Workers’ Comp Basics

By:  Alfred Vitarelli, Esq., Shareholder, Stark & Stark

Yes, it’s me again with yet another nightmare-inducing minefield to trap the unwary practitioner. Well, perhaps that’s an extreme analogy. But since we are dealing with Department of Defense-based health coverage, I believe a military-themed introduction is a necessity. Ok, I’ve got it: think of these liens as submarines, lurking underwater, undetectable unless the destroyer above uses sonar to locate it. Hmmm…I think I’ll take a break and order up “The Hunt for Red October,” or that Burt Lancaster/Clark Gable classic, “Run Silent, Run Deep.” Ok Al, enough with the movies, get down to business…..”one ping only.” Sorry, just had to get a line from a movie in here. Sorry if it makes no sense. Watch one of the above movies!

Ok, why do I say a proactive approach is needed? Well, for
one, many Petitioners are covered by VA health insurance or Tricare. Tricare,
you say? Yes. Tricare is a Department of Defense health benefit plan for
uniformed service members, retirees and their families. They are established
under CHAMPUS, the Civilian Health and Medical Program of the Uniformed
Services. Both VA health coverage and Tricare are secondary payers with respect
to workers’ compensation treatment and both have rights of subrogation under federal
law. The primary source of the right of recovery is found in the Federal
Medical Care Recovery Act, 42 U.S.C 2651. However, both the VA and Tricare have
additional statutory and Code provisions addressing recovery procedures, which
will come up while researching these lien issues.

Both the Veterans Administration and Tricare have a right of
recovery of any amounts paid for ineligible treatment. For purposes of this
article, ineligible treatment is treatment provided for a work-related injury.
Simply put, both entities have statutory rights to recover the cost of
treatment provided for a work-related injury or condition to a covered
beneficiary. Keep in mind, however, that while the VA covers veterans, Tricare
covers service members, retirees and their families, so Tricare’s right to
recovery of course extends to all such covered persons. This places an
additional responsibility on the practitioner, which I’ll discuss later.

The VA collection rules are found in 38 CFR 17.106. It
states in part:

“(a)(1) VA has the right to recover or collect reasonable
charges from a third-party payer for a nonservice-connected disability in or
through any VA facility to a veteran who is also a beneficiary under the
third-party payer’s plan.” Later, this section defines a third-party payer as
“…an entity, other than the person who received the medical care or services at
issue…responsible for the payment of medical expenses on behalf of a person
through insurance, agreement or contract.” A listing of third-party payers
includes: “(F) workers’ compensation program or plan sponsor, underwriter,
carrier or self-insurer.” Pretty comprehensive, no?

Tricare’s collection rules are found in 32 CFR 199.12. The
General statement (a) states:

“This section deals with the right of the United States to recover from third-parties the costs of medical care furnished to or paid on behalf of TRICARE beneficiaries. These third-parties may be individuals or entities that are liable for tort damages to the injured TRICARE beneficiary or a liability insurance carrier covering the individual or entity. These third-parties may also include other entities who are primarily responsible to pay for the medical care provided to the injured.”

Please note the emphasis on reimbursements from third
parties. This requires the respondent to also be actively involved in the
handling of such liens, at least in my opinion.

The recovery provisions under the rules for both the VA and
Tricare are very similar. Each allows suit to be filed in federal court against
a third-party payer within six years of the last day of the provision of the
medical care or services for which recovery or collection is sought. However,
they are much too extensive to include them here. I therefore recommend they be
read in full, as they also refer to other statutory and rule provisions which
will also impact the handling of WC matters involving VA/Tricare payments. By
way of example, I’ll just point to one:

VA/Tricare “reasonable charges,” determined in accordance
with federal law and regulation, “shall be” judicially noticed. See: 44 U.S.C.
1507. The government is not required to litigate reasonableness of
administrative fixed rates. Billing rates are not subject to challenge for
unreasonableness or arbitrariness. There are many more which may impact any
case at a given time, so when dealing with these liens, do the research!

Now it’s time for some practical ideas for handling claims
involving the VA/Tricare. As I noted earlier, many people are covered by the VA
or Tricare. For the petitioner’s attorney this will require asking a potential
client at the first interview if he or she is covered by either program. In my
prior article in this blog on Medicaid/NJ Family Care I pointed out that even
people working for employers which provide excellent health care are covered by
those programs due to the cost of the employee’s share of premiums,
co-payments, etc. The same situation exists with Tricare. Just the other day I
interviewed a woman working for a company with good employer-provided health
care. However, she was covered by Tricare, since her husband was retired from
the Navy.

