Workers Compensation Mandatory Attorney Fees

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1 STATE OF NEW JERSEY NEW JERSEY LAW REVISION COMMISSION Draft Tentative Report Relating to November 7, 2011 This draft tentative report is distributed to advise interested persons of the Commission's tentative recommendations and to notify them of the opportunity to submit comments. The Commission will consider these comments before making its final recommendations to the Legislature. The Commission often substantially revises tentative recommendations as a result of the comments it receives. If you approve of the report, please inform the Commission so that your approval can be considered along with other comments. Please send comments concerning this draft tentative report or direct any related inquiries, to: Keith P. Ronan, Legislative Law Clerk NEW JERSEY LAW REVISION COMMISSION 153 Halsey Street, 7th Fl., Box Newark, New Jersey (Fax) Web site:

2 MANDATORY ATTORNEY FEES Introduction This project is a reflection of a New Jersey Appellate Court s decision in Quereshi v. Cintas Corp., 413 N.J. Super. 492 (App. Div. 2010), addressing attorney fees in the Worker Compensation statute. Quereshi, examined whether a judge of compensation must award reasonable attorney fees when a self-insured or uninsured employer or employer's insurance carrier unreasonably delays payment of temporary disability compensation upon having actual knowledge of the occurrence of the injury or notice that compensation is due. Id. at 495. The court held that attorney fees are mandatory and not limited by N.J.S. 34:15 64(a), which governs fee awards following an award of benefits. Id. at 496. Staff s research to this time has not revealed a trend of a mandatory attorney fees, but the Quereshi decision may be the first in that direction. 1 In Quereshi, the plaintiff suffered a work-related injury, and on October 22, 2003, the court ordered the respondent employer to pay plaintiff s temporary disability benefits. Ibid. Subsequently, [t]he employer failed to timely pay the temporary benefits as required by [the order,] and the plaintiff sought a penalty under N.J.S. 34: Ibid. The judge found that the employer had paid the benefits more than thirty days after entry of his order... and assessed a penalty of 25% of the temporary benefits owed. However, the judge refused to award attorney fees because he awarded attorney fees on his original 2003 order, and deemed the current 25% penalty sufficient. Id. at 497. The statutory framework is as follows. N.J.S. 34: states that benefits must be promptly paid and if a respondent negligently or unreasonably delays payment, a penalty is assessed, and reasonable attorneys fees shall be paid. Ibid. (emphasis added). Additionally, [a] delay of thirty days or more gives rise to a rebuttable presumption of unreasonable and negligent conduct by the respondent. Ibid. The referenced section addresses delay or refusal in payment of temporary disability compensations and penalties in the following circumstances: If a self-insured or uninsured employer or employer's insurance carrier, having actual knowledge of the occurrence of the injury, or having received notice thereof such that temporary disability compensation is due pursuant to R.S. 34:15-17, unreasonably or negligently delays or refuses to pay temporary disability compensation, or unreasonably or negligently delays denial of a claim, it shall be liable to the petitioner for an additional amount of 25% of the amounts then due plus any reasonable legal fees incurred by the petitioner as a result of and in 1 Quereshi was applied in Chase Bank USA, N.A. v. Staffenberg, 419 N.J. Super. 386, 396 (App. Div. 2011), where the Appellate Division held that inclusion of [attorney] fees as taxed costs of suit is mandatory under N.J.S. 22A:2 42. The court applied the statutory framework of Quereshi that [t]he use of the word shall ordinarily denotes action that is mandatory, unless the context suggests otherwise. Ibid. (quoting Quereshi v. Cintas Corp., 413 N.J.Super. 492, 498 (App. Div. 2010)). Therefore, because N.J.S. 22A:2 42 provides that [t]here shall be taxed by the clerk of the Superior Court, Law Division, Special Civil Part in the costs against the judgment debtor, a fee to the attorney of the prevailing party, there are mandatory attorney fees in Special Civil Part actions. See ibid. (emphasis added). 2

