The penalty provision of the Workers' Compensation Act gets more teeth: a judge of compensation must award counsel fees in addition to penalties when an employer fails to make timely payment of temporary disability benefits.

On June 25, 2003, the petitioner filed a claim petition for injuries arising out of an April 26, 2002, work-related incident while working for the employer. The petitioner also filed a simultaneous Motion for Temporary Disability and Medical Benefits. The judge of compensation granted the petitioner’s motion on October 22, 2003. Pursuant to the terms of the court’s order, the respondent was instructed to satisfy a New Jersey Department of Labor temporary disability insurance lien; to reimburse the petitioner for past due temporary disability benefits and out-of-pocket medical expenses; to provide the petitioner with ongoing temporary disability benefits and medical benefits; and to pay counsel fees as set by the court. The respondent failed to timely pay the temporary benefits as required by the court’s October 22, 2003, order. As permitted by N.J.S.A. 34:15-28.1, the petitioner moved for the imposition of a penalty and other relief. The judge of compensation found that the respondent had not paid the petitioner’s benefits within the maximum 30 days allowed by his order. Further, the respondent provided no excuse for the late payment. Accordingly, the judge of compensation assessed a penalty of 25% of the temporary disability benefits owed to the petitioner. However, the judge of compensation declined to award counsel fees, reasoning that the fees he awarded when he entered his original October 22, 2003, order were sufficient. On appeal, the petitioner argued that an award of counsel fees was mandatory and not subject to the court’s discretion. In reversing the judge of compensation’s refusal to award counsel fees, the Appellate Division relied on the plain language of the statute. N.J.S.A. 34:15-28.1 provides: "If an employer’s insurance carrier . . . unreasonably delays or refuses to pay temporary disability compensation, it shall be liable to the petitioner for an additional 25% of the amounts then due plus any reasonable legal fees incurred by the petitioner as a result of and in relation to such delays or refusals. A delay of thirty (30) days or more shall give rise to a rebuttable presumption of unreasonable and negligent conduct on the part of . . . an employer’s insurance carrier." In applying the rules for ascertaining legislative intent, the Appellate Division reasoned that the use of the word “shall” ordinarily denotes action that is mandatory unless the context suggests otherwise. Moreover, the Appellate Division found that when the word “plus” is used as a preposition, it commonly means “added to” or “increased by.” Accordingly, the Appellate Division concluded that: "[U]se in the same phrase of the mandatory “shall” and the word “plus” without any qualifying language plainly signals that the Legislature intended an eligible petitioner to receive not only the statutory penalty but also recompense for the cost incurred to obtain wrongfully or negligently withheld funds." In light of the clear legislative intent of the statute, the Appellate Division reasoned that when a petitioner resorts to the remedy provided by N.J.S.A. 34:15-28.1 to address delinquent payment of temporary disability benefits, the judge of compensation must award both the statutory penalty and a reasonable counsel fee. Having determined that an award of counsel fees is mandatory under N.J.S.A. 34:15-28.1, the Appellate Division turned its attention to the issue of the amount of the counsel fee to be awarded. The petitioner argued that use of the word “reasonable” in the language of N.J.S.A. 34:15-28.1 demonstrated a legislative intent to grant complete discretion to the judge of compensation as to the amount of the counsel fee. The respondent, however, asserted that N.J.S.A. 34:15-64 should govern as it provides an explicit method for the calculation of counsel fees in all workers’ compensation matters. N.J.S.A. 34:15-64 provides that a judge of compensation “may allow to the party in whose favor the judgment is entered a reasonable counsel fee not exceeding 20% of the judgment.” Nothing in the language of N.J.S.A. 34:15-28.1, the respondent maintained, suggests any exception to the general fee calculation scheme provided by N.J.S.A. 34:15-64. Once again, the Appellate Division referred to the plain language of the statute in making its determination. The Appellate Division found most compelling the fact that, whereas N.J.S.A. 34:15-64 expressly places a cap on counsel fees, there is no such limitation imposed by N.J.S.A 34:15-28.1. Rather, N.J.S.A. 34:15-28.1 allows for the award of counsel fees incurred by the petitioner as a result of and in relation to the respondent’s delinquent payment of temporary disability benefits. Therefore, the Appellate Division reasoned, the only limitation placed on an award of counsel fees under N.J.S.A. 34:15-28.1 is that the award reflect the Actual cost to obtain the improperly withheld benefits. The Appellate Division reversed that portion of the judge of compensation’s decision denying the petitioner’s application for counsel fees and remanded for calculation of a reasonable counsel fee consistent with its holding.

Case Law Alert - 4th Qtr 2010