In a case of first impression, the Commonwealth Court has held that an employer could not offset an overpayment of workers’ compensation (WC) benefits paid for one work-related injury via a credit against an award of benefits for a subsequent injury.
In Columbia County Commissioners v. Kristie Rospendowski (WCAB), __ A.3d__ (725 C.D. 2021 filed December 1, 2022) the claimant, a deputy sheriff, sustained a work-related right ankle injury, recognized by a supplemental agreement. Over a period of four years following the injury, the claimant was in and out of work with the Sheriff’s office. The claimant, however, failed to report wages from a different employer and earnings data as required by the supplemental agreement. As such, the employer accrued an overpayment of $14,233.88. Via a Workers’ Compensation Judge (WCJ) Decision and Order, it was determined that the claimant had been unjustly enriched and the employer was entitled to a recoupment of benefits and an offset of $100.00 per week was granted. The claimant however returned to work in 2016 without a wage loss and benefits terminated. At the time of the return to work, $10,333.88 of the initial overpayment had not been recouped.
In 2019, the claimant sustained a subsequent work-related injury with the same employer to her lower back. For this second injury, the claimant was out of work from February 20, 2019 through March 17, 2019. The parties agreed that the claimant was entitled to wage loss benefits for the 27 days she was out of work. Employer argued, however, that it was entitled to a credit against these new wage loss benefits as it was still owed over $10,000 from claimant’s previous work injury. The WCJ and the Workers’ Compensation Appeal Board both ruled that the employer was not entitled to credit against the claimant’s wage loss benefits related to the new injury.
On appeal to the Commonwealth Court, the employer argued that under Section 413(a) of the Workers’ Compensation Act, the WCJ has an implied power to impose equitable principles and remedies. Looking towards the often cited rational cited by claimants regarding “equitable and humanitarian purposes of the Act”, the employer reasoned that Section 413 should be interpreted, and used, to require fairness and prohibit a party from receiving a windfall.
The employer, who was still essentially owed a $10,000 credit from the claimant, argued that they should not have had to pay wage loss benefits under the 2019 injury. The Commonwealth Court disagreed however and ruled in favor of the claimant. Ignoring the equitable and humanitarian purposes rational so commonly used against employers, the Court cautioned that while there is nothing in the Act to prohibit WCJs in awarding similarly situated credits, they should also be hesitant to engraft language to the Act that was not included by the General Assembly to remedy a perceived infirmity.
So, where does this leave employers in similarly situated positions in the future? This is a troubling decision for insurance carriers and employers for several reasons. As mentioned, claimants often rely on arguing that WCJs should consider the humanitarian and equitable purposes of the Act when deciding cases even when those remedies are not set forth expressly in the Act. What the Commonwealth Court has failed to do in Rospendowski is give employers and carriers the same benefits of these principals. It is even more concerning when looking at the facts that the employer had entirely clean hands in this matter since they were forced to overpay $14,000+ in wage loss benefits based on the claimant’s fraudulent failure to report earnings.
Moving forward, this decision is a clear reminder that carriers and employers need to vigorously monitor their claims and claimants including vigorous and regular use of the Employee Verification forms (LIBC forms 750/760). Despite the Act containing no express language, the humanitarian and equitable principals will not apply so much to employers going forward. The Commonwealth Court noted, however, in a footnote in the decision that employers are not always wholly without relief. There have been multiple cases where employers have brought equitable actions against their claimants in the Court of Common Pleas. They note that the Superior Court has determined that although the equitable remedy under Section 413 could not apply because there was no existing agreement, there was an obvious case of unjust enrichment over which the Court of Common Pleas had jurisdiction. However, in our opinion this is far from an ideal option as in many cases it may cost an employer more in fees and litigation costs than the overpayment itself. Given that this is a case of first impression, there is always the chance that this matter is not over and it is heard by the Pennsylvania Supreme Court.