Pascarelli v. Moliterno Stone Sales

The respondents were represented by Scott Wilson Williams, Esq., Maher & Williams, 1300 Post Road, P. O. Box 550, Fairfield, CT 06430-0550.

The Second Injury Fund was not represented at oral argument or at the formal hearing. Notice can be sent to William McCullough, Esq., Assistant Attorney General, 55 Elm St., P. O. Box 120, Hartford, CT 06141-0120.

This Petition for Review from the August 4, 1994 Finding and Dismissal of the Commissioner acting for the Fourth District was heard February 24, 1995 before a Compensation Review Board panel consisting of the Commission Chairman Jesse M. Frankl and Commissioners Roberta S. D’Oyen and Amado J. Vargas.

OPINION

JESSE M. FRANKL, CHAIRMAN. The pro se claimant has petitioned for review from the August 4, 1994 Finding and Dismissal of the Commissioner for the Fourth District. The commissioner found that the parties entered into a voluntary agreement in 1991 accepting his May 2, 1989 compensable injury, and setting his wage rate at $618.87 per week. A 1994 agreement established the claimant’s entitlement to a specific award. There, his wage rate was set at $655.79 per week. At the formal hearing, the claimant sought to modify this rate by including employer contributions for pensions, an annuity, and a health and welfare fund in his base wage total.

The commissioner held that there was a distinction between the definition of “income” in § 31-275(14) C.G.S.1 and the definition of “wages” in § 31-310 C.G.S., and that the latter statute excluded the fringe benefits remuneration at issue. He also noted that the employer, Moliterno Stone Sales, had filed a Chapter 11 bankruptcy petition and was currently under receivership in the Rhode Island Superior Court. The automatic stay created by the United States Bankruptcy Code applies to entities in Chapter 11, and can be lifted only with the permission of a United States Bankruptcy Court. See 11 U.S.C. § 362(a), (d). For both of these reasons, the commissioner dismissed the claimant’s request for modification. The claimant appeals from that decision.

The first issue we must address is whether the claimant’s request for modification was properly before the commissioner given the employer’s Chapter 11 bankruptcy petition. Neither party disputes the finding that Moliterno Stone Sales had filed a petition seeking Chapter 11 reorganization at the time of the formal hearing. There is also no suggestion that the petition had been resolved by one of the means listed in 11 U.S.C. § 362(c)(2), thus terminating the automatic stay. The respondents argue that the claimant was required to seek relief from the stay pursuant to 11 U.S.C. § 362(d)2 before the commissioner could rule on the claimant’s motion for modification. The claimant disagrees, citing § 31-287.3

11 U.S.C. § 362(a) provides that a petition filed under Chapter 11 “operates as a stay, applicable to all entities, of . . . the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.” This language clearly includes workers’ compensation proceedings in general. However, 11 U.S.C. § 362(b)(4) excludes “the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit’s police or regulatory power” from the operation of the automatic stay. See also 11 U.S.C. § 362(b)(5). Therefore, permission from the bankruptcy court would not be necessary to continue any proceedings falling under that exception.

In In re Mansfield Tire and Rubber Co., 660 C.2d 1108 (6th Cir. 1981), the Industrial Commission of Ohio, Bureau of Workers’ Compensation appealed from a bankruptcy court order refusing to vacate an automatic stay as to the Commission’s adjudication of the workers’ compensation claims of Mansfield Tire and Rubber Co. employees. Mansfield, both a self-insured and state-insured employer under the Ohio Workers’ Compensation Act, had ceased making payments on approximately 400 accepted and pending claims immediately prior to its filing of a Chapter 11 petition in 1979. With the filing of that petition, an automatic stay went into effect pursuant to 11 U.S.C. § 362(a). The Commission argued before the bankruptcy court that it was exempt from the automatic stay under 11 U.S.C. § 362(b)(4) and (5), but the court disagreed.

The Sixth Circuit reversed the ruling of the bankruptcy court. Because the enactment of workers’ compensation legislation is an exercise of the police power of the state, see New York Central R.R. Co. v. White, 243 U.S. 188 (1917), the circuit court held that the administration of workers’ compensation claims was necessarily an exercise or extension of those powers. Mansfield, supra, 1113. “The automatic stay prevents the exercise by the Industrial Commission of its lawful powers and operates to hinder, delay and deprive Mansfield’s injured workers of the benefits to which they are lawfully entitled and it affects their safety.” Id. The court also noted that the debtor’s bankruptcy estate and its creditors would not be affected by the Commission’s administration of claims, and distinguished the case from an attempt to make a claim or enforce a money judgment directly against the debtor, which would be stayed under 11 U.S.C. § 362(a)(6) and § 362(b)(5).

