An employer does not violate the Act by paying the claimant simple interest, instead of compound interest, on a back award of compensation benefits.

The claimant’s work-related injury was acknowledged by the employer via a Notice of Compensation Payable in 1998. The Workers’ Compensation Judge reinstated benefits as of November 21, 2002, and the employer paid the claimant $117,278.74. The claimant filed a penalty petition alleging the employer incorrectly used simple, rather than compound, interest in calculating the interest due on the award. The Judge dismissed the petition, determining the claimant was entitled to simple interest under §406.1 (a) of the Act. The Appeal Board affirmed, noting that §406.1 (a) does not contain any language indicating whether the interest that accrues is “simple” or “compound.” On appeal to the Commonwealth Court, the claimant argued that an award of compound, rather than simple, interest most accurately calculates a worker’s actual loss of use of the unpaid funds over time and serves the humanitarian and remedial purposes of the Act. The court rejected these arguments and affirmed the decisions below, pointing out that §406.1 does not expressly provide for compound interest. Also, the court noted that there is longstanding judicial policy disfavoring the awarding of compound interest, absent explicit statutory language providing for it.

_{Case Law Alerts, 4^th Quarter, October 2015}

_{Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2015 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}