Section 8(j) – Report of Earnings – Forfeiture of Compensation

Section 8(j) – Report of Earnings – Forfeiture of Compensation
Is it a good idea for an employer to monitor the post injury earnings of an employee to whom it is paying disability benefits under the Longshore Act?  Yes.  Does the Act provide a way to do this?  Yes.

Why is it a good idea?

If an employee meets the light burden of establishing a prima facie case, i.e., he has suffered a harm and working conditions or an accident at work might have caused the harm, then the section 20(a) presumption supplies the necessary causation link between the employment and the injury.

Then if the injured worker provides evidence that he cannot return to his pre-injury job (which does not necessarily entail a severe injury in the strictly medical sense), and the employer does not establish the existence of suitable alternate employment, the worker is totally disabled, and the employer is paying temporary total disability (TTD) or permanent total disability (PTD) benefits.

It is possible that injured workers receiving TTD or PTD benefits under the Longshore Act are potentially or in fact capable of working, or in fact are working.

We’ve recently discussed section 22, under which any party may request modification in a compensation case, even a case in which a Compensation Order has been issued and is final, based on a change in condition or because of a mistake in a determination of fact.  Such a modification may “terminate, continue, reinstate, increase, or decrease such compensation ….”

A change in the injured worker’s earning capacity may qualify as a change in condition under section 22 and provide the grounds for a modification of an existing TTD or PTD award, or even an award based on a loss of wage earning capacity (PPL) if the partially disabled worker’s actual earnings have increased.

Alternatively, if the claimant doesn’t return the earnings report as required, the employer may seek a compensation order forfeiting compensation for the period of the failure to report.

How does the Longshore Act provide a way for the employers to monitor the earnings of “disabled” employees?

Section 8(j) (33 U.S.C. 908(j)):

8(j)(1) The employer may inform a disabled employee of his obligation to report to the employer not less then semiannually any earnings from employment or self-employment, on such forms as the Secretary shall specify in regulations.

(2) An employee who –

(A) fails to report the employee’s earnings under paragraph (1) when requested, or

(B) knowingly and willfully omits or understates any part of such earnings, and who is determined by the deputy commissioner to have violated clause (A) or (B) of this paragraph, forfeits his right to compensation with respect to any period during which the employee was required to file such report.

(3) Compensation forfeited under this subsection, if already paid, shall be recovered by a deduction from the compensation payable to the employee in any amount on such schedule as determined by the deputy commissioner.

The employer can monitor the earnings of “disabled” employees, but it must be done right.

The Form is U.S. Department of Labor (DOL) Form LS-200, Report of Earnings.  It should be used by an employer to request earnings information at no less than 6 month intervals.

Section 8(j) uses the ambiguous term “disabled employee”.  This has been interpreted to mean an employee to whom the employer is paying Longshore Act benefits, either voluntarily or under an Order.  The employer must be paying benefits concurrently with the request for an earnings report.

Section 8(j) refers to the “deputy commissioner”.  This means the District Director of a DOL Longshore claims office.

The employee is required to report “any earnings”, including earnings from employment, self-employment, investment or rental income, and even earnings from illegal activity.

Form LS-200 requires that the employee sign and return the form to the employer within 30 days after receipt, even if the report is that there have been no earnings.

The administrators of the Special Fund send out Forms LS-200 once a year to those claimants to whom the Fund is paying benefits.  Since the earnings report may be requested at six month intervals it is in the interest of an employer who has placed cases in the Special Fund under the second injury provision of section 8(f) to also request earnings reports in its Special Fund cases.

What if the earnings report shows that the employee may be working or that he may have an earning capacity.  What if the earnings report shows no earnings but the employer has evidence that the employee may be working.  What if the employee fails to return the signed LS-200?

The employer should initiate proceedings with the DOL’s District Director in charge of the claim (or with the Administrative Law Judge if the case is already pending at the ALJ level).  The District Director should convene an informal conference and, depending on the facts of the case and the evidence provided by the employer, the District Director may issue a Compensation Order forfeiting compensation for the period during which the claimant failed to report as required by Form LS-200, or initiate modification proceedings under section 22.

Note:  Any forfeiture will be handled in accordance with section 8(j)(3).   If compensation forfeited for a past period has already been paid then the amount will be recovered by deduction from future compensation on a schedule set up by the District Director, taking into consideration all of the facts, including the claimant’s financial condition as reflected by his living expenses, total income from all sources, and total assets.

Note:  None of the three sections of the Act which provide for recovery of overpayments (sections 14(j), 8(j), and 22), provides that the employer may recover overpayments directly from the employee; such recovery can only be obtained by an offset against future compensation under the Act.

Note:  Employers should check to see if their insurance carriers are sending out LS-200s.  AEU does it for ALMA Members.  The procedures provided in section 8(j) are an appropriate way to monitor cases where benefits are being made, even where benefits are being paid pursuant to a final Compensation Order.

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About the Author

Jack Martone joined The American Equity Underwriters, Inc. in 2006, where he serves as Senior Vice President, AEU Advisory Services. Prior to AEU, Jack served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers' Compensation for the U.S. Department of Labor. As Branch Chief, Jack directed the licensing and regulation of insurance carriers and self-insured employers under the Longshore and Harbor Workers’ Compensation Act. Jack received his bachelor’s degree from Fordham University and his Juris Doctorate from St. John’s University School of Law.

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