Section 20 Versus Percentage of Disability Settlements
Posted on: August 15, 2024
There are two ways to settle a workers’ compensation case in New Jersey. About three quarters of settlements that take place in New Jersey each year fall under N.J.S.A. 34:15-22, which means that there is an award of a percentage of disability to the injured worker with reopener rights. About one quarter of all settlements in New Jersey fall under N.J.S.A. 34:15-20, commonly referred to as a Section 20 settlement – a lump sum payment without any right to reopen the case.
These two settlement paths are very different. Let’s consider a spine case where the Judge of Compensation awards an employee 30% permanent partial disability for loss of function for a total of $66,528. These payments will be made over 180 weeks for an award of 30 percent. Percentage of disability settlements cannot be paid in a lump sum. Furthermore, the fact that the employee receives a percentage of disability award means the employee is permitted to return to workers’ compensation court (reopen the case) any time within two years of the last payment of indemnity benefits or two years from the last medical treatment date, whichever is later. Such reopener rights apply to future medical care, future lost time benefits and potentially an increase in the percentage of the award. In the reopener case, assume the employee manages to increase the award from 30% to 35% (an additional 5%). That means that the employee would receive additional payments of $50,000 over a period of weeks.
By contrast, a Section 20 settlement is paid in one lump sum to the injured worker with no right to reopen the case and seek additional benefits. There is no admission of liability by the employer on a Section 20 settlement. When a Section 20 settlement is approved, it means the claim is closed for good. Finality is what employers want. In the above example, if the employer were to become aware that the injured employee suffered a new injury to the spine on his part-time non-work job, that information could be enough to resolve the case with a Section 20 payment. One other benefit on a Section 20 settlement is that the employee pays his or her own counsel fee, so if the above case settled for $50,000 on a Section 20 basis, the employee would owe his lawyer $10,000 or 20% of $50,000. But on a percentage award, the employer pays 60% of the fee of the claimant’s attorney. That would amount to $6,000 on a settlement of $50,000.
One can see why employers almost always favor a Section 20 settlement over a percentage of disability award. Why then are there three times more percentage settlements than Section 20 settlements in New Jersey? One reason is that it is not easy to meet the legal standard to persuade the judge to approve a Section 20 settlement. The Judge of Compensation must be satisfied that the defense has raised a significant legal issue of causation or liability to warrant a Section 20 settlement.
Here are some examples of hypothetical cases where the legal standard for a Section 20 would be easily met:
Example One: The employee claims she was injured in a slip and fall incident at work while working in the zoning office, but there are no witnesses to the incident, and the employee never mentioned the fall for 60 days. She went to a hospital six weeks after the alleged accident, but the ER records say “employee has been having back pain for two years.” There is no mention of a work injury. With these facts, every judge will approve a Section 20 lump sum payment, meaning that the file for this accident will be closed forever.
Example Two: The employee says he injured his shoulder lifting a bucket at work. The supervisor advises the claims adjuster that this employee has been complaining about his shoulder for years. The employee has told his supervisor numerous times that he does martial arts three days a week and is always sore afterwards. These facts are also likely to convince a judge to approve a Section 20 payment because there is an issue of causation.
Example Three: An employee claims that she had a car accident on the way from one municipal building to another one in town, but the Police Report says she was on her way home when the accident occurred. This raises an issue of liability, and a judge will likely approve a Section 20.
Why do judges favor percentage of disability awards over Section 20 settlements? The answer is that workers’ compensation law is considered social legislation, and judges know that reopener rights are very important to employees. An injured worker often would prefer getting a lump sum payment on a Section 20 rather than small weekly payments over many months or years on a percentage settlement. But a judge will not approve a Section 20 settlement just because the lump sum payment is desirable to the injured employee. The judge is obligated to protect the employee’s reopener rights. In fact, the judge must place on the court record the specific legal basis of causation or liability that would warrant the Section 20 settlement, and the petitioner must acknowledge on the record that he or she is giving up any reopener rights that might otherwise exist.
Where does the information come from to get a Section 20 settlement? For the most part, employers and supervisors provide claim adjusters and attorneys with the best information they will need to get a Section 20 outcome. There are no depositions in workers’ compensation court, and interrogatories are seldom permitted. So adjusters and defense counsel get most of the good leads on causation or liability issues by communicating with supervisors and administrators. ISO searches run by the adjuster are also very helpful. If the ISO search shows a recent non-work car accident to the same body part that the employee injured at work, this information may be enough to lead to a Section 20 settlement. The legal issue becomes whether petitioner’s present complaints and functional limitations are from the original work accident or from the subsequent non-work car accident.
There will always be more percentage awards than Section 20 settlements in our state because there are many legitimate work injuries where there simply is no legal issue of causation or liability. Having said that, we also recognize that there are a considerable number of questionable cases in workers’ compensation court posing genuine issues of causation and liability. Teamwork leads to many Section 20 settlements. The GSMJIF has very good teamwork and communication among municipal managers, supervisors, claim adjusters and defense counsel, and that is the key to getting favorable Section 20 settlements.