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By now all workers’ compensation practitioners know of the law change in 2018 with respect to voluntary offers or bona fide offers of permanency. The new law amended the 1927 law that allowed employers to make voluntary offers within certain time limits free from counsel fee. The law passed in 2018 provides that if there is an established attorney-client relationship when an offer is made, the offer is feeable, meaning that both petitioner and respondent pay a counsel fee on the amount offered when the case settles.
The main incentive for employers to make voluntary offers for the past 90 years has been the savings on counsel fees. Those savings were often significant. If the employer offered a percentage equal to $10,000 by way of voluntary offer, the respondent would save $1,200 by not having to pay a counsel fee on that offer. The petitioner would save $800. But with the new law, why would employers or carriers ever make a voluntary offer going forward? Are there still situations where voluntary offers make sense? The short answer is that there may yet be limited situations that argue in favor of a voluntary offer.
1. Obviously, if an injured worker has no attorney at the time the offer is made, the offer remains free of any counsel fee. Here is the problem: there is no way for an employer or carrier to be sure that the worker has no written agreement with a lawyer. A question may be put to the injured worker about having counsel, but there is no obligation for the worker to reveal this information to the employer or carrier. The injured worker may not feel comfortable at all with this question. Nonetheless, the employer can always make the voluntary offer, understanding that it may not know until the end of the case whether the offer is considered bona fide for purposes of being free of counsel fee. The proof will be the written counsel fee agreement offered in evidence at settlement. The date of the agreement will decide whether the offer is feeable.
2. The injured worker’s lawyer may on occasion make a request for a voluntary offer and give consent that the offer will not be feeable. This could happen in a situation where the employee has reached maximal medical improvement but the case is nowhere close to settlement. The employee’s lawyer may request a voluntary offer at this point to tide his or her client over pending the resolution of the case and may propose that the amount of the offer will not be feeable. These kinds of hardship offers by consent are likely to occur from time to time.
3. Another situation that happens concerns overpayments of temporary disability benefits. When a carrier or third party administrator has overpaid temporary disability benefits, one way to recapture the overpayment, subject to approval of the Judge of Compensation, is to make a voluntary offer of permanency and then reduce the offer by the amount of the overpayment in temporary disability benefits. The offer may still be feeable at the end of the case depending on whether there was a written attorney-client relationship, but at least this approach may remedy the overpayment issue.
4. In some cases it is not clear whether the employer or carrier owes temporary disability benefits. There may be causation or legal issues over the question whether temporary disability benefits are due and owing. In this case, the parties may discuss making an open-ended offer at a certain rate while the issues are being litigated. Once the causation issue gets resolved, the Judge will decide whether the voluntary payment will be deemed to be a payment of temporary disability benefits or a voluntary offer of permanent partial disability. Either way the employer will get a dollar credit. The advantage for the employer is that this approach may avoid penalties and perhaps counsel fees related to a motion for medical and temporary disability benefits.
5. Some carriers believe that a voluntary offer made early on in a case at the time of MMI, before it is known whether the employee has a lawyer, may deter the injured worker from filing a permanency claim petition. It is impossible to know whether this theory is valid because it is hard to prove a negative, namely that the injured worker would have filed a claim petition but for the voluntary offer. Some carriers do subscribe to this approach and may therefore continue to make voluntary offers with the hopes that such an offer will deter the filing of formal claim petitions.
In short, the new law does not eradicate all rationales for voluntary offers. Such offers will still happen from time to time but nowhere near as often as they were made over the past 90 years. Voluntary offers will be few and far between in all likelihood, and practitioners will need to weigh the plusses and minuses in each case.
John H. Geaney, Esq., is an Executive Committee Member and a Shareholder in Capehart Scatchard's Workers’ Compensation Group. Mr. Geaney concentrates his practice in the representation of employers, self-insured companies, third-party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act and Family and Medical Leave Act. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063 or by e‑mail at firstname.lastname@example.org.