Employer gets full credit for disability benefits paid before WC claim allowed

In North Carolina, when an employer pays an injured employee disability benefits under a private plan, it is entitled to deduct those payments from the amount to be paid as workers' compensation if it has not accepted the employee's injury as compensable when the disability payments are made.

Case name: Strickland v. Martin Marietta Materials, et al., No. COA08-476 (N.C. Ct. App. 11/18/08).

Ruling: The North Carolina Court of Appeals ruled that the Industrial Commission erred in reducing an employer/insurer's credit for short-term disability benefits it paid to an injured employee by 25 percent to partially fund the employee's attorney's fees. It reversed the commission's decision, awarding the employer/insurer full credit for all disability payments made.

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Summary: The claimant injured his shoulder while repairing a bent engine compartment door of a rock loader at the employer's rock quarry business. Because of the restrictions imposed by his physician, he was unable to return to work. The employer paid the claimant $11,532 in short-term disability benefits under an employer-funded disability plan. It had not accepted the claimant's injuries as compensable when it made the disability payments. The commission eventually granted the employer a credit for the payments but reduced the credit by 25 percent to partially fund the claimant's attorney's fees. The Court of Appeals reversed, finding that the employer was entitled to full credit for all benefits paid to the claimant.

The court explained that the purpose behind the statute granting a credit for such benefits is "to encourage employers to make voluntary payments to injured employees." The claimant's employer provided wage-replacement benefits after the claimant was injured, but before he was entitled to receive workers' compensation, which furthered the intent of the statute.

The commission's decision essentially required the employer to pay an additional $2,883 to the claimant's attorney in fees, which it would not otherwise have been required to pay. "This discourages employers from providing disability benefits, resulting in injured employees having to wait until awarded workers' compensation benefits to be compensated," the court said.

January 15, 2009

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