CORDEIRO v. FRIENDLY ICE CREAM, No. 10981-92 (May 28, 1996)

BOARD No. 10981-92Commonwealth of Massachusetts Department of Industrial Accidents
Filed: May 28, 1996

REVIEWING BOARD DECISION
(Judges Wilson, Fischel and McCarthy)

APPEARANCES

James N. Ellis, Jr., Esq., for the employee

Paul Kelly, Esq., for the insurer

Susan Kendall, Esq., on brief for the insurer

WILSON, J.

Counsel for the employee contends in this appeal that attorney’s fees and costs paid pursuant to a lump sum agreement are “payments due an employee” within the meaning of G.L.c. 152, § 8(1).[1] Employee counsel also asserts that the administrative judge, who rejected this argument at hearing, erred by assessing § 14 penalties against him for prosecuting the claim in a frivolous manner.[2] While we affirm the judge’s denial of the § 8(1) claim, we think that the undetermined state of the law at the time of the hearing renders the judge’s assessment of § 14 penalties inappropriate.

The employee settled her workers’ compensation claim by way of a lump sum agreement, which was approved by the administrative judge on June 21, 1994. On July 15, 1994, counsel for the employee filed a claim seeking penalties under § 8(1) for late payment of the attorney’s fee due pursuant to that agreement. The claim was denied at conference, and employee’s counsel appealed to a hearing de novo.
(Dec. 2.)

The claims adjuster assigned to handle the employee’s claim for the insurer testified at the hearing. The claims adjuster pursuant to the lump sum agreement issued a check payable to the employee for $1,263.70 sometime within fourteen days of the approval of that agreement, but neglected to remit payment of the fees and costs due to counsel for the employee in accordance with the lump sum agreement. On July 18, 1994, the claims adjuster received notice of the instant claim for penalties under § 8(1), alleging that monies due the employee’s counsel had not been paid within fourteen days of the insurer’s receipt of the approved lump sum agreement. See n. 1, supra. The insurer immediately issued a check for $1,731.30 to the employee’s counsel. Employee’s counsel chose to pursue the claim for the § 8(1) penalty, notwithstanding payment of the fees and costs. (Dec. 3-4.)

The judge determined that the facts outlined above did not warrant an award of a § 8(1) penalty for late payment, reasoning that “payments due an employee,” to which a § 8(1) penalty applied in the event of failure to pay within fourteen days, did not include payment of fees and costs due to employee counsel. (Dec. 4.) The judge further reasoned that the regulation, 452 CMR 1.07,[3]
specifically designated the procedure to be taken by employee counsel in the event that prompt payment of fees and costs was not forthcoming. The judge found that the claims adjuster for the insurer immediately remitted payment upon notification of her omission to do so, and concluded that the insurer made timely payment of the disputed fee and costs. (Dec. 5-6.) The judge then found that counsel for the employee prosecuted the instant claim “in a frivolous manner as defined in § 14(1) B[sic] of the Act.”[4] (Dec. 6.) The judge therefore ordered that the claim for the late payment penalty be denied and dismissed, and that the cost of the proceeding be assessed against counsel for the employee. (Dec. 7.)

We affirm the judge’s decision denying a § 8(1) penalty for the insurer’s failure to remit prompt payment of the attorney’s fee and costs under the lump sum agreement. In Diaz v. WesternBronze Co., 9 Mass. Workers’ Comp. Rep. 528 (1995), we determined that the phrase, “payments due an employee[,]” as contained in § 8(1), means exactly what it says: namely, that the Legislature specifically narrowed the scope of the penalty provisions for late payment of compensation benefits to include only those monies that are paid directly to the employee. Id. We noted that the plain language of § 8(1) necessarily limited the meaning of “payments due an employee” by its direction that the penalty be “payable tothe employee to whom such payments were required to be paid by thesaid document [lump sum agreement, etc.] . . . .” Id. We concluded:

The enacted language regarding the recipient of the penalty removes any doubt . . . . The “payments” in the enacted form of § 8(1) are “due the employee” within the narrow meaning of that phrase — they are “required to be paid” to that employee. The medical benefits [at issue in Diaz] that are to be paid directly to medical providers are simply not “required to be paid by the said document [to the employee].”

Id. (footnotes omitted). We therefore reversed the judge’s award of a § 8(1) penalty in Diaz for the insurer’s failure to make prompt payment of medical benefits under § 30. A fortiori, we will not construe “payments due an employee” within the meaning of § 8(1) to include attorney’s fees and costs. Indeed, the employee’s argument to that effect is far less persuasive than the corresponding contention regarding medical benefits in Diaz, supra. CompareWalenty v. New Market Fine Food,
1 Mass. Workers’ Comp. Rep. 275, 277 (1987) (legal fees are not “compensation” within the meaning of the Act) with Boardman’s Case, 365 Mass. 185, 192-193 (1974) (medical benefits are part of the “compensation to which the workman is entitled”). The judge in the instant case did not err in denying the employee’s counsel a § 8(1) penalty for late payment of his fee.[5]

We do not reach the same conclusion with regard to the judge’s award of a § 14(1)(b) penalty against counsel for the employee for bringing the § 8(1) claim. At the time of the hearing, January 13, 1995, there was no decision of the Reviewing Board or any appellate court construing the scope of the § 8(1) penalty provisions. The contention put forward by the employee’s counsel at that time was not so baseless that it was “brought . . . without reasonable grounds[.]” G.L.c. 152, § 14(1)(b). Indeed, it would be a very rare case of first impression that would render an attorney susceptible to a § 14 penalty. This is not one. We reverse the order of the administrative judge assessing the costs of the proceeding against the employee’s counsel.

The insurer requests that we invoke § 14(1)(b) and assess a penalty against employee counsel in the amount of $1,000.00. Certainly, we question the judgment of counsel in pressing this appeal to the reviewing board on the issue of attorney’s fees. When his brief was received at the reviewing board on December 11, 1995, our decision in Diaz v. Western Bronze Co., supra, had been filed and available to interested counsel for three months. TheDiaz decision left no reasonable argument that § 8(1) penalties could attach to any payments other than those directly payable to the employee. Nevertheless, it has been our practice to assess § 14 penalties only where the circumstances have been more egregious than what we discern here, and we decline to do so in this case.

The decision is affirmed in part and reversed in part.

So ordered.

____________________________________ Sara Holmes Wilson Administrative Law Judge
____________________________________ Carolynn N. Fischel Administrative Law Judge
____________________________________ William A. McCarthy Administrative Law Judge

Filed: May 28, 1996