Currents In ADA/ FMLA/ Workers Compensation CAPEHART SCATCHARD ATTORNEYS AT LAW February 16, 2011 Topics in this Issue Can An Employee Make Thirty Percent More Money By Being Out Of Work On Workers Compensation Than By Working? Section 20 Payments To Petitioner Are Lienable Where Parties Stipulate To That Fact In Settlement John H. Geaney, Esq. is a member of the Firm s Executive Committee and a Shareholder in the Workers Compensation Department. His practice involves the representation of employers, self-insured companies, third-party administrators and insurance carriers in workers compensation, the Americans with Disabilities Act and the Family and Medical Leave Act. You may contact Mr. Geaney directly if interested in training in any of these areas. by John H. Geaney, Esq. Upcoming Seminars Geaney s 2011 Workers Compensation Manual Is Now Available Additional Client Services Offered By Capehart Scatchard Through a series of unfortunate events for taxpayers, it is possible in New Jersey and other states to make substantially more money by remaining out of work on workers compensation than one could ever make while working. This is the result of a combination of special legislation and local ordinances coupled with IRS interpretation. Almost all private sector New Jersey employees are subject to the workers compensation maximum of $792 per week. Few private sector employees provide full salary for work absences. However, most public sector employees receive full salary for absences due to workers compensation injuries or illnesses. School board employees receive full salary by state law under N.J.S.A. 18A:30-2.1 for workers compensation absences up to one year. This statute was passed at a time when school board employees earned less than private sector counterparts. Many municipal and county employees receive full salary by local ordinances. These full salary statutes and local ordinances have created unexpected windfalls for injured workers and losses for state and federal budgets. For example, consider two employees, one earning $2,000 per week or approximately $100,000 per year working in a private sector job, and the second earning $2,000 per week or approximately $100,000 per year working as an experienced teacher for a board of education. Both are injured in 2011 and are out of work for one year on workers compensation. In the first instance, the private sector employee will receive $792 per week or $41,184 tax LAUREL CORPORATE CENTER 8000 MIDLANTIC DRIVE SUITE 300 S MT. LAUREL, NJ 08054 856-234-6800 www.capehart.com
WORKERS COMPENSATION SHAREHOLDERS Carla P. Aldarelli caldarelli@capehart.com Stephen T. Fannon sfannon@capehart.com John H. Geaney jgeaney@capehart.com Anne M. Hammill-Pasqua apasqua@capehart.com Richard E. Hickey rhickey@capehart.com Prudence M. Higbee phigbee@capehart.com Lora V. Northen lnorthen@capehart.com Claire Y. Ringel cringel@capehart.com Thomas J. Walls, Jr. twalls@capehart.com This update is written by John H. Geaney, Esq., a member of Capehart Scatchard s Executive Committee. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063, by fax 856.235.2786, or by email at jgeaney@capehart.com. For more information on Capehart Scatchard, visit our website at www.capehart.com. 2011 Capehart & Scatchard, PA free in a year; in the second instance, the teacher will receive almost $2,000 per week or very nearly the entire $100,000 salary in a year (minus pension and contributory insurance payments). That is approximately a 30% increase in pay on account of the substantial tax savings. In the first case, there is a huge loss even after factoring in the absence of any tax on the $792 payment. In the second instance, there is a huge gain in income. How can this happen? When the New Jersey Legislature passed its full salary provision for school board employees, clearly it did not mean that no state, federal or FICA taxes should be deducted from the full salary payment. That is where the IRS steps in. The answer lies in IRS Reg Section 31.3121(a)(2)-1. That regulation states that wages do not include the amount of any payment made under workers compensation laws. The regulation provides this example: A local government employee is injured while performing work-related activities. The employee is not covered by the state workers compensation law, but is covered by a local government ordinance that requires the local government to pay the employee s full salary when the employee is out of work as a result of an injury incurred while performing services for the local government. The ordinance does not limit or otherwise affect the local government s liability to the employee for the work-related injury. The local ordinance is not a workers compensation law, but it is in the nature of a workers compensation act. Therefore, the salary the employee receives while out of work as a result of the work-related injury is excluded from wages under Section 3121(a)(2)(A). The New Jersey Division of Pensions has provided guidance to boards of education on how to handle such full salary payments. It states, Effective