Longshore Act: Is Application of the Section 14(f) Penalty Mandatory When Equitable Considerations Warrant Otherwise?

Longshore Act: Is Application of the Section 14(f) Penalty Mandatory When Equitable Considerations Warrant Otherwise?

By Monica F. Markovich and Jonathan A. Tweedy, Brown Sims, P.C., Houston, Texas and New Orleans, Louisiana

The Longshore and Harbor Workers’ Compensation Act (the “Act”) encourages the prompt payment of compensation benefits (33 U.S.C.S. § 901 et seq.). Where the compensation benefits have been ordered (generally as the result of either a settlement or the adjudication of the claim through the Office of Administrative Law Judges), Section 14(f) of the Act provides that compensation must be paid within 10 days after it is due or the payor must provide an additional amount equal to 20% of any unpaid installments of compensation. 33 U.S.C.S. § 914(f).

Historically, this penalty provision has been stringently enforced, with courts refusing to allow equitable considerations to toll the assessment of the penalty. See Lauzon v. Strachan Shipping Co., 782 F.2d 1217, 1222, 18 BRBS 60 (CRT) (5th Cir. 1985) (holding that the Section 14(f) penalty is self-executing and requires no consideration of equitable exceptions for late payments); see also Hanson v. Marine Terminals Corp., 307 F.3d 1139, 1141-1143, 36 BRBS 63(CRT) (9th Cir. 2002) (Employer is liable for a Section 14(f) assessment even if it sent a payment timely but to an incorrect address, even if the address was supplied by the claimant); Burgo v. General Dynamics Corp., 122 F.3d 140, 142, 31 BRBS 97(CRT) (2d Cir. 1997), cert. denied, 523 U.S. 1136, 140 L. Ed. 2d 1089, 118 S. Ct. 1839 (1998) (14(f) penalty imposed even though the court was “sympathetic to the equitable complaints of good faith by an employer”); Durham v. Embassy Dairy, 19 BRBS 105 (1986) (carrier’s copy of decision sent to incorrect address); Zea v. West State, Inc., 61 F. Supp. 2d 1144, 1148-1149 (D. Ore. 1999) (14(f) penalty assessed when the administrative law judge’s award approving a settlement was served on claimant at an incorrect address and employer mailed the check to this erroneous address on file with the judge’s office). While the courts found that strict application of Section 14(f) often led to “unfair and impractical results” by forcing payment of additional benefits without any consideration of fault, the courts noted that such results were left for Congress to address. Sea-Land Service v. Barry, 41 F.3d 903, 909, 29 BRBS 1(CRT) (3d Cir. 1994).

Yet some courts have considered whether to assess such a harsh provision when circumstances beyond an employer and its insurance carrier’s control contribute to a delay in payment. An example would be when the court fails to bring finality to a decision by not specifying what benefits are due and when such benefits are effective. Severin v. Exxon Corp., 910 F.2d 286, 289, 24 BRBS 21(CRT) (5th Cir. 1990) (an order must “at a minimum specify the amount of compensation due or provide a means of calculating the correct amount without resort to extra-record facts which are potentially subject to genuine dispute between the parties.”). Other courts have recognized the “relation back” doctrine: while receipt of a check (and not delivery of cash) constitutes payment under 14(f) precedent, the application of the “relation back” doctrine prevents a claimant from delaying execution of the check in order to receive additional monetary sums. Barry, 41 F.3d at 909. The same would hold true if a claimant’s bank improperly failed to honor the check in a timely manner. Thus, as long as the check is properly delivered, the “relation back” doctrine would absolve liability from a carrier based on the later actions of another party or claimant.

The parties may agree to waive the application of Section 14(f) in settlement agreements where payment cannot be timely made because of the actions of a claimant. See D.G. [Graham] v. Cascade General, Inc., 42 BRBS 77 (2008) (Benefits Review Board held claimant could agree in a Section 8(i) settlement to waive Section 14(f) if he failed to provide a valid street address).

In the recent decision of Knox v. Mantech International Corporation, Civil No. 11-CV-4974 (D. N.J. Jan. 24, 2012), a U.S. District Court considered due process with respect to the assessment of a penalty where no party was at fault. In Knox, the employer and its insurance carrier untimely paid benefits due to inclement weather that precluded offices from opening and would have endangered employees had they ventured into the office to effectuate payment of an award. While noting the stringent force of 14(f), the court dismissed the notion that it was left to Congress to amend 14(f)’s impractical assessments. Rather, the court analyzed 14(f) in the eyes of due process. The court found the application of a large penalty because employees of the insurance carrier did not imperil themselves to get to an office in inclement weather to mail a check was “arbitrary and unreasonable and not proportionate to the actual damages sustained.” Id. at 6, citing Exxon Shipping Co. v. Baker, 554 U.S. 471, 501, 171 L. Ed. 2d 270, 128 S. Ct. 2605 (2008). The court held that due process did not allow for the assessment of 14(f) in such a situation.

The Knox decision may provide a path for the courts to follow when reconsidering their previous stance on the inequity of the application of Section 14(f). The court in Knox focused on the sheer unfairness present within the application of Section 14(f). This was not an odd stance; the courts in the cases discussed above cited such inequity. The courts also seemed to reserve comment on certain actions warranting the application of Section 14(f) that would be tantamount to allowing liability based on factors completely out of the employer or carrier’s control. “Due process,” the thought of fairness to all parties in the court of law, may not allow such application or assessment of a penalty if an employer and a carrier make good faith attempts to timely pay benefits but are prevented due to actions and circumstances beyond any realm of control. Due process requires an analysis of such considerations to ensure public policy is not offended by allowing one party to gain an advantage by exercising their express control over such an advantage. Courts were previously unwilling to consider equitable considerations in the 14(f) application, especially when provision of the compensation benefits was under the control of the employer and its insurance carrier or the alleged inequitable circumstances could have been rectified by employer or carrier. Yet these decisions leave open the possibility for a circumstance where a due process analysis would be warranted. Could Knox’s due process analysis finally provide a path for applying equitable considerations to the application of 14(f)? The Knox decision confirms the due process concept that a penalty should not occur without some form of fault.

© Copyright 2013 Brown Sims P.C. All rights reserved. Reprinted by permission. This article appeared in the January 2013 issue of the Benefits Review Board Service—Longshore Reporter (LexisNexis).