Ohio Supreme Court Declares Workers' Compensation Subrogation Statute Unconstitutional

By Dave McCarty

In what has become an all-too-familiar pattern, a four to three majority of the Ohio Supreme Court recently invalidated a workers' compensation statute considered to be favorable to Ohio employers.

Until about eight years ago, Ohio employers had almost no means by which to be reimbursed for workers' compensation benefits they paid to employees injured due to the fault of a third party when that worker recovered damages from the third party. An employer only had the right of subrogation if, at the time the worker was injured, the employer had a contractual relationship with the third party tortfeasor. In 1993, the Ohio legislature enacted a statute that gave employers subrogation rights, but the statute was poorly drafted and, in practice, not very useful. In 1995, the legislature amended the statute (Revised Code § 4123.931), making the right of subrogation automatic for the Bureau of Workers' Compensation (if the employer is in the State Fund) or the self-insured employer. That is, the statute made the worker and the third party tortfeasor jointly and severally liable to repay the Bureau or self-insured employer up to the full amount paid to the worker under his or her claim.

However, in a case decided last week (Holeton v. Crouse Cartage Co.), the same four Justices who invalidated Ohio's tort reform, employer intentional tort and school funding measures found the subrogation statute unconstitutional. While this holding obviously harms Ohio employers, the news is not all bad. Unlike the Court's decision in the intentional tort case (Johnson v. BP Chemicals), which indicated any intentional tort statute would be unconstitutional, the Holeton decision does leave open the possibility that a different subrogation statute could be found valid. The hope is, therefore, that the legislature will act quickly to pass a new statute that addresses the infirmities identified by the Court in Holeton. Employers and/or their lobbyists may wish to contact state legislators encouraging prompt action. In the meantime, workers' comp subrogation in Ohio exists only if the employer has a contractual relationship with the third party tortfeasor at the time that its worker is injured.