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California: Defendant Found Responsible for EDD Lien When Lien Not Resolved Prior to Approval of Compromise and Release

January 21, 2016 (3 min read)

In Borbeck v. ACE Building Maintenance, 2015 Cal. Wrk. Comp. P.D. LEXIS --, the WCAB affirmed the WCJ’s order requiring the defendant to pay EDD $33,921.68 in satisfaction of EDD’s lien for unemployment compensation paid to the applicant. The WCAB found that unemployment compensation payments made by EDD during the period 9/8/2012 through 8/29/2013 were duplicative of temporary disability payments the applicant received during that period. The WCAB further found that because the defendant settled the applicant’s case by way of a Compromise and Release Agreement without addressing EDD’s outstanding lien, the defendant expressly agreed, pursuant to Labor Code § 4904(e) [Labor Code § 4904(e)], to defer the lien for subsequent trial and to pay any amount of EDD’s lien found due. The WCAB explained that the defendant cannot settle around a known lien, pay out all settlement funds to which the lien might attach, and then request that the lien claimant take nothing, as such conduct deprives the lien claimant of its right to due process.

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In Borbeck, applicant received EDD benefits during a period that temporary disability benefits were also paid. In most cases, reimbursing EDD for payments made concurrently with the payment of temporary disability payments is the responsibility of the injured worker.

However, what made the EDD lien defendant’s responsibility in Borbeck was that defendant did not resolve EDD’s lien prior to the approval of the C&R. Instead, defendant deferred the EDD lien and proceeded to obtain approval of the C&R. This left EDD in the position that if it was to collect reimbursement for its lien, it would have to do so directly from the employee. Instead of leaving EDD in that position, the panel focused on what might be considered boilerplate language in the C&R that indicated “defendant to pay, adjust or litigate liens on file related to industrial medical care or disability with all defenses reserved”.

Borbeck may be a consequence of the increased numbers of cases that are being approved on a “walk-through” basis before the WCAB. The introduction of the Electronic Adjudication Management System (“EAMS”) and the reluctance of the parties of using that system for mailing in and/or filing their settlement documents may be a factor. Nevertheless, more and more parties have chosen to obtain the approval of settlements through the “walk-through” process.

Unfortunately, the “walk-though” process tends to be more informal and oftentimes the party walking through the settlement will not address all of the outstanding liens in a case. While in many cases, for example when there is a medical treatment lien left outstanding, there is usually very little risk to the parties by not having all of the liens addressed prior to approval of the C&R. However, Borbeck highlights the risk of leaving an EDD lien at issue. If it is an EDD lien, because of the language in Labor Code § 4904(e) [Labor Code § 4904(e)], and if the C&R includes boilerplate language that defendant will pay, adjust or litigate, that language will be interpreted as defendant accepting liability for whatever amount is subsequently determined as EDD’s lien

In conclusion, this case serves as a very important warning to defendants in workers’ compensation proceedings that by agreeing to have a C&R walked-through that has an EDD lien left unresolved, by including general, boilerplate language that defendant will pay, adjust or litigate any outstanding liens, defendant may have just assumed the responsibility of fully reimbursing EDD for what could be a rather substantial lien.  

Read the Borbeck noteworthy panel decision.

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