STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

WILLIAM B. WAUGH, Applicant

FOREST COUNTY POTAWATOMI
COMMUNITY INC, Employer

WAUSAU GENERAL INS CO, Insurer

WORKER'S COMPENSATION DECISION
Claim No. 2007-006488


In October 2008, the applicant filed an application for hearing asserting that compensation for a seven percent permanent partial disability to his shoulder had been improperly paid to the State of Indiana. An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development heard the matter on April 14, 2009, with a close of record on June 3, 2009.

Prior to the hearing, the employer and its insurer (collectively, the respondent) conceded jurisdictional facts and a compensable injury on or about February 12, 2007. The respondent paid certain amounts in temporary total disability and various medical expenses. The respondent also concedes the applicant sustained permanent partial disability at seven percent compared to loss at the shoulder, totaling $9,170, all of which was paid to the State of Indiana.

The sole issue before the ALJ was one involving the nature and extent of disability: more specifically, whether the applicant "was entitled or remained entitled to seven percent permanent partial disability to the right arm on a functional basis." Transcript, page 5. Mr. Waugh requested an interlocutory order requiring the insurer to pay him $9,170 for his conceded 7 percent permanent partial disability. The applicant's attorney requests a 20 percent fee, but no costs.

On August 18, 2009, the ALJ issued his decision dismissing the application with prejudice. The applicant filed a timely petition for commission review.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. Facts and posture.

The applicant was born on August 20, 1965. The applicant conceded that he is subject to two valid court orders in Indiana around 2006 and another valid court order in Oneida County, Wisconsin at about the same time making him responsible for child support for three children, Danielle, age 20, Jacob, age 15, and Devin, age 6 or 7, who are living in Indiana with his former spouse. In Indiana a child is eligible for support until age 21. Indiana is currently administering all three child support orders.

As noted above, the respondent concedes that it owed the applicant compensation for 70 weeks of permanent partial disability at the weekly rate of $131, for a total of $9,170. On February 22, 2008, before it paid the permanent disability compensation to the applicant, the insurer received an income-withholding order(1) from an Indiana state court asserting that applicant was $53,233 in arrears in child support. On March 22, 2008, the insurer informed the applicant by letter that it had received the income-withholding order and asked if he had objections.(2)

Thereafter, the insurer's representative, Jodi Plaster, spoke with the applicant about the income-support order on a number of occasions. On the last occasion, April 11, 2008, the applicant told Ms. Plaster that he had spoken with an attorney in Indiana who advised him that if the applicant had arrearages in support, he would have to pay them. Transcript, pages 12 and 34-35. That same day, the insurer paid the full permanent partial disability benefits directly to the Indiana child support agency.

At issue is whether the insurer should have paid the Indiana child support agency the applicant's permanent partial disability compensation, based on its receipt of the Indiana income-withholding where the order was not "registered" in Wisconsin under Wis. Stat. § 797.601. This can be broken down into three sub-issues:

(1) Are permanent partial disability benefits assignable under the Wisconsin statutes permitting assignment of WC benefits toward child support obligations?

(2) May a worker's compensation insurer withhold the applicant's Wisconsin worker's compensation benefits and send them directly to the Indiana child support agency, based on the insurer's receipt of an unregistered copy of income-withholding order from an Indiana court?

(3) If so, how much may be withheld for assignment?

2. The applicable statutes

In general, worker's compensation benefits cannot be assigned. Wis. Stat. § 102.27(1). However, there is an exception recognized for delinquent child support. Wis. Stat. § 102.27(2):

102.27 Claims and awards protected; exceptions.
...

(2) (a) A benefit under this chapter is assignable under s. 46.10 (14) (e), 49.345 (14) (e), 301.12 (14) (e), 767.225 (1) (L), 767.513 (3), or 767.75 (1) or (2m).