Another issue I really need to address is whether there are
requirements in these recovery Acts or Codes placing a direct responsibility on
an attorney to place the VA/Tricare on notice of a WC claim filed by a
beneficiary where some treatment has been provided by one of these programs. While
I am unaware of any such written requirement, keep in mind that the beneficiary
(your client) does have a duty to cooperate in recovery efforts. Further, the
attorney has a duty to properly represent the client. So, my position is yes,
notice should be given even if no inquiry from either program has been sent to
the attorney or client.

I believe respondents need to be pro-active here. I previously
quoted provisions of the VA and Tricare recovery Codes. Both clearly state
recovery is against a third party payer, and define a third party payer as
including workers compensation programs and carriers. In addition, I need to
cite a further VA Code provision:

38 C.F.R. 17.106 (c): VA’s right to recover or collect is exclusive. The only way for a third party payer to satisfy its obligation under this section is to pay the VA facility or other authorized representative of the United States. Payment by a third party payer to the beneficiary does not satisfy the third-party’s obligation under this section. (Emphasis added.)

This section, referring to an obligation on the part of the
third party payer, emphasizes the need for the respondent to be pro-active, in
my opinion. On its face, this section prohibits a settlement whereby the respondent
pays petitioner a sum of money to satisfy a VA/Tricare lien. Its import,
however, emphasizes the respondent’s role in satisfying a lien. Respondents
therefore need to act quickly in determining if a claimant is covered by
VA/Tricare as early as possible following receipt of a First Report of Injury.
In claims where the petition is the first notice of claim, respondent’s counsel
should immediately determine this information.

In closing, I’ll first provide two websites to visit when faced with payments by the VA/Tricare. For the VA I found the VA’s Office of General Counsel’s website quite helpful. This is www.va.gov.ocg/collections.asp. For Tricare I suggest visiting their website at www.tricare.mil and go to Forms/Claims/ThirdPartyLiability.

I’d also like to state that of the various liens discussed in my articles, those from the VA and Tricare, seem to be less understood than others. It is hoped this article will alert practitioners to them. All parties must recognize the importance of identifying and addressing payments made by one of these Department of Defense health care programs. The statutes and rules are extensive and complex but do provide guidance in navigating the shoals of DoD liens. There, I closed with another naval reference!!

(Editor’s Note:  Many thanks to Alfred Vitarelli, Esq., a frequent contributor to this blog, for an incredibly helpful explanation on how to deal with VA and Tristar liens.  This is an area of law that employers, adjusters, and practitioners must understand, and the rules are not exactly the same as those with CMS and Medicare.  Keep this blog by your side because we will all be dealing with VA and Tristar liens on a fairly regular basis.)

The post Veterans Administration/Tricare Subrogation Rights – Issues in Workers’ Compensation Practice Requiring a Proactive Approach appeared first on NJ Workers' Comp Blog.

What happens if an employer terminates the employment of a worker, who then has an accident before leaving the work premises?  Is there workers’ compensation coverage? Does it make a difference if the employee quits as opposed to being fired and then has the injury on premises while leaving?  Does the moment of job termination immediately sever workers’ compensation protection?

These are questions that were recently put to me by a claim professional.  A search of published cases in New Jersey since the 1979 Amendments yields no published case on point.  However, the answer is undoubtedly that coverage for workers’ compensation will continue, barring some deviation, until the employee leaves the work premises.

While workers’ compensation laws vary from state to state, there is one authority that courts in every state look to, namely Larson’s Workers’ Compensation Law.   This treatise written by Professor Arthur Larson suggests that the employee is covered for workers’ compensation purposes for a reasonable period of time while packing his or her belongings and leaving the work premises.  A slip and fall while exiting the work premises should therefore be compensable under most circumstances.

Professor Larson comments that injuries post job termination are actually quite common because employees are often extremely upset in the moments after termination, leading them to be inattentive or careless.  Many times employers are suspicious about such injuries, and employment counsel often recommend that someone in supervision accompany the injured worker who has been terminated until he or she leaves the premises.  This is certainly good advice for a number of reasons.

Professor Larson analogizes injuries post job termination to punching in or out before leaving the premises.  Case law in New Jersey provides that punching in and out of work is separate and distinct from shedding the protection of workers’ compensation coverage.  Punching in and out is important for purposes of payment.  But New Jersey cases make clear that one remains covered for purposes of workers’ compensation while being on the premises, whether the employee has not yet punched in or has already punched out of work.  The key is the location of the worker at the time of the accident.  Was the employee injured on premises owned or controlled by the employer? If yes, there is coverage, notwithstanding that the employee may not have punched in yet or has already punched out.

