By: Lisa A. Miller, Esquire
The Commonwealth of Pennsylvania, Department of Transportation and the Claimant both filed cross Petitions for Review of the Decision of the Appeal Board denying Employer’s request for recoupment of overpayment of compensation to Claimant, and denying Claimant an award of attorney’s fees.
The Board held that there had been an overpayment, but it denied Employer recoupment for the stated reason that the Employer did not demonstrate that its overpayment was based upon a mistaken belief. Concluding that the Board erred in this regard, The Commonwealth reversed and remanded for further findings on Employer’s recoupment request. However, the Commonwealth Court affirmed the remainder of the Board’s Order that reversed the WCJ’s award of attorney’s fees to Claimant for an unreasonable contest by Employer.
Claimant injured his left shoulder while working as a highway foreman on June 19, 1995. Employer executed an agreement providing for five (5) weeks of total disability compensation followed by a suspension. Claimant’s average weekly wage at the time of injury was $863.84, with weekly temporary total disability benefits of $509.00. Claimant continued to work at his pre-injury job, with restrictions, until his Employer discharged him in August 1997. The discharge was grieved and settled. Claimant returned to work at a different job at a lower salary.
In July 1999, Claimant suffered a recurrence of his 1995 work injury. On July 23, 1999, the parties executed a Supplemental Agreement under which Employer paid Claimant a weekly total disability benefit of $433.50. Claimant returned to work modified duty as a parts runner from August 1999 to June 2, 2000, when Employer informed him that work within his restrictions was no longer available. Employer agreed to reinstate total disability benefits as of June 3, 2000.
Claimant filed a Petition to Review compensation benefits arguing that Employer was not paying him the correct amount of disability. Employer answered that it was paying weekly compensation in the amount of $433.50 because Claimant was working at a lower paying job when his work injury occurred. The Judge found that the Claimant’s average weekly wage on the date of the 1995 work injury was determinative, and thus ordered Employer to pay Claimant total disability benefits of $509.00 per week as of June 3, 2000, and ongoing. Finding Employer’s contest of Claimant’s Review Petition to be unreasonable, the WCJ ordered Employer to pay quantum meruit fees of twenty (20%) percent, of all past due and owing benefits directly to Claimant’s counsel, not to be deducted from Claimant’s proceeds. The WCJ also approved the contingent fee agreement between Claimant and counsel and directed the Employer to deduct twenty (20%) percent from Claimant’s benefits and pay them to counsel. Employer appealed and the Board affirmed, and no further appeal was taken.
In December 2004, Employer filed a Termination and Suspension Petition. Employer contended that Claimant was fully recovered from his 1995 work injury, and that Claimant had retired involuntarily withdrawing from the work force. The Judge denied both petitions.
Employer then filed a Modification Petition based upon its referrals of jobs suitable for Claimant. The WCJ denied the Modification Petition but concluded that Employer’s contest was reasonable. The WCJ approved Claimant’s twenty (20%) percent attorney fee agreement with his counsel. No appeal was taken.
In April of 2010, Employer filed the Review Petition alleging that it has overpaid Claimant in the amount of $30,540.00. Employer sought to recover the overpayment by taking $75.00 weekly credit towards his weekly disability payment. Claimant denied that he had been overpaid or that Claimant was entitled to recoupment. The Review Petition was assigned to the same Judge who decided the prior petitions, and he held a hearing at which both parties appeared by their counsel. No testimony was presented.
Employer offered into evidence a computer printout documenting an overpayment of $30,540.00 paid to Claimant between March 6, 2004 and December 4, 2009. Employer, through counsel explained the overpayment. Employer had paid Claimant $509.00 per week without deducting twenty (20%) percent for Claimant’s attorney fee because of a misunderstanding of the WCJ’s Orders. Employer should have paid Claimant $407.20 and Claimant’s counsel $101.80 each week, for a total of $509.00 per week. Claimant, by counsel argued that this was not an overpayment because the Judge had ordered the twenty (20%) percent counsel fee to be paid in addition to Claimant’s weekly compensation check. Claimant argued that in any case the “overpayment” resulted from Employer’s unilateral mistake, and thus could not be recovered from Claimant.
The Judge denied Employer’s Petition and found that there was no overpayment because his prior Orders required that Claimant be paid $509.00 per week. Even though there had been an overpayment, Employer could not recoup money from Claimant because under Dollar Tree Stores, Inc. v. WCAB (Reichert), 931 A.2d 813 (Pa. Cmwlth., 2007) recoupment is permitted only where there has been a mathematical miscalculation or mistake in the agreement by which the Claimant receives compensation. Neither was the case here. Accordingly, the Judge ordered the Employer to “continue to pay Claimant weekly wage loss benefits in the amount of $509.00 per week and pay Claimant’s counsel fees of twenty (20%) percent of Claimant’s benefits over and above the $509.00 consistent with the Judge’s prior Orders.” The Judge also found that Employer did not present a reasonable contest and awarded a quantum meruit fee.