The section that appears most applicable here is Wis. Stat. 767.75(1)(3). Actually, that statutory subsection deals only with definitions; the substantive legal requirements regarding arrearages is actually set out in Wis. Stat. § 767.75 (1f), (3h) and (6). These sections provide:

767.75 Assignment of income for payment obligations.

(1) DEFINITIONS. In this section:
(a) "Employer" includes the state and its political subdivisions.
(b) "Payment order" means an order for child support under this chapter, for maintenance payments under s. 767.225 or 767.56, for family support under this chapter, for costs ordered under s. 767.805 (4) or 767.89 (3), for support by a spouse under s. 767.001 (1) (f), or for maintenance payments under s. 767.001 (1) (g); an order for or obligation to pay the annual receiving and disbursing fee under s. 767.57 (1e) (a); an order for a revision in a judgment or order with respect to child support, maintenance, or family support payments under s. 767.59; a stipulation approved by the court for child support under this chapter; and an order for child or spousal support entered under s. 948.22 (7).

(1f) PAYMENT ORDER AS ASSIGNMENT OF INCOME. A payment order constitutes an assignment of all commissions, earnings, salaries, wages, pension benefits, benefits under ch. 102 or 108, lottery prizes that are payable in installments, and other money due or to be due in the future to the department or its designee. The assignment shall be for an amount sufficient to ensure payment under the order, obligation, or stipulation and to pay any arrearages due at a periodic rate not to exceed 50% of the amount of support due under the order, obligation, or stipulation so long as the addition of the amount toward arrearages does not leave the party at an income below the poverty line established under 42 USC 9902 (2).

...

(3h) DUTIES OF PERSON RECEIVING ASSIGNMENT NOTICE. A person who receives notice of assignment under this section or s. 767.225 (1) (L) or 767.513 (3) or similar laws of another state shall withhold the amount specified in the notice from any money that person pays to the payer later than one week after receipt of notice of assignment. Within 5 days after the day the person pays money to the payer, the person shall send the amount withheld to the department or its designee or, in the case of an amount ordered withheld for health care expenses, to the appropriate health care insurer, provider, or plan. With each payment sent to the department or its designee, the person from whom the payer receives money shall report to the department or its designee the payer's gross income or other gross amount from which the payment was withheld. Except as provided in sub. (3m), for each payment sent to the department or its designee, the person from whom the payer receives money shall receive an amount equal to the person's necessary disbursements, not to exceed $3, which shall be deducted from the money to be paid to the payer. Section 241.09 does not apply to assignments under this section.

...

(6) FAILURE TO COMPLY WITH ASSIGNMENT OBLIGATIONS. (a) Except as provided in sub. (3m), if after receipt of notice of assignment the person from whom the payer receives money fails to withhold the money or send the money to the department or its designee or the appropriate health care insurer, provider, or plan as provided in this section or s. 767.225 (1) (L) or 767.513 (3), the person may be proceeded against under the principal action under ch. 785 for contempt of court or may be proceeded against under ch. 778 and be required to forfeit not less than $50 nor more than an amount, if the amount exceeds $50, that is equal to 1% of the amount not withheld or sent.

3. Are PPD benefits (as opposed to TTD benefits) assignable?

The first question is whether permanent partial disability benefits--as opposed to temporary total disability benefits--are assignable under Wis. Stat. § 102.27(2). Under Wis. Admin. Code, § DWD 40.02(13)(a)4 "[n]et proceeds resulting from worker's compensation or other personal injury awards intended to replace income" are included in the definition of gross income for the purposes of establishing a child support order. In prior cases before the commission involving Wis. Stat. § 102.27(2), the question arose as to whether permanent partial disability benefits were "intended to replace income." The question is now resolved by the relatively recent promulgation of Wis. Admin. Code, § DWD 40.02(13)(b), which now provides:

[DWD 40.02](13)(b) This subsection defines gross income used in establishing a child support order under this chapter and may not be used to limit income withholding under s. 767.75, Stats., or the assignment of worker's compensation benefits for child support under s. 102.27 (2), Stats.

Note: This paragraph clarifies that although the portion of worker's compensation awards not intended to replace income is excluded from gross income in establishing a child support order, the full worker's compensation benefit is assignable for the collection of child support. [Italics in original.]

