We attorneys rarely see the interests of injured people align squarely with those of medical providers. Be it the fundamental nature of medical malpractice claims, attorney advertising seeking clients with such claims, or the prevalence of medical liens, the interests of injured people and medical providers in the legal arena are frequently unaligned—if not diametrically opposed.
That’s what makes the Commonwealth Court of Pennsylvania’s decision in Neves v. Workers’ Compensation Appeal Board, 232 A.2d 996 (Pa. Commw. Ct. 2020), so significant. In Neves, the court ruled an attorney’s contingency fee of 20% on an injured worker’s medical compensation award was per se reasonable. In so ruling, the court aligned the interests of injured people (in this case, workers) with those of medical providers in a way that has profoundly changed the relationship between them within the commonwealth’s workers’ compensation system.
Neves was decided in May 2020. Yet despite the impact of Neves on Pennsylvania’s workers’ compensation system, as far as I could tell, no workers’ compensation attorneys to date have discussed in this forum why the decision is so important. I will gladly do so.
The pre-Neves landscape
To understand the importance of Neves, you must first have a passing understanding of both Pennsylvania workers’ compensation law and the relationship between injured workers, their attorneys, and their medical providers before Neves.
In 1972, the Pennsylvania Legislature amended Section 442 of the Pennsylvania Workers’ Compensation Act to eliminate the ability for Workers’ Compensation Judges (“WCJs”) to disapprove a contingency fee agreement between an injured worker and their attorney if the contingency fee was 20% or less of the “amount awarded” to the worker. The amendment also gave WCJs the discretion to approve contingency fees greater than 20% upon a showing that the fees were reasonable. It also awarded “reasonable counsel fees” to claimants when they prevailed in their cases but there was “no immediate reward,” as well as “a reasonable sum for costs incurred for attorney’s fee” when a claimant demonstrates their employer unreasonably contested their claim.
Four years later, the Commonwealth Court, in Workmens’ Compensation Appeal Board v. General Machine Products Company, held that the term “amount awarded” in Section 442 meant “all amounts awarded to a claimant,” including disability compensation and medical compensation.
In 1992, the Legislature again amended the Workers’ Compensation Act. This time, it prohibited a medical provider’s recovery of “the difference between the provider’s charge and the amount paid by the employer or the insurer” from the claimant, commonly referred to as “balance billing.” The amendment also provided directions for WCJs when determining what “a reasonable sum” was when an employer unreasonably contested a claim.
In 2006, the Legislature amended Section 442 again, this time eliminating the possibility that a claimant and their attorney could agree to a contingency fee greater than 20% of the claimant’s recovery. (My law partner Jerry Lehocky was one of the attorneys publicly encouraging and supporting this amendment because it was (and still is) in the public interest for claimants to receive no less than 80% of their recoveries.)
Despite clear statutory language and long-established precedent that workers’ compensation attorneys were entitled to fees of 20% of their clients’ total recoveries of both disability and medical compensation, some WCJs and Workers’ Compensation Appeal Board (“WCAB”) panel members pushed back against awarding attorneys’ fees on medical compensation. They would either not allow them or they would rule that a determination of reasonableness was required for those fees despite there being no support for that position in the Workers’ Compensation Act or in Commonwealth Court precedent.
As word got out about this pushback, injured workers felt the brunt of it in two ways—both of which jeopardized their financial and physical well-being.
First, many workers’ compensation attorneys were unwilling to pursue medical expenses on behalf of injured workers because they were concerned they would not be paid for their efforts. Understandably, they were troubled by the idea of investing time and expenses in pursuing medical benefits for a client if they would not receive a fee for their efforts.
Sometimes, this forced injured workers to turn to less experienced attorneys who could not provide the same level of service and counsel that more experienced attorneys could. Other times, workers’ attorneys engaged in the unsavory practice of not considering their clients’ outstanding medical bills during settlement negotiations to ensure there would be no question about whether they would receive a fee.
This left many injured workers struggling to pay medical bills that should have been covered by the workers’ compensation system.
Second, as a result of medical expenses not being pursued in workers’ compensation proceedings or being left out of settlement negotiations, qualified physicians refused to participate in workers’ compensation matters. These physicians believed the chances of getting paid for their services were too slim to justify providing services to injured workers.
This left many injured workers struggling to find qualified physicians to help them recover from their workplace injuries. As a result, workers recovered slower than they should have, which posed problems for those workers and impacted their employers’ operations.
The Neves decision
Robert Neves worked for American Airlines as a baggage handler. In his February 2015 workers’ compensation claim, he alleged he suffered a work-related heart attack in January 2015 that damaged his heart muscle. In May 2016, a WCJ granted Neves’s claim and found that his counsel was entitled to “20% of any benefits awarded to be paid as counsel fees.”
American Airlines refused to pay for Neves’s medical treatment and withheld payment of his fees on the medical benefits secured for Neves. After American Airlines eventually paid 80% of the amount owed to Neves’s medical provider in connection with his injury, the parties litigated the question of whether Neves’s attorney was entitled to fees on the medical benefits.
A second WCJ held that the 20% of benefits Neves’s attorney was entitled to corresponded to Neves’s disability compensation and not his medical compensation. The WCJ further held that Neves did not establish that his fee was reasonable, relying on a 1993 Commonwealth Court case in support of its decision.
