9325937053_1172fd0af0_zWhen attorneys for a worker covered by the Workers Compensation Act successfully sue a third party for injuries sustained by the worker in the course of his or her employment, the employer can get reimbursed for some or all of the workers compensation benefits it paid to the employee. In recognition of the benefit the employer is getting from the employee’s lawsuit, the Act also requires that the employer pay 25% of its gross reimbursement as attorneys’ fees. So are future medical benefits which the employer avoids having to pay as a result of the employee lawsuit subject to that same rule? In the closing days of the September term, the Illinois Supreme Court held that the answer was “yes” in a unanimous opinion by Justice Lloyd Karmeier in Bayer v. Panduit Corporation. Our summary of the underlying facts and lower court rulings is here. Our report on the oral argument in Bayer is here.

The plaintiff’s employer was hired by an iron works contractor to help build warehouse facilities for the defendant corporation. While working on the project, the plaintiff fell, sustaining permanent injuries. The plaintiff filed a claim for workers compensation benefits, and began receiving substantial payments for total disability and medical expenses. At the same time, the plaintiff filed suit against the defendant. The plaintiff later added the general contractor and a structural engineering company as additional defendants, and the general contractor sued the plaintiff’s employer for contribution and breach of contract. The plaintiff settled with his employer, and they filed a joint motion for good faith settlement, which was granted, thereby discharging the employer from liability for contribution to the other parties. Subsequently, the plaintiff went to trial against the owner-defendant, receiving a judgment for $64 million. Following the judgment, the plaintiff’s employer successfully moved the Court for an order recognizing its right to recover reimbursement for past and future workers compensation payments.

The plaintiff’s attorneys then moved for an award of 25% of the workers compensation benefits which the employer avoided by virtue of the suit. The employer agreed that it was liable with respect to the suspended wage payments, but insisted that it was not liable for fees based upon avoided future medical expenses. The Circuit Court disagreed and awarded the fees to the plaintiffs’ lawyers. The Appellate Court reversed in part, holding that the employer was not liable for fees based upon future medical expenses.

The Supreme Court reversed the Appellate Court. The Court found that the only possible basis for excluding the future medical expenses from the fee obligation is if the expenses are not part of the “gross amount of such reimbursement” within the meaning of the Act. The Court held that there was no basis in the Act for excluding future medical expenses. The employer argued that it would not actually be “reimbursed” for future medical expenses, but the Court pointed out that the same was true of future workers compensation payments. Nevertheless, the Act specifically required future benefits and past benefits to be treated the same for purposes of the reimbursement obligation. There was no reason why future medical expenses should be treated any differently for purposes of determining the benefit the employer received from the employee’s tort suit.

Finally, the employer argued that requiring them to pay the statutory attorney fees on the future medical expenses would result in an impermissible double recovery to the plaintiffs’ attorneys (given that their fee had already been paid in full by the plaintiff). The Court rejected the employer’s argument, noting that the plaintiffs’ attorneys had made it clear that they understood that any amount received from the employer would need to be forwarded to the plaintiff.

Image courtesy of Flickr by John Loo (no changes).