In recent cases, the commission thus has held that a worker's permanent partial disability benefits may be assigned to pay child support arrearages. Brad Miller v. Roberts Roofing & Siding, WC claim no. 2001-046371 (LIRC, July 9, 2007). See also: McRoberts v. Bauer Built Inc., WC claim no. 2005-031612 (LIRC, March 31, 2009).

4. Did the WC insurer properly assign the applicant's compensation to an Indiana child support agency based on an unregistered Indiana order?

The next question is whether a worker's compensation insurer may withhold the applicant's Wisconsin worker's compensation benefits and send them directly to the Indiana child support agency, based on the insurer's receipt of an unregistered copy of income-withholding order from an Indiana court. The family law statute itself requires full faith and credit be given, in the courts of this state, to the amount of arrearages owed for nonpayment of support or maintenance payments under an order issued by a court of competent jurisdiction of another state. Wis. Stat. § 767.041(1).

In support of his argument that the insurer improperly paid his permanent partial disability compensation to the Indiana child support agency, the applicant cites Wis. Stat. § 767.75(2m)(b), which describes a procedure for causing an assignment "under par. (a) to go into effect." Wis. Stat. § 767.75(2m)(a) in turn, refers to an obligation to pay certain court fees, as well as assignment of benefits under chapter 102 (as well as other income sources) to pay those court fees. This is separate from the assignment of benefits under chapter 102 to pay support orders, including arrearages in support, under Wis. Stat. § 767.75(1f). The assignment of benefits under Wis. Stat. § 767.75(1f) arises automatically upon the issuance of the payment order. The commission, like the ALJ, concludes that Wis. Stat. § 767.75(2m)(b) does not apply to the arrearages in support at issue in this case.

Again, however, this case involves an income-withholding order issued by an Indiana court. The applicant thus cites Wis. Stat. § 769.601 which provides:

769.601 Registration of order for enforcement. A support order or an income-withholding order issued by a tribunal of another state may be registered in this state for enforcement.

The applicant reads this statute to mean that the Indiana order can only be enforced if registered.

It is noteworthy that Wis. Stat. 769.501 permits the enforcement of income withholding orders issued in another state without first registering the order by sending the order directly to an obligor's employer.(4) This case, of course, involves the obligation of the employer's insurer with respect to the income-withholding order. On the other hand, the insurer in this case is jointly liable with the applicant's employer for the payment of the applicant's worker's compensation liability.

Under Wisconsin Stat. § 769.506, an obligor may contest the validity and enforcement of income-withholding order received directly by an employer in this state. Such a contest would seem to trigger the requirement of registering the order, at the very least. See Wis. Stat. § 769.507 (2) (dealing with enforcement of an unregistered income-withholding order issued in another state by a Wisconsin child support agency). However, under the facts of this case, and particularly the conversation between the applicant and Ms. Plaster on April 11, 2008, the commission cannot conclude the applicant put the validity or enforcement of the Indiana income-withholding order in contest in this case.

Under Wis. Stat. § 769.503(2), an employer is to treat an income-withholding order issued in another state as if it were issued by a court of this state. Wisconsin Stat. § 767.75(3h) says that when "a person"--liable to pay money to a parent-obligor (under a child support order)--receives notice of an assignment under the various provisions of Wis. Stat. ch. 767 "or similar laws of another state", the person shall withhold the amount and send it "to the department or its designee." A person who fails to make the required withholding and payment may in fact be liable in contempt.

Based on the record in this case, the commission concludes that the Indiana income-withholding order in this case was enforceable, even though unregistered. The record does not establish that the applicant put the order in contest before it was paid. Arguments may be made as to the effect of an unregistered income-withholding order sent to an employer's worker's compensation insurer, as opposed to the employer itself. However, Wis. Stat. § 767.75(1f) and (3h) requires the payment of worker's compensation benefits to child support agencies in other states, upon receipt of notices from the other states. The Indiana income-withholding order was such a notice under the laws of Indiana. The commission therefore concludes that the worker's compensation insurer could withhold at least part of the applicant's Wisconsin worker's compensation benefits and send it directly to the Indiana child support agency.

