Wisconsin Supreme Court Rules Cap On Damages Unconstitutional

From MSNBC.com: “Health industry frets over ruling against cap on damages.” Excerpt:

The Wisconsin Supreme Court ruled July 14 that non-economic damage caps on malpractice jury awards are unconstitutional. Set by the Legislature in 1995 at $350,000, the cap now stands at $445,775, adjusted for inflation.

Also, from the ABA Journal Report–“Med-Mal ruling Has Doctors Reeling: Wisconsin Damage Cap Wiped Out in Rational Basis Review.” Excerpt:

Critics were especially perplexed because the court suggested some caps still might be constitutional, even ones applying to pain and suffering in medical malpractice cases. But the justices offered no hint as to what kind of limit would outlive a court challenge. The options are limited.

You can access the very lengthy Wisconsin Supreme Court opinion here (dissenting opinion included). Key excerpt from the opinion:

Young people are most affected by the $350,000 cap on noneconomic damages, not only because they suffer a disproportionate share of serious injuries from medical malpractice, but also because many can expect to be affected by their injuries over a 60- or 70-year life expectancy. This case is a perfect example. Matthew Ferdon has a life expectancy of 69 years; he was injured at birth. An older person with a similarly serious medical malpractice injury will have to live with the injury for a shorter period. Yet both the young and the old are subject to the $350,000 cap on noneconomic damages. Furthermore, because an injured patient shares the cap with family members, the cap has a disparate effect on patients with families.

The legislature enjoys wide latitude in economic regulation. But when the legislature shifts the economic burden of medical malpractice from insurance companies and negligent health care providers to a small group of vulnerable, injured patients, the legislative action does not appear rational. Limiting a patient’s recovery on the basis of youth or how many family members he or she has does not appear to be germane to any objective of the law. . .

Also, on a related note, KaiserNetwork.org reports: “House Approves Bill That Would Cap Noneconomic Damages in Medical Malpractice Cases.” Excerpt:

The House on Thursday voted 230-194 to approve a medical malpractice reform bill (HR 5), CQ Today reports. The legislation, sponsored by Rep. Phil Gingrey (R-Ga.) would limit non-economic damages to $250,000 and punitive damages to $250,000 or two times the economic damages, whichever is greater.

Tax Humor

Got a chuckle from this. (Source: Tax Guru-Ker$tetter Letter.)

More on Nesteg . . .

Here are links and excerpts from articles discussing the legislation now approved by the Senate Finance Committee (previous post here):

  • From the WSJ–” Senate Panel Approves Pension-Funding Bill.” Excerpt:
    The Senate Finance Committee, acting to head off a savings-and-loan-style bailout of the federal pension insurer, overwhelmingly approved legislation requiring employers to fully fund their defined-benefit pension plans.

    But the panel also amended the measure to give the struggling airline industry more leeway than others in funding its pension obligations. . .

    The bill, approved by voice vote with no debate, is a closer parallel to the Bush administration’s pension-system overhaul proposals than a more business-friendly bill approved last month by a House committee.

  • From the Washington Post–“Senate Panel Advances Pension Overhaul.” Excerpt:
    Labor Secretary Elaine Chao praised the committee for advancing the bill but said the Bush administration would like to see some stronger rules imposed on businesses to make sure they fund their pensions adequately.

  • From SHRM–“Pension bill advances in the Senate.” Excerpt:
    The version of NESTEG passed by the Senate was a revamping of the bill, S. 219, which was introduced in January by Sen. Charles Grassley, R-Iowa, chair of the finance committee, and Sen. Max Baucus, D-Mont., the committee’s ranking minority member. Grassley and Baucus unveiled the new version of NESTEG on July 22 and included several new reform proposals specifically designed to avoid catastrophic pension failures after the United Airlines $9 billion pension default was announced in May. . .

    The new Senate measure includes a number of provisions designed to meet goals set by Labor Secretary Elaine Chao earlier this year. One element of the new Senate bill would stop the practice of “smoothing” pension liability, something many employers now do to avoid drastic fluctuations in contributions they make to their pension plans. Critics of smoothing say it can hide insolvencies and allow pension sponsors to reduce contributions when plans actually may need more funding.

    The Senate bill also includes a proposal suggested by Chao to require a new accounting standard for pension funds when the credit rating of a plan sponsor is reduced to junk-bond status. The new “at risk” standard would place tougher requirements on plan sponsors to ensure that they make the contributions needed to keep their pension plans solvent. While employer groups have expressed support for both the Senate and House versions of the pension reform proposals, the endorsements have been lukewarm at best. . .

