SHEILA R. PEULEN, Employee/Appellant, v. ANDERSEN CORP. and OLD REPUBLIC INS. CO./GALLAGHER BASSETT SERVS., INC., Employer-Insurer.
WORKERS’ COMPENSATION COURT OF APPEALS
JULY 1, 2009
PENALTIES. The compensation judge erred in denying penalties for late payment of attorney fees and costs pursuant to Minn. Stat. § 176.225, subd. 1, where the employer and insurer unreasonably delayed or neglected to pay attorney fees and costs within 14 days as ordered in the award on stipulation, and erred in denying the mandated 25% penalty under Minn. Stat. § 176.225, subd. 5, for inexcusable delay in making payments due under the award on stipulation to the employee and to her attorney.
Determined by: Johnson, C.J., Wilson, J., and Stofferahn, J.
Compensation Judge: Gary P. Mesna
Attorneys: Rick R. Larson, Woodbury, MN, for the Appellant. James S. Pikala and Christine L. Tuft, Arthur, Chapman, Kettering, Smetak & Pikala, Minneapolis, MN, for the Respondents.
THOMAS L. JOHNSON, Judge
The employee appeals the compensation judge’s denial of her claim for penalties under Minn. Stat. § 176.225, subds. 1 and 5. We reverse.
The facts in this case are undisputed. On October 16, 2006, Sheila R. Peulen, the employee, sustained a personal injury in the nature of an abdominal wall strain arising out of her employment with Andersen Corporation, then insured by Old Republic Insurance Company, administered by Gallagher Bassett Services, Inc. The employer and its insurer admitted liability for the employee’s injury and paid workers’ compensation benefits including wage loss benefits, medical benefits, and vocational rehabilitation benefits.
In September 2007, the employer and insurer served and filed a Petition to Discontinue Compensation under Minn. Stat. § 176.238. At the scheduled hearing, the parties reached a settlement. A stipulation for settlement was drafted and submitted to the Office of Administrative Hearings (OAH). The stipulation provided that the employer and insurer would pay to the employee the sum of $50,000.00 from which attorney fees of $6,883.48 would be withheld and paid directly to Rick R. Larson, the employee’s attorney. The parties waived the requirement for the filing of a statement of, or petition for, attorney fees, as well as the applicable period in which to object to attorney fees. An Award on Stipulation was served and filed on December 28, 2007, and ordered that
payment shall be made in accordance with the terms and provisions set forth in the Stipulation for Settlement, which terms and provisions are incorporated herein by reference, and, pursuant to the provisions of Minn. Stat. § 176.221, subd. 8, shall be made within 14 days of the filing of this Award.
The employer and insurer were further ordered to pay the sum of $43,116.52 directly to the employee and pay to Mr. Larson the sum of $6,883.48, plus costs of $215.00. (Ee Ex. 2.)
A check in the amount of $43,116.52 payable to the employee was issued by Gallagher Bassett Services, Inc., dated January 11, 2008. The envelope in which the check was mailed to the employee was postmarked January 12, 2008. Two checks were issued to Mr. Larson dated January 11, 2008, one for the withheld attorney fees of $6,883.43, and the second for costs of $215.00. The envelope in which the checks were mailed to Mr. Larson was postmarked January 12, 2008.
The employee then filed a claim petition seeking payment of penalties and interest for late payment of the settlement amount to the employee and of the attorney fees and costs to Mr. Larson. The employer and insurer objected to the claimed penalties, and the case was heard by a compensation judge at OAH. In a findings and order, the compensation judge awarded the employee a penalty under Minn. Stat. § 176.225, subd. 1, of 6% of the amount owed the employee under the terms of the stipulation for settlement. No party appealed this award. The compensation judge denied the employee’s claim for a penalty under Minn. Stat. § 176.225, subd. 5, and denied Mr. Larson’s claim under subdivisions 1 and 5 of the statute for late payment of attorney fees and costs. The compensation judge found:
7. Attorney Larson is not entitled to a penalty for the payments issued to him. There is no provision in the statute which specifically states when attorney fees must be paid or imposes a penalty for the late payment of attorney fees or costs.
8. A penalty for inexcusable delay, under Minn. Stat. § 176.225, Subd. 5, is not appropriate in this case. The claim had been denied and was later settled in the Stipulation for Settlement. Therefore, the penalty claim falls under paragraph B of Minn. Rule 5220.2790, Subp. 1. The payment was not more than 3 days late.
