Today’s public service announcement concerns the unilateral suspension of an injured worker’s compensation benefits on the grounds of “forfeiture.” Injured workers are sometimes told by their insurance adjuster that the worker “forfeited” the right to compensation by failing to report earnings. Typically, this occurs after the adjuster sent the worker a form called the LS-200, Report of Earnings. Then, without seeking a district director’s determination, the adjuster suspends benefits.
This is wrong. There is a procedure for the “forfeiture” of benefits. When the carrier has not followed the procedure, they have violated the law. The carrier is then subject to penalties and interest.
Statutory Basis for Forfeiture:
Forfeiture is a real thing. The statutory basis for forfeiture can be found in Section 8(j) of the Longshore and Harbor Workers’ Compensation Act. Section 8(j) states:
(j)(1) The employer may inform a disabled employee of his obligation to report to the employer not less than semiannually any earnings from employment or self-employment, on such forms as the Secretary shall specify in regulations.
(2) An employee who —
(A) fails to report the employee’s earnings under paragraph (1) when requested, or
(B) knowingly and willfully omits or understates any part of such earnings, and who is determined by the deputy commissioner to have violated clause (A) or (B) of this paragraph, forfeits his right to compensation with respect to any period during which the employee was required to file such report.
(3) Compensation forfeited under this subsection, if already paid, shall be recovered by a deduction from the compensation payable to the employee in any amount and on such schedule as determined by the deputy commissioner.
See 33 U.S.C. § 908(j) (1984) (emphasis added).
While there is such a thing as “forfeiture,” a carrier does not have the right to unilaterally declare that an injured worker forfeited their entitlement to compensation. Section 8(j) specifically premises forfeiture on a determination by the deputy commissioner (now called the district director).
Procedure for Forfeiture:
Plus, the Code of Federal Regulations contains a provision that explains the procedure that a carrier and the Department of Labor must follow prior to declaring a forfeiture:
An employer or carrier who believes that a violation of paragraph (a) of this section has occurred may file a charge with the district director. The allegation shall be accompanied by evidence which includes a copy of the report, with proof of service requesting the information from the employee and clearly stating the dates for which the employee was required to report income. Where the employer/carrier is alleging an omission or understatement of earnings, it shall, in addition, present evidence of earnings by the employee during that period, including copies of checks, affidavits from employers who paid the employee earnings, receipts of income from self-employment or any other evidence showing earnings not reported or underreported for the period in question. Where the district director finds the evidence sufficient to support the charge he or she shall convene an informal conference as described in subpart C and shall issue a compensation order affirming or denying the charge and setting forth the amount of compensation for the specified period. If there is a conflict over any issue relating to this matter any party may request a formal hearing before an Administrative Law Judge . . . .
See 20 C.F.R. § 702.286(b). Let me boil that down to simpler terms:
- First, a carrier must apply for a forfeiture determination from the district director. The carrier should “file a charge.”
- Second, the carrier’s complaints must be accompanied by evidence. It can’t just cry, “Forfeiture!” and then cut benefits.
- Third, the evidence shall include proof of service requesting the earnings information for a specific, and clearly stated date range.
- Fourth, if omission or understatement is alleged, the employer has an even higher evidentiary standard. The regulation requires evidence of earnings or receipts of income from self-employment or “any other evidence showing earnings not reported or underreported for the period in question.”
- Fifth–and after the evidence presentation–the district director shall hold an informal conference.
- Sixth, after the conference the district director shall issue a compensation order affirming or denying the charge.
Forfeiture is not a simple matter. A carrier cannot simply cut benefits without following the appropriate procedure–at least, not without opening itself up to Section 14 penalties and interest. Instead, the carrier must come forward with affirmative proof of the alleged earnings.
If a carrier is going to suspend benefits, it ought to follow the law. Before benefits stop, the carrier must first get a district director’s determination. Failing to do so makes the carrier guilty of the same thing that that irked the carrier in the first place: a failure to abide by if Section 8(j) of the Longshore Act.
Forfeiture is a real thing. Used inappropriately, it can cause significant financial hardship on injured workers and their families. If your benefits were suspended due to an alleged “forfeiture,” contact a lawyer immediately.