December 15, 2005, Federal Regulation 31.3121(A) (2) - 1 provided that these payments are also free from all FICA wages. Therefore, federal, state or FICA wages should not be deducted when an employee is receiving worker s compensation pay. In other words, a school board employee can earn approximately 30% more by being out of work on worker s compensation than by working since no federal, state, or FICA taxes are paid for the period of absence due to work injury or illness. As the example above illustrates, the IRS applies this interpretation to employees who receive full salary by municipal ordinance. This windfall is not limited to school board employees but to any employee who receives full salary under a local ordinance. The IRS examples do not discuss full salary provisions under collective bargaining agreements since these agreements are arguably not equivalent to a local ordinance. The situation cries out for legislative change. State statutes and local ordinances that were meant merely to help a public employee retain full salary while out on workers compensation have now been interpreted by the IRS in such a way that employees earn substantially more money by remaining out on workers compensation. The state and federal governments as well as taxpayers everywhere lose out. New Jersey Member Firm of the National Workers Compensation Defense Network PAGE 2
by John H. Geaney, Esq. Daniel Aquilino Calva Calle filed a dependency claim petition alleging that his son, Christian Daniel Calva Siguenza, died in the course of his employment at a jobsite in Yonkers, New York, while working for American Style Company. The claim petition was denied and the respondent proposed a Section 20 settlement for $100,000. The issue supporting the Section 20 was dependency. With respect to $50,000 of that amount, respondent reserved Section 40 lien rights to any thirdparty recovery petitioner might make in his Superior Court action. In the course of the Section 20 settlement, Mr. Calle testified that he understood that there was a lien which needed to be paid back if the Superior Court law suit against Hitachi Corporation was successful. The third-party action was settled for an undisclosed amount but apparently higher than the $50,000 lien amount. Respondent asserted its right to reimbursement of two thirds of the $50,000 and in response, Calle filed a motion in the Law Division seeking to declare American Style s lien void. Calle s motion was granted and American Style appealed. The Appellate Division reversed and found that the agreement in the Section 20 proceeding was valid. It reviewed the statute in regard to Section 20 settlements and stated that Section 20 payments are not payments of workers compensation but only for insurance rating purposes. Ordinarily, therefore, a Section 20 payment is not lienable. However, this was a contractual agreement between the parties. To settle Calle s claim for benefits, American Style made the Section 20 payment expressly conditioned on the retention of its lien right as to $50,000. We disagree with Calle s contention that American Style s lien covered only compensation payments and did not attach to dependency benefits. A Section 40 lien includes liability to the injured employee or his dependents. The court said that the parties are free to enter into lien negotiation agreements in concluding a case on a Section 20 basis. The resolution of plaintiff s claims, including retention of the Section 40 lien, was negotiated as a material part of the settlement. A settlement agreement between parties in litigation is a contract. The court also noted that Mr. Calle himself had agreed to these terms under oath. This case clarifies an important issue for practitioners. Absent any language about lien reimbursement, when a respondent pays on a Section 20, the payment is not lienable. However, if the parties specifically agree in the order and the testimony at settlement to a full or partial lien reimbursement, this is enforceable. The court did not disapprove of the practice in which parties negotiate to make all or part of a Section 20 settlement lienable. This case may be found at Calle v. Hitachi Power Tools, A-1015-09T1 (App. Div. February 15, 2011). April 14, 2011 The undersigned will be moderating a full-day seminar for Millennium Seminars, Inc. at the Doubletree in Mount Laurel, New Jersey on the above date. The first fifteen registrants will receive a complimentary copy of Mr. Geaney s 2011 Workers Compensation Manual sold by ICLE for $169.00. CLE credits are being applied for in connection with this seminar. To view the full seminar brochure, please visit their website at www.millenniumseminars.com. To register for this seminar, please contact Carol Wright at (609) 234-1776. Below are the seminar topics and speakers: Recent Cases You Should Know About NJ Comp -- Michael L. Bileci, Esq., Capehart Scatchard Trends in Workers Compensation, ADA and FMLA -- John H. Geaney, Capehart Scatchard Part One: Why Comp Is Often Misused As General Health Care Coverage Part Two: How to Fight FMLA Fraud and Avoid ADA Litigation PAGE 3
