Workers’ Compensation: Troubling decision for Maryland government workers
Maryland appeals court expands the reach of offset provision.
In July 2021, the Court of Special Appeals of Maryland issued a ruling likely to be financially detrimental to some public employees (or their surviving dependents) who become eligible for Workers’ Compensation in addition to another, “similar” employment benefit. The “similar” benefits are usually employer-provided or contributory retirement or pension benefits.
(Please note: In August 2022, this case was affirmed by the Maryland Court of Appeals. We provide a new article here.)
Novel question about a complicated law
In Spevak v. Montgomery County, a county firefighter was forced to retire after being injured in a work-related accident. He received service-connected total disability retirement benefits (replacing 70% of his wages) starting in 2010 for a back injury. Interpreting the Workers’ Compensation offset statute, the Court said that he could not simultaneously receive retirement benefits and permanent partial disability Workers’ Compensation benefits. This application of the set-off provisions in the statute has been settled law for years.
Subsequently, seven years later, the Maryland Workers’ Compensation Commission approved an Award based on a service-connected progressive permanent partial hearing loss, but then off-set the Award completely pursuant to LE 9-610(a) as a “similar benefit.”
The Court decided a matter of first impression. The issues presented were the following: whether the off-set provision in the Maryland Workers’ Compensation Act allows a covered government employer to off-set its liability for a permanent total or permanent partial Workers’ Compensation award against disability retirement benefits for which the employer was also responsible, and, whether or not the disability retirement benefits for the back injury are “similar” to Workers’ Compensation benefits for the later hearing loss. The Court ultimately said yes, so the similarity of the two benefits triggered the off-set statute even though the injuries were different because they arose out of the same job.
In other words, the government employer would not have to pay the lower Workers’ Compensation benefits for the hearing loss because the higher disability retirement benefits for the back injury canceled them out under the set-off provision. The claimant could not receive disability retirement benefits PLUS Workers’ Compensation benefits. The higher retirement benefit completely off-set (canceled) the lower Workers’ Compensation payments even though this additional disability was for something other than his back.
Nuts and bolts of the offset provision
The offset works like this: the Commission decides in each case (subject to court review) whether the retirement or other benefit and the Workers’ Compensation award are similar. If so, and the retirement or other benefit is HIGHER, the employer (or insurer or Subsequent Injury Fund) is relieved from paying Workers’ Compensation on top of the retirement or other, “similar benefit.” If the other benefit is LOWER than the Workers’ Compensation award, the Commission should order payment of the portion of the Workers’ Compensation benefit that brings the sum of both benefit payments to the level of the higher Workers’ Compensation award.
If the Commission finds the two benefits are not similar, the claimant gets both with no offset. This applies to a Years of Service Retirement where there is no setoff, where the worker has retired due to age, rather than due to any injury or disability, according to Newman v. Subsequent Injury Fund.
It makes no difference if different governmental entities pay each of the two benefits at issue.
What is a similar benefit?
The Act does not define “similar benefit,” but Maryland courts have frequently interpreted it. The Spevak opinion contains a chronology of the main opinions on this issue back to 1975. It becomes clear reading this history that our state courts have relied on different aspects of benefit awards in determining similarity for purposes of offset. A key component of the analysis has often been whether the two kinds of benefits are based on the same injury, in which case the benefits are normally similar, and the offset applies.
Courts have also looked at whether both benefits were meant to replace the same wages that the claimant is no longer able to earn, which usually results in an offset. The offset is designed to avoid replacing wages twice from the same wage-loss period – to prevent the claimant from “double-dipping.”
The benefit’s purpose can be a factor as well. For example, the Spevak court explained that service-connected disability retirement benefits are usually similar to a Workers’ Compensation award, and ordinary disability retirement benefits, MAY be similar if the work injury also triggered the disability retirement. But, in Newman, the Court of Appeals said that retirement benefits based on age and years of service were NOT similar to Workers’ Compensation benefits based on work-related injury, so collecting both is not an impermissible windfall.
Paid sick leave was similar to permanent partial disability in Workers’ Compensation, so the court ordered setoff in Board of Education of Prince George’s Cty. v. Brady, according to the Spevak opinion. And the cash part of a Workers’ Compensation vocational rehabilitation award meant as wage replacement was similar to disability retirement benefits, so the cash award was subject to setoff as well. However, the rehabilitation portion of the benefit consisting of counseling and job services was not similar; therefore, it survived the setoff.
Why is Spevak potentially harmful to claimants?
These decisions have not been completely consistent and are intensely dependent on the detailed facts of each case. Still, despite some courts referring to a legislative intention that the purpose of the setoff is to prevent double recovery for the same injury, Spevak took a broader approach. It applied the setoff to Spevak’s benefits for DIFFERENT injuries, saying that so long as a claimant’s “permanent total or permanent partial [W]orkers’ [C]ompensation benefits … is awarded for injuries or diseases [are] related to that same employment”, the setoff applies. This is contrary to the holding in Reger v. Wash. Co. Bd. of Ed., where the Court of Appeals indicated that “similar benefits” as a setoff was applicable to “benefits accruing by reason of the same injury,” citing Newman.
This approach in the Spevak decision could prevent firefighters and other covered government employees receiving retirement or pension benefits after a work injury or occupational disease from getting any Workers’ Compensation for later developing service-related injuries or illnesses.
The Maryland Court of Appeals has granted certiorari (permission to review the lower court’s decision), so this case will ultimately be decided by the highest court in Maryland, most likely, in late 2022.
Anyone facing setoff issues related to Workers’ Compensation should speak with an attorney about the current state of the law and how to effectively advocate before the Commission or in court for maximum benefits. As demonstrated, the law is complicated, and it is important an injured worker receive counsel to best ensure the coverage they are entitled to.