    NESTEG will now move on to the Senate Health Education Labor and Pension Committee for consideration. No further action on the measure is expected until after Labor Day, when Congress returns from its August recess.

    Pre-markup industry comments regarding the legislation:

    See also, the Senate Finance Committee’s description of changes made to the original legislation proposed earlier this week in “Modifications to the Senate Finance Committee Chairman’s Mark of the “National Employee Savings and Trust Equity Guarantee Act of 2005.”

    By the way, regarding the House version of pension legislation, see this Tax Analyst report–“Retirement Bill Coming Second Week of September, Thomas Says.

  • More on Nesteg . . .

    Here are links and excerpts from articles discussing the legislation now approved by the Senate Finance Committee (previous post here):

  • From the WSJ–” Senate Panel Approves Pension-Funding Bill.” Excerpt:
    The Senate Finance Committee, acting to head off a savings-and-loan-style bailout of the federal pension insurer, overwhelmingly approved legislation requiring employers to fully fund their defined-benefit pension plans.

    But the panel also amended the measure to give the struggling airline industry more leeway than others in funding its pension obligations. . .

    The bill, approved by voice vote with no debate, is a closer parallel to the Bush administration’s pension-system overhaul proposals than a more business-friendly bill approved last month by a House committee.

  • From the Washington Post–“Senate Panel Advances Pension Overhaul.” Excerpt:
    Labor Secretary Elaine Chao praised the committee for advancing the bill but said the Bush administration would like to see some stronger rules imposed on businesses to make sure they fund their pensions adequately.

  • From SHRM–“Pension bill advances in the Senate.” Excerpt:
    The version of NESTEG passed by the Senate was a revamping of the bill, S. 219, which was introduced in January by Sen. Charles Grassley, R-Iowa, chair of the finance committee, and Sen. Max Baucus, D-Mont., the committee’s ranking minority member. Grassley and Baucus unveiled the new version of NESTEG on July 22 and included several new reform proposals specifically designed to avoid catastrophic pension failures after the United Airlines $9 billion pension default was announced in May. . .

    The new Senate measure includes a number of provisions designed to meet goals set by Labor Secretary Elaine Chao earlier this year. One element of the new Senate bill would stop the practice of “smoothing” pension liability, something many employers now do to avoid drastic fluctuations in contributions they make to their pension plans. Critics of smoothing say it can hide insolvencies and allow pension sponsors to reduce contributions when plans actually may need more funding.

    The Senate bill also includes a proposal suggested by Chao to require a new accounting standard for pension funds when the credit rating of a plan sponsor is reduced to junk-bond status. The new “at risk” standard would place tougher requirements on plan sponsors to ensure that they make the contributions needed to keep their pension plans solvent. While employer groups have expressed support for both the Senate and House versions of the pension reform proposals, the endorsements have been lukewarm at best. . .

    NESTEG will now move on to the Senate Health Education Labor and Pension Committee for consideration. No further action on the measure is expected until after Labor Day, when Congress returns from its August recess.

    Pre-markup industry comments regarding the legislation:

    See also, the Senate Finance Committee’s description of changes made to the original legislation proposed earlier this week in “Modifications to the Senate Finance Committee Chairman’s Mark of the “National Employee Savings and Trust Equity Guarantee Act of 2005.”

  • International Tax Services Web Site

    Professor Maule has recommended a “very interesting and useful tax resource on the web that should be of interest to practitioners, tax law professors, and law students.” The site is Andrew Mitchel LLC’s International Tax Services Web Site.

    NESTEG Legislation Unveiled

    Plan Sponsor.com has a good article summarizing pension legislation unveiled last Friday by Senators Charles Grassley (R-Iowa) and Max Baucus (D-Montana): “Senate Bill Takes On Private Pension Pickle.” Also, from Mary Williams Walsh of the New York Times: “2 Senators Present a Plan for Strengthening Pensions.” In connection with the scheduled markup tomorrow by the Senate Committee on Finance, the Joint Committee On Taxation has issued a Description Of The Chairman’s Mark Of The “National Employee Savings And Trust Equity Guarantee Act of 2005.”

    NESTEG Legislation Unveiled

    Plan Sponsor.com has a good article summarizing pension legislation unveiled last Friday by Senators Charles Grassley (R-Iowa) and Max Baucus (D-Montana): “Senate Bill Takes On Private Pension Pickle.” Also, from Mary Williams Walsh of the New York Times: “2 Senators Present a Plan for Strengthening Pensions.” In connection with the scheduled markup tomorrow by the Senate Committee on Finance, the Joint Committee On Taxation has issued Description Of The Chairman’s Mark Of The “National Employee Savings And Trust Equity Guarantee Act of 2005.”

