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Appellate Court Orders Commission to Award Penalties for Non Payment of Award while Employee’s Appeal is Pending

By John F. Kamin

In a prior article, I discussed the penalties that may be assessed against an employer and in favor of an employee when the employer unreasonably delays or refuses payment of benefits. Those include 19(l) (a delay in payment), 19(k) (an unreasonable and vexatious refusal of benefits), and attorney’s fees under Section 16. Under Section 19(l), an employer may be subject to a daily penalty for delay in payment with a maximum of $10,000. Section 19(k) penalties are more severe, and allow an assessment of an additional 50% on benefits awarded. If it is found that an employee is entitled to Section 19(k) penalties, the award of attorney’s fees of 20% is also assessed.

Recently the Illinois Appellate Court, in Jacobo v. IWCC, ordered the Commission to award penalties. In Jacobo the employer had disputed liability for temporary total disability benefits and permanent disability benefits relying upon the opinions of an examining physician. After trial, the Arbitrator awarded TTD and found the petitioner to be permanently and totally disabled. In addition, the Arbitrator concluded that the employer’s reliance upon an IME report was unreasonable and awarded penalties and attorney’s fees. On appeal, the Workers’ Compensation Commission affirmed the award of TTD/PTD but vacated the assessment of penalties. The Commission found that it was neither unreasonable nor vexatious for the employer to rely upon their examining physician in disputing causal relationship. Thereafter, the employee filed an appeal to the Circuit Court asserting that the Commission improperly vacated the Arbitrator’s award of penalties. Shortly thereafter, the employer’s attorney sent a letter to the petitioner’s attorney advising that they did not intend to file an appeal and would accept the Commission award. The petitioner’s attorney then requested payment of the award on several occasions.

Approximately thirteen (13) months after the Commission Decision was rendered, arguments were heard before the Circuit Court on the Commission’s denial of the original petition for penalties. The Circuit Court reversed the Commission’s Decision on the penalties issue and reinstated the Arbitrator’s penalties award. Roughly three (3) weeks later, the petitioner’s attorney then filed a second penalties petition for non payment of the award.

The employer then appealed of the Circuit Court’s Decision reinstating the Arbitrator’s penalties award. Ten (10) months later, the Appellate Court reversed the Circuit Court and reinstated the Commission Decision. Roughly two (2) months later, the employer then paid the undisputed portion of the Commission award of medical, TTD and PTD benefits. Four (4) months later, the Commission then conducted a hearing on the second penalties petition filed by the petitioner. The Commission denied the penalties petition noting the Appellate Court issued its opinion on April 29, 2009 affirming the Commission’s Decision denying penalties and fees and noted that as soon as that opinion was rendered the employer paid the Commission award. The Commission stated that it adopted the Appellate Court Decision and denied the second petition for penalties and fees was denied.

The petitioner then appealed the Commission’s denial of the second penalties petition and the Circuit Court affirmed noting that at no time while the appeal was pending could the petitioner file a 19(g) petition before the Circuit Court as it did not have jurisdiction.

In the subsequent appeal, the Appellate Court then went into lengthy detail concerning the various penalties that are available. First, it noted that the 19(l) penalties are of the nature of a late fee but that the 19(k) penalty standard was much higher finding not only that there must be a finding of unreasonable delay, but that the delay must be deliberate or as the result of a bad faith or improper purpose. Consequently, it used a two-part analysis on review of the Commission’s Decision denying the second penalties petition. First, it noted that it had to determine whether or not the facts established the denial was contrary to the manifest weight of the evidence, and, second, that it was an abuse of discretion to refuse to award such penalties.

The Court noted that employer had not appealed the original Commission Decision awarding TTD/PTD benefit, and that the entire appeal process addressed only the Commission’s denial of penalties to the employee. As a result, the employer could not have obtained the relief finding it not liable for payment of the TTD/PTD benefits awarded by the Commission. The Court noted that the failure to pay those benefits for several years was obviously an unreasonable delay and ordered the Commission to award the 19(l) penalties. The employer argued that the claimant had appealed the entire award, and noted there was no specific request made by the employee for payment of the permanent total disability award. The Appellate Court noted that the Commission’s original denial of penalties was appropriate. However, the second penalties petition should have been granted as that was filed after the Commission had determined the merits of the petitioner’s claim. The employer argued that this was a “second bite of the apple,” but the Court pointed out there were separate bases for the two (2) penalties petitions. The Court then also concluded that the denial of 19(k) penalties and Section 16 attorney’s fees was against the manifest weight of the evidence and further was an abuse of discretion failing to award same. The employer’s conduct in this case was not the result of simple inadvertence or neglect, but it simply refused to pay undisputed portions of the award until all appeals on contested issues were exhausted. The Court stated: “We want to be clear on this point. Any portion of a claimant’s benefits which are undisputed must be promptly paid or the employer will be subject to penalties and attorney’s fees under the Act.” As a result, the Court remanded the matter to the Commission with instruction to determine the amount of penalties and attorney’s fees to be assessed.

Interestingly, I question whether or not undisputed benefits that are awarded at arbitration must now be promptly paid when the petitioner’s attorney files a petition for review to the Commission. Notably, the Act specifically provides that in the event of an employee’s appeal of an Arbitration Decision, statutory interest pursuant to Section 19(n) does not accrue on the award unless the employee’s appeal results in an increase in the award. The Act appears to recognize a circumstance where an employee’s appeal to the Commission will forestall the payment of the Arbitrator’s award. However, the decision in Jacobo causes concern that the benefits that are awarded by an Arbitrator and not subject to an employer’s appeal to the Commission should be paid even in the event the petitioner files a petition for review. Recognizing that the Commission conducts a de novo review, an employer could argue that even absent an employer’s appeal the award is not final and due until the Commission renders its Decision. Many claims settle while on review, but in order to avoid a potential claim for penalties, it is recommended that an employer promptly pay the award or file a cross review with the Commission even if the employer is generally satisfied with the Arbitration award.

Originally published in the Winter 2011 edition of Quinn Quarterly.