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Appellate Court Allows Employee To Reopen Terms Of A Consent Settlement To Reconstruct Wages

By on June 12, 2020 in Settlements with 0 Comments

A recent unpublished case poses an unusual question:  can a party to a consent settlement for a percentage of disability award reopen the case to dispute the rate that was agreed to in the settlement?  The case is Calero v. Target Corporation, A-2650-18T3 (App. Div. June 10, 2020).   

Ms. Calero and Target Corporation agreed to a settlement on August 23, 2016 for a certain percentage of partial permanent disability.  Wages were stipulated at that time of $276.17 week with a capped rate of $193.32.  That meant that petitioner’s weekly permanency payments were capped at $193.32.  The Judge of Compensation and all parties, including the petitioner, signed the final order.   Several months later petitioner hired a new lawyer, who filed a motion for reconsideration of the wage which had been stipulated to in the settlement order.  The new lawyer argued that the part-time wage should have been reconstructed based on a full time wage. Target opposed the motion for reconsideration.

A hearing took place on September 12, 2018, and petitioner was permitted to testify essentially that the consent award was wrong on her wage.  She agreed that she earned $11.50 per hour but she was not seeking a higher percentage of disability.  She testified that she was hired on a full-time basis but she “worked the hours that were posted” for her.  She maintained that she was always available for 40 hours.  After her accident she tried to return to work but was physically unable to do so, and she said her hours continued to be reduced until there was no more work for her.  She had not worked anywhere since leaving Target.

On cross examination, petitioner acknowledged that sometimes she barely worked 20 hours per week. But she maintained that most of the time she worked 40 hours per week.   Counsel for Target did not offer any documents on her actual hours worked, nor produce any testimony from store employees.  It does not appear in the decision whether petitioner was asked why she had in fact agreed to the rate of $193.32 at the time of the 2016 settlement.

On January 16, 2019, the Judge of Compensation issued his decision reconstructing petitioner’s wages to 40 hours per week.  The judge applied the law set forth in Katsoris v. S. J. Publ’g Co., 131 N.J. 535 (1993).  That case requires proof of a permanent diminution of earnings capacity to reconstruct wages. Given petitioner’s testimony that she mainly worked 40 hours per week and that she could no longer work, the judge held that petitioner had proven a permanent diminution of wage earning capacity.  In so finding, the Judge of Compensation relied on a Civil Rule 4:50-1, which allows for judicial relief “which involves mistake, inadvertent surprise or excusable neglect.” 

Pursuant to the reconstructed wage, petitioner’s new wage became $460 per week, which allowed for a permanency rate up to $322 per week, substantially higher than the rate in the 2016 order of $193.32 per week.

Target appealed and argued that N.J.S.A. 34:15-27 respecting requests for modifications does not permit a party to reopen a case on stipulated facts like wage and rate.  Rather, the rule is designed for requests for modifications in the percentage of disability, or requests for further treatment or further temporary disability benefits.  The Appellate Division refused to hear this argument because Target failed to argue this point before the Judge of Compensation.  The policy of the appellate division is to only hear arguments on appeal that were raised below.  The Appellate Division also noted that Target had conceded that Civil Rule 4:50-1 permitted petitioner to make application to the Judge of Compensation for relief from a mistake. 

The Appellate Division commented that even if it had considered Target’s argument that stipulations on wages and rates cannot be the subject of a motion for reconsideration, “… we would find no error because regardless of the Act’s provisions, a judge of compensation has inherent authority to open judgments or orders in the interest of justice and that decision will not be disturbed absent an abuse of discretion.”

Target also argued that it was unfairly required to “incur additional and unforeseen litigation expenses to defend the settlement” which created “a tangible and significant harm.”  The Court rejected this argument because “Target did not argue before the judge of compensation or now before us, that had reconstruction been raised by Calero in the settlement discussions that led to the consent order, she would not have been entitled to the application of reconstruction to her wages.”  In other words, the Court said that Target never proved petitioner was not entitled to the reconstructed wage.  The Court said, “Target offered absolutely no evidence to refute Calero’s proofs or to establish that the alleged substantial prejudice Target suffered outweighed that which Calero experienced by not have her award properly determined.”

This case is unpublished, meaning that other courts are not bound by it, but it raises some very important questions for all cases where petitioners do not regularly work 40-hour per week jobs and may have capped permanency rates. If the petitioner agrees on the record to the wage and rate and testifies as such, is the petitioner still able to hire another lawyer later on to prove that wages should have been reconstructed?  How can the respondent protect itself from settlements being overturned on this issue?  Can respondent do the same thing and reopen awards if records show that the petitioner in fact had a lower wage than that which was agreed on? 

In this particular case, the evidence produced by petitioner for reconstruction of wages was strong and consistent with the Katsoris decision because petitioner argued she had a permanent diminution of earning capacity.   There was no evidence offered by Target to dispute the statements petitioner made in court.  Rather, Target focused on the unfairness to the company when a petitioner moves to reject the terms of consent order after the order has been entered and is being paid.   In fact, It does seem unfair to the employer to negotiate a settlement considering all factors, including the percentage of disability and rate, and then have one part of that settlement remain open for a subsequent attack.  What we do not know in this case was whether the overall percentage of disability was negotiated higher in exchange for a capped rate.  There is no mention of that in the decision.

Thanks to Rick Rubenstein, Esq. for bringing this case to our attention.

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John H. Geaney

About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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