Be Aware of Reform Act Penalty Provisions

By Judge Audrey Headrick,
Did you know that workers’ compensation judges have statutory authority to issue penalties in two situations?
The first situation where workers’ compensation judges may issue penalties is pursuant to Tennessee Code Annotated section 50-6-118(d) (2015).  It states as follows:
If an employee receives a settlement, judgment or decree under this chapter that includes the payment of medical expenses and the employer or workers’ compensation carrier wrongfully fails to reimburse an employee for any medical expenses actually paid by the employee within sixty (60) days of the settlement, judgment or decree, or fails to provide reasonable and necessary medical expenses and treatment, including failure to reimburse for reasonable and necessary medical expenses, in bad faith after receiving reasonable notice of their obligation to provide the medical treatment, the employer or the workers’ compensation carrier shall be liable, in the discretion of the court, to pay the employee, in addition to the amount due for medical expenses paid, a sum not exceeding twenty-five percent (25%) of the expenses; provided, that it is made to appear to the court, that the refusal to pay the claim was not in good faith and that the failure to pay inflicted additional expense, loss or injury upon the employee.  (Emphasis added.)
As set forth above, the workers’ compensation judge is required to make two specific findings in order to assess a 25% penalty. The first finding is that an employer or carrier acted in bad faith.  As you might know, “bad faith” is not defined in the Workers’ Compensation Law, nor is it defined in pre-Reform Act case law. The second finding that a judge must make is that the employer’s or carrier’s failure to pay caused the employee to sustain an “additional expense, loss or injury.” Interestingly, the statute allows a judge to look at not only whether an employee suffered financially, but also whether an employee suffered physically due to the failure to pay.
The second situation where workers’ compensation judges may issue penalties is pursuant to Tennessee Code Annotated section 50-6-205(b)(3)(A) (2015) when “an employer, trust or pool or an employer’s insurer fails to pay, or untimely pays, temporary disability benefits within twenty (20) days after the employer has knowledge of any disability that would qualify for benefits under this chapter.” If the workers’ compensation judge assesses a penalty, it will be 25% of the late or unpaid temporary disability benefits owed to the employee.
In light of the findings that must be made for penalties assessed under Tennessee Code Annotated section 50-6-118(d) (2015), it is likely that the most common penalty assessed will fall under Tennessee Code Annotated section 50-6-205(b)(3)(A) (2015).
Please note that the two statutes discussed above are specifically assessed by a workers’ compensation judge, as opposed to other types of penalties that are assessed by the Bureau’s Penalty Program for violations under the Tennessee Workers’ Compensation Act. There are also penalties assessed by the Uninsured Employers Fund and the Employee Misclassification Education and Enforcement Fund.
Regardless of whether you are an employer, an adjuster, an employee, or an attorney, please keep these penalties in mind as you move forward in current and future workers’ compensation cases.

2 thoughts on “Be Aware of Reform Act Penalty Provisions

  1. Kenneth Switzer says:

    Thank you for your comment. If you are self-represented you may contact the Bureau's ombudsmen at 1-800-332-2667. The Bureau and Court staff strives to be helpful whenever possible, but we are unable to provide legal advice.


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