Similarly, an employee is covered for workers’ compensation purposes during on-premises lunches, even though having lunch itself is not a job requirement.  New Jersey law is unequivocal that injuries in company cafeterias are compensable.  The reasoning again is that New Jersey has a strong premises rule.  Work premises are equal:  sitting in a lunch room is the same as sitting at one’s desk for purposes of workers’ compensation coverage.

Are there exceptions to the rule noted above?  Professor Larson makes an interesting observation that an employee who has quit or who has been fired can sometimes lose coverage if he or she lingers for a lengthy period of time on the premises and begins, for example, to play cards with colleagues or drink alcohol.  Those activities would be deviations and would take the employee out of workers’ compensation coverage.  But if the delay in departure from the work premises is caused by the employee’s need to wait for employer transportation in a company vehicle, coverage would continue while the employee leaves in the company vehicle.

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Section 20 settlements are not technically payments of workers’ compensation benefits except for insurance rating purposes.  These settlements are popular with employers because the file can be closed for good with no potential for a reopener claim.  In many states, the Section 20 settlement is called a full and final settlement.  But does a Section 20 settlement mean that the employer has no subrogation rights as to medical, temporary or permanency payments when the injured worker has a good third party case arising from the work accident?

It is important for practitioners to consider at the time of a Section 20 settlement whether there is a third party case pending.  If so, the issue arises whether the employer has a lien on medical and temporary disability benefits paid prior to the settlement.  Example:  suppose the employer pays $30,000 in medical and temporary disability benefits to a claimant, who has a good third party lawsuit which he will eventually settle for $100,000.  There are causation issues in the workers’ compensation case such that the parties agree to settle the permanency claim petition months later for $45,000 on a Section 20.  On the day of settlement, no one mentions anything about the prior payments of $30,000 for medical and temporary benefits.  The Judge of Compensation approves the Section 20 settlement for $45,000.  A few days later the third party case settles for $100,000, and the employer requests reimbursement of two thirds of the $20,000 it has paid in medical and temporary disability benefits.

Does the claimant owe the employer $20,000 minus $750 in costs of suit?  The answer is yes, according to Aetna Life & Cas. v. Estate of Engard, 218 N.J. Super. 239 (Law Div. 1986).  The $45,000 payment under the Section 20 is not lienable, but the prior medical and temporary disability benefits made well before the case settled remain lienable.  Best practice would be to place all of this on the record so that the injured worker is well aware that only the $45,000 Section 20 payment will escape the respondent’s lien, not the prior medical and temporary disability benefits.

Suppose the defense attorney in the same case negotiated with the petitioner’s attorney to allow the $45,000 Section 20 payment to be lienable?  Can that be done in New Jersey when a Section 20 payment is not really a payment of workers’ compensation benefits?  Yes, according to Calle v. Hitachi Power Tools, No. A-1015-09T1 (App. Div. February 15, 2011).  This situation seldom happens in workers’ compensation court.  But the parties are free to negotiate the terms of a settlement whereby the petitioner agrees to permit a Section 20 payment to be lienable.  The Judge of Compensation must, of course, approve the entire settlement, including this aspect of the settlement.  The intention to make the Section 20 payment lienable should be placed on the actual court order and on the record, thereby making clear that respondent has a lien on the Section 20 payment itself.

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In every workers’ compensation trial both parties believe passionately in their position, but in the end, one party will prevail and one will lose.  Inevitably, the losing party will have to consider whether to file an appeal.  It is important to understand the appellate process, particularly the types of cases that stand a good chance of reversal and those that do not.

Some workers’ compensation trials focus on purely legal issues where the facts are really not in dispute; other trials focus primarily on facts in dispute, and still others focus on medical causation issues.  There are even cases with all three of these issues involved in the same trial.

Appeals in New Jersey from workers’ compensation go to the Appellate Division.  The judges in the appellate division do not take testimony on their own.  They do not hear witnesses, and they do not do independent research on medical causation issues.  Their focus is on the trial record below, which consists of testimony at trial, evidence submitted at trial, legal briefs submitted at trial, and the formal decision of the Judge of Compensation.  Appellate judges will defer often to the findings of the Judge of Compensation but not on questions of law.

So for starters one can say that when the issue on appeal is purely one of law, the parties know that the appellate judges are not going to defer to the Judge of Compensation.  The appellate judges will review the facts in the record and apply their own understanding of the relevant law.  They will read the statute and will read the relevant case law.  Most successful appeals happen when the issue is a legal one involving interpretation of the law.