    4th Circuit: Employees Cannot Waive Rights under the FMLA Without DOL or Court Approval

    The employment law blogosphere was all a flurry last week over this recent 4th Circuit case–Taylor v. Progress Energy, Inc., No. 04-1525 (4th Cir. July 20, 2005). The West Virginia Legal Weblog has a good summary of the case:

    Yesterday in Taylor v. Progress Energy, Inc. , No. 04-1525 (4th Cir. July 20, 2005) (PDF), the Fourth Circuit held that “without prior DOL or court approval, 29 C.F.R. § 825.220(d) bars the prospective and retrospective waiver or release of the FMLA’s substantive and proscriptive rights.” This ruling places FMLA claims in the same boat as FLSA claims. While claims under Title VII and the ADEA may be waived by private agreements (including employee severance agreements) out of court, FLSA and FMLA claims cannot.

    Michael Fox has these comments:

    The Court applied § 825.220(d) of the FMLA regulations as written — an employee cannot waive rights under the FMLA. Call this one the revenge of Robert Reich, President Clinton’s Secretary of Labor, and a good reminder of the importance of having control of the executive branch of government when it comes to writing and amending regulations.

    According to the 4th Circuit the trial court was led astray by the 5th Circuit’s opinion in Faris v. Williams WPCI, Inc., 332 F.3d 316 (5th Cir. 2003) which had taken a restrictive view of the regulation, holding it applied only to prospective waivers. A position with which it flatly disagreed.

    The fact pattern in Taylor is exactly the kind that one would expect — a severance package with a release that the employer no doubt thought included FMLA claims. Given the long statute of limitations and lack of administrative prerequisites for FMLA claims, if Taylor is accepted by other courts, it could cause a lot of headaches for employers who thought that they were in the clear.

    The release in question read as follows:

    GENERAL RELEASE OF CLAIMS. IN CONSIDERATION OF SEVERANCE PAYMENTS MADE BY THE COMPANY, EMPLOYEE HEREBY RELEASES CP&L [AND] ITS PARENT . . . FROM ALL CLAIMS AND WAIVES ALL RIGHTS EMPLOYEE MAY HAVE OR CLAIM TO HAVE RELATING TO EMPLOYEE’S EMPLOYMENT WITH CP&L . . . OR EMPLOYEE’S SEPARATION THEREFROM, arising from events which have occurred up to the date Employee executes this General Release, including but not limited to, claims . . . for relief, including but not limited to, front pay, back pay, compensatory damages, punitive damages, injunctive relief, attorneys’ fees and costs or any other remedy, arising under: (i) the Age Discrimination In Employment Act of 1967, as amended, (“ADEA”); (ii) the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”); (iii) Title VII of the Civil Rights Act of 1964, as amended; (iv) the Energy Reorganization Act and Atomic Energy Act, both as amended; (v) the Americans With Disabilities Act (“ADA”); (vi) any wrongful termination claim under any state or federal law; (vii) claims for benefits under any employee benefit plan maintained by CP&L related to service credits or other issues; (viii) claims under the Older Workers Benefit Protection Act of 1990 (“OWBPA”); and (ix) any other federal, state or local law.

    While the release contained no specific reference to the FMLA, apparently that did not matter because, according to Taylor, even a specific release of FMLA rights would not have been effective under DOL regulations which prohibited such release as follows:

    29 C.F.R. § 825.220(d): Employees cannot waive, nor may employers induce employees to waive, their rights under FMLA. For example, employees (or their collective bargaining representatives) cannot “trade off” the right to take FMLA leave against some other benefit offered by the employer. This does not prevent an employee’s voluntary and uncoerced acceptance (not as a condition of employment) of a “light duty” assignment while recovering from a serious health condition (see Sec. 825.702(d)). In such a circumstance the employee’s right to restoration to the same or an equivalent position is available until 12 weeks have passed within the 12-month period, including all FMLA leave taken and the period of “light duty.”

    Post-Retirement Pay for a CEO Under Fire

    Broc Romanek has some interesting posts regarding excessive SERPs and disclosure issues which were in the news today.

    An Article Discusses An ERISA Claims and Appeals Process Gone Awry

    From the Wall Street Journal via the Pittsburgh Post-Gazette.com: “Retiree runaround: Challenging a benefits decision.”