PA Supreme Court “Corrects” Long-Standing Rule Regarding Award of Attorney’s Fees Against Employer Who Reasonably Contests Issues

In a decision that is turning heads in the Keystone State, the Supreme Court of Pennsylvania, stressing the importance differences between two words—“shall” and “may”—reversed a decision by the state’s Commonwealth Court, and held that in all cases in which a workers’ compensation claimant prevails, the WCJ may, in his or her discretion, enter an award requiring the employer to pay claimant’s attorney’s fees, even where there was a reasonable basis for the employer’s contest [Lorino v. Workers’ Comp. Appeal Bd. (Commonwealth), 2021 Pa. LEXIS 4255 (Dec. 22, 2021), emphasis added]. The high court’s decision goes against long-standing practice within the Commonwealth of not allowing awards of fees where the employer and/or carrier is able to establish that its decision to deny coverage or seek termination of benefits was reasonable.

Background

Lorino worked as an equipment operator for the Pennsylvania Department of Transportation for nearly 11 years. On August 22, 2016, he slipped on the running board of the truck he used for work and fell backwards, injuring his lower back and left hip. The employer, through its insurer, accepted liability for a low back sprain/tear and a left hip sprain/tear pursuant to two medical-only notices of compensation payable (“NCP”). Lorino did not miss any work because of his injury, and did not receive wage or indemnity benefits, but the insurer paid for periodic medical treatment, which primarily consisted of epidural spinal injections.

In February 2017, the employer referred Lorino to a board-certified orthopedic surgeon, for an independent medical examination (“IME”). The doctor determined that Lorino had fully recovered from his injuries, that any pain he experienced was the result of pre-existing degenerative disc disease, and that Lorino required no further treatment. As a result, on March 10, 2017, the employer filed a petition to terminate Lorino’s treatment, asserting that Lorino had fully recovered from his work-related injury as of February 21, 2017.

Lorino retained counsel for the hearing on the employer’s termination petition. At the hearing, Lorino testified that he had been receiving treatment from his physician, who administered epidural steroid injections to alleviate the pain in his back and left hip. Lorino explained that, while the steroid injections would alleviate his pain for a few months, the pain would slowly return, at which point he would need to return to his physician for additional injections. Lorino indicated that he received his most recent injection in January or February 2017, approximately two to three weeks before the IME. Lorino further stated that, at the time of the IME, his lower back pain had temporarily improved. He disputed the IME physician’s conclusion that he had fully recovered from his injury, claiming that he still experienced pain; continued to see his own physician for treatment; used over-the-counter pain medication; performed at-home physical therapy exercises; and used hot and cold therapy on his back after standing for extended periods of time at work. Appellant submitted medical reports from his physician to substantiate these assertions.

Claimant Asks for Attorney Fees at End of Hearing

At the conclusion of the hearing, Lorino requested, in addition to continued medical benefits, $14,050 in attorney’s fees pursuant to Section 440 of the WCA. Lorino asserted that, because he received only medical benefits, he was unable to retain the services of an attorney based on a traditional contingent fee arrangement, and instead was required to enter into an hourly-rate fee agreement. Lorino’s counsel’s hourly rate was $400.

WCJ Denies Employer’s Termination Petition But Does Not Assess Fees

On July 10, 2018, the WCJ denied the employer’s termination petition. Although the WCJ found that the employer had established a reasonable basis for its termination petition based on the IME physician’s opinion, it ultimately determined, based on Lorino’s physician’s medical reports, that the employer had not met its burden of proving that Lorino had fully recovered from his injury. Additionally, the WCJ denied Lorino’s request for an award of attorney’s fees under Section 440. Instead, the WCJ opined that $2,000 was a reasonable sum for attorney’s fees in this case, and, pursuant to Section 442 of the WCA, determined that Lorino was responsible for that amount.

Board and Commonwealth Court Agree: No Fees Assessed

The Board affirmed the WCJ’s decision, concluding that, based on the IME physician’s opinion, the employer presented a reasonable basis to support its termination petition. The Board further determined that Lorino had failed to provide any support for his assertion that he was entitled to attorney’s fees under Section 440 where the WCJ concluded that the employer established a reasonable basis for its petition. Lorino appealed to the Commonwealth Court, which affirmed in relevant part in an unpublished memorandum opinion. The Commonwealth Court said that Lorino was not entitled to attorney’s fees under Section 440 of the Act because the employer had a reasonable basis for its termination petition [see Lorino v. WCAB (Commonwealth of Pennsylvania), 239 A.3d 1145, 2020 Pa. Commw. Unpub. LEXIS 423 (2020).

Difference Between “Shall” and “May”

Examining the language of section 440, the Commonwealth Court stated:

In line with this legislative intent and despite the General Assembly’s use of the word “may,” this Court has always interpreted Section 440 to mean that attorney[s’] fees shall be awarded unless a reasonable basis for the employer’s contest has been established; or otherwise expressed, the award of attorney[s’] fees is the rule and their exclusion is the exception to be applied in cases where the record establishes that the employer’s … contest is reasonably based [Lorino, 2020 Pa. Commw. Unpub. LEXIS 423, 14 (quoting Weidner v. WCAB, 16 Pa. Commw. 561, 332 A.2d 885, 887 (Pa. Cmwlth. 1975)).

Appeal to PA Supreme Court

The Supreme Court of Pennsylvania granted review. Because the matter involved the interpretation of a statute, the Court’s standard of review was de novo and its scope of review was plenary.

WCJ May Award Fees Even When Employer’s Contest is Reasonable

After its review, Pennsylvania’s high court concluded that the Commonwealth Court’s interpretation of Section 440 was contrary to its express language. The Supreme Court stated:

Based on the established meaning of the terms “shall” and “may,” under Section 440, when a contested case is resolved in favor of an employee, a reasonable sum for attorney’s fees shall be awarded to the claimant. Such an award is mandatory. Where, however, the employer has established a reasonable basis for the contest, an award of attorney’s fees may be excluded. In other words, the WCJ is permitted, but not required, to exclude an award of attorney’s fees. The Commonwealth Court below, in “always interpret[ing] Section 440 to mean that ‘attorney[s’] fees shall be awarded unless a reasonable basis for the employer’s contest has been established,’” Lorino, 2020 Pa. Commw. Unpub. LEXIS 423, 14, disregarded the distinction between the terms “shall” and “may,” and failed to recognize the discretion afforded to the workers’ compensation judges to award attorney’s fees even when they find a reasonable basis for an employer’s contest [emphasis added by the Court].

WCJ Has Discretion

The Court concluded by saying it was not suggesting that, under Section 440, a WCJ may never deny an award of attorney’s fees when the employer has established a reasonable basis for its contest. The language of Section 440 afforded the WCJ discretion to refuse an award of attorney’s fees in such circumstances. Rather, it was the Commonwealth Court’s interpretation of Section 440 as a per se disqualification of an award of claimant’s attorney’s fees where the employer had established a reasonable basis for its contest that was contrary to the plain language of the statute.