For example, imagine a case where an UBER driver is injured and files a workers’ compensation claim against UBER.  The company denies that the driver is an employee and asserts that she is an independent contractor.  The facts are not in dispute.  The Judge of Compensation reviews the testimony and finds that the driver is an employee and not an independent contractor.  The Appellate Division will not defer to the Judge of Compensation on that finding because this case involves interpretation of the law on employee status and independent contractor status.  The appellate division will respect the findings of the Judge of Compensation on the facts of the case, but it will do its own assessment of the relevant law as applied to the facts.

In contrast, when a Judge of Compensation hears testimony from witnesses and finds that the witnesses for the petitioner were far more credible than the witnesses for the respondent, the appellate judges will defer to the findings of the Judge of Compensation.  The Judge of Compensation is in the best position to assess credibility because he or she hears the actual witnesses, can see their reactions to questions, and can evaluate the way they responded to cross examination.  Judges often ask their own questions of witnesses, and that level of engagement puts them in a very strong position to assess credibility.   So if the sole argument in the appeal is that respondent believes its witnesses were more credible, one can say at the outset that the chances of reversal are extremely low.  This type of appeal will seldom find any success.

Another category of appeal common in workers’ compensation involves the battle of the experts.  There are many occupational disease claims, cancer trials for example, where the facts are not in dispute but the medical experts dominate the trial.  Sometimes one expert is highly qualified and practices in the field at issue, and the other expert has far less qualifications.  The less qualified expert may simply provide a generalized opinion that the cancer condition is work related without citing to valid studies or medical literature.  These cases can be successfully appealed either on the theory that one expert was more credible based on qualifications or that the less qualified expert simply provided a “net opinion,” which is an opinion without any real scientific support for it.

When the issue pertains to the level of permanent partial disability, appellate judges will always defer to the expertise of the Judge of Compensation.  For example, consider a case where a construction employee lifts a heavy beam and herniates two discs, requiring fusion surgery.  The Judge of Compensation considers the impact of the injury on work and non-work aspects of the petitioner’s life, and the judge finds a disability of 45% permanent partial disability.  The respondent’s IME physician had a relatively low estimate and respondent expected an award of 35% permanent partial disability.  The difference between 35% and 45% is around $60,000, so the respondent appeals.  This sort of appeal almost always has a very low percentage of reversal because the appellate division judges defer to the skill and expertise of the Judge of Compensation in assessing permanency.

As a rule appeals based solely on the level of disability are ill-advised.  It is a rare case where such a reversal will occur.  For example, an appeal might be successful if the judge in the above example in finding 45% permanent partial disability said: “I found 45% permanent partial disability because that is what I normally find for two disc fusion surgery.”  Respondent could argue that the judge used a pre-set percentage in his or her mind and applied it to this case, as opposed to studying the individualized facts of the case and the impact of the accident on this claimant’s work and non-work life.  New Jersey Judges of Compensation understand that they need to consider each case on its own merits, so this type of appeal seldom gets filed.

Perhaps the most common argument on appeal is that there is insufficient credible evidence to support the findings of the Judge of Compensation.  This sort of an appeal can be successful in the circumstance where the Judge of Compensation makes a finding that is truly unsupported by the evidence.  But it is a tough argument because the appellate judges must be convinced that there is really no sufficient credible evidence to support the finding below.

Here is a simple example of where this argument could be made.  Consider a case where the employer has store security footage showing that the alleged injured employee did not fall at 2 p.m. in aisle six of the grocery store as is alleged in testimony.  The footage is unchallenged as to authenticity and it shows that the employee was never in that aisle at that time.  The employee maintains that he or she fell definitely in aisle six by the Kelloggs’ cereal boxes at 2 p.m.  The petitioner produces a witness who says that she believes that the petitioner may have gone in that aisle that day, but the witness did not see the actual fall.

The Judge of Compensation finds petitioner’s witness more credible and also finds that petitioner may have been mistaken about the aisle and probably fell in aisle five because there were some Kelloggs’ products also in aisle five.  But petitioner never claimed to be in aisle five.  Respondent will likely win on appeal by arguing there is insufficient credible evidence to support the determination of the Judge of Compensation because the best evidence would be the security footage showing that the injury could not have happened as alleged in aisle six at 2 p.m.

Estimating chances on appeal is a difficult thing to do, and there are many factors to consider.  The record has to be solid, meaning that all the evidence that the appealing party wanted to get in to evidence actually did get in, and the appellate brief and argument must be strong.  It is also very important to remember that the appellate judges do not hear arguments on appeal that were never raised in the trial before the Judge of Compensation.  If there is a valid argument on the independent contractor defense, that argument must be made at trial, not for the first time on appeal.

