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Welch v. Workforce Safety and Insurance

Supreme Court of North Dakota

August 29, 2017

Marqus Welch, Appellant and Cross-Appellee
v.
Workforce Safety and Insurance, Appellee and Cross-Appellant and Stern Drywall, Inc., Respondent

         Appeal from the District Court of Burleigh County, South Central Judicial District, the Honorable David E. Reich, Judge.

          Stephen D. Little, Bismarck, ND, for appellant and cross-appellee.

          Mitchell D. Armstrong, Special Assistant Attorney General, Bismarck, ND, for appellee and cross-appellant.

          OPINION

          Kapsner, Surrogate Judge.

         [¶ 1] Marqus Welch appeals and Workforce Safety and Insurance ("WSI") cross-appeals from a judgment affirming an administrative law judge's ("ALJ") decision that affirmed a WSI order ending Welch's vocational rehabilitation benefits and disability benefits and that reversed a WSI order finding Welch committed fraud and requiring him to repay benefits. We conclude the ALJ did not err in affirming WSI's disability benefits order because a reasoning mind could reasonably conclude Welch could return to work. We conclude, however, the ALJ misapplied the law in failing to apply the proper definition of "work" and in analyzing whether Welch had "willfully" made false statements. We affirm in part, reverse in part, and remand to WSI for further proceedings.

         I

         [¶ 2] In April 2013, Welch sustained an injury to his left knee when he slipped and fell while working on a roof for Stern Drywall, Inc., as a journeyman carpenter. WSI accepted his claim and paid him disability and medical benefits. Welch received disability benefits continuously from April 2013 through July 2014. He underwent surgery in June 2013 for a torn meniscus and had physical therapy on an ongoing basis.

         [¶ 3] While receiving disability benefits, Welch was required to report work activities and income to WSI on injured worker status reports, also known as form FL214. The status reports Welch submitted from June 2013 through August 2014, with one exception, indicated that he had not done any type of work, whether for pay or not, and that he had not received money from any source other than WSI. On one report form, signed and dated April 3, 2014, where Welch had answered "yes, " a WSI claims adjuster testified that she spoke with him on that date and Welch indicated to the adjuster he had made an error by checking "yes" and had not worked since his injury.

         [¶ 4] In summer and fall 2013, Welch submitted multiple FL214 forms indicating he had received no money and performed no work activity. During this time, however, Welch formed MDW Construction in North Dakota and began offering services under that name. On July 28, 2013, Welch signed a document providing a bid for services from MDW Construction to Quest Development to perform subcontractor work. On July 30, 2013, Welch opened a bank account for MDW Construction, listing Marqus Welch as sole proprietor. He also registered the business's trade name with the secretary of state. Welch was the only authorized signatory on the bank account.

         [¶ 5] In WSI's subsequent fraud investigation, WSI discovered MDW Construction, through Welch, had received and deposited payments totaling over $10, 000 in August and September 2013 for work performed for Quest Development and for Oahu Restaurant. Welch had endorsed checks for deposit into the MDW Construction account. There was conflicting testimony at the administrative hearing, however, on the extent of Welch's involvement on the projects. Welch testified that his brother was living with him at the time and did the work on the projects with some assistance from him. He testified his brother received the money from the projects and had access to those funds with a debit card.

         [¶ 6] In January 2014, Welch again had surgery on his knee, after which he continued to treat with his orthopedic surgeon's office and remained on restrictions. Welch attended physical therapy in Arkansas. On June 24, 2014, Welch was seen by Dr. Joel Blanchard at Sanford Health Occupational Medicine. Dr. Blanchard's note includes a detailed history and physical examination, and he indicates Welch had reached maximum medical improvement: "MMI reached. May need fitness for duty testing prior to return to work at your company's discretion. Additional time was spent reviewing the workability testing. Workability testing has been reviewed in full and work status was guided by these findings. I discussed job duties with the patient." Dr. Blanchard's note states Welch's recommended work status was "Regular Duty" and does not indicate any physical restrictions.

         [¶ 7] In July 2014, Welch was again treated by Dr. Blanchard. Dr. Blanchard's note states: "I discussed with Marqus, that his examination is unchanged. He does have some disuse atrophy and he will have pain as he starts to use his leg. He is encouraged to go to work. I feel he is safe to return to work based on my exam today and the workability he had last visit." Welch's recommended work status continued to be regular duty. On August 28, 2014, WSI also issued a vocational case manager's report that concluded the first appropriate rehabilitation was return to the same occupation, any employer, based on his release to return to regular duty. Welch again treated with Dr. Blanchard on August 29 and September 5, 2014, and Dr. Blanchard again opined on both dates that Welch's work status was regular duty and noted Welch was referred for a second opinion.

         [¶ 8] On September 15, 2014, Welch received a second opinion from Dr. David O'Regan, who opined that Welch had reached MMI and was released to his pre-injury occupation. On September 17, 2014, Welch treated with Dr. Krissondra Klop, who noted that Welch remained unchanged since his last visit and that he was released to regular duty. On September 29, 2014, Welch again treated with Dr. Blanchard, who noted Welch's condition remained unchanged since the last visit and his work status was to return to regular duty. Notably, Welch subsequently had an independent functional capacity evaluation ("FCE") performed in December 2014, which indicated Welch was limited to "medium work level."

         [¶ 9] On September 9, 2014, WSI issued an order ("disability benefits order"), holding that Welch was not entitled to disability or vocational rehabilitation benefits after July 18, 2014, that the first vocational rehabilitation option was "return to the same occupation, any employer, " and that Welch had been released to work without restrictions effective June 24, 2014. On December 16, 2014, WSI issued another order ("fraud order"), finding that Welch willfully and intentionally made false statements and failed to fully report his income and work activities and that, as a result, WSI continued paying Welch temporary total disability benefits. WSI ordered that all benefits be terminated after December 16, 2014, and that Welch repay $33, 289.15.

         [¶ 10] Welch requested an administrative hearing on both the September and December 2014 orders. In July 2015, the ALJ held a consolidated administrative hearing on the specified issues regarding WSI's two orders. After the hearing, the ALJ issued a decision affirming the September 2014 disability benefits order, finding Welch was able to return to work as a journeyman carpenter on June 24, 2014, but reversing the December 2014 fraud order, finding Welch had not made false statements "willfully." Both Welch and WSI requested ...


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