9. The penalty assessment of $2,586.99 is a sufficient penalty for the offense in this case, taking into consideration the amount involved, the seriousness of the offense, and the fact that the payment was only one day late. Additional penalties would be unjust.
The employee appeals the denial of the claimed penalties.
Pursuant to Minn. Stat. § 176.221, subd. 8, all payment of compensation shall be made with 14 days of the filing of the award. Payment was, accordingly, due by January 11, 2008. A payment is made by the mailing of properly addressed compensation check. Thronson v. Premier Aggregates, slip op. (W.C.C.A. Sept. 15, 2000). The envelopes in which the checks were mailed in this case were postmarked January 12, 2008.
1. Penalties on Attorney Fees
The compensation judge found the statute does not provide when attorney fees must be paid nor does the statute impose a penalty for late payment of attorney fees or costs. The employee appeals this finding and the compensation judge’s denial of a penalty for the late payment of the attorney fees and costs. The employee contends the compensation judge’s decision is contrary to established case law. The employer and insurer acknowledge there is case law supporting the imposition of a penalty for a delayed payment of attorney fees and costs. However, the respondents assert the determination as to whether such a penalty is appropriate in any given case should be left to the discretion of the compensation judge. We disagree.
In Meyers v. K Byte-Hibbing Mfg., 66 W.C.D. 148 (W.C.C.A. 2005)(summarily aff’d, Minn. May 1, 2006), this court applied Minn. Stat. § 176.225, subd. 1, to attorney fees and costs, concluding that a penalty was appropriate when the employer and insurer failed to make a timely payment of attorney fees and costs. In this case, the stipulation for settlement provided that attorney fees and costs were immediately payable and the parties waived the requirement under Minn. Stat. § 176.081, subd. 1(d), that a statement of attorney fees be served and filed. The award on stipulation ordered payment to Rick R. Larson, P.A., of attorney fees and costs as provided in the stipulation. Payment was to be made within 14 days of the date of filing of the award pursuant to Minn. Stat. § 176. 221, subd. 8. There is no dispute the payment was not timely made. Accordingly, the insurer unreasonably delayed or neglected to pay compensation due.
When an employer or insurer has unreasonably delayed payment or neglected to pay compensation, Minn. Stat. § 176.225, subd. 1, provides that the Workers’ Compensation Court of Appeals, upon appeal, shall order a penalty of up to 30% of the total amount of the compensation that was not timely paid. The statute is mandatory and affords no discretion as to the imposition of a penalty when the statutory grounds have been met. The court does have discretion, however, as to the amount of the penalty. The payment of attorney fees was only one day late, was not intentionally delayed, and there is no evidence of any particular hardship because of the delay. The employee is awarded a penalty of $250.00 under Minn. Stat. § 176.225, subd. 1, for the late payment of attorney fees.
2. Penalty Under Minn. Stat. § 176.225, Subd. 5
Minn. Stat. § 176.225, subd. 5, provides that “[w]here the employer is guilty of inexcusable delay in making payments, the payments which are found to be delayed shall be increased by 25%.” If a delay is inexcusable, Minn. Stat. § 176.225, subd. 5, mandates a 25% penalty. The statute gives no discretion to a compensation judge to award a greater or lesser penalty. Kjeldergaard v. Pueringer Distrib., Inc., 62 W.C.D. 505 (W.C.C.A. 2002) (summarily aff’d Minn. July 19, 2002). The payment to the employee and to her attorney were delayed and the respondents offered no excuse for the delay. The employer and insurer are ordered to pay to the employee and to her attorney a penalty of 25% of the benefits due to each.
 The compensation judge awarded a 6% penalty pursuant to Minn. R. 5220.2760, subp. 2. This rule governs penalties assessed by the Workers Compensation Division of the Department of Labor and Industry. The rule has no application to penalties awarded by a compensation judge at OAH or by this court under Minn. Stat. § 176.225.
 In 1995, Minn. Stat. § 176.225, subd. 1, was amended to provide that compensation “shall” be awarded in certain situations, rather than “may” be awarded. In penalty cases arising under the prior version of the statute, the compensation judge had discretion to award or to not award a penalty. See, e.g., Thomas v. Nelson Constr. Co., 50 W.C.D. 222 (W.C.C.A. 1993).