UPS Airlines v. West, No. 2010-CA-001433-WC (Ky. App. 2011): A benefit plan as identified under KRS 342.730(6) is not “exclusively employer funded” if it is the product of collective bargaining.

In this to-be-published decision, the Kentucky Court of Appeals with an issue of addressed an issue of first impression KRS 342.730(6) to determine if a benefit plan as defined under that statuary provision is considered “exclusively employer funded,” entitling the employer to a credit against any workers’ compensation benefits paid, if it is negotiated through the collective bargaining process.

Under KRS 342.730(6):

All income benefits otherwise payable pursuant to this chapter shall be offset by payments made under an exclusively employer-funded disability or sickness and accident plan which extends income benefits for the same disability covered by this chapter, except where the employer-funded plan contains an internal offset provision for workers’ compensation benefits which is inconsistent with this provision.

Regarding the benefit plan before it, the Court concluded such was not an exclusively employer-funded plan, reasoning that the collective bargaining process was contractual in nature and different from non-negotiated employee benefit plans. In forming its holding the Court relied specifically upon GAF Corp. v. Barnes, 906 S.W.2d 353 (Ky. 1995), as well as various rulings from foreign jurisdictions.

COMMENTARY: This was an exceedingly thoughtful and carefully considered opinion by the Court of Appeals, hinging ultimately on the Court’s determination (borrowed from a Utah court) that “The workers’ compensation system . . . was not designed or intended to free an employer from performing its contractual promises to produce specific benefits to its employees.”

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