A Mexican firm cannot claim the North American Free Trade Agreement excuses it from having to provide workers' compensation coverage for its employees doing business in Arizona, the state Court of Appeals has ruled.
In a decision this week, the judges also rebuffed arguments by Porteadores del Noroeste S.A. de C.V. that Arizona's requirements to care for injured workers were preempted by provisions of the U.S. Constitution giving the federal government the exclusive right to regulate foreign commerce. Appellate Judge Michael Brown, writing for the unanimous court, said he and his colleagues found no evidence that anything in federal law or regulation intended to preempt state worker-protection laws.
The case involves Adan Valenzuela, a Mexican citizen and resident, who was injured in a rollover accident north of Nogales and suffered numerous injuries. After being treated first at a Nogales hospital and then at Tucson's University Medical Center, he returned to Mexico where he requested a determination of disability and benefits from the Instituto Mexicano del Seguro Social. That agency provides coverage for lost wages for injured workers.
While IMSS provided benefits, it paid only some medical bills.
Valenzuela filed a claim with the Industrial Commission of Arizona, and because Porteadores had no valid Arizona workers' compensation insurance, the claim was paid by a special fund of the commission
The commission then sought to recover its costs from Porteadores.
Attorneys for the company argued that NAFTA controlled its corporate activities in the United States and therefore the commission lacked jurisdiction. They also said requiring a foreign employer to comply with Arizona's worker's compensation laws would violate federal law.
The appellate court did not see it that way.
“States have a strong interest in protecting employees working within their borders,” he wrote. And Brown said the state constitutional requirement for a workers' compensation system is designed to maintain a “just and humane” law to “relieve workers and their dependents from burdensome, expensive and litigious remedies.”
That latter part refers to the fact that workers' compensation in Arizona is a no-fault system: An employee injured in a work-related accident is entitled to have medical bills and part of lost wages covered without having to sue the employer to prove negligence.
Brown also noted that Arizona law makes any employee injured in the state eligible for benefits, even if the worker was not hired in the state.
Brown acknowledged that Congress approved NAFTA 1994 as an agreement setting out trade rules with Mexico and Canada. But he said the federal law implementing NAFTA specifically spelled out that only the U.S. government can use the agreement to challenge any state law. That, Brown said, did not occur here.
The judge acknowledged that the exclusive power of Congress to regulate foreign trade can curb state regulations if there is a “special need for federal uniformity.” Brown said the court could find nothing in NAFTA or any other any trade agreement that suggested the federal government intended to preempt state laws protecting workers.
In fact, Brown wrote, there is nothing in NAFTA or other agreements mentioning workers’ compensation at all.