Although Illinois courts are generally presumed to have subject matter jurisdiction, that rule doesn’t apply when it comes time to review a decision of the Workers’ Compensation Commission. In order to initiate judicial review of a workers comp decision, strict compliance with the steps set forth in the Act are required. One of those steps is to file an appeal bond with the clerk. (820 ILCS 305/19(f)(2).)

But does that rule apply to the Illinois State Treasurer when suing as ex officio custodian of the Injured Workers’ Benefit Fund?

Ordinarily, the purpose of an appellate bond is to protect the prevailing party’s right to the judgment in case the losing party dissipates assets while the appeal is pending (as well as to partially compensate the prevailing party for loss of use of the money). But is there really any risk that the State is going to run out of money?

The Illinois Supreme Court considered these issues during its November term, hearing oral argument in Illinois State Treasurer v. The Illinois Workers’ Compensation Commission. Our detailed summary of the underlying facts and lower court opinions in State Treasurer is here.

The claimant in State Treasurer is a home healthcare provider who fell on the stairs at a patient’s home. Because her employer had no workers’ compensation insurance, the claimant added the Injured Workers’ Benefit Fund as a co-respondent. The arbitrator awarded benefits. The State Treasurer appealed the ruling to the Commission, which affirmed, then to the Circuit Court, which affirmed again, and finally to the Appellate Court. The Appellate Court initially reversed. The plaintiff sought rehearing, arguing for the first time that the Circuit Court (and by extension, the Appellate Court) lacked jurisdiction to hear the appeal. This was so, plaintiff argued, because the Treasurer had failed to file an appellate bond. The Appellate Court agreed, dismissed the appeal and vacated the Circuit Court’s judgment.

Counsel for the Treasurer began the argument. Counsel argued that the Treasurer must defend the Fund against workers’ comp claims in order to hold the employee to its proof. The Treasurer’s role is important because the Fund doesn’t become involved unless the employer is insolvent, or has insufficient funds to have a real stake in the defense. Counsel argued that since the legislature doesn’t guarantee full payment of an award when no appeal is involved, there is no reason to assume the legislature would have been worried about guaranteeing full payment in case of appeal. Counsel argued that the Appellate Court was wrong for three reasons: (1) the state is immune from costs, including bonds, absent affirmative language in the statute – which the Workers Comp Act doesn’t have; (2) Section 19(f)(2) indicates that a bond requirement applies only when an award for payment of money has been entered – and the Treasurer is not immediately liable for any judgment; and (3) the consequences of applying the bond requirement to the Treasurer would be absurd.

Counsel argued that the State’s sovereign immunity could not be overridden by generally applicable language in the Act. Justice Thomas asked how the Court should get past the language of the Act, which appears to unambiguously provide that the Treasurer isn’t exempt. Counsel answered that the plain language of the statute supported the Treasurer’s view, since the bond requirement is only applicable against a party against whom an award is entered. Since the amount payable by the Fund isn’t determined until the end of a fiscal year, the statute doesn’t apply. Chief Justice Garman asked whether the statute was plain or ambiguous. Counsel answered that the language of the Act was plain. The Act provides that no amount is due from the Fund at the time of the award. Various factors determine whether the Fund will be liable for the entire award, including how many claims the Fund has received and how much money remains. Besides, counsel argued, it was clear that government entities appearing before the Commission as employers were exempt from the bond requirement, and it made no sense to exempt government entities which are directly liable while not exempting the Fund, whose liability is only derivative. Counsel argued that the practical consequences of imposing the bond requirement would be absurd as well. Imposing the bond requirement against the Treasurer would upset the legislative scheme by reducing the money available from the Fund for paying awards. Moreover, counsel argued, the bond could never be triggered, since no matter how little money is left in the Fund at the end of the year, a pro rata distribution is made. Justice Karmeier asked whether the bond would be triggered if the legislature zeroed out the Fund. Counsel answered no, since the Act bars relying on any other source of funding. If there is no money in the Fund, the Fund distributes nothing, and the Act is satisfied. Counsel acknowledged that the legislature has diverted money from the Fund in the past, but that was during periods when considerable excess money was in the Fund. It was unlikely that the legislature would divert funds again in the future.

Counsel for the employee followed. He argued that the language of the Act was plain, so there was no need for construction. Justice Thomas asked whether counsel thought there was legislative oversight in this case. Counsel responded that the Fund had been created in 2005, but although the legislature had carved out an exception for Commission employees, it had not exempted the Fund from the bond requirement. Justice Thomas asked whether that would be a matter for the legislature to amend later, if the Court agrees with the employee. Counsel responded that the legislature could amend the statute. Justice Burke asked whether there was language in Section 19(f)(2) supporting a distinction between awards which are presently payable by the Fund and a mere contingent right to later distributions. Counsel said no – the amount of the bond isn’t based on the award, it’s capped at $75,000. Counsel argued that there are many reasons why the employee needed a bond. The legislature might shut down the Fund, or comprehensively reform the system. Counsel argued that failure to carry workers compensation insurance is a criminal act, so every injured employee in this situation is a crime victim. Chief Justice Garman asked whether the Treasurer should take the bond premium out of the Fund, and if not, where the money should come from. Counsel answered that the Treasurer has to pay for the transcript in order to perfect the appeal – if they can pay for that, there must be funds somewhere to pay for the bond premium. Moreover, Supreme Court Rule 305(i) requires the Treasurer to file a bond when an appeal is not taken for the benefit of the general public, and the premiums for those bonds are getting paid from somewhere. The Chief Justice asked what role the Treasurer has other than to hold the Fund and pay it out as required by awards. Counsel answered that the Treasurer is a party to the case. The Treasurer is not analogous to a co-signer – they are jointly and severally liable for the award. Justice Karmeier asked how counsel responded to the Attorney General’s argument that the bond could never be triggered. Counsel answered that if the Fund were entirely closed down, the employee would have the right to proceed against the bond. Justice Karmeier asked whether, in that event, the employee would be better off if all the money in the Fund were diverted. Counsel acknowledged that in some years, Fund payment has been less than 100%. Justice Karmeier asked whether the result – that an employee can get 100% of the award from the bond if the Fund is entirely zeroed out – conflicts with the language in the Act saying that an employee gets a pro rata award if the Fund is depleted. Counsel answered that even if the employee proceeded against the bond, a court would still have to determine the amount owed. Justice Kilbride asked whether the Commission entered an award against both the employer and the Fund. Counsel responded yes.

In rebuttal, counsel for the Attorney General explained that the award was against the Fund only to the extent appropriate under Section 4(d) of the Act. Nothing in the award suggests that the Fund is liable in the same way as the employer. Counsel argued that the joinder provision referenced by opposing counsel merely means that the Treasurer can participate in the case – it doesn’t make the Treasurer fully liable for the award. Counsel argued that there was no basis for opposing counsel’s claim that the employee could proceed against the bond if the Fund were zeroed out.

We expect State Treasurer to be decided in four to six months.

Image courtesy of Flickr by Marko Kudjerski (no changes).