Workers’ Comp Board Adds to Judicial Oversight of Settlements

Since the dawn of mankind, human have settled their disagreements amongst themselves, albeit with varying degrees of civility. In the last few millennia, kings or their proxies would intervene when necessary to maintain order in their lands, as depicted by the Prince of Verona in Romeo and Juliet: “Rebellious subjects! Enemies to peace!...Throw your mistemper’d weapons to the ground, And hear the sentence of your moved Prince.”

Those learned in the King’s ways were often employed to help frame the dispute and to stand in the parties’ stead at the King’s court. For the last few centuries, personal injury attorneys have exercised the responsibility for advising their clients on accepting compensation for their past and future losses, including the primary issue of how much money is enough. Modern personal injury attorneys routinely assist their clients in planning for future expenses related to their injuries and in allocating the funds appropriately to ensure their availability when needed.

In Maine civil practice, the Court actively encourages the parties’ attorneys to settle cases privately, after which the moving party’s attorney simply asks the Court to dismiss the pending lawsuit with prejudice, which the Court routinely grants. In cases in which one party is a minor or otherwise legally incapable of consenting to settlement, of course, the Court must approve the settlement, but otherwise the Court leaves it to the attorneys to explain to their clients the risks and benefits of trial and settlement.

In Maine worker’s compensation practice, however, the State has adopted a far more paternalistic role. 39-A MRSA §325 limits the fees clients can pay their attorneys, and §352 requires the Board to scrutinize the settlement of every case to ensure that the injured employee’s interests are adequately protected. In doing so, the Legislature has exhibited its fundamental distrust of attorneys in general, and workers’ compensation attorneys in particular, apparently presuming them to be too incompetent and irresponsible to establish a reasonable fee agreement with their clients and to advise their clients of the ramifications of settlement.

As in civil practice, injured parties rarely represent themselves in worker’s compensation cases, nor should they ever. Although the 1992 Maine Worker’s Compensation Act was ostensibly designed to function “without attorneys,” it is a patchwork of three states’ laws and contains the same the Byzantine intricacies Maine workers’ compensation law has always included, plus a variety of others. Most attorneys shy away from workers’ compensation cases, leaving them to attorneys who practice regularly in that specialized arena.

Regardless of the plethora of experienced workers’ compensation attorneys in Maine, the Legislature found it necessary to establish a fee schedule for employees’ attorneys, thus involving itself in private legal matters in ways unique to Maine jurisprudence. For injuries occurring on or after January 1, 2003, the statute limits an employee’s attorney’s fees to 30% of “accrued benefits” and 10% of any settlement amount (up to $50,000, with a downward-sliding scale thereafter).

The statute expressly prohibits any other fee arrangement between the employee and attorney. As a result, no Maine employee can legally pay an attorney an hourly fee for advice in a workers’ compensation case, nor can any Maine attorney legally accept such a fee. The State has thus invaded the attorney-client relationship in such a fundamental manner, I wonder how employees and their attorneys can sit on their collective hands and take it. I represent Maine employers and insurers, which hire me by the hour anytime they want. It seems unfair to deprive employees of that same right, but what would I know— I’m just a lawyer.

Since many workers’ comp cases involve relatively small sums of money, and since the new Act trimmed benefits to the bone, private attorneys often find that they cannot accept those cases and still pay the rent. The State’s solution was to provide Worker’s Advocates, funded by an assessment on employers’ workers’ compensation insurance premiums. These Advocates are state employees (usually lawyers) who have offices and staff located in the local WCB offices, and who are trained and equipped to handle only employees’ workers’ compensation claims. They charge the employees no fee at all, eliminating any reason for employees not to have experienced, specialized legal help with their claims.

In spite of this wide availability of assistance, the State continues to involve itself in the details of any prospective settlement of a workers’ compensation case. After the parties’ attorneys have negotiated a settlement, they must present the proposed settlement to a Hearing Officer at a recorded hearing, at which the Hearing Officer must formally question the employee under oath, to ensure that the settlement is in his (or her) best interest and that he understands the finality of the settlement— just as if his lawyer had not done that already.

Pursuant to §352, the Hearing Officer must ask the employee about his age, the number of his dependents, the reasons he wants to settle his case, the level of his current earnings and his future earning prospects, and any child support he may owe. Typically, the Hearing Officer will ask the employee what he plans to do with the settlement proceeds and, with large settlements, will often suggest that he obtain professional financial advice on investing the money wisely.

Maine’s worker’s compensation statute requires the Board to adjust the permanent impairment (PI) threshold, so as to limit the availability of lifetime partial incapacity benefits to the 25% of claimants with the most PI. While the wisdom of this demarcation is questionable, parties who settle cases are required to give the Hearing Officer a PI number. The Board is about to amend the rule to require the parties to present actual written medical PI opinions, rather than to let the parties estimate the extent of PI themselves.

In spite of the “objectivity” of PI assessments under the AMA Guide to the Evaluation of PI, physicians’ assessments of PI can vary widely, often producing litigation over the issue. Thus, the Board’s requirement that PI be established by medical evidence is likely to delay most settlements, totally prevent others, create additional litigation, and increase costs for the parties and the Board. This pernicious effect of the Board’s rule is merely an extension of the problem the legislature created by relying on PI ratings to determine eligibility for incapacity benefits.