The importance of this distinction was emphasized in In re Geffken, 43 B.R. 697 (Bankr. N. D. Ohio 1984), in which the bankruptcy court stressed the difference between government actions aimed solely at advancing a pecuniary interest, which are not exempt from the stay, and government actions that serve a valid regulatory purpose. Id., 700. In that case, an attempt by the Ohio Industrial Commission to enjoin the operation of a debtor’s business for failure to pay workers’ compensation premiums was held to be outside the scope of Mansfield, supra, by the court, as such an action would have been highly detrimental to the rights of creditors, and was not clearly related to health and safety. Geffken, supra, 701. See also In re Adkins, 94 B.R. 703 (Bankr. D. Or. 1988) (state’s disclaimer of intention to bind Chapter 11 debtors to administrative ruling on workers’ compensation claim neutralized pecuniary interest of state and kept activity within police power exception to stay); compare In re Rose Exterminator Co., Inc., 135 B.R. 637 (Bankr. E. D. Mo. 1992) (workers’ compensation claim made directly against bankruptcy debtor impliedly required relief from stay).

In the instant case, the compensability of the claimant’s injury had already been accepted by the insurer, and liability for payment had been transferred to the Second Injury Fund. (Transcript, December 7, 1993, p. 2). The claimant sought to reopen the voluntary agreement on the ground that certain benefits had not been included in his compensation rate, and that he should have collected benefits under § 31-284b C.G.S. before that statute was declared unconstitutional as applied to private employers. See Civardi v. Norwich, 231 Conn. 287, 298 n.14 (1994). He clearly stated his position that his claims were against the insurer and the Second Injury Fund, and that relief from the bankruptcy stay was unnecessary. (See Adkins, supra). Opposing counsel maintained that a higher wage rate would result in additional liability against the employer, payable by the insurer, and that the stay must apply as a result. (Transcript, p. 25).

Section 31-287 allows an injured worker to enforce his claim against the insurer where the insured becomes insolvent or is discharged in bankruptcy. Section 31-340 C.G.S. also requires that a workers’ compensation insurer be directly and primarily liable to the employee to pay compensation for which the employer is liable. Thus, it is possible under Connecticut law for an employee to seek recovery from an insurer by proceeding directly against the insurer. This comports with the requirement of Mansfield, supra, and its progeny that a debtor’s estate not be affected by workers’ compensation proceedings if the effect of the automatic stay is to be avoided.

Nevertheless, it is the commissioner who has the authority under § 31-297 and § 31-298 C.G.S. to schedule the hearing of claims and to conduct those hearings. Even though there was room in this case for the commissioner to conclude that the automatic stay did not apply to the claimant’s claim, it was still his prerogative to determine that a stay would be advisable in light of the issues that needed to be decided and the employer-debtor’s involvement in them. He may very well have believed that the employer’s presence and participation in further proceedings might be necessary, and that the best course of action in this case would be to honor the automatic stay. A commissioner must have discretion to make those kinds of decisions. We therefore hold that it was not error for the commissioner to deny the request for modification in light of the automatic stay.

The commissioner also based his ruling on the language of § 31-310. Although his decision on the automatic stay issue made it unnecessary for him to rule on any other issues, we note that his legal interpretation was correct. At the time of injury, § 31-275(14) C.G.S. defined “income” to include “wages, accident and health insurance coverage, life insurance coverage and employee welfare plan contributions.” Section 31-310, however, based the average weekly wage solely on “total wages received by the injured worker.” Clearly, therefore, employer health plan contributions and payments to annuity and pension funds, even if based on the number of hours worked by the claimant, are not “wages” within the meaning of the statute. “Income” and “wages” are simply not equivalent under the Workers’ Compensation Act. The fact that overtime pay is included in wages, see Goodwin v. Stop & Shop Companies, Inc., 1830 CRB-3-93-9 (decided April 21, 1995), is irrelevant; overtime pay does not fall into another branch of the definition of “income.”4

The trial commissioner’s decision is affirmed.

Commissioners Roberta S. D’Oyen and Amado J. Vargas concur.

2 11 U.S.C. § 362(d) provides that “[o]n request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying or conditioning such stay . . . for cause . . . .” BACK TO TEXT

3 Section 31-287 provides, “[n]o policy of insurance against liability under this chapter . . . shall be made unless the same covers the entire liability of the employer thereunder and contains an agreement by the insurer that . . . the insurer shall in all things be bound by and subject to the findings, awards and judgments rendered against such insured; and also that, if the insured becomes insolvent or is discharged in bankruptcy during the period the policy is in operation, or the compensation, or any part of it, is due and unpaid . . . an injured employee . . . may enforce his claim to compensation against the insurer to the same extent that the insured could have enforced his claim against the insurer had he paid compensation.” BACK TO TEXT

4 In light of our decision on this issue, the claimant’s Motion to Submit Additional Evidence is denied. BACK TO TEXT