Statutorily Mandated Security Payment Cannot be Withheld Pending Good Faith Appeals

In Stanfield, the administrative law judge (“ALJ”) issued an order that assessed penalties against Respondent for failure to deposit money with the Trustee of Colorado Division of Workers’ Compensation or post a bond in the same amount. In this case, Claimant’s injury was found compensable and Respondent was required to pay Claimant benefits and pay into the Colorado Uninsured Employer Fund.

The facts in Stanfield are as follows: Respondent was advised by the Trustee of the Special Funds Unit that failure to deposit funds into the account in accordance with the ALJ’s December, 2019 Order could lead to additional penalties. Respondent timely filed a petition to review the ALJ’s order. The ALJ issued a Supplemental Order in March, 2020 that did not result in a different outcome. Respondent was against ordered to make payments to the trustee or post bond. Respondent timely filed a petition to review the March, 2020 Order. In response to this petition to review, the ALJ issued a second Supplemental Order in April, 2020 and clarified that the amount owed was to be paid directly to the Uninsured Employer Fund and was not to be paid to the trustee or made part of the bond. Respondent again timely filed a petition to review the April, 2020 Order. The order was reaffirmed and Respondent appealed. Respondent argued the ALJ erred as a matter of law in awarding penalties during a good faith appeal. Respondent also argued that the 50 percent increase in penalties and award of attorney fees were inapplicable because Claimant was only awarded medical benefits in the initial award.

On appeal, the Industrial Claims Appeals Office (“Panel”) deemed important the fact that all three of the ALJ’s orders found Respondent to be non-insured and ordered that “the filing of any appeal, including a petition to review, shall not relieve the employer of the obligation to pay the designated sum to the trustee or file a bond.” See § 8-43-408(2), C.R.S. Respondent had argued it was not required to comply with the orders because it timely filed petitions to review. The ALJ was unpersuaded with this argument as all three orders expressly mentioned that any petition to review would not excuse Respondent from securing payment of the benefits as ordered. The ALJ assessed penalties up to $250.00 per day for violations of the three orders.

Respondent was also ordered to pay Claimant additional penalties and attorney fees due to Respondent’s repeated failure to comply with the orders. In assessing whether penalties were warranted, the ALJ was required to engage in a two-step analysis. First, the ALJ had to determine that Respondent’s conduct constituted a violation of the Workers’ Compensation Act, a rule or an order. Second, the ALJ had to consider whether the conduct constituting the violation was objectively unreasonable.

The ALJ first found Respondent did not dispute that it did not comply with the orders, therefore under the first step of the analysis, Respondent violated an order. Secondly, Respondent’s conduct was objectively unreasonable as there was specific language in the order which stated that filing any appeal, including petitions to review, would not excuse Respondent’s failure to comply with the order. Upon review, the Panel distinguished this case from existing Colorado case law that held a penalty for failure to pay benefits that were awarded could not be imposed during the pendency of a good faith appeal. The Panel clarified that in this case and unlike the existing Colorado law, Respondent was not being penalized for failure to pay the benefits ordered while an appeal of the order was pursued. Instead, Respondent was being penalized for failure to secure payment of the benefits as ordered. The Panel stated the security is statutorily mandated regardless of whether an appeal is pursued. The Panel stated the purpose of the security requirement is to ensure that an injured worker is protected in the case of an uninsured employer. This protection would be circumvented if no security could be required while an appeal is pursued. The Panel also explained that it did not matter that Claimant was only awarded medical benefits because the statute stated that “in all cases where compensation is awarded, the employer within ten days after the date of such order, shall file a bond with the director or administrative law judge….” Respondent’s failure to secure the payment created a mandatory imposition of a fifty percent increase in award of benefits and allowed Claimant to recovery attorney fees.

However, the Panel found that the issue of attorney fees was not final for purposes of review because the ALJ had not yet determined the amount of attorney fees owed, and therefore that part of the order did not represent an award or denial of benefits or penalties. The Panel upheld the ALJ’s penalty awards and dismissed the attorney fees claim without prejudice.

Stanfield v. Maru LLC, W.C. No. 5-112-091-003 (I.C.A.O. Oct. 14, 2020)

Want to know more? Contact Brianna Tancher at btancher@pollartmiller.com or 877-259-5693.

November 2020 Newsletter

2020-12-30T11:33:37+00:00