Can you Correct "Mistaken" Work Comp Benefit Payments?

The number of documents created and reviewed in the Pennsylvania Workers' Compensation system is voluminous. At times, errors occur in the processing and payment of wage loss benefits. [Let's leave discussion of medical expenses for another day].

Under-payment of benefits may be readily corrected by the issuance of an "amended" Supplemental Agreement, LIBC 337. Statutory interest is due on any delayed payment.
See: Section 406.1

"Over-payments" of benefits may be voluntarily corrected, by agreement of the parties. A Supplemental Agreement should be executed to memorialize this benefit change.

What does one do, when the Employee has been over-paid, and will not voluntarily agree to a benefit correction and repayment/credit payment?
File a Petition to Review Benefit Payments.

Commonwealth of PA/Department of Transportation v. WCAB (Noll), No. 819 C.D. 2013 & No. 907 C.D. 2013, is a reported decision of the Commonwealth Court of Pennsylvania, authored by Judge Leavitt on November 6, 2013, which addressed a benefit overpayment issue.

Factual and Procedural history
There were a series of compensation agreements and petitions which ultimately led to the scenario where benefits were overpaid to Employee.
These facts bear repeating, as they illustrate a manner in which benefit payment status may become confused, over the course of extended claims handling and multiple decisions.

June 1995 injury accepted by agreement.
AWW $863.84; TTD rate $509.
5 weeks disability followed by Suspension upon return-to-work with restrictions.
August 1997, Employee discharged, grievance filed, return-to-work at another position, lower salary.
July 1999 injury described as a "recurrence" 1995 injury.
Supplemental Agreement paid TTD at a new rate of $433.50 [not $509].
August 1999 return-to-work, modified duty position.(same rate of pay, suspension?)

June 2000, work no longer available, TTD reinstated by agreement, at the $433.50 rate!
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Employee filed a Petition for Review, arguing the Reinstated Benefits should be at 1995 rate, $509.
WCJ Decision March 2002
WCJ agrees with Employee,

(1) orders payment of $509 rate commencing June 2000.

(2) Unreasonable Contest quantum meruit fees were awarded,
"20% of all past due and owning benefits directed to claimant's counsel, not deducted from claimants proceeds".

(3) WCJ approved the contingent attorney fee agreement "to deduct 20% of the claimant's benefits and pay them directly to counsel".

Employer appealed, WCAB Affirmed.
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OK. Let's recap for a moment.
Paragraph (2) specifically states "past" benefits.
Paragraph (3) does not say "future" benefits ... so it may be mildly vague ... but it is not inconsistent with 2.

December 2004 Employer files Termination and Suspension petitions.

WCJ Decision March 2006
WCJ denies both petitions.
WCJ approved the 20% contingent attorney fee agreement, directing Employer to pay:
 "reasonable counsel fees and litigation costs".
The WCJ did not make any findings of an unreasonable contest and Employee counsel did not submit a quantum meruit attorney fee exhibit in this portion of this case.
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April 2010 Employer files the instant REVIEW Petition.
Apparently Employer made an overpayment to Employee by paying a full TTD rate of $509 per week without any attorney fee deduction from March 2004 to December 2009.
Employer also paid a 20% attorney fee to Employee counsel of $101.80 which resulted in this overpayment.
The overpayment was $30,540.

The 20% attorney fee deduction should have been  $101.80 per week.
Employee net benefit rate should have been $407.20.

WCJ Decision December 2010 in Employer Review Petition
Employer submitted computer printout documenting payments.
Employee counsel argues: 
(1) it was not an overpayment, as the WCJ ordered 20% to be paid in addition to claimant benefit!
(2) if it was an overpayment, it was a Employer's unilateral mistake and cannot be recovered!

WCJ DENIED EMPLOYER'S REVIEW PETITION.
WHY?
(1) There was no overpayment! His prior order required payment of $509 to Employee.
(2) Even if it was an overpayment, Employer could not recoup the money.
(3) Recoupment is only allowed for a mathematical miscalculation or mistake in an agreement, citing Dollar Tree Stores Inc. (2007).

WCJ EXPLAINED: 
WCJ said  (i)   he had ordered Employee to be paid  at the rate of $509, which Employer did.
WCJ said  (ii)  he had ordered payment of counsel fees of 20%, over and above claimant's $509 rate.

