There are two main avenues of settlements in workers’ compensation. When we talk about settlements, we are almost always talking about the third phase of a workers’ compensation case, namely the extent of any permanent partial disability. Medical benefits and lost time benefits (temporary disability benefits) have generally been concluded before the permanency stage.
As municipal managers know, even if an injured employee is back to work doing the very same job, that employee may apply for an award of permanent partial disability by filing a simple claim petition form. This is the third benefit and the most misunderstood benefit. This article will address what municipal managers need to know about settlements of permanency claims and what can be done to reduce awards.
Question: How are most workers’ compensation claims settled in New Jersey?
Answer: About 70% of cases are settled with a percentage of disability award. For example if a police officer had major back fusion surgery from a 2021 work accident and returned to work, he or she might settle for 35% permanent partial disability or $94,920 – tax free and paid out over a period of weeks. The settlement is based on an assessment of the loss of function in the employee’s work or non-work life. If someone gets a 35% permanent partial disability award, that means that the employee has a 35% loss of function for workers’ compensation purposes only. It generally does not mean the employee cannot perform his or her job because it is not necessary for the employee to prove a lessening of working ability in order to obtain a percentage award. All the employee has to do is prove a substantial impairment of non-work activities.
Question: What is the other type of settlement besides a percentage of disability settlement?
Answer: A minority of cases is settled on a Section 20 basis. The number “20” just refers to the statute (NJSA 34:15-20) which says that when the employer has information that the injury did not arise from work or occur during work, then the employer can negotiate a lump sum settlement without admitting liability so long as all parties agree. If the employer has solid information that discredits the case, most often the claimant, her attorney and the judge will agree to the Section 20 lump sum payment.
Question: Why do employees generally prefer percentage settlements to Section 20 settlements?
Answer: Because New Jersey is one of a few states that allows the employee to “reopen” a percentage award case within two years from the last payment or last date of medical treatment in order to request additional lost time benefits, medical benefits or permanent partial disability benefits. That means that the employee above can bump up the 35% award on the first reopener perhaps to 45% which would be another $60,000!!! Future reopeners are also possible and frequently recur.
Question: Can a Section 20 settlement ever be reopened?
Answer: There is no way to reopen a Section 20 settlement. In fact, the settlement states that it is not an admission of liability by the employer. It is a final payment and that case is closed forever.
Question: Since Section 20 settlements seem better for employers, why are most cases settled on a percentage basis and not Section 20?
Answer: The reason is the judge will not approve a Section 20 settlement unless there is an issue of causation or liability. For example, consider an injury which is witnessed on work premises, like falling from a ladder, and there is no dispute about the happening of the incident and the cause of the injury, then the Section 20 avenue is not available. Furthermore, every party must agree to a Section 20 settlement, including the injured worker, her lawyer and the judge. If any party says no to the Section 20, that option is not available. So it can be a challenge to settle under Section 20.
Question: What can we do as public employers to minimize the cost of both kinds of settlements?
Answer: A very large percentage of favorable settlements for employers is directly related to information provided by the employer to the adjuster and the defense lawyer. In my view, a high level of cooperation between the municipality and the adjuster or defense attorney becomes a critical cost saver. We defense attorneys find out critical information from our municipal employers, who may advise us that the employee has a very physical second job that could be the cause of the back or shoulder condition, or does heavy weight lifting in the gym, or may currently be performing a lot of recreational activities that he is telling the doctor he can no longer do.
Question: Can you give me an example of why it is important to know about non-work activities?
Answer: To get a permanency award, the employee has to convince the judge that the work injury has prevented the employee from either working or enjoying hobbies and sports, like playing golf or going to the gym or bowling, etc. If the employee tells the medical expert who assesses permanency that there are many activities he or she can no longer enjoy due to the accident, that drives up the doctor’s estimate of disability. The doctor will assume this accident must be pretty serious because the employee’s lifestyle has been significantly affected. When this happens, the percentage estimate from the claimant’s doctor is going to be higher. But if we find out that the employee is actually doing all the things he told the examining doctor he cannot do, that information may not only reduce the percentage of the award but may cause the judge to consider dismissing the case entirely.
Question: Can you give an example of such a scenario?
Answer: A school board employee claims that her knee was so debilitated from a work injury following surgery that she had to stop golfing. This is a real case, by the way. The Business Administrator advised our office that the employee continues to play golf two or three days a week and had just competed in the club championship, coming in second. When presented with this information the judge was furious. Instead of awarding the employee $40,000, the judge recommended that the employee dismiss her case.
How about some other examples?
We had a case where a firefighter said that his neck injury caused him to have to quit his construction job. He could no longer do the second job. The captain revealed to the adjuster that this was not true at all: the firefighter was still doing construction work but with a different company. The adjuster hired an investigator who found him jackhammering yards and yards of concrete for five days in a row at a private swimming pool. The judge was shocked by the level of dishonesty. In another case a DPW worker said that he could not leave his house because his back was so bad. He really couldn’t do anything. The municipal department head provided a lead that petitioner was actually home a great deal because he was building an addition to his house! A surveillance team was assigned, and the employee was caught carrying a refrigerator on his back out of a Home Depot store and then loading it into his truck without any assistance. There are a surprising number of cases that are won based on information from the employer directly to the adjuster or defense lawyer.
Question: Are there other ways municipal managers can help lower awards?
Answer: Yes, one key way is to pin down the accident witnesses early on in a case and provide this information to an adjuster. Many workers’ compensation cases start off with a description of a minor incident involving the low back, but then the employee starts adding body parts, telling the treating doctors about other injuries from the accident, adding the shoulder and neck, for example. There are no depositions in New Jersey, so we never get to ask the employee any questions unless we go to trial. But eye witness statements can make a huge difference and can be discussed with the judge. If the witness says she saw the incident occur and all the employee did was slip and did not even fall, the value of the case will plummet and the credibility of the claimant will also plummet as well.
Question: How do judges react when we present them with information that discredits the employee’s case? Aren’t the judges liberal and quick to forgive misstatements?
Answer: Yes, the judges are generally quite liberal and some will buy the argument the worker may make that “you caught me on a good day.” That is why we do surveillance on more than one day! But most judges are bothered by dishonesty from either party to a workers’ compensation case. Judges will not ignore material evidence that shows the employee lied about a key aspect of the case or the employee is grossly exaggerating the injury. The process of settling a case involves negotiation based on the known facts in the case. Solid information casting doubt on credibility provided by the municipality to the defense lawyer and adjuster not only reduces case values but can lead to complete victory at trial.
By: John H. Geaney