On appeal to the WCAB, it held that Neves had to prove the reasonableness of a fee of 20% of the medical compensation but he did not present any evidence in support of its reasonableness, relying on a 2016 Commonwealth Court case in support of its decision.
The Commonwealth Court, in an opinion by then-President Judge Mary Hannah Leavitt, reversed the WCAB’s ruling. The court held that the 20% fee provided for in Section 442 of the Workers’ Compensation Act applies to both disability and medical compensation, was per se reasonable so it does not require an inquiry into the reasonableness of it, and can be awarded without factoring in the amount and degree of difficulty of the work performed by the attorney. In so ruling, the court relied on the plain language of the Workers’ Compensation Act. It distinguished the cases the second WCJ and the WCAB relied on, holding that the language in those two opinions deviated from the language of the current version of Section 442.
The reasoning that underpins the Neves decision is neither novel nor earth-shattering. There is no doubt that the plain language of Section 442 of the Workers’ Compensation Act allows workers’ compensation attorneys to collect a 20% fee on their clients’ medical recoveries after the fee has been approved by a WCJ.
(Neves is consistent with decisions from state supreme courts across the country, including the Florida Supreme Court (Castellanos v. Nextdoor Co., 192 So.3d 431 (Fla. 2016)) and the Utah Supreme Court (Injured Workers Ass’n of Utah v. State of Utah, 374 P.3d 14 (Utah 2016)), that have recognized that an injured worker’s right to receive a reasonable attorney’s fee has been a critical feature of the workers’ compensation system, and that preventing attorneys from obtaining reasonable fees would hurt injured workers by discouraging attorneys from taking workers’ compensation cases.)
And yet, the clarity (and binding precedent) the decision provides to players in the workers’ compensation system, including injured workers, attorneys, medical providers, and WCJs, has resulted in aligned interests among, and better outcomes for, injured workers and medical providers, while allowing WCJs to more efficiently resolve the cases in front of them.
First, Neves has helped injured workers retain counsel when payment of their medical benefits is at issue. As I mentioned above, some injured workers had difficulty finding counsel to pursue recovery of their medical benefits because of uncertainty over whether counsel would be paid for their efforts. Now that Neves has resolved that uncertainty, injured workers should have no problem finding workers’ compensation attorneys to assist them in this pursuit.
Second, Neves increases the chances medical providers will recover outstanding medical bills owed by injured workers, which means they will be more likely to provide care to those workers. Knowing that workers’ attorneys will be incentivized to aggressively pursue payment of their clients’ outstanding medical bills, medical providers can once again treat injured workers without worrying whether their bills will get paid. Because of Neves, I expect more medical providers to begin treating injured workers, especially those who once did but stopped after they saw attorneys pull back on pursuing payment of medical benefits.
While Neves aligns the interests of injured workers and medical providers by incentivizing workers’ attorneys to pursue the payment of their clients’ medical bills by employers, the decision also benefits WCJs. When workers’ attorneys seek a 20% fee, WCJs need not look into the reasonableness of the fee or determine the amount and degree of difficulty of the work performed by the attorney. This will allow WCJs to resolve cases more quickly and spend more time on the merits of cases instead of on fee applications, which will help injured workers more quickly obtain the benefits they’re entitled to.
On a related note, any concern that in light of Neves injured workers could be held liable by medical providers for the 20% attorneys’ fee on medical benefits awards is unfounded. As I mentioned above, the 1992 amendments to the Workers’ Compensation Act prohibit a medical provider’s recovery of “the difference between the provider’s charge and the amount paid by the employer or the insurer” from the worker. In addition, in our experience, an attorney’s 20% fee will be covered by the medical providers themselves. Most providers are happy to settle for 80% of the outstanding balance owed by an injured worker because the providers are at risk of receiving 0% of that balance if an injured worker does not pursue payment of their medical benefits.
The Commonwealth Court’s decision in Neves, through straightforward statutory interpretation, has removed any doubt about awarding attorneys’ fees for medical benefit recoveries in workers’ compensation cases. As a result, it has aligned the interests of injured workers and medical providers in a way that strengthens Pennsylvania’s workers’ compensation system.
Now, injured workers can more easily find counsel to pursue payment of their medical benefits. At the same time, medical providers are more likely to get paid for their services and thus will be more willing to treat injured workers. WCJs benefit from Neves as well in that they should now have less fee applications to rule on. And, of course, workers’ compensation attorneys will get paid for their efforts seeking payment of their clients’ medical benefits.
Because of this alignment of a number of varied interests within the commonwealth’s workers’ compensation system, Neves may go down in history as one of the most consequential workers’ compensation decisions the Commonwealth Court has ever issued.
Samuel H. Pond is the managing partner of Pond Lehocky Giordano LLP, the largest workers’ compensation and social security disability law firm in Pennsylvania. Fighting for the injured and disabled, the firm has helped tens of thousands of clients obtain workers’ compensation benefits and/or Social Security Disability benefits, and has connected more than 120,000 clients, friends, family, and neighbors across the U.S. to attorneys in its national referral network. For more information, please visit www.pondlehocky.com.
Reprinted with permission from the September 7, 2021 edition of The Legal Intelligencer © 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or email@example.com.