Change in Voluntary Tender Statute and its Potential Impact on Workers’ Compensation Claims

11.1.18

Change in Voluntary Tender Statute and its Potential Impact on Workers’ Compensation Claims

On Aug. 24, the governor signed into legislation the removal of the voluntary tender credit for counsel fees.

By Robert R. Hanneman Jr. | November 01, 2018 at 02:00 PM

The governor of New Jersey recently removed a very large tool that has been used by parties involved in pending workers’ compensation claims, which helped facilitate a petitioner’s continuation of benefits while the matter is being resolved. On Aug. 24, the governor signed into legislation the removal of the voluntary tender credit for counsel fees. He noted that, “After the establishment of an attorney client relationship pursuant to a written agreement”; counsel fees will be based upon the full amount of the award, and not reduced by any voluntary tender or offer of permanency.

The pertinent part of the statute that applies to counsel fees for workers’ compensation claims is 34:15-64, “Rules and regulations; witness fees; attorney fees.”

When, however, at a reasonable time, prior to any hearing compensation has been offered and the amount then due has been tendered in good faith or paid within 26 weeks from the date of the notification to the employer of an accident or an occupational disease or the employee’s final active medical treatment or within 26 weeks after the employee’s return to work whichever is later or within 26 weeks after employer’s notification of the employee’s death, the reasonable allowance for attorney fee shall be based upon only that part of the judgment or award in excess of the amount of compensation, theretofore offered, tendered in good faith or paid.

This was the prior language of the statute that has been changed.

The above is commonly referred to as the “voluntary tender” provision. It provided the respondent with an incentive to pay an offer of monetary benefits to a petitioner after the completion of treatment. If the offer was made in good faith and within the required time frame, there would be a reduction in the amount counsel could be awarded in a fee on the permanency benefits offered to the petitioner at the time of settlement. The petitioner received the continuation of monetary benefits while permanency evaluations were being completed, and while settlement negotiations took place. The respondent received the benefit of the reduction in the overall counsel fee due to petitioner’s counsel. This established an incentive for the respondent to continue benefits for a petitioner while a matter is being resolved. The change in the law removes the benefit received by the respondent.

The issue of counsel’s fee is not a new matter before the legislature. The New Jersey Workers’ Compensation Act was initially signed into law without reference to any provision for counsel fees. It was not until 1913 that the issue of counsel fees was addressed. The early statute noted: “when, however, prior to any hearing compensation has been offered or paid, the reasonable allowance” for fees was to be based upon the benefits obtained in excess of the offer. During this time period, the courts were reluctant to address the issue of counsel fees. The Supreme Court held that, “Because the making of policy was for the Legislature, the Court enforced the statute, observing that Lawyers who accepted employment under Statutes which regulate allowance for fees for their services do so with the knowledge and subject to the provisions of the Statute.” Haberberger v. Myer, 4 N.J. 116, 125 (1950). Further amendment of the statute was necessary as it was found that a respondent could attempt to avoid paying counsel fees if an offer for compensation was made just prior to a hearing, and this offer would either diminish or defeat an award of fees.

The statute was again amended in 1952, to preclude respondents from defeating awards for counsel fees at the last minute before a hearing. The new provision included the language,  “when, however, at a reasonable time, prior to any hearing compensation has been offered and the amount then due has been tendered in good faith, or paid ….” (Italics added.) The change was completed in order to afford greater protection to attorneys representing compensation claimants who may have invested substantial time and effort in a matter prior to the making of an offer by a respondent. The added time frame of a “reasonable time” as well as the language that the offer must be in good faith, provided the necessary protections for a counsel fee. The respondent could, by showing that an offer was made within a “reasonable time” and “in good faith,” still receive the benefit of a reduction of the counsel fee at the time of final resolution of the claim. This above change did not restrict or eliminate the incentive for the respondent to continue to provide monetary benefits to a petitioner while the matter was being resolved. The present change removes that incentive.

