PA Update – The Supreme Court of Pennsylvania holds that the Workers’ Compensation Act does not preclude the award of attorney fees to a claimant even if an employer establishes a reasonable basis for seeking a termination of benefits in Lorino v. Workers’ Comp. Appeal Bd. (Commonwealth), 266 A.3d 487 (Pa. 2021).
A PennDOT equipment operator suffered an injury on August 22, 2016. The employer’s workers compensation carrier, InServco, accepted liability for a low back sprain/tear and a left hip sprain/tear pursuant to two medical only notices of compensation payable. The employee did not miss any work because of his injury and did not receive indemnity benefits or wages. The insurer continued to pay for periodic medical treatment consisting primarily of epidural spinal injections. In February 2017 the employer/carrier referred the claimant to a board certified orthopedic surgeon for an independent medical examination. Based upon that examination the claimant was deemed to be fully recovered from his injuries. It was determined the claimant required no further treatment. On March 2017, the employer/carrier filed a termination petition alleging full recovery as of February 21, 2017.
A hearing was scheduled in regard to the termination petition. The claimant appeared and testified regarding the ongoing care and treatment he was receiving in the form of epidural steroid injections. He testified the injections would alleviate his pain for a few months but the pain would slowly return. According to the claimant he had received his most recent injection approximately two to three weeks before the IME. At the time of the IME his low back pain had temporary improved. At the conclusion of the hearing the claimant requested his continued medical benefits and $14,050.00 in attorney fees pursuant to Section 440 of the Act. He claimed that due to only receiving medical benefits he was unable to retain the services of an attorney based upon a traditional contingent fee arrangement. Therefore, he was required to enter into an hourly fee arrangement at the rate of $400.00 per hour.
The W.C.J. denied the termination petition. He found the employer had established a reasonable basis for it is petition. However, based upon the examining physician’s opinions the employer/carrier had failed to meet its burden of proving full recovery. The Judge also denied the claimant request for an award of attorney fees under Section 440. He determined $2,000.00 was a reasonable sum for attorney fees and pursuant to Section 442 of the Act determined the claimant was responsible for that amount.
The claimant and employer/carrier filed an appeal to the Board. The Board affirmed the Judge’s decision indicating the employer had presented a reasonable basis to support its termination petition. The Board further indicated the claimant failed to provide any support for his claim that he was entitled to attorney fees under Section 440 of the Act. The claimant filed an appeal to Commonwealth Court.
In an unpublished memorandum opinion, the Board was affirmed in relevant part holding the claimant was not entitled to attorney fees under Section 440 Act because the employer had a reasonable basis for its termination petition. The Court observed Section 440(a) states in any contested case where the insurer has contested liability in whole or in part, including contested cases involving Petition to Terminate…, the employee… in whose favor the matter at issue has been fully determined in whole or in part shall be award, in addition to the award for compensation, a reasonable sum for costs incurred for attorney fees, witnesses, necessary medical examination, and a value of unreimbursed time to attend the proceedings: provided, that costs for attorney fees may be excluded where a reasonable basis for the contest has been established by the employer or the insurer.
The Court noted the purpose of Section 440 was to protect claimants from unreasonable contests by employers. The Court stated in line with this legislative attempt and despite the general assemble use of the word may, this Court has always interpreted Section 440 to mean that attorney fees shall be award unless a reasonable basis for the employer’s contest has been established. In other words, the award of attorney fees is the rule and their exclusion is the exception to be applied in cases where the record establishes that the employer’s contest is reasonably based.
The Claimant filed a Petition for Allowance of Appeal. The Supreme Court granted review to consider whether the Commonwealth Court had improperly held the language of Section 440(a) precludes an award of attorney fees where there is a reasonable basis for the employer’s contest. The Court noted the claimant was not advocating for an automatic award of attorney fees to a successful claimant where the employer’s contest was reasonable but rather that such an award be discretionary. The Court further held the instant matter involved an interpretation of a statute, therefore their standard of review was de novo and the scope of review was plenary.
The Claimant contended the Commonwealth Court had errored in holding he was not entitled to attorney fees under Section 440 simply because the Judge found the employer had a reasonable contest. The claimant asserted the legislature’s use of the word may instead of shall in discussing the exclusion of attorney fees demonstrated the legislature did not intend for attorney fees to be excluded in every reasonable contested case, otherwise it would have used the words shall be excluded. The claimant noted the Supreme Court had concluded where the general assemble uses both may and shall in the same section of a statute it intends for those words to have distinct meanings.
The employer/carrier argued the Commonwealth Court had properly interpreted Section 440 as requiring an award of attorney fees only in cases where an employer had made an unreasonable contest. Employer/carrier maintained the purpose of Section 440 was to protect claimants against unreasonable contest and once an employer established a reasonable contest there was no longer a need to award attorney fees to protect the claimant.
The Supreme Court reversed in part, holding that the Commonwealth Court’s interpretation of Section 440 was contrary to its expressed language. The Court stated when the legislature uses the term shall and may in the same section of a statute, it is a clear indication that the legislature intends certain actions to be mandatory and others discretionary. The Court went on to indicate based upon the established meaning of the term shall and may under Section 440, when a contested case is resolved in favor of an employee, a reasonable sum for attorney 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 fees may be excluded. A WCJ is permitted, but not required, to exclude an award of attorney fees. In always interpreting Section 440 to mean that attorney fees shall be awarded unless a reasonable basis for the employer’s contest has been established, the Commonwealth Court disregarded the distinction between the terms shall and may, and failed to recognize the discretion afforded to the judge to award attorney fees even when they find a reasonable basis for the employer’s contest.
The Court stated they did not suggest, under Section 440, a judge may never deny an award of attorney fees when the employer has established a reasonable basis for its contest. Rather the language of Section 440 affords the WCJ discretion to refuse an award of attorney fees in such circumstances. The Court stated in a footnote they were “confident” judges will apply their discretion based upon the humanitarian and remedial purposes which underlie the act.