WCJ said (iii)  he ordered "new"payment of the quantum meruit itemization to Employee counsel for unreasonable contest of the Employer Review Petition.
[problem with iii, there was NO itemization, in re this petition].
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So, let's recap, Employer tried to correct a mistake,
Employer was denied any relief and,
Employer was assessed the additional cost of Employee attorney fees.

WCAB decision reversed the unreasonable contest award in the Employer review petition,
BUT denied Employer recoupment of overpayments, as there was no evidence that payments were made under a "mistaken belief".
The Dollar Tree Stores Inc. case was interpreted to require payments are made under a "mistaken belief", in order to allow a recoupment to Employer..

Commonwealth Court gets it "right"!

l. Did an overpayment occur? YES
Unreasonable contest attorney fees are paid pursuant to Section 440.
Section 440 requires the submission of an itemized quantum meruit fee statement demonstrating the time and effort required and actually expended.
An attorney fee award that simple "adds" 20% to claimant's weekly compensation indefinitely, does not (1) relate to the work actually done and (2) is not authorized by the Act.

The Court reviewed the prior 2002 WCJ order, which the WCJ apparently had trouble deciphering in 2010.

In March 2002 the WCJ ordered payments to Employee at $509 per week.
WCJ directed Employer to deduct  20%of Employee's benefits and pay them directly to counsel.
WCJ ordered quantum meruit attorney fees for an unreasonable contest of all past due benefits.

In 2010, the WCJ erred in holding that his 2002 order required Employer to pay an ongoing quantum meruit fee of 20% in addition to the full amount of benefits awarded to Employee.

ll. Can Employer Recoup the Overpayment? YES
The circumstances where recoupment from an Employee is permitted are varied.
Prior decisions have allowed recoupment to prevent a double recovery or unjust enrichment to an Employee.

Where an Employer miscalculated an AWW rate and did not discover the mistake for two years, recoupment was permitted to prevent an unjust enrichment. Fahringer (1987).

Section 413 of the Act allows the WCJ to modify an agreement which contains a material mistake.

In Dollar Tree Stores Inc., the reason the Employer request for recoupment was denied was because Employer paid disability benefits without issuing an NCP or compensation agreement! There was no agreement to modify, as authorized by Section 413.

In Mino (2010) recoupment was allowed where Employee was awarded and paid PPD benefits, when unbeknownst to the Insurer, the Employer had continued to pay Employee full salary, despite reduced work hours.

In Lucey (1999) recoupment was allowed to avoid unjust enrichment, where Employer paid claimant $140k to pay a hospital bill, believing that amount was necessary to cover that expense. Claimant negotiated a lower payment of $110k. As the $140k was a payments made under a "mistaken belief", a credit was allowed against future benefit payments.


Appellate case decisions support Employer's argument that recoupment has been allowed to correct agreements and in other circumstances, to prevent unjust enrichment.
HERE Employer made payments under a mistaken interpretation of the WCJ orders.
This allows an argument for recoupment.
This case was remanded for a determination of a just and manageable sum for the weekly credit amount.

PRACTICE POINTERS:
1. HURRAY, The Commonwealth Court inserted reason and fairness in their analysis of this workers' compensation case. The parties should be allowed to correct mistakes.
We all make mistakes. A mistake should not be the basis for anyone to unrightfully claim or keep a financial payment.
The Court balanced the Employer right to a credit with the assessment of a fair figure for a weekly credit, paid by the Employee.

2. At times, the wording of decisions, lends itself to alternative interpretations.
Try to identify and address any problem areas with Employee counsel.

For example, a 50% penalty assessed on all outstanding medical bills ... does that mean outstanding at the time of the petition, or outstanding at the time of decision, when substantial payments were made in the interim.
In my experience, after we could not reach an agreement, I filed a Petition for Review, noting that we would pay ... we just wanted to be certain of the amount payment due.Unfortunately, We did not discover our disagreement, until after the appeal period expired.

3. Remember that a WCJ decision may be corrected or amended within 20 days, as per Regulation 131.112. A typographical or clerical error may be corrected by motion of the WCJ or either party.
Other amendments or corrections may be made upon written agreement of the parties.

4. The parties can always reach an agreement and voluntarily correct any mistake via the execution of a Supplemental Agreement. A best practice, is to explain the reason for the change of benefit status, where provided on the agreement.