The recently passed legislation L. 2019, C. 387, increasing the value of hand and foot injuries in New Jersey, has generated considerable debate about which cases the law affects.
Does it affect only cases filed after the date the law was passed? Or does it affect all cases presently pending in the Division of Workers’ Compensation but not yet subject to a court order?
One point all practitioners agree on is that the law does not affect prior court orders. There is no indication that the law was meant to be primarily retroactive, requiring old orders to be reconsidered. But there remains the question of whether the law is supposed to be secondarily retroactive, meaning it affects all present claims, even those filed before the effective date of the law but not yet subject to a court order.
The law states, “This act shall take effect immediately.” There is no language specifically stating that the law should have “prospective relief only,” nor any clear language stating that the law should be in any way retroactive. So the focus is on the meaning of the words “shall take effect immediately.”
Practitioners have two reported workers’ compensation cases to consider on this issue. Unfortunately, these two cases seem to be in conflict. Both involve the dependency statute.
The first is Harris v. Branin Transport. In that case, Anne Harris became a statutory dependent back in 1979 when her spouse died in a work-related accident. Under the old law, any income after 450 weeks had to be offset against dependency benefits. Harris was earning $128 per week after 450 weeks, so that amount was deducted from her dependency award.
In 1995 the law was changed removing the earnings credit. Harris applied to end the removal of the earnings credit. The question was whether the new law removing the earnings credit would apply to only new dependents after 1995 or to all current and existing dependents.
The Appellate Division held that the new law was intended to apply to Harris and others like her who were already receiving dependency benefits, calling this “secondarily retroactive.” The Supreme Court declined to accept the case, so the Appellate Division stood. If Harris is followed, the hand and foot bill would affect all existing claims in the division not yet decided.
Nine years later another change in the dependency law occurred. In Cruz v. Central Jersey Landscaping Inc., the Supreme Court considered an amendment that removed the graduated dependency scale. Prior to 2004, one dependent received 50% of wages, two received 55%, three received 60%, four received 65% and five or more received 70% of wages. The new law established that one dependent alone would receive 70% of wages, eliminating the graduated scale.
Four separate cases were tried and eventually were consolidated before the Supreme Court. All four claimants were existing dependents who had filed claims before the law was passed in 2004, and they argued that they should get the benefit of the new law.
The division split on whether the new law was prospective only. The Appellate Division ruled the new law was secondarily retroactive as in Harris, but the Supreme Court reversed. The very same language appeared in that act, namely that the law was supposed to have immediate effect.
The Supreme Court held that the new law should apply only to those who filed after the effective date of the act. It said:
Indeed there is nothing in the amendments or in the sponsors’ statements that suggests that the Legislature intended to give the new benefit level retroactive effect of any kind. We certainly see no basis in the legislative history, and in an interpretive framework that includes our prior holding that vesting occurs on the date of death, to conclude that the Legislature intended to effect a reopener of settled awards. Nor is there anything in the directive that the act ‘shall take effect immediately’ to suggest retroactivity. On the contrary, these words bespeak an intent contrary to, and not supportive of, retroactive application.
The Supreme Court interpreted the words “shall take effect immediately” to imply only to those cases filed in the future, i.e., after the effective date of the amendment to the act.
The court was concerned about how far back one goes, stating that retroactive application would mean reaching even beyond pending and non-finalized claims, implying that it could be applied to closed orders in the past.
But no one is arguing that the hand and foot bill should affect orders entered in the past. The argument on the hand and foot bill is between secondary retroactivity (existing claims) versus prospective effect. If Cruz is followed, the hand and foot bill will apply only to claim petitions filed after the effective date in late January 2020.
It is very difficult to reconcile the decision in Harris with the decision in Cruz. In Harris, the Supreme Court did not take the case and, therefore, let the Appellate Division stand. In Cruz, the Supreme Court took the case and reversed. The decisions were only nine years apart but the reasoning diverged markedly.
I have spoken with many attorneys and clients about this issue. Defense attorney Joe Soriano took the time to review the legislative history and the sponsor’s statement and notes that there is no clear intention that the bill should be retroactive in any way. He points out the word “retroactive” does not appear anywhere in the legislative history, sponsor’s statement or the legislation itself.
I have also spoken with several petitioners’ counsel. They make the point that the words “shall take effect immediately” do not mean the same thing as “shall have prospective effect.” The argument from the petitioner side is that if that was the intention, the Legislature have simply said, “This law shall apply only to claim petitions filed after the effective date.” The meaning of “shall take effect immediately" is open to interpretation.
In the meantime, what should employers and carriers do? Suppose they settle a case without paying the new higher rates on hand and foot injuries, only to receive a decision a year from now from the Appellate Division ruling that they should have paid the increased weeks? In that instance, the award would have to be reopened and corrected. For this reason, it may be wise to reserve for this potential outcome until there is a decision.
What about petitioners’ counsel? Suppose the judge of compensation rules that the petitioner is entitled to the benefit of the new law, only for the Appellate Division to rule a year from now that the law is not retroactive. Does the petitioner owe the money back to the carrier? Should an amount be set aside for that eventuality?
The sooner we hear from the courts on this issue, the better for all workers’ compensation practitioners. We thank the many counselors who have provided their input on this important issue.
John H. Geaney is an attorney, executive committee member and shareholder with Capehart Scatchard, a defense law firm in New Jersey. This post appears with permission from Geaney's New Jersey Workers' Comp Blog.
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