September 19, 2012
Was it Fraud or Not?

by Justice Paul E. Pfeifer

When a person is injured in a workplace accident and cannot work, he or she may be eligible for temporary total disability compensation. As its name suggests, temporary total disability (“TTC”) provides total compensation, temporarily, while the person recovers.

Here at the Supreme Court of Ohio we recently reviewed a case involving a man named Garry K. McBee, who received TTC from October 30, 2004, through March 9, 2006.

During the time that he was receiving TTC, Garry was also helping his wife with her business. The trouble is people receiving TTC aren’t supposed to work. When the Industrial Commission of Ohio – which handles such matters – learned of these activities it investigated.

It turned out that Garry was not paid for the services he performed for his wife’s business. But the Industrial Commission nevertheless determined that the activities constituted work, and it concluded that TTC should not have been paid.

Consistent with those findings, the TTC award was vacated, and an overpayment was declared. The Commission also concluded that Garry had committed fraud by submitting disability paperwork to the Commission and the Bureau of Workers’ Compensation between October 2004 and March 2006, in which he certified that he was not working.

Garry responded with a complaint in the court of appeals. The court of appeals upheld the finding that Garry had worked while receiving TTC, but it overturned the finding of fraud after concluding that the evidence cited in the Commission’s order didn’t prove that Garry knew that his unpaid activities for his wife’s company constituted “work” for purposes of TTC eligibility.

After that ruling, the Commission – which sought to have its declaration of fraud reinstated – appealed to our court for a final review of this case.

So did Garry’s activities on behalf of his wife’s business constitute work that would make him ineligible for TTC?  “Work” in this context is generally considered to be labor exchanged for pay. But there is one important exception: unpaid activities that directly generate income for a separate entity can, in some situations, be considered work for purposes of TTC eligibility.

This principle can be extracted from a decision by our court in a case from 2006 that involved the Ford Motor Company. In that case, Ford sought to recoup TTC, arguing that the person making the claim was improperly receiving compensation while working in his own lawn-care business.

Evidence showed that after his industrial injury, the claimant hired workers to do the lawn care for his company, while his participation was limited to signing paychecks, fueling lawnmowers weekly, and driving the mowers onto a truck. There was no evidence that the claimant did any of the landscape work or mowing while receiving TTC. All clerical work besides signing checks was performed by the claimant’s girlfriend.

Our court concluded that the claimant’s activities did not amount to work that would disqualify him from TTC. In the majority opinion for that case we wrote that this claimant’s “activities did not, in and of themselves, generate income.” His “activities produced money only secondarily.” For example, the claimant “signed the paychecks that kept his employees doing the tasks that generated income.” His activities were “truly minimal and only indirectly related to generating income.”

Based on our finding in that case, it follows that activities that are not minimal and that directly generate income for a separate entity may be considered work and may disqualify a claimant from receiving TTC even when the claimant is not paid.

The court of appeals in the McBee case concluded that Garry’s activities for his wife’s company directly generated income and were consistent and ongoing. Thus, his activities, though unpaid, constituted work, which meant that he was not eligible for TTC.

But was he engaged in fraud when he received TTC while working? The absence of pay factored into this issue as well.

Fraud requires a knowing misrepresentation of a material fact. Garry received TTC because of the paperwork he submitted that certified he was not working. But for this to qualify as a knowing misrepresentation, it had to be shown that Garry was aware that his unpaid activities could be considered “work.” Therefore, we had to determine whether the evidence cited in the Commission’s order demonstrated such an awareness.

The documents that Garry used to apply for ongoing TTC advised only that a claimant is “not permitted to work” while receiving TTC. The documents did not define “work,” nor did they indicate that unpaid activities could sometimes be classified as work. But the Commission insisted that such knowledge could be inferred from the testimony of Garry and his wife at their hearing. We disagreed.

Claimants are informed that they are not permitted to work while receiving TTC. But the exception to the general principle that “work” entails getting paid – an exception that we carved out in the Ford case – is a fairly complicated idea. It’s not an intuitive exception, and it isn’t within the realm of the average claimant’s experience, dealing as it does with unpaid activities within the context of a secondary business enterprise.

Mindful of these considerations, our examination of the evidence revealed nothing from which we could infer that Garry recognized that the activities in question could be construed as work. And if Garry was asked at the hearing whether he knew that “work” included some unpaid activities, the Commission’s order didn’t reflect it.

The order focused on why Garry’s activities were work, not on whether he knew that they were work for purposes of TTC eligibility. As for Mrs. McBee – the order didn’t cite any testimony from her, so there was nothing for us to review.

Ultimately, we concluded – by a seven-to-zero vote – that there was no evidence that Garry knew that his unpaid activities constituted work that would preclude TTC. Thus, there was no evidence that he knowingly misled the Commission. And without such knowledge, a fraud declaration cannot stand. We therefore affirmed the judgment of the court of appeals.

EDITOR'S NOTE: The case referred to is State ex rel. McBee v. Indus. Comm., 132 Ohio St.3d 209, 2012-Ohio-2678. Case No. 2010-2288. Decided June 19, 2012. Opinion Per Curiam.