3 relation to such delays or refusals. A delay of 30 days or more shall give rise to a rebuttable presumption of unreasonable and negligent conduct on the part of a self-insured or uninsured employer or an employer's insurance carrier. [N.J.S. 34: ] To determine whether attorney fees are mandatory under N.J.S. 34: , the Quereshi court looked at the plain language of the statute and its legislative history. Quereshi, supra, 412 N.J. Super. at The court noted that the purpose of the statute was to ensure prompt payment to ameliorate the economic disruption occasioned by a workplace injury and the loss of a regular paycheck. Id. at 499 (citing Amorosa v. Jersey City Welding & Machine Works, 214 N.J. Super. 130, (App. Div. 1986)). The specific language in question was the use of shall and plus in the phrase, it shall be liable to the petitioner for an additional amount of 25% of the amounts then due plus any reasonable legal fees. N.J.S. 34: (emphasis added). The court found that the word shall ordinarily denotes mandatory action and the preposition plus commonly means increased by. Quereshi, supra, 412 N.J. Super. at 498. Thus, the court found that the judge must award both the statutory penalty and a reasonable legal fee. Ibid. Having found attorneys fees mandatory, the court examined whether attorney fees granted under N.J.S. 34: are limited by N.J.S. 34:15 64(a). Id. at 499. Subsection 64(a) provides that [t]he official conducting any hearing under this chapter may allow to the party in whose favor judgment is entered, costs of witness fees and a reasonable attorney fee, not exceeding 20% of the judgment. The employer argued that because Subsection 64(a) and Subsection 28.1 require reasonable attorney fees, a judge of compensation awarding attorney fees under Subsection 28.1 is bound by the 20% limit in Subsection 64(a). Quereshi, supra, 412 N.J. Super. at 501. The Appellate Division disagreed. Ibid. The court found the lack of a cap referenced in Subsection 28.1 dispositive. Id. at The court reasoned that the reasonableness standard in Subsection 28.1 should reflect the actual cost to obtain the previously ordered benefits. Id. at 502. Furthermore, the court analogized Subsection 28.1 to Subsection Ibid. Subsection 28.2 provides the judge of compensation with further remedy to address non-compliance with orders, and also lacks a limitation on attorney fees. Ibid. More importantly, the court recognized that during debate in the Assembly, Subsection 28.2 was amended to delete language that would have limited the fee to 20% of the sum awarded to enforce the order. Ibid. The court found that the congruence of language between the statutes indicated that they are designed to provide similar remedies, [and t]he deletion of the cap in the subsequently adopted remedial section is further evidence that section 28.1 legal fees are not capped at 20% of the penalty assessed. Ibid. In summary, the court held that attorney fees are mandatory under Subsection 28.1, and attorney fees are not subject to the 20% restriction found in Subsection 64(a). Staff modified N.J.S. 34: and N.J.S. 34:15 64, to reflect the court s decision. N.J.S. 34: Delay or refusal in payment of temporary disability compensation; penalty 3

4 If a self-insured or uninsured employer or employer's insurance carrier, having actual knowledge of the occurrence of the injury, or having received notice thereof such that temporary disability compensation is due pursuant to R.S. 34:15-17, unreasonably or negligently delays or refuses to pay temporary disability compensation, or unreasonably or negligently delays denial of a claim, it shall be liable to the petitioner for an additional amount of 25% of the amounts then due plus and it shall be liable to the petitioner for any reasonable legal fees and costs incurred by the petitioner as a result of and in relation to such delays or refusals. Any legal fees granted under this subsection shall not be subject to the 20% statutory limit under N.J.S. 34:15-64(a). A delay of 30 days or more shall give rise to a rebuttable presumption of unreasonable and negligent conduct on the part of a self-insured or uninsured employer or an employer's insurance carrier. COMMENT The revision in N.J.S. 34: reflects the extent to which an employer who unreasonably or negligently delays or refuses to pay temporary disability payments is liable to pay reasonable attorney fees to the petitioner. The revision codifies the reading of the statute found in Quereshi v. Cintas Corp., 413 N.J. Super. 492 (App. Div. 2010). In Quereshi, the court found that the judge must award both the statutory penalty and a reasonable legal fee, because the use of the word shall in Subsection 28.1 denotes mandatory action and the preposition plus subsequent to shall means increased by. Id. at 498. To clarify the court s statutory interpretation, this revision removes the word plus and instead reuses the word shall to denote mandatory action. Additionally, in Quereshi, the court stated that reasonable attorney fees should reflect the actual cost to obtain the previously ordered benefits. Id. at 502. In congruence with typical attorney fees provisions, and reflecting the Commission s guidance at the October 2011 meeting, this revision provides for reasonable attorneys fees and costs. Furthermore, this revision reflects the court s finding that reasonable attorney fees granted under N.J.S. 34: are not limited by the 20% cap under N.J.S. 34:15-64(a). Ibid. K In the alternative, Staff has prepared a modification to N.J.S. 34:15-64(a) for Commission review. The Commission s comments regarding this project at the October 2011 meeting pertained to a modification of N.J.S. 34: In an effort to provide additional options for the Commission, Staff seeks guidance on pursuing the modification below: N.J.S. 34: Rules and regulations; witness fees; attorney fees; costs a. The commissioner, director and the judges of compensation may make such rules and regulations for the conduct of the hearing not inconsistent with the provisions of this chapter as may, in the commissioner's judgment, be necessary. The official conducting any hearing under this chapter may allow to the party in whose favor judgment is entered, costs of witness fees and a reasonable attorney fee, not exceeding 20% of the judgment unless respondent is liable under N.J.S. 4