For this reason, both parties should submit detailed legal briefs explaining their position in the trial below, or at least make closing arguments to the Judge of Compensation detailing each point at issue.  This is the only way that the Judge of Compensation can know the arguments.  Judges in our system do not have law clerks and are extremely busy handling large lists every day, so it is incumbent on counsel to raise all the issues either in legal briefs or closing arguments – or both.  Counsel should then be able to provide to their clients solid guidance on the potential for success on appeal.

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Employees who are out of work due to work injuries or illnesses are eligible for temporary disability benefits at a rate of 70% of wages subject to an annual maximum.  In 2018 that maximum is $903 per week.  That means that the employee who earns $2,000 per week or even $20,000 per week is limited to $903 per week in temporary disability benefits.  But a substantial number of New Jersey employees – particularly public sector employees – receive full salary during their period of work absences and are not limited to the annual maximum.

There are two categories of full salary employees:  those who receive full salary by statute and those who receive full salary by collective bargaining agreement.  The difference is significant and is important to understand.

Full Salary By Statute

One very large group of New Jersey employees receives full salary by statute – employees of boards of education.  Under N.J.S.A. 18A:30-2.1, a board of education employee receives full salary for one year from the date of injury.  So an experienced teacher, for example, earning $1,800 per week receives full salary for up to one year from the date of injury.  Here is the part that is not well known:  that teacher also has no state or federal taxes taken out of the paycheck!  Clearly, that was not the intention of the New Jersey legislature in passing this statute.  The IRS, however, has issued opinions that have resulted in a windfall to education employees such that they actually earn substantially more than they did while working.

How did this happen?  The explanation is really quite simple.  Workers’ Compensation laws are not taxed.  The IRS interprets N.J.S.A. 18A:30-2.1 as a workers’ compensation law because it is a statute passed by the legislature.  The law provides full salary compensation to those education employees who are injured at work for one year.  The IRS therefore concludes that the entire full salary payment is not taxable.  What is the result? Board of education employees keep virtually their whole paycheck while out on workers’ compensation absences up to one year, making more than they did while working.

Full Salary By Collective Bargaining Agreement

The other large category of employees which receives full salary does so by collective bargaining agreement, including those in the public or private sector.  These agreements are negotiated ones between union and management.  In the public sector, virtually all public safety workers, i.e., police, fire, EMT, receive full salary by collective bargaining agreement.  In some towns all municipal employees are covered by such agreements.  In the private sector, there are also comparable negotiated agreements.  The same principle applies:  the police officer earning $2,000 per week receives full salary by negotiated agreement but the employee must pay state and federal taxes from his or her paycheck.

Why the difference?  Because a negotiated agreement is not the equivalent of a law.  It is simply a written agreement between parties.  Therefore when the police officer earning $2,000 per week is out on workers’ compensation, all the same deductions come out of the paycheck.

The IRS would be more receptive to not taxing the entire full salary payment of a public safety employee if the municipality passed an ordinance, and the elected officials voted on it, as opposed to simply negotiating a collective bargaining agreement.

There are generally time limits for full salary under both scenarios.  Under Title 18A the full salary period ends at one year.  After that the third party administrator or carrier pays temporary disability benefits directly to the employee subject to the $903 maximum rate.  The same is true of most collective bargaining agreements.  Most public sector employers provide some limitation to the full salary period, perhaps six months or a year, but a good number remain unlimited, ending only at maximal medical improvement or return to work.

When an employee who was receiving full salary is reduced to the maximum rate of $903 per week for a 2018 injury, he or she may request that the employer allow supplementation of workers’ compensation benefits with accrued leave – sick time, vacation time, or personal days.  This is discretionary on the part of the employer, unless the collective bargaining agreement addresses the issue.  The FMLA does permit substitution of paid leave for those on workers’ compensation, but employees who have been out for a year are not eligible for FMLA since they cannot satisfy the requirement of having worked 1250 hours in the prior year.

The interesting question is what does an employer pay to an employee who is receiving full salary?  Is the police officer who is receiving $2,000 per week while out of work receiving workers’ compensation benefits?  Not really.  The officer is receiving something substantially better than workers’ compensation benefits.  He or she is getting full salary payments in lieu of workers’ compensation benefits. That is part of the negotiation.

