Everything Municipal Officials Need to Know About Permanency Awards and How to Reduce Awards

This Q&A article was developed based on questions commonly asked to the author, John H. Geaney, Esq. of Capehart Scatchard, P.A. Mr. Geaney’s practice involves representation of employers, self-insured companies, third party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act, and Family and Medical Leave Act. He also conducts training sessions on workers’ compensation, ADA, and FMLA issues.

Permanent partial disability awards are rising sharply in New Jersey. In 2022 alone, every award of any percentage at all rose 10% over the prior 2021 year. An award of 30% in 2022 was 10% higher than an award of 30% in 2021.   

Clients often ask me to explain what are permanency awards in the first place, and why can a municipal employee return back to their job and still get a large permanency award? 

After an employee reaches maximal medical improvement (MMI), medical benefits end as do lost time payments (called temporary disability benefits). But there is one benefit still available to an employee who has filed a simple claim petition form, called permanent partial disability. This benefit is not to replace lost wages necessarily or pain and suffering but loss of bodily function and impact on work or non-work life. Judges decide how much to award the worker, or the parties reach an agreement on a percentage of disability, and then the judge approves the proposed settlement percentage.  

Percentages translate into dollars based on the year of injury. For example: an employee gets an award of 40% permanent partial disability at 2023 rates for the lower back. That amounts to $140,640 tax-free dollars paid out over 240 weeks at $586 per week. 

Here are a few of the other commonly asked questions I hear often from clients. 

Question: Why does an employer have to pay someone for permanency benefits who already has returned to the same job duties?  

Answer: New Jersey law does not require the employee to prove a substantial impact on working ability. The employee can still get an award under the law if the employee can prove a substantial impact on non-work life activities, such as not being able to enjoy hobbies like jogging, bowling, gardening, etc. 

Question: What is the judge supposed to focus on in deciding the appropriate percentage of disability and are lawyers and judges following the letter of the law? 

Answer: The Judge of Compensation is supposed to focus on both the medical impairment at issue (i.e., torn rotator cuff in the shoulder) AND how this impairment or injury substantially impacts the worker’s work life or non-work activities. The short answer to the second part of this question is that judges and claimants’ lawyers are seldom following the letter of the law. Instead of going into the details about how the injury has impacted the employee’s work or non-work life, the judges and claimants’ lawyers are focusing just on the medical impairment itself, skipping the requirement that the Supreme Court laid down in Perez v. Pantasote, 95 N.J. 105 (1984).  

Question: What is the difference between an “impairment” and a “disability”?   

Answer: There is a significant conceptual difference. Let’s assume I have a torn medial meniscus in my knee from a work injury, and I get cortisone injections and return to work. The tear in my knee is an impairment, which is a medical concept. My favorite activity is running, and after the cortisone injections I am able to return to running 10 miles a week with no pain or discomfort. I have an impairment (torn medical meniscus), but it is not impacting my life in any substantial manner, therefore  I don’t have a disability. In fact, I am running just as far and fast as I ever was, so I would not be eligible for a disability award. The lesson is that just because one has an impairment does not mean one has a disability. Impairment is a medical concept; disability is a factual and legal concept.  

Question: What is going wrong then in New Jersey’s judicial system? 

Answer: Judges and lawyers are translating medical impairments directly into disability percentages without paying attention to the requirements set by the statute at N.J.S.A. 34:15-36 and the Supreme Court case noted above.  

Judges are saying things like: “This police officer had a two-level back fusion surgery, and to me that equates to 35% permanent partial disability or $107,730.” The medical impairment on paper (the back pathology) is being automatically translated into a disability percentage, which is incorrect by law. To get a disability award, the focus must be on the actual worker’s life and what the worker can or cannot do any longer. Judges are not supposed to evaluate paper; they are supposed to evaluate people.  

What matters is not whether someone had a surgery, but whether that surgery or injury has caused a substantial change in the worker’s life.  If the employee is back to work doing a physical job with no complaints, that is significant evidence of a good treatment result. We then focus on the impact on non-work life activities, if any.   

Question: What can municipal employers, adjusters, and lawyers do to reduce these skyrocketing permanent partial disability awards?  

Answer: The mindset that has existed for decades has to change. A medical impairment on paper should not be equated directly to a disability percentage. The medical impairment should be considered, of course, but the focus has to be on what the employee says he or she can no longer do as a result of the injury – and whether those statements are truthful. If a person with a back sprain only says he or she had occasional pain at night, and a person with a fusion surgery only says he or she has occasional pain at night, the judge should not award the person with the sprain $13,000 and the person with the fusion $140,000. The fusion case is being compensated as a paper disability in that example, not an actual disability.  

Question: Can you give me an example of where an employee has lost an award of permanent partial disability benefits because the medical impairment really had no impact on work or non-work life? 

Answer: In one case I handled, an employee said that her knee surgery prevented her from golfing any more, which was her favorite hobby. I was able to find out where the employee golfed, obtained records of rounds golfed from the golf club, and proved to the judge that the employee lied about giving up golf.  In fact, the employee had golfed dozens of times in the year before she testified. The judge awarded nothing. The demand had been 25% permanent partial disability of the leg. The judge found that there was an impairment but it was not disabling.  

Question: What is the ideal way for the permanency process to work and how would this process save money?  

Answer: The most important part of the permanency phase of the case occurs after MMI when the employee is seen by two medical experts (one for his or her lawyer and one for the employer’s lawyer). This exam is called an Independent Medical Examination, or IME. In each examination, the employee must tell the physician what the impact of the injury is on work or non-work activities. That is when we find out what the employee’s proofs are in respect to a substantial impact on work or non-work activities. The complaints are often rather threadbare.  

The defense attorney, adjuster, and employer should communicate about verification of whether the employee’s statements to the IME doctors are accurate. If the employee’s main complaint is that he can no longer bowl, then the question is this: Is the employee still bowling? Sometimes the employer knows the answer right away (the employee may be in a bowling league), sometimes social media provides the answer, and sometimes surveillance provides the answer. If the employee is truthful, then the judge will assign an appropriate percentage of disability. If the employee is not truthful, the award should be lowered or no award should be given. 

The savings can be huge because awards today are higher than ever.  An award of 60% permanent partial disability is $316,440 in tax-free money. Bear in mind that most workers’ compensation claimants are back to work doing the very same job, including those workers who get 60% partial permanent disability awards. Some employees are forced to retire or to do a much lighter job with lower pay as a result of the injury. If that is the case, the judge should and will follow the law and award a higher percentage of disability, but the overwhelming majority of awards go to workers who are back to work, not complaining about their job duties. Sometimes we find out from the employer that the employee now has two jobs. In that case, the employee will argue that even though the injury has not impacted working activities, the injury has substantially impacted the employee’s non-work life activities.   

The statements that are made to the IME physicians must be verified. If the statements are not accurate, and the judge is made aware of this fact, there will be a large savings to the municipality. In short, the more that municipal managers are in touch with the adjuster and defense counsel about the current activities of employees, the greater the savings in permanency awards.  

By:  John H. Geaney, Esq. 
​Capehart Scatchard, P.A.