5 34: or N.J.S. 34: ; and a reasonable fee not exceeding $400 for any one witness, except that the following fees may be allowed for a medical witness: (1) (a) A fee of not more than $400 paid to an evaluating physician for an opinion regarding the need for medical treatment or for an estimation of permanent disability, if the physician provides the opinion or estimation in a written report; and (b) An additional fee of not more than $400 paid to the evaluating physician who makes a court appearance to give testimony; or (2) (a) A fee of not more than $450 paid to a treating physician for the preparation and submission of a report including the entire record of treatment, medical history, opinions regarding diagnosis, prognosis, causal relationships between the treated condition and the claim, the claimant's ability to return to work with or without restrictions, what, if any, restrictions are appropriate, and the anticipated date of return to work, and any recommendations for further treatment; and (b) (i) An additional fee of not more than $300 per hour, with the total amount not to exceed $2,500, paid to the treating physician who gives testimony concerning causal relationship, ability to work or the need for treatment; or (ii) An additional fee of not more than $300 per hour, with the total amount not to exceed $1,500, paid to the treating physician who gives a deposition concerning causal relationship, ability to work or the need for treatment. b. (1) No fee for an evaluating physician pursuant to this section shall be contingent on whether a judgment or award is or is not made in favor of the petitioner. (2) No evaluating or treating physician shall charge any fee for a report, testimony or deposition in excess of the amount permitted pursuant to the provisions of this section. c. A fee shall be allowed at the discretion of the judge of compensation when, in the official's judgment, the services of an attorney and medical witnesses are necessary for the proper presentation of the case. In determining a reasonable fee for medical witnesses, the official shall consider (1) the time, personnel, and other cost factors required to conduct the examination; (2) the extent, adequacy and completeness of the medical evaluation; (3) the objective measurement of bodily function and the avoidance of the use of subjective complaints; and (4) the necessity of a court appearance of the medical witness. When, however, at a reasonable time, prior to any hearing compensation has been offered and the amount then due has been tendered in good faith or paid within 26 weeks from the date of the notification to the employer of an accident or an occupational disease 5

6 or the employee's final active medical treatment or within 26 weeks after the employee's return to work whichever is later or within 26 weeks after employer's notification of the employee's death, the reasonable allowance for attorney fee shall be based upon only that part of the judgment or award in excess of the amount of compensation, theretofore offered, tendered in good faith or paid. When the amount of the judgment, or when that part of the judgment or award in excess of compensation, offered, tendered in good faith or paid as aforesaid, is less than $200, an attorney fee may be allowed not in excess of $50. d. All counsel fees of claimants' attorneys for services performed in matters before the Division of Workers' Compensation, whether or not allowed as part of a judgment, shall be first approved by the judge of compensation before payment. Whenever a judgment or award is made in favor of a petitioner, the judges of compensation or referees of formal hearings shall direct amounts to be deducted for the petitioner's expenses and to be paid directly to the persons entitled to the same, the remainder to be paid directly to the petitioner. COMMENT The revision in N.J.S. 34:15-64 reflects the extent to which a judge of compensation may award attorney fees to a petitioner whose employer is found liable under N.J.S. 34: In Quereshi v. Cintas Corp., 413 N.J. Super. 492, 502 (App. Div. 2010), the court found that reasonable attorney fees granted under N.J.S. 34: are not limited by the 20% cap under N.J.S. 34:15-64(a). This revision codifies the Quereshi court s reading of the statute. Of concern, Staff s research revealed a potential conflict with modifying N.J.S. 34:15-64 in regards to the possible effect it will have on attorney fees awarded under N.J.S. 34: The Quereshi court found that an attorney fees cap does not apply to N.J.S. 34: because of its analogous language found in N.J.S. 34: , and because the legislative history of N.J.S. 34: revealed that language requiring an attorney fees damage cap was removed during drafting. See Quereshi, 413 N.J. Super. at 471. Although this dicta likely means that the cap in N.J.S. 34:15-64 does not apply to N.J.S. 34: , Staff s concern is that adding language exempting N.J.S. 34: from N.J.S. 34:15-64, will confuse the issue of whether N.J.S. 34:15-64 applies to N.J.S. 34:

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