Additional Hearings Warranted Where Evidence of Fraud is Discovered

Third Quarter Legal Briefs

Naglieri v. Sun Devil Auto, Court of Appeals, Division I, Published Opinion, Filed 9/30/2014

In this case, the court addressed alleged fraudulent testimony given during an Industrial Commission hearing and held the administrative law judge should have granted an additional hearing to receive evidence on the alleged untruthful testimony given by the employer’s manager.

Applicant worked as an automobile mechanic. He was also a gun collector and he had brought his 1919 Browning machine gun to work one day. Because work was slow that afternoon, he disassembled and cleaned his gun on top of his tool box in the center of the shop. He worked on the gun for about an hour, then the gun’s drive rod came unhinged and shot into his right eye.  His claim for workers compensation benefits was denied and he requested a hearing, alleging that he was injured in the course of his employment because his supervisors had allowed him to clean his gun at work.

The prevailing law in Arizona is that when an employer gives permission to workers to perform acts that have little or no connection to an employee’s job duties, and the employee is injured while engaged in an act for his own individual benefit, that injury may be compensable.

Applicant testified at the ICA hearing that several co-workers witnessed him cleaning the gun, including the store manager and the assistant store manager, and that the store manager asked him questions while he cleaned the gun.

The manager testified that he was unaware that the applicant had a gun at work until after his injury, when someone came into the front office, saying, “Call 911.” The manager stated that when business was slow, employees were supposed to “clean the shop, put away inventory, or go home.” He acknowledged that employees were allowed to work on their personal vehicles if they were off the clock, an invoice was written, and they paid for parts. He also testified that he was unaware that employees had brought guns to work and that employees had never asked permission to do so. He said that if he had seen an employee cleaning a gun, he would have told the employee to stop and sent the employee home.

The ALJ found that the claim was non-compensable. She found the applicant and another witness not credible, and ruled that she did not believe that employees were allowed to work on guns at the workplace where the business was auto mechanics, or that supervisors and other employees watched the applicant work on the gun while he was on the clock.

The applicant requested review and asked for another evidentiary hearing, attaching an affidavit from the assistant manager who stated that he witnessed the applicant working on the gun and was aware of it, and that he wanted to clear his conscience because the store manager admitted to him that he was not truthful at the Industrial Commission hearing. The ALJ denied the request for the additional hearing, and affirmed the decision for non-compensable claim.  The applicant appealed.

The Court of Appeals ruled that the issue of whether the manager was aware of the applicant’s activity was critical and discussed long-standing Arizona case law that holds “[a]n employee is entitled to compensation when he sustains his injury during a reasonable and anticipated use of the employer’s premises . . . . [W]here the employees’ acts are performed with the implied consent of the employer, injuries sustained therefrom are in the course of employment.”

Lying about a material matter affecting whether an injury is compensable under the workers compensation statutes constitutes fraud. The ICA has the authority to address issues of fraud at any time. An award based on fraudulent evidence can be voided at any time. Fraud requires, among other things, that a false statement be (1) made about a material issue and (2) knowingly false when made.

The Court ruled that the ALJ should have scheduled an additional hearing when the injured worker presented evidence that a supervisor admitted to another supervisor that he had not testified truthfully at the hearing. This was a 2-1 decision, with the dissenting judge finding that the claimant’s evidence was insufficient to show fraud, meaning the administrative law judge did not abuse her discretion in denying the request for an additional hearing.

See next posting for final third quarter workers compensation case.

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