The Board denied the Review Petition but reversed the WCJ’s Findings. The Board held that the Claimant had indeed been overpaid and reasoned that the WCJ had misinterpreted his prior Orders and ordered relief not authorized by the Act because the Act does not allow payment of unreasonable contest attorney’s fees over an indefinite period of time. With regard to the recoupment, the Board concluded that the WCJ’s reliance on the Dollar Tree was misplaced, noting that recoupment was not limited to overpayments made because of a mistake in the party’s agreement. Recoupment is available where the Employer has made overpayments in the mistake and belief that they are required. The Board held that Employer’s evidence, the computer printout did not prove that Employer had made the payments under a “mistake and belief”. Therefore, the Board denied recoupment. Finally, the Board concluded that Employer’s contest was reasonable and vacated the WCJ’s award of quantum meruit attorney’s fees.
Two (2) issues were raised on appeal: First, Claimant argued that the Board erred in finding that Employer had overpaid its benefits. Second, Claimant argued that the Board erred in concluding that Employer’s contest was reasonable. The Employer raised one issue, contending that the Board erred in denying Employer’s recoupment after it was found that Claimant had received payment to which he was not entitled.
Where fees are awarded because the Employer’s contest is unreasonable, the WCJ must determine the amount of a reasonable fee. Section 440 (b) of the Act directs the Judge to make a finding as to the amount and length of time for which such counsel fee is payable based upon the complexity of the factual and legal issues involved, the skills required, the duration of the proceedings, and the time and effort required and actually expended. This is the quantum meruit standard requiring the Claimant to show by evidence the value of the work done by Claimant’s attorney. An attorney’s fee that simply adds twenty (20%) percent to the Claimant’s weekly compensation indefinitely does not relate to the work actually done. Accordingly it is not authorized by the Act.
In the March 2002 Decision, the Judge ordered Employer to pay Claimant disability benefits at the rate of $509.00 per week as of June 3, 2000. He also directed Employer “to deduct twenty (20%) percent of the Claimant’s benefits and pay them directly to counsel” pursuant to Section 442 of the Act. Finally, the Judge ordered Employer to pay quantum meruit fees of twenty (20%) percent of all past due and owing benefits directly to Claimant’s counsel, not to be deducted from Claimant’s proceeds. The wording of this Order is confusing because it does not say dollar amounts. Nevertheless, the Order specifies a quantum meruit fee of twenty (20%) percent of the benefits that were past due and owed to Claimant on the date of this Order. Thereafter, Employer will deduct twenty (20%) percent of Claimant’s weekly benefits going forward, consistent with the contingent fee agreement. In short, the Judge erred in holding that his 2002 Order required Employer to pay an ongoing quantum meruit fee in addition to the full amount of the benefits awarded to the Claimant, and as noted by the Board this would have been improper.
As a general rule, Employers seek reimbursement of benefit overpayments from the Supersedeas Fund. However, there are circumstances wherein an Employer can recoup an overpayment directly from the Claimant to prevent unjust enrichment or double recovery. The circumstances where recoupment from the Claimant has been permitted vary. In Fahringer, McCarty and Grey, Inc. v. WCAB (Green), 529 A.2d 56 (Pa. Cmwlth., 1987) Employer miscalculated Claimant’s average weekly wage and did not detect the error for two (2) years, resulting in an overpayment of more than $5,200.00. The Commonwealth Court allowed Employer recoupment based on principles of unjust enrichment. We concluded that Section 413 (a) of the Act permits the Board to modify an agreement that contains a material mistake.
In Dollar Tree the Employer paid disability benefits to the injured Claimant without issuing a Notice of Compensation Payable or executing an agreement for Compensation Payable. After four and a half (4 ½) years, the Employer realized that it had been paying an inflated amount because of a miscalculated average weekly wage. The Court denied recoupment from the Claimant because unlike the facts in Fahringer, there was no “incorrect agreement to modify” under Section 413 of the Act.
Different facts were presented in Lucey, 557 Pa. 272, 732 A.2d 1201. Their Employer remitted $140,000.00 to the Claimant to pay for his hospital bill. The Claimant then negotiated a settlement with the hospital which agreed to accept $110,000.00 for total payment. The Claimant kept the remaining $30,000.00, and Employer petitioned for a credit against Claimant’s future disability and medical benefits. The Supreme Court looked at the restatement of restitution, which states as follows: “A person who has paid another an excessive amount of money because of an erroneous belief by mistake of fact that the sum paid was necessary for the discharge of a duty, for the performance of a condition, or for the acceptance of an offer is entitled to restitution of the monies.
Because the Employer mistakenly believed that $140,000.00 was necessary to cover the Claimant’s medical bills, it was entitled to restitution of the $30,000.00 kept by the Claimant.
The Commonwealth Court reached the same decision Mino. The Claimant was working reduced hours because of his work injury, and was awarded partial disability benefits. However, unbeknownst to the insurer, the Employer had continued to pay the Claimant his full salary despite his abbreviated work day which resulted in an overpayment of $22,000.00. The insurer sought offset of the overpayment against the future benefits on the area of unjust enrichment.
The Court found that Claimant was unjustly enriched by the receipt of benefits to which he was not entitled. In short, Employer proved that it had paid $509.00 per week undiminished by counsel fees under the mistaken belief that those payments were necessary to discharge its duty under the WCJ’s Order. This entitles it to a credit against future Workers’ Compensation to prevent unjust enrichment.
The Commonwealth Court remanded to the Board, which may remand to the WCJ to accept evidence and to make finding as to how much Claimant can afford to repay each week.
The Commonwealth Court did not address the quantum meruit fees since Claimant was not entitled to a quantum meruit fee, since it prevailed on the litigation.
