Addressing an issue of first impression, the Appeals Court recently held that an employer who fails to maintain a workers’ compensation policy in violation of the Massachusetts Workers’ Compensation Act, G.L. c. 152, et seq., is automatically debarred from bidding or participating in any state or municipal funded contract for three years. New England Survey Systems, Inc. v. Department of Industrial Accidents, 89 Mass. App. Ct. 631 (2016) (“NESS”).

For employers who rely on state contracting to conduct their business, the three-year debarment is a severe sanction and a strong incentive to comply with the statute. The plaintiff in NESS was unaware that its workers’ compensation policy had lapsed. It reinstated the policy the same day it received a stop work order from the Department of Industrial Accidents, but nevertheless was held subject to the non-discretionary three-year ban.

The legal dispute in NESS turned on the placement of a single comma. Section 25C(10) of the statute provides, in pertinent part:

…an employer who fails to provide for insurance or self insurance as required by this chapter or knowingly misclassifies employees, to avoid higher premium rates, will be immediately debarred…

The issue presented to the Appeals Court was whether the phrase “to avoid higher premium rates” requires the Department to prove that the employer’s failure to provide the required insurance was motivated by a desire to avoid higher premium rates.

Applying the “last antecedent rule” of statutory construction, the plaintiff argued that the placement of a comma after “employers” separating the modifier “to avoid higher premium rates” from the two antecedent clauses (“who fails to provide for insurance or self insurance as required by this chapter or knowingly misclassifies employees”) suggested that both antecedent clauses were qualified by the modifier. Such an interpretation would require the Department to prove that an employer who “fails to provide insurance” was motivated by a desire “to avoid higher premium rates.”

The Appeals Court rejected the plaintiff’s reading of the statute, siding instead with the Department’s interpretation that the modifier “to avoid higher premium rates” qualifies only the immediately preceding antecedent clause (“knowingly misclassifies employees”). Such an interpretation compels debarment any time an employer fails to obtain the statutorily mandated insurance, regardless of the employer’s reason for non-compliance.

To support its interpretation, the Appeals Court explained that the workers’ compensation statute is remedial and must be interpreted broadly to accomplish its purpose to protect workers. The court also relied on its analysis of the legislative history of the statute, in particular the 1991 amendments, which first implemented the debarment penalty as part of an effort to address the statute’s failure to meaningfully reduce the cost of insurance.

Thus, the NESS case, in addition to being a cautionary tale for Massachusetts employers, is a helpful example to appellate lawyers of the various canons of statutory construction and the use of legislative history that Massachusetts appellate courts will consider in the process of statutory interpretation.