In Coffman v. Kline, PA Super 241 (Pa. Super. 2017), the Superior Court held that a carrier improperly disbursed workers' compensation settlement proceeds of less than $5,000, despite a Workers' Compensation Judge's (WCJ) decision approving the Compromise and Release Settlement Agreement, where the county domestic relations office had issued a non-disbursement order. The Court also found that the carriers' disregard of the non-disbursement order made it subject to a finding of civil contempt, and that the WCJ's Decision approving the settlement agreement provided the carrier no immunity.
The employee in this case had child support arrearages totaling $14,983.10. He entered into a Compromise and Release Settlement Agreement to resolve his work-related injury for $5,000. After a deduction of counsel fees, the employee was to receive a lump sum of $3,400. The county domestic relations office was alerted to the settlement, and issued a non-disbursement order. The WCJ later approved the settlement agreement and circulated a decision ordering the carrier to issue net proceeds to the employee. The domestic relations office subsequently filed a petition for contempt, which the trial court dismissed with prejudice.
On appeal, the Superior Court clarified that the domestic relations office has an automatic statutory lien on net proceeds greater than $5,000. However, domestic relations offices also reserve the right under Section 4305 of the Domestic Relations Act to collect child support arrears in any amount, without regard to a statutory minimum sum, by issuing non-disbursement orders. The Court also found that the WCJ is only obligated to disburse net proceeds in excess of $5,000 to the domestic relations office. Therefore, the responsibility to comply with non-disbursement orders for settlements of less than $5,000 falls squarely on the carrier. The Court considered the carrier's arguments that non-disbursement would (1) violate the WCJ's decision to disburse net proceeds, and (2) that the ability of domestic relations to seize an employee's entire settlement would chill negotiations. However, the Court found that these "practical concerns" were not a defense to the clear mandate of the Domestic Relations Act.
Comment: When child support arrearages are identified during settlement, carriers and their attorneys must determine whether the county domestic relations office has issued a non-disbursement order. This is equally true in instances where the total lump sum payable to the employee is less than $5,000. Where a non-disbursement order has been issued that order should be presented to the WCJ, who can then circulate a decision that takes the non-disbursement order into consideration. As Coffman clearly illustrates, a non-disbursement order supersedes a decision of the WCJ instructing the carrier to disburse net proceeds to the employee. Therefore, it is best to address the issue with the WCJ at or before the C&R hearing.
For more information regarding this topic, please contact Weber Gallagher Attorney Dawn Nicholson at dnicholson@wglaw.com.
Disclaimer: The contents of this post are for informational purposes only, are not legal advice and do not create an attorney-client relationship