MARY JO ENGLAND, Applicant

DECOR PRODUCTS INC, Employer

LIBERTY MUTUAL INS CO, Insurer

In December 2010, the applicant filed an application seeking, among other things, disability compensation and increased compensation under Wis. Stat. § 102.57. The parties subsequently compromised the disability claim. A hearing was scheduled for September 7, 2011, on the increased compensation claim.

Prior to the hearing, the ALJ asked the parties to brief the issue of whether he was required "to hold a hearing on the hypothetical entitlement of the worker to benefits that she could have won had she gone to hearing on the underlying disability issues, in order to determine her entitlement to a 15 percent increased compensation." The applicant asserted that such a hearing was required, while the employer asserted that the ALJ lacked jurisdiction to hold the hearing. The employer also did not concede its liability under the statute, but stipulated (as discussed below) that a relatively nominal award could be made if the issue was decided in its favor so the matter could be appealed.

On November 23, 2011, the ALJ issued his decision. The applicant filed a timely petition for 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:

As stated above, the parties entered into a compromise on the applicant's disability claim, but did not compromise a potential claim for increased compensation due to a safety violation by the employer under Wis. Stat. § 102.57. That statute provides:

102.57 Violations of safety provisions, penalty. If injury is caused by the failure of the employer to comply with any statute, rule, or order of the department, compensation and death benefits provided in this chapter shall be increased 15% but the total increase may not exceed $15,000. Failure of an employer reasonably to enforce compliance by employees with any statute, rule, or order of the department constitutes failure by the employer to comply with that statute, rule, or order.

The employer contends that because the disability compensation was decided by compromise, and because the commission has previously held that the increased compensation may not be based on the compromise settlement amount, there may be no award for increased compensation under Wis. Stat. § 102.57. The applicant, on the other hand, contends that because the safety violation claim itself was not settled by compromise, the 15 percent increased compensation be based on the disability that would have been awarded had there been no compromise.

The ALJ awarded 15 percent based solely on the amount of compensation that the employer and its insurer paid before it entered into the compromise, even though the employer later contended this amount was paid by mistake of fact. The commission agrees with the ALJ, and affirms his decision as modified.

As indicated above, the commission has previously held that an increased compensation award may not be based on the amount of a compromise. In Rice
v. Seljan Tool Company, WC claim no. 2005-033772 (LIRC May 31, 2011), the commission stated:

...the commission previously held in the Merkes case^[(1)] that it would not award increased compensation on amounts settled by limited compromise. In Merkes, the commission stated:

... the administrative law judge erred by assessing the 15% penalty against the $25,000.00 received for the limited compromise. The commission long ago determined that the 15% penalty is not to be assessed against compromise amounts. Those amounts do not constitute compensation, and assessment of the 15% penalty against compromise amounts would necessitate assessment of the 15% deduction for decreased compensation when there was an employee violation of Wis. Stat. § 102.58 (employee's failure to use safety devices/procedures). James R. McCoy v. Fox Valley Construction Company and Employer's Insurance of Wausau, WC Claim No. 85-036974 (LIRC May 31, 1990). The statutes do not contemplate applying increased or decreased compensation assessments against compromise amounts independently negotiated between the parties.

The commission reached a similar result not only in the James R. McCoy case cited in the Merkes decision, but also in Donna K. Gretz v. Goetze Corporation of America, WC Claim No. 1990-037421 (LIRC August 6, 1998).

The basis for the McCoy, Gretz, and Merkes decisions, then, is that amounts paid under limited compromises of worker's compensation cases are not "compensation" as that term is used in Wis. Stat. § 102.57.

The ALJ correctly observes that the 15 percent increase under Wis. Stat. § 102.57 is applied to "compensation" and that compensation is defined by statute as "allowances, recoveries, and liabilities" under Wis. Stat. ch. 102. See Wis. Stat. § 102.01(1)(intro.) and (am). An amount that would have been awarded had a claim not been compromised is not an allowance, recovery, or liability. The commission appreciates that under the terms of the compromise the parties retained "their respective rights, remedies, claims and defenses" with respect to Wis. Stat. § 102.57. Still, the commission concludes that an award under Wis. Stat. § 102.57 may not be based on the amount that would have been awarded had there been no compromise.

The commission's decision in Rice v. Seljan Tool Company is not inconsistent with that conclusion. In Rice, the commission held that increased compensation could not be based on the amount of a compromise. However, the commission did not deny the claim for increased compensation in Rice in its entirety, but rather set aside the ALJ's decision and remanded the matter to the department for further appropriate action. The applicant now argues that had the commission meant to rule out the possibility that an increased compensation award could be based on the disability compensation that an injured worker would have been awarded had the disability claim not been compromised, it would have simply issued a final decision denying the increased compensation claim in Rice.