Some public employees have argued that the workers’ compensation portion of their check (for example $903 of the $2,000 paycheck) should be tax free, but that would result in a windfall to the employee.  Our hypothetical police officer would be getting $903 tax free on top of $1,100 approximately taxable.  Viewed properly, the full salary employee is not getting workers’ compensation at all.   The 70% temporary disability check goes to the employer from the third party administrator or carrier as a partial reimbursement for the full salary check.

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Everyone knows that New Jersey has a minimum rate for temporary disability benefits, but it is not as widely understood that New Jersey also has a minimum rate for permanency.  In 2018 the minimum rate for temporary disability benefits is $241 per week.  But the minimum rate for permanency remains $35 per week, as it has for many decades.

Why is this important?  Part-time employment is at an all-time high in the United States, and millions of Americans have second jobs. There are many situations where an employee will have a high-paying full-time job but the injury occurs on the part-time job.  The question for adjusters and professionals is how to set the rate and thereby determine exposure and reserves.

Consider a cafeteria worker in a private business who works part-time earning $100 per week.  He falls, fractures his hip and develops problems with walking.  What do we pay this worker for temporary disability benefits?  The answer is $241 per week until he reaches maximal medical improvement or can return to work either full-time or on a light duty basis.  It does not matter that $241 per week is higher than the wage of $100 per week.  That is the minimum rate.

Now fast forward to the permanency stage of the case.  The injured worker has had a hip replacement and has permanent gait issues.  The Judge of Compensation has reviewed the permanency estimates for both sides and recommends 50% permanent partial disability as a compromise for settlement purposes.

What do we pay this worker for a 50% award?  He is back to work at the cafeteria job and back to work full-time at his regular job at a grocery store, but he clearly has objective evidence of a significant impariment.  The rate chart which we all have at our desks says that 50% permanent partial disability equates to 300 weeks of compensation at a rate of $657 per week for a 2018 injury for a grand total of $180,600.   But remember that his wage is $100 per week in the part-time job.  That is the wage we focus on, not the worker’s full-time job at the grocery store.  Can we pay less than $241 per week, which is the minimum for temporary disability benefits?  Yes we can because there is a different minimum for permanency purposes.

This is an area of practice that every good practitioner must master.  We do not pay $180,600 over 300 weeks.  That would be an enormous overpayment.  We take the wage of $100 and multiply it by 70% for a rate of $70 per week.  We then multiply $70 per week times 300 weeks and get an award of $21,000.  That is about $160,000 less than the rate chart provides for someone with a 50% disability!

So the lessons in understanding the minimum rate for permanency are crucial to grasp.  Countless workers’ compensation cases get overpaid for failure to understand that the minimum for permanency is far less than the minimum for temporary disability benefits.

• Remember not to use the rate chart on your desks for low wage employees. The rate chart is only relevant for high wage employees
• Do not count the other job’s wages in New Jersey in calculating the amount due for temporary disability or permanent disability purposes.  You use the wage for the job where the injury occurred.
• For permanency awards, take the average weekly wage, multiply by 70% and that becomes what we refer to as the “capped rate.”  The rate never goes higher than that number.  In the above case, the capped rate is $70 per week.
• Set the wage and rate at the start of the case for both temporary and permanency purposes.  All accurate reserves and exposure analysis depend on this.
• We do not reconstruct wages for temporary disability benefit purposes.  In some cases a worker’s part-time wage may be reconstructed to a 40-hour week if the worker can show a permanent diminution of working ability.  It is our position that someone who is back to work on both jobs cannot meet this test for reconstruction of wages.

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On August 24, 2018, Governor Murphy signed a bill that for all practical purposes ends the right of employers to make bona fide offers of permanent partial disability free of counsel fees.  The statute that enabled employers to make bona fide offers within 26 weeks of maximal medical improvement, or return to work, whichever is later, without the offer being feeable, was passed on April 3, 1928.  For almost a century, employers made such voluntary offers to tide injured employees over while their workers’ compensation cases were pending.  The inducement to employers was the savings on counsel fees.  Neither petitioner nor respondent paid a counsel fee on the amount of a timely voluntary offer.

Under the new law signed by the Governor, counsel for petitioners are entitled to a fee on all benefits paid to the petitioner if those payments occur after the date of a signed agreement between counsel and the injured worker.  An employer can still make an offer of permanency if the employer so desires and get a dollar credit, of course, but for practical purposes there will be no way to know whether the voluntary offer will be feeable.  There is no obligation on the part of the injured worker to disclose to the employer or carrier whether he or she has a signed agreement with counsel.  In many cases the adjuster may be well aware that the injured worker has an attorney and can therefore infer that there is an attorney-client relationship.