The Complex Nature of Knee Injuries in Workers Comp -- Alexander A. Sapega, M.D., New Jersey Knee & Shoulder Center Physiatry and Pain Management in Workers Comp -- Daniel J. Ragone, Jr., M.D. Jeopardy Comp Style FCEs and Fitness-For-Duty Exams in New Jersey -- Matthew F. Gerdes, P.T., D.P.T., Kinematic Consultants, Inc. New Jersey Workers Comp Fundamentals -- John H. Geaney, Capehart Scatchard and Prudence M. Higbee, Esq.,Capehart Scatchard Part One: How To Win In Comp Court Part Two: All You Need To Know About Permanency Rates May 5-6, 2011 The New Jersey Self-Insurers Association Spring Meeting will be held at Harrah s Resort and Casino in Atlantic City, New Jersey. The topics are as follows: Navigating the Difficulties of Neck and Back Injuries -- Charles Gatto, M.D., Tri-County Spine Center Evidenced Based Functional Testing - Beth Sarfaty, PT, Kessler Rehabilitation Center Managing Co-morbidities in Workplace Injuries - Getting Employees Back to Baseline -- Peter LaRocca, HR, PSE&G, Steven Crawford, M.D., Meridian Health, Jeff Newby, Esq., Weber Gallagher and the Moderator is Dana Veronica, RN, Wegmans Food Market, Inc. Safety Leadership and Risk Management - Ken Bogdan, VP Private Sector Director, J.A. Montgomery Risk Control So You Think You ve Got It Bad?! Attorney Panel Discussion - Ken Goldman, Esq., Wolff, Goodrich & Goldman (New York, Robin Romano, Esq., Marshall, Dennehey, Warner, Coleman & Goggin (Pennsylvania), John Geaney, Esq., Capehart Scatchard (New Jersey), Albert Randall, Esq., Franklin & Prokopik (Maryland) and the Moderator is Judge Robert F. Butler, Sr., Retired Around The Horn - Joyce Newman, EVP Business Development, First MCO and Lora Northen, Esq., Capehart Scatchard Case Law and Legislation Update -- Nicole Downs, Esq., Hoagland, Longo, Moran, Dunst & Doukas Risk Management 101- A. Wayne Klokis, Corporate Risk Manager, Johnson & Johnson Pain Management, Physical Medicine and Rehabilitation -- Alan Sackstein, M.D., The Pain Management Center and Robert Pannullo, M.D., CIME, Seaview Orthopedic For more information, please contact Maura Bala at 732-219-0319, via email at mbala@njselfinsurers..com or visit the website at http://www.njselfinsurers.com. PAGE 4
The 2011 Manual is a compilation of prior editions with particular emphasis on cases decided in 2009-2010 as well as the addition of important chapters for practitioners of workers compensation. The manual is being sold by New Jersey Institute for Continuing Legal Education for $169.00. To order a copy of the manual, please contact Carol Wright at cwright@capehart.com. Some of the 2011 Edition highlights are as follows: New chapter on appellate practice in workers compensation New chapter on applications for review or modification (reopeners) New chapter on medical reimbursement liens New chapter on Longshore Harbor Workers Act CD attached to Manual including Rules of the Division and other key items Expanded analysis of bad faith claims Expanded analysis of 2008 FMLA regulations Expanded analysis of intentional harm claims Expanded analysis of Medicare Secondary Payer Statute Analysis of over 50 Appellate Division decisions Sexton v. County of Cumberland (perfume exposure) Quereshi v. Cintas Corporation (counsel fees) Meuse v. Egg Harbor (idiopathic claims) Cooper v. Barnickel (coffee break and major/minor deviation) Davis v. OneBeacon (federal court bad faith claim) Ottens v. Board of Review (TDB benefits) Condi v. Compucom (job termination and temp benefits) Gruzlovic v. Giovanni s Trattoria (reconstructed wages) Zrno v. Wegman s (reopener impleaders) Singletary v. Wawa (reopener impleaders) Huntoon v. Borough of Clementon (occupational statute of limitations) Van Dunk v. Reckson (intentional harm and exclusive remedy) For clients of Capehart Scatchard here are some additional services that may interest you: 1) Access to a recommended list of treating and IME physicians maintained by John Geaney for each county in the state. This list is regularly updated and includes address, phone numbers and fax numbers for physicians. 2) Access to useful forms such as an employee accident history filled out entirely by the injured worker 3) Access to a post-offer medical history form 4) In-house training seminars on a number of issues involving workers compensation, the ADA and FMLA 5) Guidance on new files not yet in petition status 6) Guidance on transitional duty policies If interested in any of the foregoing, please contact John Geaney directly at 856-914-2063 This update is published for our clients, friends and professional associates. It is designed to provide accurate and authoritative information with respect to the subject covered. The information contained in this update is intended to be general in nature. In addition, state law may have an impact on specific situations. Before any action is taken based upon this information, it is essential that competent, individual, professional advice be obtained. For more information on Capehart Scatchard, P.A. visit our website at www.capehart.com. 2011 Capehart & Scatchard, PA PAGE 5