Townsend v. M-R Products, Inc , 436 Mich. 496 ( 1990 )

Levin, J.

Section 801(2) of the Workers’ Disability Compensation Act¹ provides that if weekly compensation benefits or accrued weekly benefits are not paid within thirty days after becoming due and payable, $50 per day shall be paid to the worker for each day over thirty days the benefits are not paid, and that "[n]ot more than $1,500.00 in total may be added pursuant to this subsection.”

We hold that no more than $1,500 may be added for all the weeks involved.

i

Townsend injured her back while working at M-R Products, Inc. She filed for workers’ compensation benefits and obtained an open award of $61 per week. M-R Products, apparently neither insured for compensation nor properly qualified as a self-insurer, failed to pay benefits to Townsend from the fall of 1983 through the middle of 1985.²

Townsend filed penalty petitions pursuant to §801(2) for the delinquent payments. Fifteen of the petitions³ were deemed to have been properly filed, and $22,500 in penalties, $1,500 for each petition, was awarded against M-R Products. The wcab reduced the award to $1,500.⁴ The Court of

Appeals reinstated the $22,500 award. 173 Mich App 15, 16; 433 NW2d 374 (1988).

ii

In DeKind v Gale Mfg Co, 125 Mich App 598, 606; 337 NW2d 252 (1983), the Court of Appeals held that a worker may obtain an award of $1,500 for each period for which compensation benefits were not paid and for which the worker filed a petition under § 801(2).⁵

The dissent concludes that a worker may obtain $1,500 for each week that benefits are delinquent or unpaid, and specifically declines to rule on "DeKind’s petition-filing requirement.”⁶

The dissent construes the last sentence of §801(2) providing that not more than $1,500 in total may be added, in isolation from the rest of that subsection.

Section 801(2) provides:

If weekly compensation beneSts or accrued weekly beneñts are not paid within 30 days after becoming due and payable, in cases where there is not an ongoing dispute, $50.00 per day shall be added and paid to the worker for each day over 30 days in which the benefits are not paid. Not more than $1,500.00 in total may be added pursuant to this subsection. [MCL 418.801(2); MSA 17.237(801)(2). Emphasis added.][⁷]

The subsection refers to both "weekly compensation benefits” and "accrued weekly benefits.” When "weekly compensation benefits” remain unpaid they are moved out of the category of "weekly compensation benefits” into "accrued weekly benefits.” Weekly compensation and accrued weekly benefits are subcategories of "benefits.” Thus, $50 per day is required to be added for each day "in which the benefits are not paid” whether unpaid for weekly compensation or accrued weekly benefits or both.

The last sentence of §801(2), providing that "[n]ot more than $1,500.00 in total may be added pursuant to this subsection,” includes both unpaid weekly compensation benefits and unpaid accrued weekly benefits.^{7 8} Construed in the context of the entire subsection in which it is embedded, the last sentence of § 801(2) provides a maximum $1,500 penalty that may be levied against an employer or insurer for delinquent or unpaid compensation benefits owing to a worker.

hi

Under the dissent’s reading of §801(2), if payment of benefits were delayed for a year, a worker would be entitled to an award of $1,500 per week, $78,000 annually, in addition to the benefits and statutory interest.

The dissent would adopt the DeKind rationale that a single $1,500 penalty would not deter employers or insurers from delaying payment of benefits. The dissent further states that "[t]o believe that a maximum penalty of $1,500 would deter the majority of employers from failing to pay compensation benefits is naive, to say the least.”⁹

DeKind also argues, and the dissent similarly contends, that there is an investment potential awaiting the employer or insurer who would deliberately withhold payment of benefits. The argument is that if an employer were to withhold benefits for a number of years it could invest the benefits and earn "much more than $1,500 from investments . . . .”¹⁰

The argument ignores that ten percent interest is payable pursuant to § 801(6)¹¹ from the date each payment is due on all late payments. In the instant case, Townsend’s benefits, at $61 per week, provide compensation of $3,172 a year. If M-R Products invested $3,172, one year of benefits, at twelve percent interest, then, having in mind that ten percent interest must be paid pursuant to § 801(6), it would be over twenty years before M-R Products netted $1,500.¹²

iv

When the $1,500 penalty provision was added in 1977, the workers’ compensation act did not provide for the payment of interest. In 1960, however, this Court had held that interest at the legal rate of five percent per annum was payable on a judgment entered by the circuit court on a workers’ compensation award.¹³ Since that decision, interest was required to be paid by employers and insurers at five percent per annum on workers’ compensation awards without regard to whether a judgment had been sought from or entered by a circuit court.¹⁴

In 1981, the Legislature amended §801(5) to provide: "When weekly compensation is paid pursuant to an award of a hearing referee, the board, or a court, interest on the compensation shall be paid at the rate of 12% per annum from the date each payment was due, until paid.”¹⁵_

The interest rate was increased from five percent to twelve percent because the Legislature decided, in light of then current market interest rates, that interest of five percent encouraged employers and insurers to delay paying workers’ compensation benefits. There would, however, have been no cause for such legislative concern if the $50/$l,500 limitations truly meant that $78,000 a year was required to be paid for late payment, and, thus, no need to increase the interest rate from five percent to twelve percent to forestall delay in payment of benefits. Clearly, the Legislature did not understand that it "intended” that $78,000 a year was to be paid for late payment.

