Claimant Attorney Fee Deductions... Who, What, When, Where, Why?

Employee Attorney Fee Deductions.
When an attorney is successful in representation of an injured Employee, the attorney may request the WCJ  approve an attorney fee deduction. See: Section 442, 77 P.S. 998. The statute specifically requires approval of any attorney fee deduction. The attorney fee deduction request shall be approved, provided the attorney fee does not exceed 20% of the amount awarded.


Where there is an unreasonable contest of a petition, the WCJ may award attorney fees, to be paid by Employer, in addition to the wage loss benefits and medical expense reimbursements awarded.
This attorney fee is not deducted from Employee's compensation award. This attorney fee award is authorized by a separate section of the Pennsylvania Workers' Compensation Act, Section 440, 77 P.S. 996.

When Employee is receiving work comp benefits and Employer files a petition, Employee Counsel will typically request the approval of an attorney fee deduction, at the time the WCJ rules upon the Employer supersedeas request, customarily after an initial hearing.

What if the WCJ does not rule on the Employee Attorney fee deduction request?
What if the WCJ does not rule on the Employer supersedeas request?

Mason v. WCAB (Upper Providence Township), No. 575 C.D. 2013, an unreported memorandum opinion of a panel of the Commonwealth Court of Pennsylvania, authored by Judge McCullough on September 25, 2013, addressed these practical issues.

Factual and Procedural Background
Employee was injured in a work-related motor vehicle accident in the course of his employment as a police officer. Work Comp benefits were initiated via Notice of Temporary Compensation Payable LIBC-501. This document "converted" to a Notice of Compensation Payable, by operation of law, after 90 days. See: Section 406.1(d)(6), 77 P.S. 717.1(d)(6).

Medical Examination resulted in an opinion that Employee had recovered such that he was capable of returning to work as a police officer. Employer offered Employee the opportunity to return to his prior position. Employee did not return to work.

Employer filed a petition for Suspension as of the October 9, 2008 job offer. Employer requested a supersedeas (immediate suspension) of wage loss benefits during the litigation of the Suspension petition.
[Employer subsequently amended this petition to include an averment of Termination of all disability].

First Hearing Supersedeas Issues
At the initial WCJ  hearing of January 5, 2009, the WCJ considered the supersedeas request. Employee counsel was directed to submit a fee agreement by mail, which he did. The WCJ never issued an interlocutory order, to rule on the supersedeas request. He did not issue an interlocutory order to approve an immediate attorney fee deduction.

Note: When a WCJ does not rule on an Employer supersedeas request, within 14 days of the hearing, it is deemed denied from the date of filing of the request. See: Rule 131.43(a) of the Special Rules of Administrative Practice and Procedure before Workers' Compensation Judges.

Outcome:
So Employee continues to receive 100% of his ongoing wage loss benefits during this litigation, as there was no supersedeas and there was no attorney fee approval.

WCJ Final Decision:
Employer Termination and Suspension Petition requests were denied in decision dated January 20, 2010.

WCJ approved an attorney fee deduction commencing retroactive to January 5, 2009, "the date of the supersedeas denial ". [?]

Employer WCAB Appeal
Employer did not appeal the WCJ denial of the Termination and Suspension requests.

Employer appealed the attorney fee "retro-activity" to January 5, 2009, as Employee had been paid 100% of wage loss benefits due, based upon the lack of an interlocutory supersedeas order or an interlocutory attorney fee deduction approval.

WCAB amended the WCJ order, to commence the approved attorney fee deduction as of the date of the WCJ decision.

Employee Attorney Appealed this Ruling!!!

Commonwealth Court Affirmed the WCAB decision.
The WCAB correctly reasoned that the WCJ did not "approve" the attorney fee deduction, until the date of his decision. Employee counsel did not submit an attorney fee agreement at the initial hearing.
Employee counsel did not request an attorney fee approval at the initial hearing or at any time thereafter.

Employee counsel was not entitled to an attorney fee deduction until the approval of a fee in the final decision.
Employer argued the WCJ order was "illegal on its face" as there is no authority to provide a retroactive award of attorney fees on compensation which has already been paid to a claimant".

Commonwealth Court relied upon its prior decision at City of Philadelphia v. WCAB (Ford-Tilghman) 996 A.2d 569 (Pa. Cmwlth. 2010) for the reasoning as to when a claimant attorney is entitled to a 20% attorney fee deduction, even in the situation where the employee receives 100% salary continuation under the Heart and Lung Act.

The Court explained, once the Termination petition is denied by the WCJ and the 20% attorney fee deduction is approved, 20% of claimant's indemnity benefits were no longer payable to claimant.
 At that point [the time of the decision] 20% was payable to counsel.
Slip opinion page 6, citing Ford-Tilghman 996 A.2d at 574.

Practice Pointers:
1. It is an uncommon circumstance were claimant counsel demands a retroactive payment of attorney fees, where claimant has received 100% of their wage loss benefits. This decision provides a common-sense resolution of the problem.

2. Employer and Insurer properly paid this case. 
IF employer paid a 20% attorney fee deduction WITHOUT WCJ approval, Claimant could make a request for payment of that 20% ... and probably prevail! 

3. Employer legal counsel should advise their clients WHEN there is an attorney fee deduction and the proper AMOUNT to be deducted, in their hearing report letter or upon receipt of an interlocutory supersedeas order.