Employees in Michigan, Ohio, Kentucky and Tennessee who believe they have been wrongfully denied workers’ compensation benefits now have a new weapon – RICO. In Brown v. Cassens Transport Co., 6th Cir., No. 10-2334, 4/6/12, five employees sued their employer, a claims adjuster and a doctor alleging conspiracy to deny them workers’ compensation benefits. The Sixth Circuit Court of Appeals ruled that the lawsuit stated a claim under RICO.

RICO, the Racketeer Influenced and Corrupt Organizations Act, requires that an alleged victim identify four elements: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Each element requires an additional analysis: an “enterprise” is marked by association and control; a “pattern” requires a showing of “continuity”, which is continuous and related behavior that amounts to, or poses a threat of, continued criminal violations; and “racketeering activity” involves the violation of designated federal laws. In addition, an alleged victim must allege that he was injured in his business or property “by reason of” a violation of RICO’s substantive provisions.

In this instance, the employees claimed that the defendants engaged in conduct through a pattern of criminal activity designed to deny them their workers’ compensation benefits. The employees claimed that the defendants engaged in mail fraud – the use of the mail in furtherance of their wrongful scheme. The Court noted that an employee’s “expectancy” of workers’ compensation benefits, as statutorily provided, creates a “property” right that when denied, created the necessary property injury to support a RICO claim. RICO provides for recovery of treble damages and attorneys’ fees.

So, what is the impact?

  • Some employers, or adjusters, can be aggressive in denying certain workers’ compensation claims. In response, workers denied such benefits have a new – and very powerful – weapon on challenging such denials.
  • Some unscrupulous employers have encouraged employees to submit claims under their health plans, not under workers’ compensation, to avoid increased costs related to increased experience modifiers. Such conduct could expose employers to more serious claims under RICO if such a pattern is detected.
  • Look for more savvy workers’ compensation plaintiffs’ lawyers to assert such claims to “gain leverage” in workers’ compensation cases.