workers' compensation benefits

Whose Money is it?

CT Supreme Court Says Injured Employees May Keep 1/3 of Workers’ Compensation Benefits from Lawsuits Against Third Parties

In a recent opinion, Callaghan v. Car Parts Int’l, the Connecticut Supreme Court held that employees who are injured on the job by third parties (people unrelated to the employer- think customers, vendors, passers-by, etc.) may keep a portion of any money won in a lawsuit by the employee against that third party. This is a great win for employees in the state of Connecticut, as this money would have previously been paid to the employer as reimbursement for workers’ compensation benefits paid.

BACKGROUND

“Allowing employees to keep at least one-third of [these winnings] creates a win-win situation, where employers receive a partial reimbursement of money they paid through no fault of their own, and employees get to keep a share of the money they deserve.”

Patrick Callaghan was on the job when he was involved in a motor vehicle accident. As a result, his employer was required to pay him workers’ compensation benefits in the amount of $75,000. Mr. Callaghan was able to receive a settlement from the other driver in the accident in the amount of $66,000. Older Connecticut law would have required Mr. Callaghan to reimburse his employer up to the full amount of workers’ compensation benefits he received (meaning Mr. Callaghan would not have kept any money from the lawsuit unless he won more than his $75,000 in workers’ compensation benefits; in this case, he would have kept nothing).

The Connecticut legislature changed the law in 2011 to allow employees to keep at least one-third of these proceeds from lawsuits against third parties, regardless of how much the employer has paid out in workers’ compensation benefits, so long as the employee is the one who started the lawsuit. Several members of the legislature noted that employees otherwise had no reason to go after third parties for compensation because any money they won would be repaid directly to their employer- why go through the trouble of suing someone if your employer gets to keep the money? Allowing employees to keep at least one-third of these proceeds creates a win-win situation, where employers receive a partial reimbursement of money they paid through no fault of their own, and employees get to keep a share of the money they deserve.

DOUBLE PAYMENT?

According to the new law, Mr. Callaghan was allowed to keep one-third of his winnings against the third party responsible for his injury, or an amount of $22,000. The problem came as Mr. Callaghan realized that the workers’ compensation benefits he was paid so far would not completely cover his medical bills. Would he be allowed to keep the $22,000 he won, or would he have to put that money towards his medical bills before his employer would be required to cover further costs? The Connecticut Supreme Court says Mr. Callaghan gets to keep his money.

The controversy comes from the idea that an employee should not be compensated twice for the same injury. If the employee is compensated once by their employer through workers’ compensation benefits should they later be allowed to also sue the third party that caused the injury? And should the employee keep that money, or should that money go to repaying the employer, who had no fault in the accident but still paid for their employee’s injuries?

Older law said the money would go to the employer because it is unfair for the employee to be paid twice while the employer has to pay for an injury they didn’t cause. The problem is that employers often do not consider it financially worthwhile to go after the party that actually caused the injury, while employees do not see the point of going through a lawsuit that will only benefit their employer. This meant that the employer would often simply take the loss and the party that caused the injury would get off without paying.

This new change in the law creates an incentive for both employers and employees to sue the party that really caused the injury; employees will now keep one-third of any proceeds they win in such a lawsuit (so long as they initiate the suit), and employers may avoid this one-third reduction of their reimbursement by exercising their right to sue the third party first.