We hold that no more than $1,500 may be added for all the weeks involved.

Riley, C.J., and Brickley and Griffin, JJ., concurred with Levin, J.

1 MCL 418.801(2); MSA 17.237(801X2).

2 M-R Products was apparently experiencing financial difficulties. M-R Products also apparently failed to pay benefits during the latter part of 1982. A penalty petition was filed pursuant to § 801(2) in December, 1982, and a $1,500 penalty was awarded in April, 1983. This $1,500 penalty appears to have been incorporated in a circuit court judgment for $19,457.91 entered against M-R Products in June, 1984, which was paid.

3 Of the fifteen properly filed petitions, one was for one week. The others covered time periods ranging from two weeks to six months.

Although at least fifteen petitions were filed, M-R Products had received only two petitions before the first day of the hearing. The hearing was adjourned to provide M-R Products with copies of the other petitions and time to respond.

4 The wcab, citing DeKind v Gale Mfg Co, 125 Mich App 598; 337 NW2d 252 (1983), found that Townsend had failed to file separate petitions for each period of delinquency. See text accompanying n 5.

5 ln DeKind, supra, p 606, the employer, a bankrupt self-insurer, failed during a period of about five years to make regular benefit payments to the worker. The worker filed a single penalty petition. The wcab, affirming the decision of the referee, awarded a $1,500 penalty. The Court of Appeals affirmed.

The Court, responding to the worker’s argument that §801(2) provides a $1,500 penalty for each delinquent payment, held that the penalty provision applies to each period in which benefits are not paid and for which the worker has "filed a petition for a hearing on the nonpayment.” Id.

6 Post, p 512.

7 Before the enactment of 1985 PA 103, this subsection encompassed not only weekly benefits or accrued weekly benefits, but also "medical bills, or travel allowance.” Before the 1985 amendment, delinquent or unpaid compensation benefits, medical bills, or travel allowances all triggered the penalty provision with a $1,500 limitation. The 1985 amendment eliminated the words "medical bills, or travel” from § 801(2), and added § 801(3) which provides for an additional $1,500 for nonpayment of medical bills or travel allowance:

If medical bills or travel allowance are not paid within 30 days after the carrier has received notice of nonpayment by certified mail, in cases where there is no ongoing dispute, $50.00 or the amount of the bill due, whichever is less, shall be added and paid to the worker for each day over 30 days in which the medical bills or travel allowance are not paid. Not more than $1,500.00 in total may be added pursuant to this subsection.

8 Section 801(2), as originally enacted by 1977 PA 302, provided that "[i]f weekly compensation beneñts, accrued weekly benefíts, medical bills, or travel allowance are not paid within 30 days after becoming due and payable in cases where there is an ongoing dispute, $50.00 per day shall be added and paid to the worker for each day over 30 days in which the compensation, medical bills, or travel allowance are not paid.” 1981 PA 195 changed "compensation” to "benefits.” (Emphasis added.)

Rather than repeat the phrases "weekly compensation benefits,” and "accrued weekly benefits,” the drafters used the shorter "compensation”/“benefits” to encompass both.

9 Post, p 510.

10 DeKind, supra, p 605.

11 See n 15 and the accompanying text.

12 It appears that the maximum benefit payable under the workers’ compensation act is currently $427 per week, $22,204 per year. If that sum were invested at the two percent interest differential, it would take over three years to net $1,500.

13 This Court held that the circuit court was authorized to allow the legal rate of interest (five percent) when it enters a judgment on a compensation award pursuant to part 3, § 13 of the act (MCL 413.13; MSA 17.187, subsequently reenacted as § 863 of the present act, MCL 418.863; MSA 17.237[863]). Wilson v Doehler-Jarvis Div of Nat’l Lead Co, 358 Mich 510; 100 NW2d 226 (1960).

14 See Drake v Norge Div, Borg-Warner Corp, 367 Mich 464; 116 NW2d 842 (1962); Solakis v Roberts, 395 Mich 13, 22; 233 NW2d 1 (1975).

15 1981 PA 194, MCL 418.801(5); MSA 17.237(801X5). Subsequently, the interest rate was reduced to ten percent, and the quoted language became subsection (6) of § 801.1985 PA 103.