5. How much may be withheld?

The last question is how much of the applicant's permanent partial disability benefit may be assigned toward the arrearage in Indiana? The applicant points to Wis. Stat. § 767.75(1f) which states that amount of the assignment that arises against worker's compensation benefits (as well as other forms of income)

to pay any arrearages due at a periodic rate [is] not to exceed 50% of the amount of support due under the order, obligation, or stipulation so long as the addition of the amount toward arrearages does not leave the party at an income below the poverty line established under 42 USC 9902 (2).

There is insufficient evidence to establish that withholding the permanent disability compensation at any level would leave the applicant at an income below the poverty line. On the other hand, the court of appeals has held that the language cited above refers to 50 percent of the parent-obligor's periodic payment, not 50 percent of the total amount of the arrearage. Marriage of Schnetzer v. Schnetzer, 174 Wis. 2d 458, 465-66(1993), overruled on other grounds by Luciani v. Montemurro-Luciani, 199 Wis. 2d 280, 295 (1996).

The last few pages of exhibit 1 include three notices of lien totaling an obligation of $593 per month,(5) or $136.85 per week. Accordingly, the most that should have been withheld under Wisconsin law would have been about $68.425 per week or $4,789.75 in total over 70 weeks, not the whole permanent partial disability award of $9,170. Because the worker's compensation statutes disfavor the assignment of worker's compensation benefits except where specifically allowed by statute, the commission concludes that the remainder, $4,380.25, remains due to the applicant.

The applicant agreed to the withholding of an attorney fee set under Wis. Stat.102.26 at 20 percent of the amount awarded, or $876.05. That amount shall be paid to the applicant's attorney within 30 days. The remainder, $3,504.20, shall be paid to the applicant within 30 days.

Neither party objected to the interlocutory character of the ALJ's decision. This likewise shall be left interlocutory.

NOW, THEREFORE, the Labor and Industry Review Commission makes this

INTERLOCUTORY ORDER

The findings and order of the administrative law judge are modified to conform to the foregoing and, as modified, are affirmed in part and reversed in part.

Within 30 days, the employer and its insurer shall pay all of the following:

1. To the applicant, William B. Waugh, Three thousand five hundred four dollars and twenty cents ($3,504.20) in disability compensation.
2. To the applicant's attorney, John H. Schieck, Eight hundred seventy-six dollars and five cents ($876.05) in fees.

Jurisdiction is retained for further orders and awards as are warranted and consistent with this decision.

Dated and mailed March 24, 2010
waughwi . wrr : 101 : 9 ND 5.42 

/s/ James T. Flynn, Chairperson

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

MEMORANDUM OPINION

The commission's modification of the ALJ's decision was based entirely on its reading of the applicable statutes and caselaw, and not on the credibility of the witnesses who testified before him. The testimony of both the applicant and Ms. Plaster about their conversation of April 11, 2008 was consistent. Accordingly, the commission did not confer with the ALJ concerning witness credibility and demeanor.

cc: Attorney John H. Schiek
Attorney Thomas P. Stilp


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Footnotes:

(1)( Back ) Exhibit 3.

(2)( Back ) The applicant did not testify that he was not provided with a copy of the order itself.

(3)( Back ) Wis. Stat. 767.225(1)(L) and 767.513(3) deal with health care expenses; Wis. Stat. 767.75(2m) deals with arrearages in specified court fees.

(4)( Back ) 769.501 Employer's receipt of income-withholding order of another state. An income-withholding order issued in another state may be sent to the obligor's employer without first filing a petition or comparable pleading or registering the income-withholding order with a tribunal of this state.

(5)( Back ) The notices of lien show monthly payment amounts $34, $497, and $60. The cause numbers on the notices of lien correspond to those in the income-withholding order at exhibit 3.

 


uploaded 2010/04/19