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Appellate Division Voids Penalty Assessed Against Borough for Late Payment of Award

By on May 16, 2019 in Awards with 0 Comments

There are few cases in the Division involving assessments of penalties against an employer for late payment of a settlement.  Ramella v. Borough of Seaside Heights, A-3310-17T3 (App. Div. April 8, 2019) is therefore of interest to practitioners.

The petitioner, Shirley Ramella, brought a dependency claim against the Borough and its various workers’ compensation carriers alleging that her husband died from work-related chronic obstructive pulmonary disease due to alleged exposure to asbestos during his 15-year employment.  The total settlement against all carriers was $50,000, but the Borough itself agreed to pay $7,500 on a Section 20 basis for a period in which its insurance coverage was in dispute.  An order was entered on August 15, 2017 against the Borough.

Public entities need vouchers before they can make payment, and a voucher was mailed to Shirley Ramella on August 22, 2017, one week after the order was signed.   Mrs. Ramella did not sign or return the voucher for months.  The Borough’s counsel reached out to Mrs. Ramella’s counsel seeking the signed voucher. In January 2018, Mrs. Ramella executed the voucher and returned it to the Borough.  The Borough then promptly paid the $7,500 once it received the signed voucher.

In the days immediately prior to the return of the voucher by Mrs. Ramella, her attorney moved to enforce the August 15, 2017 order.  By the time the motion was listed in workers’ compensation court, the order had been paid.

The Judge of Compensation conducted no formal hearing and took no testimony.  The Judge found that the Borough should have prepared the voucher during the years that the case had been litigated. The Judge made no findings of fact concerning Mrs. Ramella’s failure to sign the voucher, nor her attorney’s failure to inquire about it, nor the promptness of payment by the Borough once it received the signed voucher. Instead, the Judge entered an order on February 20, 2018 assessing a $5,000 penalty against the Borough payable to the Second Injury Fund, plus $500 to her attorney.

The Borough appealed the penalty order, and the Judge later denied the Borough’s motion for reconsideration and a stay. The Appellate Division began by noting (incorrectly) that there is no statute establishing a specific timeframe for payment of workers’ compensation settlement proceeds.  Actually, N.J.S.A. 34:15-28 states: “Whenever lawful compensation shall have been withheld from an injured employee or dependents for a term of 60 or more days following entry of a judgment or order, simple interest on each weekly payment for the period of delay of each payment may, at the discretion of the division, be added to the amount due at the time of settlement.”  This statute was not mentioned in the decision but the Court did discuss another section dealing with penalties for failing to comply with orders generally.

The Appellate Division proceeded to observe that N.J.A.C. 12:235-3.16(e) requires a Judge to hold a hearing before assessing a penalty for failure to comply with an order.  The Court was critical of the Judge of Compensation for failing to hear any witnesses or place documentation in the record supporting the reasons for the penalty. 

The Court focused on N.J.S.A. 34:15-28.2, which states that a Judge of Compensation may assess a penalty for failure to comply with a court order not to exceed 25% of moneys due for unreasonable payment delay and to impose a penalty of up to $5,000 payable to the Second Injury Fund.  The Court said, “Here, it was entirely reasonable for the Borough to send Shirley a voucher for her signature. . . We do not agree with the judge’s observation that the Borough could have prepared the voucher and secured Shirley’s signature during the eight years that her amended claim petition was pending.” The Court commented that this was a contested matter, and there was no reason for the Borough to prepare a voucher during the contested period of the case.

The Court reversed the award of the penalty and the award of counsel fees.  It said: “Finally, the judge did not consider the inaction of Shirley and her counsel after her receipt of the voucher, the affirmative acts of the Borough’s counsel in seeking Shirley’s signature, or his client’s prompt payment once it obtained the signed voucher, when deciding whether a penalty was warranted.”

The facts of this case were unusual because the petitioner in this matter did not return for months a signed voucher that was sent to her one week after the settlement.  The use of a voucher does not occur in private sector settlements.  But this case is still important because it shows that judges need to conduct a full hearing with testimony from the parties before assessing penalties under the statute.

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John H. Geaney

About the Author

About the Author:

John H. Geaney, an executive committee member and shareholder with Capehart Scatchard, 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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