However, the commission's decision in Rice was based on the particular facts presented in that case. The parties in Rice had initially included increased compensation among the claims settled in the compromise agreement, then struck the language compromising increased compensation from the agreement by hand. On appeal, the employer in Rice--that is, the party who normally would be expected to ask to have the Wis. Stat. § 102.57 claim dismissed with no increased compensation paid--did not make that request (as does the employer here). Rather, the employer in Rice asked that the ALJ's decision (which in that case awarded compensation based on the amount of the compromise amount) be set aside. Based on those facts, the commission concluded that the parties in Rice "may have agreed that there would be an increased compensation award on the loss of earning capacity claim resolved by the second limited compromise agreement."(2) Under those facts, the commission determined that the most prudent course was to simply vacate the award as the employer asked and remand, rather than resolve issues not raised by the parties.

The final issue is whether it is appropriate to base the increased compensation award under Wis. Stat. § 102.57 on the compensation that the employer paid before it entered into the compromise, but which it now contends was paid by mistake of fact. Even though the employer now argues mistake of fact, it paid the applicant $2,674.67 and that payment would be an allowance or recovery meeting the definition of compensation under Wis. Stat. § 102.01(1)(intro.) and (am). The fact that the employer now asserts that the payment should not have been made does not mean that the amount that was paid is not "allowance or recovery" under the Act. The commission agrees with the ALJ that any increased compensation awarded in this case should be based on the amount the employer paid the applicant toward his disability claim prior to the compromise.

The amount of disability compensation paid by the employer's insurer prior to the compromise is $2,674.67. Fifteen percent of that amount is $401.20. Before the ALJ, the employer stipulated it would pay that amount so the matter could be appealed, but it did not admit liability for the underlying increased compensation claim.(3) The commission understands from the briefs that employer still does not concede a safety violation or its liability under Wis. Stat. § 102.57, but also asks the commission to affirm the ALJ's decision which, of course, orders payment of $401.20.

Recognizing that the issue of whether there has actually been a safety violation has never actually been heard or decided, the commission shall nonetheless order payment of $401.20 based on the employer's stipulation to permit further appeal. A 20 percent fee of $80.24 shall be deducted from the award and paid to the applicant's attorney.

This order shall be left interlocutory to permit further hearing on all issues pertaining to the applicant's claim for increased compensation under Wis. Stat.
§ 102.57, should a court determine that the applicant may seek a larger amount for increased compensation under that statute.

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

1. To the applicant, Mary Jo England, Three hundred twenty dollars and ninety-six cents ($320.96), as stipulated.

2. To the applicant's attorney, Krysta R. Walsh, Eighty dollars and
twenty-four cents ($80.24) in fees on the stipulated amount.

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

Dated and mailed
July 26, 2012
england . wrr : 101 : 5 ND6  8.2; 8.16

BY THE COMMISSION:

/s/ Robert Glaser, Chairperson

/s/ Ann L. Crump, Commissioner

/s/ Laurie R. McCallum, Commissioner

cc: Attorney Krysta Walsh
Attorney Robert Simandl
Attorney Peter Topczewski

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(1)( Back ) Merkes v. Hamel Ralph Forest Products, Inc., WC Claim No. 1998-033594 (LIRC Sept. 25, 2003)

(2)( Back ) Specifically, in Rice the commission stated:

On appeal, the employer's attorney does not argue that the commission should reverse ALJ Smiley's decision to hold that no increased compensation may be awarded on the compromised loss of earning capacity claim, but rather the commission should vacate--or set aside--her decision. The commission concludes that the parties may have agreed that there would be an increased compensation award on the loss of earning capacity claim resolved by the second limited compromise agreement. Certainly, that is one way to read part 7 of the limited compromise agreement, in which language specifically stating that the limited compromise barred liability for "safety violation penalties pursuant to sec. 102.57, Wis. Stats." was struck out.

Because the parties may have agreed that that there would be an increased compensation award on the loss of earning capacity claim resolved by the second limited compromise agreement, the commission shall simply set aside ALJ Smiley's decision and remand for further appropriate action. At this point the commission holds only that if a claim for increased compensation on the loss of earning capacity claim resolved by the second limited compromise agreement is found to be viable, it may not be based on the dollar amount paid under the limited compromise as provided in Merkes.

As the ALJ notes in the current case, the better practice for parties would be to state in the limited compromise agreement how the increased compensation award is to be determined, if the parties do not include that claim in the compromise.

(3)( Back ) In order to be appealed to the commission, and then to circuit court, an order must award or deny compensation. See Wis. Stat. 102.18(3) and 102.223(1)(a).

uploaded  2012/10/01