In 1979, the New Jersey workers’ compensation statute went through a thorough overhaul, and multiple changes were made to the statute to increase benefits for seriously injured employees, as well as to eliminate, clarify or tighten awards for minor injuries. These changes established the provision of 34:15-64 as it existed before the new change signed into law by the governor. It was noted that in discussing the 1979 amendment, the Joint Statement observed that “The bill would limit the base upon which to determine attorney fees, to be paid by the worker or his dependents and by the employer, to the amount awarded beyond an employer’s offer, providing that offer was made within the designated time frames.” (State Labor, Industry and Professions Committee, Joint statement to S 802 and A 840.) The time period in which an employer may make an offer, after final medical treatment or return to work (whichever is later), has been limited to six months. Again, changes to the statute were made to limit the activity of the respondent with regard to defeating or reducing the potential counsel fee due. It did not, however, eliminate the benefit due to the respondent if the respondent complied with the statutory limits. While restricted as to when an offer can be made, and with the good faith requirement, respondents still routinely made such offers for the benefit of the petitioner. This continued the overall intent of the statute to provide the appropriate benefits to an injured worker.

It is understood that the New Jersey Workers’ Compensation Act and statute were created to establish a basis of benefits for employees who suffered work related injuries in New Jersey. Injured workers are entitled to reasonable and necessary medical benefits, temporary disability benefits and, with proofs being presented, permanent disability. It is believed that the change in the law will have a chilling effect on the continuation of benefits for a petitioner once medical treatment has concluded and the worker is not receiving any temporary disability. Without the corresponding reciprocal benefit for the respondent, there is no incentive for any voluntary tender to be paid. Any award of permanency will begin to accrue following the day  after the last date of temporary disability. The voluntary tender has covered that period of time while the claim was pending resolution, when the petitioner was not receiving any monetary benefits, but may be entitled to same once a permanent disability is established.

Although, the petitioner may still be entitled to an award of permanency, there is no corresponding benefit for the carrier to pay a voluntary tender. It can be projected that voluntary tenders will significantly decline, and petitioners therefore will not receive continuation of benefits while matters are pending. The changing of the law could potentially create additional financial hardship for a petitioner who is awaiting resolution of his claim and not receiving any benefits.

The only group that appears to benefit from this change in the law is the petitioner’s counsel, who is not an actual party to the pending claim. Counsel will now be able to receive a fee on all of the payments made or offered to the petitioner under the permanency award, as long as an agreement has been reached between counsel and the worker for representation. It has been postulated that the change in the law will help promulgate expedition of settlements. This fails to take into consideration the need for obtaining permanency evaluations and the customary delay that takes place in scheduling and completing such evaluations. It has also been noted that the change provides the “needed and necessary” protection for the petitioner’s attorney against any attempt to reduce, defeat or eliminate a counsel fee for representation by counsel of the injured worker. The additional argument fails to take into consideration that this issue was previously noted by the legislature and addressed in a prior amendment, as discussed previously. A judge in a workers’ compensation claim has “full discretion” to award attorney fees up to a specific percentage. The court can use this discretion to determine that an offer, while technically complying with the statute, was not made in good faith; therefore, the court can allow a full or more complete counsel fee for the employee’s attorney. No change in the voluntary tender statute was necessary.

The newly enacted change to NJSA 34:15-64, relative to voluntary tenders will reduce and restrict any such offers that would have been made had the respondent still received the reasonable incentive of a partial reduction of counsel fees. The change will delay the benefits that could have been provided to a petitioner. It does not appear that adequate consideration was given to the effect this change will have on benefits to a petitioner, which, as noted above, is the stated goal of the Workers’ Compensation Act and 34:15-1, et seq.

 

Robert R. Hanneman Jr. is a partner with Weber Gallagher in Mount Laurel. He defends municipalities, manufacturers, hospitals and numerous carriers in workers’ compensation matters throughout New Jersey.  

Media Contacts

Lexi Burchmore
267.295.3377
lburchmore@wglaw.com

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