Penalties, PARs, and Psychological Claims: Recent New York Workers’ Compensation Decisions

It has been a few weeks since the 3rd Dept. issued decisions on workers’ compensation cases. We got three today, plus the Court of Appeals dropped a decision on Tuesday, 3/17/26.

Gonzalez v. Northeast Parent & Child Society (Ct. of Appeals, March 17, 2026)

This is a big win for carriers. The issue is whether a claimant’s attorney can get a legal fee on a late fee penalty chargeable to the carrier. The Court of Appeals, in a 17-page decision with one Dissent, said no. Pursuant to WCL § 25, a 20% penalty will be applied to the sum of any late payment on an award. The Court held that WCL § 24 (2) only permits the Board to approve legal fees that accord with its counsel fees schedule, which does not include late fee charges awarded pursuant WCL § 25. If the Court held the other way, this would have been even more punitive financial burden on carriers than what the 20% penalty already imposes.

Cortez v. Royal Stone Cabinet & Tile Inc. (3rd Dept., March 19, 2026)

Here, the Board found that the claimant was an employee of Royal Stone, which did not have insurance. The Board assessed a $145,000 penalty for not carrying workers’ compensation insurance. Royal Stone appealed on various issues, including the rulings on employment and the fairness of the penalty. The 3rd Dept. upheld the finding of employment because there was substantial evidence in the record that claimant worked two to three days per week at the Royal Stone location, where Royal Stone supervisors were present. The claimant did not provide his own tools or equipment. There was no reference in the decision to whether there was a contract or any agreement as to terms of the work, but Royal Stone would give the claimant a written description of what work was needed. The 3rd Dept. did remand the penalty portion in the interests of justice, because that determination was not made until after the hearing, and the employer did not have an opportunity to address the calculation.

Fleming v. DOCCS Attica Correctional Facility. (3rd Dept., March 19, 2026)

This was an interesting challenge by a claimant who argued that an approval for surgery was an admission of liability for an unestablished body part. Here, the claimant who injured his right foot and ankle in 2015 had developed bilateral hip pain in 2022. The claimant’s physician filed a prior authorization request (PAR) for a left hip surgery in 2022. The carrier’s PAR level 2 insurer review found the left hip was consistent with the Medical Treatment Guidelines and granted the request. The surgery was performed in 2023. The carrier ultimately objected to payment of the bills based on lack of causation. The Board permitted testimony and development of the record on causal relationship of the hip, and at the close of evidence, disallowed the hip. The Court affirmed and relied on 12 NYCRR 324.4 (d), which provides that “[i]f a claim is controverted or the time to controvert the claim has not expired, and the insurance carrier, self-insured employer, or third-party administrator agrees that the medical care for which a PAR is requested is consistent with the Medical Treatment Guidelines or is medically necessary, such agreement shall not be construed as an admission that the condition for which the PAR is requested is compensable and the insurance carrier, self-insured employer, or third-party administrator is not liable for the cost of such treatment unless the claim or condition is established.” (Emphasis added).

Wallace v. New York City School Support Services, Inc. (3rd Dept., March 19, 2026)

This case involved a claim by a handyman and custodian at a migrant processing center who claimed psychological trauma from cleaning in unsanitary conditions. The claimant’s stress was allegedly from concerns about asbestos, and being present in a place with multiple arrests and police warnings of gang membership. The claimant was ultimately suspended for not reporting to work. During the claimant’s suspension, he sent multiple vulgar messages to his supervisor and other staff regarding the migrants and their morals and hygiene, referring to himself at one point as a Batman villain.

The Board disallowed the claim. The 3rd Dept. affirmed finding that the stress that claimant experienced at work as a result of this alleged incident was not greater than that which similarly situated workers experience in the normal work environment. Note that this claim was decided before the amendment to the psychological injury law, WCL § 10 [3] [c], which now requires that a claim not be disallowed upon a factual finding that the stress was not greater than that which usually occurs in the normal work environment. There was no argument regarding the application of the new amendment.