Judge of Compensation Can Order Petitioner to Reimburse An Employer Following Reversal of An Award by the Appellate Division

What happens when an order is entered against an employer to pay a workers’ compensation award and then respondent appeals the decision? Does respondent have to pay benefits pending appeal?  If it does have to pay benefits during the appeal period, what happens if the Appellate Division reverses the award?  Can respondent get a court order for repayment of benefits and counsel fees paid during the appeal?

These are very important questions for practitioners, employers, carriers and third party administrators.  An answer was provided in Malone v. Pennsauken Bd. of Educ., No. A-3404-18T3 (App. Div. July 28, 2020). The case involved a full trial in which petitioner, a custodian, claimed that his need for bilateral total knee replacements was caused by the physical stresses of his job over several years.   Malone won a substantial award of $109,214 in permanency benefits and $7,638 in temporary disability benefits, and his lawyer received a counsel fee of $21,840.  The Board appealed and argued that there was no reliable evidence showing that the knee pathology and knee replacements were work related.

Naturally, the Board did not want to pay the award while the appeal was pending since appeals can take a very long time.  The Board therefore sought what is known as a “stay” of the award pending appeal.  In essence, that is a request by the employer for permission to suspend payments until a decision comes down on appeal.  The request for a stay was denied by both the Judge of Compensation and by the Appellate Division.  That meant that the Board had to pay the award during the many months of the appeal period.  Although the Judge of Compensation denied the request for a stay, she did alert petitioner to the potential need to reimburse the award in the event of a reversal of her decision:

I’m going to deny the motion to stay. I do believe your argument is that in the event the Appellate Division does overturn my decision that it would be difficult for you to recoup your money. Petitioner needs to be aware of the fact that those monies would, in fact, have to be repaid in the event that the Appellate Division reverses my decision . . .

On appeal, respondent persuaded the Appellate Division to reverse the award of all benefits by arguing that petitioner failed to prove that petitioner’s bilateral knee conditions were work related.

Following the successful appeal, the Board next filed a motion with the Judge of Compensation seeking an order requiring petitioner and his attorney to repay the Board of Education all the funds that had been paid pursuant to the reversed order. The Judge of Compensation denied the Board’s motion stating that she did not believe she had the power to do this:

I do believe that once the case is appealed, the Appellate Division, if they accept it, they have jurisdiction. In this case, the decision was reversed, it was not remanded. The issue of repayment was not addressed by the Appellate Division. But I have no statutory authority to do anything with the Malone matter at this point in time, because the Appellate Division still, in my mind, has jurisdiction over this matter.

That left respondent with only one more option:  to return to the Appellate Division.  The Court cited N.J.S.A. 34:15-57 stating that every Judge of Compensation “. . . shall have power to modify any award of compensation, determination and rule for judgment or order approving settlement and to provide for the commutation of any such award, determination and rule for judgment or order approving judgment.”

The Appellate Division disagreed with the Judge of Compensation and held that the statute vests the Judge of Compensation with the authority to enter a judgment against Malone and his attorney for the amounts the Board paid to them under the order which had been reversed. 

This is a very important decision because there really are few appellate decisions, if any, in workers’ compensation that address whether a Judge of Compensation has the power to order a petitioner or his/her attorney to repay benefits after an appeal. 

Congratulations to Capehart partner, Adam Segal, Esq., in winning the appeal of the award and then winning the argument that a Judge of Compensation can in fact order a petitioner to repay benefits when an award is reversed.