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Attorney Fees In Workers’ Compensation

It is a hallmark of American jurisprudence that in most cases, each litigant pays his or her own attorney fees. For many years in workers’ compensation practice, this bellwether has held true. But in late 2021, the Pennsylvania Supreme Court issued a decision that turned years of practice on its head. The case is just now, in late 2022, playing out through the courts and its implications are being felt.

The case that made headlines, Lorino v. WCAB (Commonwealth of Pennsylvania), 266 A.3d 487 (Pa. 2021), followed a familiar scenario where the injured worker, Vincent Lorino, had returned to work without any loss of wages, and therefore was not being paid any wage loss benefits. Mr. Lorino’s workers’ compensation insurance company sent him for an independent medical examination (“IME”) which found him to be fully recovered. The workers’ comp carrier filed a petition to terminate Mr. Lorino’s medical benefits. Mr. Lorino disputed that he was fully recovered, and hired an attorney to help preserve his entitlement to medical treatment. The attorney could not represent Mr. Lorino on a contingent fee basis, which is typically 20% of the claimant’s benefits, since Mr. Lorino was not receiving any wage loss benefits. Instead, they entered into an hourly fee agreement.

At the end of the litigation, Mr. Lorino’s attorney asked the workers’ compensation judge to award attorney’s fees. The judge found that the employer had not met its burden to show that Mr. Lorino was fully recovered from his work injury, and denied the attorney’s request for $14,050 in attorney fees, but granted an attorney fee of $2,000. Both parties appealed.

Generally, most practitioners had understood that attorneys fees would not be awarded where the employer had a reasonable basis to pursue the petition. Section 440(a) of the Workers’ Compensation Act provides:

In any contested case where the insurer has contested liability in whole or in part, including contested cases involving petitions to terminate, reinstate, increase, reduce, or otherwise modify compensation awards, agreements or other payment arrangements or to set aside final receipts, the employee [sic] or his dependent, as the case may be, in whose favor the matter at issue has been finally determined in whole or in part shall be awarded, in addition to the award for compensation, a reasonable sum for costs incurred for attorney’s fee, witnesses, necessary medical examination, and the value of unreimbursed lost time to attend the proceedings: Provided, That cost for attorney fees may be excluded when a reasonable basis for the contest has been established by the employer or the insurer.

77 P.S. § 996(a). Most judges always took the last line of this section to mean that if the employer had a reasonable basis to file the petition in the first place, attorney fees should not be awarded.

The court also had to wrestle with Section 442 of the Act, which provides as follows:

All counsel fees, agreed upon by the claimant and his attorneys, for services performed in matters before any workers’ compensation judge or the board, whether or not allowed as part of a judgment, shall be approved by the workers’ compensation judge or board as the case may be, providing the counsel fees do not exceed twenty per centum of the amount awarded.

In cases where the efforts of the claimant’s counsel produce a result favorable to the claimant but where no immediate award of compensation is made, such as in cases of termination or suspension, the hearing official shall allow or award reasonable counsel fees, as agreed upon by claimant and his attorneys, without regard to any per centum. In the case of compromise and release settlement agreements, no counsel fees shall exceed twenty per centum of the workers’ compensation settlement amount.

77 P.S. § 998. The Supreme Court focused on the use of the words “may” and “shall” in Section 440, and concluded that when a contested case is resolved in favor of an employee, a reasonable sum for attorney’s fees shall be awarded to the claimant, but where the employer has established a reasonable basis for the contest, an award of attorney’s fees may be excluded. In other words, the workers’ comp judge is permitted, but not required, to exclude an award of attorney’s fees.

This holding was a win for injured workers who would otherwise have had a hard time finding an attorney who was willing to work essentially for free to defend the injured worker’s right to ongoing medical benefits. Going forward it will be much more likely that attorneys across the state will be willing to take up a client’s “medical only” case if they have an expectation that they will be able to receive a reasonable fee if they are successful, without charging their client directly.

In fact, claimant’s attorneys probably now have an ethical obligation to discuss attorney fees with their clients, and whether to pursue a request for fees under Lorino. Since the Supreme Court has made it clear that attorney fees shall be awarded, and that the workers’ comp judge has the discretion to decline to award fees, it stands to reason that many more claimants will be asking for attorney fees in the appropriate situations. Time will tell as to whether the judges will in fact award more attorney fees to claimants.

These issues present one more example of why injured workers need an experienced workers’ compensation attorney on their side, to help them secure all of the benefits to which they are entitled.

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