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Unlike many states, most settlements in New Jersey are paid out over a period of weeks, often with payments carrying out well into the future. For example, if an employee receives an award of 40% permanent partial disability, the award is paid over 240 weeks in equal payments beginning with the last payment of temporary disability benefits. When an employee seeks to accelerate those payments into one lump sum check, this is known as a commutation. Permission must be obtained from the judge.
A recent case illustrates the issue. Terrance Jenkins received an award of permanent disability benefits. He applied to the lateVirginia Dietrich, Judge of Compensation, for the sum of $16,000 in commutation funds from the remaining award of $28,000, which was being paid in equal amounts over many weeks. He contended that he wanted to open a small business selling fish and chips. He testified in workers’ compensation court that he wanted to build on his mother’s current catering business. However, he admitted that his mother’s business had few customers, and he needed to purchase equipment and supplies for the business. Furthermore, he was in arrears on his rental payments for the business premises and needed to pay off his mother’s debts.
Judge Dietrich reviewed the provisions ofN.J.S.A. 34:15-25. That section states,“Commutation is to be allowed only when it clearly appears that an unusual circumstance warrants a departure from the normal manner of payment and not to enable the injured employee . . . to satisfy a debt, or to make payment to physicians, lawyers or others.” Applying this standard, the judge rejected the request for commutation concluding that this “would be throwing good money after bad.” She further found that the petitioner did not have a sound business plan and had managed to get over-extended financially.
The Appellate Division affirmed the rejection of the commutation request because of the reasons provided byJudge Dietrich. The case shows that it is really quite difficult to obtain a commutation inNew Jersey. Very few requests get approved because judges look out for the best interests of employees. This case may be found atJenkins v. L.A. Fitness, A-3570-12T2 (App. Div. February 4, 2015).
It is important for practitioners to realize that a commutation is improper when it is caused by the employer or carrier by mistake. For example, suppose an employer or carrier is supposed to pay out an award over the next 52 weeks. Due to a misunderstanding or computer error, the company pays the entire 52 weeks of future payments in one lump sum to the employee. This amounts to a commutation, and it would be illegal because only a judge of compensation can approve a commutation.
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 email@example.com.