DON R. BINSFELD, Applicant
JONES SIGN CO, Employer
REGENT INSURANCE CO, Insurer
An administrative law judge (ALJ) for the Worker's Compensation Division of the Department of Workforce Development issued a decision in this matter. A timely petition for review was filed.
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 agrees with the decision of the ALJ, and it adopts the findings and order in that decision as its own, except that it makes the following modifications:
1. In the paragraph beginning on page 6 of the ALJ's order, delete
"An attorney's fee totaling $7,844.25 is authorized. Because of the application of the social security offset the respondent has an independent liability for an attorney fee's fee in the amount of $7,844.25, which is hereby authorized. The fee is to be paid by the respondents, neither paid from nor otherwise used to reduce the cushion amount. The Administrative Law Judge declines to authorize additional attorney fees because they would be paid from funds from applicant's portion of the third party recovery for which the attorney has already received a fee."
and substitute:
"An attorney's fee totaling $7,844.25 is authorized, which shall also be deducted from cushion amount. No additional fee is authorized at this point."
2. The first sentence of the ALJ's Interlocutory Order is deleted and the second and third paragraphs of the commission's Interlocutory Order substituted therefore.
NOW, THEREFORE, the Labor and Industry Review Commission makes this
The findings and order of the administrative law judge, as modified, are affirmed and reversed in part.
Within 30 days, the employer and its insurer shall pay the applicant's attorney George Burnett, the sum of Seven thousand eight hundred forty-four dollars and twenty-five cents ($7,844.25), which it may pay from or recover from the cushion. In addition, the cushion amount is reduced by Thirty-one thousand, three hundred seventy-six dollars and ninety-eight cents ($31,376.98) for payment of the balance due the applicant under this order.
Jurisdiction is reserved for further orders and awards as may be appropriate.
Dated and mailed September 16, 2010
binsfel . wmd : 101 : 1 ND6 1.5, 9.48, 9.49
/s/ James T. Flynn, Chairperson
/s/ Robert Glaser, Commissioner
/s/ Ann L. Crump, Commissioner
This case involves an attorney fee paid to the applicant's attorney following the distribution of a third party settlement under Wis. Stat. s 102.29, with an added factor of a reduction in disability compensation rates due to the social security reverse offset under Wis. Stat. § 102.44(5). In general, an award or settlement from a third party action subject to Wis. Stat. § 102.26(1), is divided as follows:
Money remaining in the third part after reimbursing the worker's compensation insurer for its current payments may be held in a kind of escrow for future payments. This remainder is referred to as the "cushion."
In this case, the employer conceded certain medical expenses and temporary disability. It disputed its liability for certain other medical expenses and, more significantly, for permanent total disability. After a hearing, the ALJ decided the permanent disability claim in the applicant's favor. As a result of his order, while the worker's compensation insurer is liable for permanent total disability benefits instead of permanent partial disability, those benefits are currently being paid from the "cushion."
Further, because the applicant is receiving social security disability, the permanent total disability benefit amount is reduced due to the social security reverse offset. In this case, the offset reduce the applicant's disability rates to $173.33 per week. The effect of the ALJ's decision, then, was award to permanent total disability at that weekly amount. After calculating what was due, and what had been paid, the insurer owed an additional $31,376.98 which, of course, it was entitled to recoup from the cushion.
The only issue on appeal to the commission in this case involves the payment of the attorney fee. Ordinarily, where there is no cushion and no social security offset, the attorney fee is deducted from the amount currently due the worker and the remainder paid to the worker. The fee is usually based on a percentage of additional compensation awarded, including amounts yet unaccrued, though in permanent total disability cases the fee is subject to a maximum of 500 weeks.
However, when a worker's disability compensation rate is reduced by the social security reverse offset, his or her attorney fees are not deducted from the award, but paid in addition to the award from what is sometimes called the "reverse offset savings" or the amount the worker's compensation insurer saves by not having to pay the injured worker his full rate. See Wis. Stat. § 102.44(5)(a) (referring to the exclusion of costs). The department's interpretative note to that statutory subsection states that "[a]ttorney fees and costs are not offset," and a "DILHR Memorandum on Social Security Reverse Offset" sent by then-Division Administrator Chris Faulhaber to all worker's compensation insurers on August 1, 1987 explains at page 9:
7. Attorney fees: When an attorney makes a recovery for a client and is entitled to a fee, the 20 percent is paid on the amount you pay as the weekly balance to the employee but it is in addition to it rather than withheld from it.
Effective May 2008, the department changed its policy to pay a fee of 25 percent on the amount awarded to the applicant, so that when the fee and the amount paid to the applicant are added together, the fee is 20 percent of the sum. See Worker's Compensation Insurance Letter, INS # 472, dated March 31, 2008, from Frances Huntley-Cooper to Insurance Carriers et al.
That is not the only complication in this case. The respondent argues there should be no fee at all, as the applicant's attorney really did not get any additional compensation for the applicant, at least not yet. The disability compensation which the applicant is being awarded is being paid out from the cushion that is part of the applicant's third party award, and would be retained by him in full, were no worker's compensation being paid. Further, the cushion amount is two-thirds of what is left of the third party settlement after attorney fees and costs are deducted. Hence, ordering payment of a fee may seem like paying an attorney fee twice on the same amount.