The statute also requires that, if the settlement requires the release of an employer’s liability for future medical expenses of the employee, the board must find that “the parties would be unlikely to reach agreement on the amount of the settlement without the release of liability for future medical expenses.” Since virtually all settlements include the release of future medical expenses (otherwise, why should the employer/insurer bother to settle?), the Hearing Officer routinely asks the employer’s attorney, “Would settlement be possible without release of future medical expenses?” To which the attorney always answers, “No.”

Effective December 26, 2007, however, the Workers’ Compensation Board has enacted a new rule requiring the Hearing Officer to make yet another inquiry: “How much of the settlement proceeds is for future medical bills?”

With large settlements, the Center for Medicare & Medicaid Services requires the establishment of Medicaid Set-Aside trusts, to avoid the parties shifting to the federal government the cost of future medical care related to the work injury. In small settlements, however, MSA trusts are unnecessary, but the parties are still supposed to “consider Medicaid’s interests” in the settlement. Typically, employees’ attorneys will prepare and present at the WC settlement hearing “Findings of Fact” for future use by the Social Security Administration in determining eligibility for disability benefits. These “Findings” include rough estimates of future medical costs, and the Hearing Officers sign them without any analysis whatsoever.

The Board’s new rule will change that. It provides as follows:

When making findings pursuant to 39-A M.R.S.A. § 352 (3)(A) relating to the release of an employer’s liability for future medical expenses, Hearing Officers shall make a determination regarding expected future medical costs related to the injury.

In order for the Hearing Officer to “make a determination” of future medical costs, however, the settling parties may need to present at least some evidence supporting their estimate of future related health care, including doctors visits, surgery, therapy, and medication. Of course, the necessity and relatedness of ongoing medical care is but one of many disputed issues in these cases which settlement was designed to resolve. Indeed, the employer may disagree with the employee’s proposed cost allocation, as it may affect the employer’s rights under the Supplemental Benefits Fund (qualified employers can recover the incapacity benefits they paid due to the Board’s extension of benefits). If so, the settlement hearing itself may become contested, adding uncertainty, delay and legal cost to the settlement of worker’s compensation cases—just what the settlement was intended to avoid.

The Workers’ Compensation Coordinating Council, an organization of employer and insurer representatives, formally objected to the Board’s new rule, arguing that Hearing Officers already have authority to make findings as to future medical costs (and do, whenever employee’s attorneys request it); that the rule would require such findings in every case, even in those not involving Medicare; that Hearing Officers will not have sufficient information to make an objective decision regarding future medical costs; and that Medicare is not obliged to honor the Hearing Officer’s findings anyway.

The Maine AFL-CIO, represented by a long-time employees’ attorney, argued that the new rule is “critical to protect the interests of employees” and to ensure that they understand “the financial burdens settlement will place upon them.” Why? Because employees’ attorneys will not include future medical costs in their settlement negotiations? Having dealt with employees’ attorneys for nearly a quarter-century, I know better than that, and so does the AFL-CIO attorney. Nevertheless, one of the employer representatives on the WC Board of Directors moved to adopt the rule, and the Directors voted unanimously in favor.

Employers and insurers harbor ample mistrust toward employees’ attorneys, but now employees’ attorneys have apparently admitted that they cannot trust themselves and need the State’s added intervention in their attorney-client relationships in order to ensure that they treat their clients properly.

That slippery slope may lead to more governmental control of other attorneys, and why not? Other clients are just as vulnerable as injured workers, so let’s protect them from their lawyers, e.g.: plaintiffs’ attorneys’ fees shall not exceed 10% of the recovery; hourly rates shall not exceed $80; all settlements, contracts, and other final legal products shall be approved by judges—when their dockets allow. Is this the natural and logical result of attorneys failing to control themselves?

The real purpose behind the new Board rule may be simply to increase the workers’ compensation settlement values by expressly including future medical costs. To request the Board’s involvement in that process, however, is to suggest the incompetence of employee’s attorneys generally and to surrender control to an outside agency unfamiliar with the details of the case. If the employee’s attorney must prepare a “future medical cost analysis” for the Board’s “determination” at a settlement hearing, he or she can just as easily prepare one for the employer’s attorney in the context of settlement negotiations. The converse, of course, is also true. But why make settlements harder?

As their families laid Romeo and Juliet to rest in the gloomy peace of medieval Verona, the Prince lamented, “All are punished,” as indeed all attorneys are by society’s prejudice against them, but they need not actively bring more of it upon themselves by declaring themselves incompetent. Instead, we attorneys should stand up and reminded ourselves and our fellow citizens that we have dedicated our lives to serving our clients honorably and well, and that we don’t need the government to tell us how to do our jobs.

The State wonders how it can save costs. The best way is to involve itself in people’s business only when they request it, and otherwise let people resolve matters peaceably between themselves. Only anarchists like Dick the Butcher in Henry VI want to “kill all the lawyers.” Those who favor order will give the lawyers freedom to do what they do best— work privately with their clients to resolve disagreements, without unnecessary governmental interference.