Pennsylvania Supreme Court: In Upset, Employers Now - at WCJ's Discretion - to Pay Attorney's Fees on Top of Claimant's Award

The Pennsylvania Supreme Court, in a holding at odds with custom and practice, has held that, in all cases where a claimant prevails, the employer is, at the WCJ’s discretion, responsible for claimant’s attorney’s fees.  This is so even when the employer has maintained a reasonable contest.  The decision was unanimous; the court discerned no ambiguity attending the key statutory language.  

Under the longstanding prior practice, the claimant would bear his or her attorney expenses by paying a maximum 20% contingent fee out of his or her share.  Only when the employer had a manifestly unreasonable (arbitrary and capricious) contest would the employer have to pay claimant's fees.  And the Appeal Board, on intra-agency review, always granted a stay on fees (not on the worker's award) in the event of an employer appeal.       

The statute and the foregoing custom and practice is 50 years old, so this 2021 interpretation by the Supreme Court has upset the apple cart in the Pennsylvania practice.  Presumably, the value of claims will be enhanced and carriers will have to review premium levels.  A skilled lawyer colleague of this writer refers to the case as a "game-changer."  (Any comments here are strictly those of the writer.) 

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Lorino v. W.C.A.B. (Commonwealth of PA/Penn DOT), ___ A.3d ___, 2021 WL 6058030, filed 12.22.2021 (Pa. 2021).
 
          The Supreme Court, in a holding at odds with custom and practice, has held that, in all cases where a claimant prevails, the employer is, at the WCJ’s discretion, responsible for claimant’s attorney’s fees.  This is so even when the employer has maintained a reasonable contest.  The decision was unanimous; the court discerned no ambiguity attending the key statutory language. 

          The holding, arguably addressing a sleeper (though long identified) issue – lo these many years – is based upon a reading of Section 440(a), 77 P.S. § 996(a). That statute provides, in pertinent part, that in “any contested case … the employe … in whose favor the matter has been finally determined in whole or in part shall be awarded … a reasonable sum for costs incurred for attorney’s fee …[.] Provided that cost for attorney fees may be excluded when a reasonable basis for the contest has been established by the employer ….” (Emphasis added.)     

          The Supreme Court held that the term “shall” means that an award of fees is mandatory.  Meanwhile, the term “may” indicates that an award of fees is not “automatic” – the determination is for the WCJ, in his or her discretion, on a case-by-case basis. The court, notably, was confident that WCJs were equipped for the task, despite employer’s anxiety that “no standards are provided.” The court, on this point, responded, “We are confident [that] judges will apply their discretion based on the humanitarian and remedial purposes which underlie the WCA.”  Slip op. at p.11, note 7.       

Torrey's Note 1: The court distinguished (effectively overruled) a 1991 Commonwealth Court case where the Section 440 issue was current.  The court there stated, “attorney’s fees are not automatically awarded to a successful claimant under Section 440, when the employer has presented a reasonable contest.”  Mason v. W.C.A.B. (Wheeling-Pitt), 600 A.2d 241 (Pa. Commw. 1991). But, of course, the Supreme Court in this new case is not holding that the award is mandatory; it is discretionary.

Torrey's Note 2: An award of fees on top of compensation where a reasonable contest has been found is foreign to our Pennsylvania sensibilities.  Still, in some states this is the rule, and employers, presumably, simply insure for the same as part of their premiums.  Florida is a major example; New Hampshire is another.  In the latter state, the agency establishes the hourly fee to be assessed by the judge.  Perhaps it was this type of regime that the legislature, fifty years ago, was contemplating.  

Torrey's Note 3: The WCJ has, seemingly, been supplied with significant authority: “An abuse of discretion occurs where the WCJ's judgment is manifestly unreasonable, where the law is not applied or where the record shows that the action is a result of partiality, prejudice, bias or ill will.” Allegis Group v. W.C.A.B. (Coughenaur), 7 A.3d 325, 327 n.3 (Pa. Commw. 2010).

Torrey's Note 4: The lack of any “brightline” as to when to exercise discretion on fees, and how much to award, will be a concern among the WCJs.  Appeals over abuse of discretion may, similarly, be a headache.   

Torrey's Note 5: The court’s holding is not limited to medical-only cases.

Torrey's Note 6: The crux of the court’s holding is found in two paragraphs, which I will reproduce here: 

Based on the established meaning of the terms “shall” and “may,” under Section 440, when a contested case is resolved in favor of an employee, a reasonable sum for attorney’s fees shall be awarded to the claimant. Such an award is mandatory. Where, however, the employer has established a reasonable basis for the contest, an award of attorney’s fees may be excluded. In other words, the WCJ is permitted, but not required, to exclude an award of attorney’s fees. The Commonwealth Court below, in “always interpret[ing] Section 440 to mean that ‘attorney[s’] fees shall be awarded unless a reasonable basis for the employer’s contest has been established,’” … disregarded the distinction between the terms “shall” and “may,” and failed to recognize the discretion afforded to the workers’ compensation judges to award attorney’s fees even when they find a reasonable basis for an employer’s contest.
 

To be clear, we do not suggest that, under Section 440, a WCJ may never deny an award of attorney’s fees when the employer has established a reasonable basis for its contest. As explained above, the language of Section 440 affords the WCJ discretion to refuse an award of attorney’s fees in such circumstances. Rather, it is the Commonwealth Court’s interpretation of Section 440 as a per se disqualification of an award of claimant’s attorney’s fees where the employer has established a reasonable basis for its contest which is contrary to the plain language of the statute.  

Slip op. at 10-11.

Full Text: https://www.pacourts.us/assets/opinions/Supreme/out/J-58-2021mo%20-%20104992019155173360.pdf?cb=1