Bankruptcy sale of manufacturer prevents cap on benefits

In Tennessee, an employer's sale in bankruptcy and subsequent purchase by a new company can prevent an employee's meaningful return to work.

Case name: Cook v. General Motors Corp., No. M2010-00272-WC-R3-WC (Tenn. 02/16/11).

Ruling: The Tennessee Supreme Court held that an assembly line worker did not have a meaningful return to work following his injury, so the lower statutory cap for permanent partial disability benefits did not apply.

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What it means: In Tennessee, an employer's sale in bankruptcy and subsequent purchase by a new company can prevent an employee's meaningful return to work.

Summary: An assembly line worker for an automobile manufacturer injured his right biceps while working. Following surgery, he returned to work and filed for benefits. Shortly thereafter, the manufacturer filed for bankruptcy. A new company was formed to purchase the manufacturer's assets. All employees for the manufacturer automatically became employees of the new company. The worker continued to work at the same location, perform the same tasks, and receive the same rate of pay. Later, the worker was laid off but accepted a transfer at a lower rate of pay. The manufacturer argued that the 1 1/2 times medical impairment statutory cap should not apply to the worker because the bankruptcy sale precluded his return to work. The Tennessee Supreme Court held that the worker did not have a meaningful return to work, so the cap did not apply to the worker's permanent partial disability benefits.

The court compared the case to previous cases where the employer was sold to a new company. The court said it was immaterial that following the sale the worker continued to perform the same job duties for the same pay at the same location. The court noted that the new company was an entirely separate entity from the manufacturer, although they had similar names. Following the bankruptcy sale, the worker did not return to work for his preinjury employer.

The worker argued that a statutory amendment casting "considerable doubt" on the previous cases considered by the court should apply. However, the worker's injury occurred before the effective date of the amendment, so the court concluded the injury was outside the scope of the amendment.

Read more at the WorkersComp Forum homepage.

March 28, 2011

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