Coverage Issues Unique to Maritime Employers

June 27th, 2014

Employers in the sportfishing industry have been faced with an unprecedented dilemma in recent years of having to defend against claims by the Department of Labor Standards Enforcement (“DLSE”) that the DLSE has jurisdiction over the employment of seamen, when in fact it does not. The DLSE has been issuing Stop Order – Penalty Assessments (“penalties”) against sportfishing employers for their alleged failure to maintain state workers’ compensation insurance, in purported violation of the California Labor Code. Penalties are being improperly assessed despite the employers’ proof of protection and indemnity insurance that includes coverage for maintenance and cure, wages, and Jones Act claims under federal maritime law – the exclusive law applicable to employers of seafaring employees.

The Jones Act is the federal workers’ compensation statute applicable to “seamen” (who, conceptually, are seafaring employees who spend most of their employment in the service of vessels on navigable waterways). The statute grants seamen who are injured or killed in the course of their employment a cause of action against their employers. The statute was intended to be a seaman’s exclusive remedy against his employer in the case of alleged negligence causing injury. Consequently, the remedies under the Jones Act supersede and preempt the remedies provided by California’s workers’ compensation statutes. Therefore, California workers’ compensation authorities, like the DLSE, have no jurisdiction over the employment of seamen.

Since the DLSE has no legal authority to assess penalties against a Jones Act employer, it is critical for employers in the sportfishing industry, and the maritime industry at large, to determine whether they qualify as a Jones Act employer, should they find themselves subject to a DLSE investigation. In doing so, we typically consider the following general principles.

An employee is a Jones Act seaman if his employment satisfies a two-prong test: (1) his duties contribute to the function of a vessel or accomplishment of its mission; and (2) he has a connection to a vessel in navigation or an identifiable group of such vessels that is substantial in terms of both its duration and nature. The second-prong of the test is met if the employee performs a substantial part of his work on the vessel or fleet of vessels with at least some degree of regularity and continuity. In every case, the answer to the two-pronged analysis is fact-intensive, and always depends upon the unique circumstances of the employee’s employment. In other words, one cannot assume “seaman” status without carefully considering the employee’s every-day tasks in light of how case law has interpreted them. For example, case law has held that an injury on land may still be governed by the Jones Act if an employee meets the two-pronged test, and is on authorized leave from, or is subject to be called back to work aboard, the vessel at the time of injury. Therefore, the Jones Act may apply, even in situations that would otherwise intuitively involve landside or state regulation.

However, as a maritime industry employer, it is important to consider that there are alternatives to being classified as a Jones Act employer. Even if your employees sometimes, or always work aboard vessels, the circumstances may call for regulation by the state (and enforcement by the DLSE), or another federal scheme. A classic example is a stevedoring company, or longshore employer, whose employees spend most of their time on docks or on vessels that are moored at ports throughout the United States, loading and unloading vessel cargo and fuel. In these cases, the DLSE may have a legal basis to assess penalties under qualifying circumstances.

A legal doctrine, referred to as the “twilight zone doctrine”, has developed in the area of workers’ compensation law as it relates to maritime employees. The doctrine enables an injured maritime employee, who does not satisfy the Jones Act seaman test, to elect between the Longshore Harbor Workers’ Compensation Act (or “LHWCA”, the federal statutes which exclusively govern workers’ compensation claims by longshoremen) and state workers’ compensation statutes in cases where there is doubt as to which set of laws applies (LHWCA vs. Workers’ Comp.). In these unique cases, the doctrine creates a system of concurrent jurisdiction between the LHWCA and state law such that a workers’ compensation claim may be pursued either before the U.S. Department of Labor (if made under the LHWCA) or before the California Workers’ Compensation Appeals Board (if made under the state workers’ compensation statutes). In these cases, the DLSE may have a basis to assert jurisdiction.

If you have been the target of a DLSE investigation, have questions about employers’ rights under the Jones Act, or are wondering about the laws applicable to your employees and which coverage you should procure, we invite you to contact us. For more information about the contents of this article, contact Jolene Rice at jrr@cwlfirm.com