One question practitioners have is whether an attorney for the injured worker can still agree with the employer or carrier not to take a fee on a voluntary offer of permanency as an inducement for such an offer to be made.  Voluntary offers of permanency are popular with injured workers because they help with the employee’s finances while the case is pending.  This sort of agreement by petitioner’s counsel to waive a fee on an amount offered would almost certainly be honored by a Judge of Compensation, even if there is a written agreement predating the offer of permanency.

One other important legislative development in New Jersey is the potential loss of the “reverse offset.”  New Jersey is one of 15 states that has an agreement with the Social Security Administration giving the offset for total disability payments to the employer.  In most states the offset goes to the Social Security Administration.   In a reverse offset state like New Jersey, workers’ compensation benefits in total disability award cases are reduced by the amount of SSDI benefits in certain circumstances.

The proposed 2019 federal budget eliminates the reverse offsets in the 15 states that currently are permitted to offset against SSDI benefits.  There is a formula that limits the employee to 80 percent of the employee’s average current earnings between workers’ compensation and SSDI benefits.  In New Jersey, the benefit from workers’ compensation is reduced rather than SSDI in achieving the 80% limit.  This has saved employers and carriers countless millions of dollars over the years.  The current budget proposal would eliminate this practice in all 15 states that have a reverse offset.  The reason for the budget proposal is that it will allegedly save the federal government $164 million over 10 years.

Thanks to Craig Livingston, Esq. for bringing this budget proposal to our attention.  Employer groups need to speak to their federal legislators about opposition to this budget proposal.  This would be a very costly change for New Jersey employers, and such a change will generate much more litigation in total disability claims.

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New Jersey has a sensible provision that protects employees of subcontractors who are injured on construction jobs.  If an employee of a subcontractor is injured on a job, and the subcontractor has no workers’ compensation insurance, the injured employee becomes covered by the general contractor’s workers’ compensation policy.  But what if the injured employee instead decides to file a civil suit against the general contractor for negligence?  Does the general contractor’s liability insurance policy cover the civil suit? Can the injured employee sue the general contractor and obtain workers’ compensation from the general contractor?

These questions were answered in DaSilva v. JDDM Enterprises, LLC, David Cohen, t/a JDDM Custom Construction, A-3302-16T2 (July 27, 2018).  The case involved an injury to Mr. DaSilva.  He was working for Hand Brothers on a construction job.  Hand Brothers was a subcontractor of JDDM, the general contractor.  DaSilva fell one story through a cut-out stairwell on the job and suffered injuries.  Hand Brothers had allegedly presented a fake certificate of insurance to JDDM and actually had no compensation coverage.

DaSilva sued JDDM and its principal, David Cohen, seeking damages in a civil action.  JDDM referred the suit to Utica Insurance, its liability carrier.  Utica declined coverage because its policy excluded workers’ compensation injuries.  JDDM and Cohen then filed a third-party declaratory judgment action against Utica, seeking an injunction to compel Utica to defend NJJD and Cohen in the civil action.  Utica then moved for summary judgement arguing that the declaratory judgment suit must be dismissed as Mr. DaSilva’s injuries arose from work. Utica further contended that DaSilva was covered by JDDM under N.J.S.A. 34:15-79 because JDDM was the general contractor.

The trial judge granted summary judgment in favor of Utica.  JDDM and Cohen settled the civil claim with DaSilva and then appealed the decision to let Utica out of the case.  The Appellate Division reviewed the language contained in Section 79.  “Under this provision, a contractor who retains a subcontractor becomes liable for workers’ compensation benefits owed to the subcontractor’s employees if the subcontractor does not provide workers’ compensation insurance.”

The Appellate Division also took note of the fact that JDDM’s workers’ compensation carrier in fact admitted liability under Section 79 to DaSilva. The Appellate Division ruled that Utica’s policy excluding coverage for benefits that are provided or are required to be provided under workers’ compensation was valid.  Since JDDM was required to provide workers’ compensation coverage under Section 79, Utica was well within its rights to deny coverage on the civil suit.

What about the right of DaSilva to sue the general contractor while at the same time asserting coverage for workers’ compensation against the general contractor under Section 79?  Does the exclusive remedy provision apply barring his civil law suit?  The Appellate Division commented as follows: “Because general contractors are not part of an employment contract between a subcontractor and its employees, they are ‘not required to provide workers’ compensation coverage, and do not enjoy the immediate employer’s immunity from tort liability,” citing to Eger v. E. I. du Pont de Nemours Co., 110 N.J. 133, 137 (1988).