In other cases, the ALJs and the commission have declined to start paying an attorney fee until the cushion is exhausted. See Radank v. Sprinkmann Sons Corp., WC claim no. 93011349, 1997 WI Wrk. Comp. LEXIS 230 (LIRC, October 28, 1997, ALJ's decision, April 3, 1997); Howell v. Wintz Company, WC claim no. 92042764, 1994 WI Wrk. Comp. LEXIS 357 (LIRC, May 4, 1994, ALJ's decision March 1, 1993). However, both Howell and Radank involved relatively smaller cushions that were exhausted, or nearly exhausted, by the time of commission review. The applicant's attorney argues that what makes this case different is not the size of the cushion, but the social security reverse offset. Because the reverse offset statute provides that the amount of the compensation cannot be reduced by the attorney fees (which are paid instead from the reverse offset savings), the applicant argues that the ALJ has the authority to award a fee paid by the insurer that is neither deducted from the applicant's weekly payment nor credited against the cushion, but for which the insurer is independently liable and must pay from the reverse offset savings without deduction from the applicant's award or the cushion.
The social security reverse offset statute does provide that the attorney fee cannot be deducted from the weekly amount paid to an injured worker after the application of the reverse offset. However, it does not say the fee cannot be paid from the cushion. On the other hand, the statute dealing with the payment of the worker's compensation from the proceeds of a third party settlement states the worker's compensation insurer is entitled to recover "all payments made by it"(1) from the third-party proceeds following the division as set out above. See Wis. Stat. § 102.29(1).
Thus, if an attorney fee is awarded, the worker's compensation insurer cannot deduct the fee from the weekly rate it pays to the applicant in a case involving the social security reverse offset. However, the weekly rate paid to the applicant is not reduced, if the worker's compensation insurer takes a credit against the cushion. The amount in the cushion will be lower, of course, which either reduces the amount left over for the applicant or (as more likely in a permanent total disability case) hastens the point at which the insurer must start paying compensation out-of-pocket, but, again, the weekly rate paid to the applicant is not decreased. The commission concludes, then, that an insurer has the right to deduct whatever fee may be awarded from the cushion.
The commission carefully considered the argument that the applicant is not getting any additional compensation, at least not until the cushion is exhausted, as a result of the permanent total disability award. While this argument is supported by the result in Howell and Radank, Wis. Admin. Code, § DWD 80.43, provides that a fee is dependent on a valid dispute between the employer and the insurer--which existed here even though the permanent total benefits will be paid, for some time in the future, from the cushion. The rule also refers to the need to secure adequate representation, which of course would be thwarted if attorneys are reluctant to take a disputed worker's compensation case when a cushion is involved.
In this case, then, the commission concludes a fee is appropriate. Consistent with the department's policy, it shall be paid at $7,844.25, as awarded by the ALJ. The commission changes the ALJ's award only to specify that the fee be paid from the cushion, rather than as an independent liability.
The applicant argues that the commission lacks jurisdiction to make this change. Indeed, the commission has held it does not have jurisdiction in attorney fee-only disputes, noting that its review authority on petition under Wis. Stat. § 102.18(3) is limited to decisions that award or deny compensation and that an attorney fee generally is not "compensation" for the purposes of Wis. Stat. ch. 102. See: Eisenberg v. ILHR Department, 59 Wis. 2d 98, 105 (1973); Cranston v. Industrial Commission, 246 Wis. 287, 289; (1944). Moreover, Wis. Stat. § 102.18(3) provides that a "party in interest" may petition the commission for review of a department order, and an attorney representing an applicant in a worker's compensation proceeding is not a "party in interest" under the statute, Eisenberg, at 59 Wis. 2d 105, and Cranston v. Industrial Commission, at 246 Wis. 289. See: Jacobson v. Milwaukee Sign Company, WC claim no. 2004-010430 (LIRC, November 9, 2006; see also: Neal & Danas, Workers Compensation Handbook § 1.5 (5th ed. 2007).
However, as the respondent points out here, the commission has distinguished fee disputes between the applicant and an employer or insurer from those that are solely between the applicant and his or her attorney. In Jacobson, the commission explained:
However, ... the holdings on this point arise from attempts by an injured worker's attorney to challenge an ALJ's division of a compensation award between the injured worker and the attorney. Such a division does not award "compensation," particularly since an injured worker's attorney is not recognized as a "party" to a worker's compensation proceeding. Further, because the fee is paid from an award of compensation, there is no net effect on the amount paid by worker's compensation insurer -- who is a party -- in such cases.
Here, however, the ALJ is ordering the insurer to pay an additional amount above and beyond the compensation proven to this point; ALJ Lake's letter in effect awards compensation. Again, the insurer, who has been ordered to pay the additional compensation, is a party unlike an attorney who raises a fee issue. Thus, the respondent asserts, the commission has jurisdiction to review under Wis. Stat. § 102.18(3).
The commission agrees.
Similarly, this is not a dispute between the applicant and his attorney (who is not a party), but between the applicant and the respondent (who are both parties).
cc:
Attorney George Burnett
Attorney Jeffrey J. Strande
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