Unilateral suspension of benefits ends up costing employer

In North Carolina, once an employer has accepted liability for a claim, its ability to unilaterally terminate a worker's benefits is very restricted.

Unilateral suspension of benefits ends up costing employer

Case name: Fonville v. General Motors Corp., d/b/a GMAC, et al., No. COA09-120 (N.C. Ct. App. 10/06/09).

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Ruling: The North Carolina Court of Appeals reversed a portion of the Industrial Commission's finding that an employee was not entitled to total disability benefits and late payment penalties and remanded to determine the amount of benefits owed.

What it means: In North Carolina, once an employer has accepted liability for a claim, its ability to unilaterally terminate a worker's benefits is very restricted. An employer may not unilaterally suspend or terminate benefits simply because it has terminated the worker's employment.

Summary: While attending an employee appreciation luncheon, a worker was injured when a tent pole struck her on the head. GMAC agreed to pay benefits by filing an "Employer's Admission of Employee's Right to Compensation" form. The worker was subsequently terminated for reasons unrelated to her injury. The worker reached maximum medical improvement approximately two months after her termination and started another job approximately nine months after reaching MMI. In the interim, GMAC unilaterally stopped payment of her total disability benefits without filing any of the required forms or otherwise notifying the Industrial Commission or the worker. The worker argued that under North Carolina law, she was entitled to continued benefits at least through the date she returned to work, and GMAC was required to follow certain notice procedures before it could terminate her benefits. The court agreed. It stated GMAC's filing of the form was equivalent to a valid decision by the commission. Therefore, GMAC was required to follow the rules before terminating benefits. The court also determined that the worker was entitled to notice and due process which GMAC did not provide.

GMAC argued that the worker was required to prove ongoing disability in order to receive disability compensation. The court pointed out that GMAC ignored the fact that its desired outcome could have easily have been obtained by simply following the procedures. The court stated GMAC could not use a later determination that the worker was not disabled "to justify its clear circumvention of established [c]ommission procedures and [the worker's] due process rights."

The court determined the worker was entitled to a 10 percent penalty fee for GMAC's termination of benefits during the disputed period. The court held that GMAC failed to properly dispute that the penalty, as it did not establish its termination of payments, was for circumstances outside of its control.

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November 23, 2009

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