So the Court was saying that DaSilva’s civil law suit against the general contractor was not barred under the exclusive remedy provision. That may seem unfair to the general contractor.  However, Section 79 does allow the general contractor to full reimbursement from the subcontractor which failed to carry insurance.  In addition, there would be subrogation issues here under Section 40.  DaSilva had a double recovery here.  He settled his civil suit against the general contractor and obtained workers’ compensation benefits from the general contractor by virtue of Section 79.  Therefore, the worker’s compensation carrier would be entitled to assert subrogation rights and thereby reduce its obligation to DaSilva.

Thanks to our friend Ron Siegel, Esq. for bringing this case to our attention.

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I have written many times about the fact that success for employers in workers’ compensation most often comes down to past medical history and causation analysis.  This is particularly true in a state like New Jersey where there is virtually no formal discovery allowed.  Employers need to know in a back claim, for example, whether the injured worker has an extensive prior history of chiropractic treatment or car accidents. But what about the importance of reviewing treating notes of various doctors and therapists after the work accident? This is an underrated concept and deserves some consideration.

This practitioner had a case recently where the employee injured her knee at work and was diagnosed with a partial tear requiring no significant treatment.  Conservative care ensued and the recovery seemed excellent.  Then six months went by and the injured worker suddenly returned back to the authorized doctor stating that her knee had become much more painful.  The treating doctor noted the significant worsening in the knee and mentioned that petitioner had seen her family doctor recently.  The IME doctors put fairly high estimates on the knee, leading to a potential award of 20% of the leg with the potential for knee surgery on a reopener.

Our office sent a subpoena for the family doctor’s records with particular interest on the visit in the summer noted in the treating doctor’s report.  That entry in the family doctor records stated, “Patient was doing some challenging rock climbing over the weekend and jumped from a height landing on her knee, causing intense pain and swelling.”  That was the only reference to this new incident, and obviously this constituted a significant event. It accounted for the sudden visit to the treating doctor after six months of no treatment.  This information changed the course of the case.  It allowed respondent to avoid a significant order approving settlement with reopener rights.  Instead the case settled for a nominal Section 20.  But for the subsequent family doctor records, this employer would have paid ten times as much money, bought a likely reopener, and eventually a likely knee surgery with a higher award.

Defense counsel, adjusters and employers must scrutinize subsequent treatment records, PT notes, and tools like ISO reports.  When an employee like the claimant above reinjures her knee, that new incident amounts to the same thing as a work accident – except it is a non-work event that breaks the chain of causation.  If someone falls in a grocery store while shopping and reinjured his shoulder before the case is settled, that subsequent accident may be perhaps of equal significance to the original fall at work that injured the shoulder.  The same is true of subsequent car accidents that cause significant treatment, new MRIs, and injections in a person who has already had a work-related back injury.

Subsequent non-work accidents are pivotal in many workers’ compensation case. These accidents often relieve the employer of paying an expensive order approving settlement with reopener rights. The reason is simple: injured workers receive permanent disability benefits for their “current complaints” at the time of settlement.  The current complaints incorporate the complaints from the subsequent non-work accident.  Employees are not entitled to receive permanency awards for their condition before the subsequent non-work event.  Think about it:  if a non-work accident has objectively worsened the medical condition originally injured in the work accident, it is impossible to distinguish the effects of the medical condition before the subsequent non-work injury from the effects after the subsequent injury.  The employee might have healed if it were not for the subsequent non-work injury.  The testimony at settlement regarding present complaints will by definition be closer in time to the events of the non-work accident.  For the petitioner to prove that the present complaints are unaffected by the subsequent accident is impossible if the non-work subsequent accident worsened the medical conditions from the work accident.  It would be like putting additional ingredients in a basic smoothie, drinking the smoothie for the first time, and then trying to describe what the drink would have tasted like before the ingredients were added.

Practitioners should read PT notes religiously.  They often contain amazingly important nuggets of information about non-work activities.  Most physical and occupational therapists are prolific note takers.  They know how important it is to get the interim medical history, and they write it down.  How many times have counsel read PT notes and discovered that the injured worker is complaining of a new injury playing sports over the weekend?  That new injury may explain a sudden change in condition and break the chain of causation.  It may lead to a Section 20 that otherwise would not have occurred.  Nor should the practitioner assume that the IME doctor is going to read the treating notes thus relieving the obligation of defense counsel and adjusters to read them.

Just as prior family doctor and chiropractic records often hold the key to the defense of a workers’ compensation case, so too subsequent treating notes may dramatically lower the defense exposure and lead to enormous savings for employers.

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