Director of Division of Workers' Compensation Orders to End Practice Of Offsetting Comp Awards Again

Accidental disability pensions are available to certain public employees, who as the result of a traumatic work event, can no longer perform their job duties.  Those accidental disability pensions (ADPs) are lifetime payments that almost always exceed the amount of a workers’ compensation award for the very same accident. When a traumatic work event occurs with severe employment consequences, the public employee who applies for an ADP almost always also applies for workes’ compensation benefits.  The law is clear that the employee cannot keep both awards, but who gets the offset?
Public employers have been taking an offset for the amount of an ADP for many decades when a Judge of Compensation awards workers’ compensation benefits for the same accident.  The reason is that workers’ compensation laws abhor double recoveries.  The offset is dollar for dollar.  So if an injured police officer gets $969 per week for life in workers’ compensation benefits and receives an ADP paying $1,500 per week, the public employer would not pay the $969 per week as it would be completely offset dollar for dollar against the ADP.  This has saved public employers tens of millions of dollars over the years.  On February 4, 2021, the Director of the Division of Workers’ Compensation advised all judges and practitioners that public employers are no longer entitled to take the offset and offer only medical monitoring to a seriously injured worker with an ADP.  Henceforth, the compensation case will proceed to its conclusion by settlement or trial, and the Division of Pensions and Benefits gets the offset.
The reason for this sudden reversal stems from a study done by the Acting State Comptroller dated February 4, 2021.  The Comptroller concluded that the practice of offsetting for accidental disability pensions is having a negative impact on New Jersey state pension funds.  The report completely failed to mention that there are two provisions in the New Jersey Workers’ Compensation Act that allow employers to offset against accidental disability pension benefits as a matter of law:
N.J.S.A. 34:15-43 states in the Workers Compensation Act,, “No former employee who has been retired on pension by reason of injury or disability shall be entitled under this section to compensation for such injury or disability; provided, however, that such employee, despite retirement, shall, nevertheless, be entitled to the medical, surgical and other treatment and hospital services as set forth in R.S. 34:15-15.”
There is also a corollary provision in N.J.S.A. 34:15-29 which says the same thing in the Workers’ Compensation Act, namely that workers’ compensation payments may be offset against disability pension benefits.  The Comptroller report seemed to assume that the offset taken by public employers  against ADPs was a convenient practice in the Division rather than a legal right. 
What makes this issue impossible to resolve between two divisions in the executive branch is that the Division of Pension and Benefits has its own statutes passed by the New Jersey legislature stating that the Division of Pensions and Benefits is entitled to an offset against workers’ compensation benefits. Yes, if you just concluded that this is a contradiction, you are correct.  Amazingly, the Legislature passed laws saying that public employers get to offset workers’ compensation payments against accidental disability benefits, but also passed laws stating that the Division of Pensions and Benefits gets to offset against workers’ compensation benefits when an employee gets an ADP! 
What public employers have been offering employees who obtain accidental disability awards is medical monitoring for life for the condition that is the subject of the injury and accidental disability pension.  That is mandated in the provision cited above in Section 43.  The new directive from the Director of the Division of Workers’ Compensation ends what is known as medical monitoring orders.  Generally speaking, injured workers who received an ADP would drop their workers’ compensation case and accept a medical monitoring award since they could not keep both awards anyway.
The Comptroller Report has not really helped resolve the legal issue at all.  All the report does is inflame tensions by pitting public employers who pay for serious work injuries against the Division of Pensions and Benefits.  The real blame does not fall on the Division of Workers’ Compensation, Division of Pensions and Benefits,  or public employers:  the blame falls on the New Jersey Legislature for passing statutes that cannot be reconciled.  The Comptroller report concludes that the offset provides “windfalls to workers’ compensation insurance providers, including joint insurance funds and private insurance companies.”  There are very few public employers who have first dollar coverage, so there is no real windfall to carriers. Almost all public entities are self insured or are in joint insurance funds.   The costs of workers’ compensation are funded by taxpayer dollars, including workers’ compensation awards and pension awards.  Taxpayers pay either way and the injured employee gets no more money because an offset is going to be taken by one division or the other.
But there will be a new cost now to taxpayers that did not exist if public employers have to pay the workers’ compensation award where there is an ADP.  Not only will public employers (i.e. taxpayers) have an increase in workers’ compensation costs, but claimants’ lawyers are now going to get large counsel fees paid for by taxpayers when they really are not getting their clients any new money. Over the past decades, when an attorney resolved a case in workers’ compensation where an accidental disability award was received, the attorney would only receive generally $2,500 for a legal fee since the offset meant that the claimant’s attorney was not getting his or her client any more money.
Now counsel fees are no longer limited to $2,500 and can be based on a larger amount of workers’ compensation benefits, potentially 20% of the entire award.  That could mean that a claimant’s lawyer can now receive over $100,000 dollars in counsel fees depending on the size of the workers’ compensation award – even though the injured worker gets no more money because his or her ADP is being reduced dollar for dollar.  Public employers are rightly scratching their heads: they lose the offset, they pay millions more dollars, and they now have to pay claimants’ attorneys large legal fees to get their clients no more money anyway?
Who should get the offset legally? There is only one way the issue will be resolved, and that is through the courts.  Sometime soon a public employer is going to challenge a judge’s decision not to provide a dollar-for-dollar offset in workers’ compensation, and that issue will eventually land in the New Jersey Supreme Court.
In the meantime, trials in workers’ compensation filed by public employees who receive an ADP will occur frequently because public employers will want to pay as small an award as possible.  Since they will not be receiving an offset, public employers will need to fight these cases.  More often than not the recipient of an ADP will be found not to be totally and permanently disabled after trial in workers’ compensation.  How can it be that an injured worker is considered totally disabled for purposes of an ADP but only partially disabled for purposes of workers’ compensation?  Because the application for an ADP focuses only on the ability to perform one job, (the job the public employee was doing when injured), while total disability in workers’ compensation is not limited to performing one job. In workers’ compensation, the total and permanent disability means the ability to perform work in a reasonably stable job market, so many job skills need to be considered in workers’ compensation before finding someone to be totally disabled, not just the job performed at the time of injury.  Further, in the PFRS pension system, recipients of an ADP can return to work in another job outside their pension system and keep the earnings of the new job because the Division of Pensions and Benefits does not employ an earnings test to reduce ADP payments for PFRS recipients.
John H. Geaney, Esq
Capehart Scatchard, P.A.