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Court Rules that Reduction of Employer Reimbursement to Cover Attorney Fee in SLU Award Improper Because It Resulted in Windfall to Claimant

In Enoch v. New York State Department of Corrections and Community Supervision, decided by the Appellate Division, Third Department, on 1/30/2020, the Court ruled that the Board correctly allowed a carrier to reduce a claimant's schedule loss of use award by the amount of outstanding employer reimbursement remaining where there was sufficient money moving on the SLU to pay for both the claimant's attorney's fee and provide for the remaining reimbursement.

The court stated that “Continuing to reduce the employer's reimbursement credit by the counsel fee award after claimant received his schedule loss of use award would result in a windfall to claimant, essentially making the employer subsidize a portion of claimant's legal expenses."

The claimant in Enoch injured his right knee during a training activity and filed a workers’ compensation claim. While he was off work, the employer paid the claimant his regular wages and filed a claim for reimbursement of those wages with the Board. In 2017, the Board awarded the claimant benefits payable as a credit to the employer to partially reimburse it for the wages paid. The claimant's attorney was paid $700 as a lien on the employer's wage reimbursement credit.

A workers’ compensation law judge ("WCLJ") found that the claimant had a 20% schedule loss of use ("SLU") of the right leg and directed reimbursement to the employer for remaining wage reimbursement request. The carrier filed an Application for Board Review because the WCLJ reduced the employer's reimbursement credit by the amount of the previous $700 attorney fee.

The Board ruled that the employer was entitled to full reimbursement of wages paid at the time of the SLU award without any reduction for attorney fees. The Board modified the WCLJ's decision by directing that the fee be paid out of the claimant's portion of the SLU award.

The Appellate Division reasoned that when the Board initially made the award of counsel fees payable as a lien on the claimant's reimbursement credit, he was receiving temporary total disability payments, and the employer's reimbursement credit was limited to the amount of the payments and at that time, the employer' wage reimbursement was the source from which the attorney could be paid.

Once the claimant was awarded a SLU, however, there were sufficient funds from which the employer could receive full reimbursement of the wages paid to the claimant during his period of disability, leaving him with an excess from which counsel fees could be paid.

This decision from the Appellate Division ensures that employers will be able to secure full reimbursement of wages paid in lieu of compensation in most cases.

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