, 2011, Plaintiff alleged she injured her
neck and back down into her foot due to constantly
twisting and bending over to pick up trailer arms
from a pallet while working on the assembly line.
Defendants denied the compensability of
Plaintiff’s claim on a Form 61
Both the Deputy Commissioner AND the Full
Commission denied Plaintiff’s claim
pursuant to The Misrepresentation Defense
Plaintiff appealed to the Court of Appeals
The Court of Appeals held that when requiring a
“causal connection” to satisfy the third element
of N.C.G.S. §97-12.1, Defendants must show
that the undisclosed or misrepresented injury,
condition, or occupational disease increased the
risk of the subsequent injury or disease.
In the Purcell case, the Court held the Industrial
Commission did not err in denying Plaintiff’s claim
based on N.C.G.S. §97-12.1, as the evidence
revealed Plaintiff was exceeding her work
restrictions when she injured her back.
Expert testimony revealed that Plaintiff was at an
increased risk of injury if she exceeded her
restrictions, thus satisfying the “causal connection”
requirement set forth in N.C.G.S. §97-12.1.
Takeaways From Decisions Holding
The Misrepresentation Defense
Barred Benefits
• Top Notch Hiring Programs:
 Employment Application Certifications
 Post-Offer, Pre-Hire Questionnaires
Takeaways From Decisions Holding
The Misrepresentation Defense
Did NOT Bar Benefits
• IF it is important for the prospective Employee to be
able to physically perform the job, find out during
the hiring process if he/she can actually do the job
• Tight drafting of Post-Offer, Pre-Hire Questionnaires