ISSUE: Employer’s Dilemma

Jack_crop 72dpiHere is a hypothetical situation that illustrates a difficult dilemma for employers/carriers involved in claims under the Longshore and Harbor Workers’ Compensation Act.

In our hypothetical case, a U.S. Department of Labor Administrative Law Judge (ALJ) has issued a Compensation Order awarding the claimant a scheduled award for an 88% binaural hearing loss. At the claimant’s weekly compensation rate of $500.00, the value of the award is (200 weeks x .88 x $500) $88,000.

The Compensation Order is filed in the office of the U.S. Department of Labor’s District Director. The employer now has 10 calendar days to pay the award in full (the last exposure was years ago so the entire award is due and payable).

At this point, Section 14(f) of the Longshore Act applies. It states, “If any compensation, payable under the terms of an award, is not paid within ten days after it becomes due, there shall be added to such unpaid compensation an amount equal to 20 per centum thereof ….”

Because of what it believes are erroneous evidentiary rulings by the ALJ with regard to the employer’s expert witness testimony and the issue of causation, the employer is confident that it can have the Order reversed on appeal to the Benefits Review Board, or if necessary, to the federal Court of Appeals.

But Section 14(f) is mandatory and unforgiving. The Order must be paid (money in the claimant’s hands) in 10 days (maybe 10 business days in the federal Fifth Circuit). The employer’s only option is to obtain a stay from the Benefits Review Board as provided for in Section 21(b)(3), which is very unlikely.

Section 21(b)(3) states, “The payment of the amounts required by an award shall not be stayed pending final decision … unless ordered by the Board. No stay shall be issued unless irreparable injury would otherwise ensue to the employer or carrier.” The standard of “irreparable injury” sets the bar very high for the employer/carrier seeking a stay.

So the employer is not going to get a stay no matter how strongly it feels that it has a good case for reversal. The employer has 10 days to pay the claimant $88,000.

The first dilemma for the employer is whether or not it should appeal the Order. Even if the employer wins on appeal, either at the Benefits Review Board or following a costly appeal to federal court, it cannot get its money back from the claimant. The only way for an employer to recoup an overpayment under the Longshore Act is to offset future entitlement to that claimant. Since this is a scheduled award with no future entitlement, the $88,000 is gone, along with the attorney fees and costs of the appeal. So unless the employer believes that it has the opportunity to make good law for application in future cases, there is no financial benefit in even a successful appeal. It probably also has to pay the Special Fund assessment on that payment, but that is a question for another day.

In the alternative, the choice for the employer is whether it should simply refuse to pay the Order, risk paying the 20% additional compensation ($17,600 plus interest) and wait for the result of the appeal.

This won’t work. The Longshore Act gives the claimant several remedies for collection once a Compensation Order is issued.

For example:

Section 18(a) says that if an award is not paid, after 30 days the claimant may request a Supplemental Order of Default from the U.S. Department of Labor’s District Director. Then the claimant can take the Default Order to federal district court and obtain a judgment against the employer. The judgment can then be executed.

So by not paying the Order, the employer/carrier is not only risking the 20% additional compensation; it is risking the spectacle of the U.S. Marshall’s office coming around to execute the claimant’s judgment.

This non-payment scenario may also bring the employer/carrier under the provisions of Section 14(i) which states, “Whenever the deputy commissioner (district director) deems it advisable he may require any employer to make a deposit with the Treasury of the United States to secure the prompt and convenient payment of such compensation, and payments therefrom upon any awards shall be made upon order of the deputy commissioner.” This provision is virtually never used, but once an employer/carrier refuses to pay an award I wouldn’t be surprised if that put that employer/carrier on the Department of Labor’s Section 14(i) radar screen.

Of course, if these provisions to encourage the prompt payment of compensation and to enforce Compensation Orders weren’t built into the Act, the other side of the coin would be the claimant’s dilemma, especially if the Compensation Order awards continuing recurring benefits such as Temporary Total or Permanent Total disability. If the employer could simply withhold payment until all appeals are exhausted the claimant would be without compensation for a period of possibly several years.

So the employer must pay an Order in 10 days, and if it wins on appeal then it cannot get its payment back. Otherwise the claimant would go without compensation for years.

Where’s the equitable middle ground? What is the answer to the employer’s dilemma?

As Gertrude Stein (I think) once said: “There ain’t no answer. There ain’t going to be any answer. There never has been an answer. That’s the answer!”

Now I get to use one of those catch phrases that you hear everywhere for awhile, they run their course, and they disappear. I think that this one’s about done, but I want to use it before it’s gone:

It is what it is.

A primary purpose of the Act is to ensure the prompt payment of compensation. The remedies and protections are for the benefit of the injured workers. It’s the employer/carrier’s dilemma.

Final Note: It may occur to some that a possible solution to the employer’s problem would be to give the employer the right to recover from the claimant the amount of any overpayment that results from a successful appeal.

This is a hard sell, considering the remedial purposes underlying the Act and the longstanding position against the right of an employer to recover an overpayment except by offsetting future benefits, if any. Even if the average employer would be willing to endure the public relations problems raised by its decision to go after its employees to recover overpayments that the employees have most likely already spent.

One thought on “ISSUE: Employer’s Dilemma

  1. John Chamberlain

    Is it not also the case that the Benefits Review Board will not hear the appeal if the employer has not paid the amount due?

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