CLAUDE BRUTON, Employee/Appellant, v. SMITHFIELD FOODS, INC., and SAFETY NAT’L CAS. CORPS., admin’d by ESIS, INC., Employer-Insurer/Respondents.

MAY 21, 2018

No. WC17-6113

CREDITS & OFFSETS. Where there is no evidence that the payor of an employee’s short-term disability benefits is the same entity as the employer, and where the payor did not intervene in the action, we reverse the compensation judge’s determination that the employer and insurer are entitled to offset the owed temporary total disability benefits by the short-term disability benefits paid to the employee. Had the employer shown it was the same entity and was not required to intervene, there is still no right to an offset since there is no right to reimbursement in the short-term disability policy, and the compensation judge erred in applying equitable principles to allow an offset.

    Determined by:
  1. Sean M. Quinn, Judge
  2. Patricia J. Milun, Chief Judge
  3. Gary M. Hall, Judge

Compensation Judge: Grant R. Hartman

Attorneys: Christopher E. Sandquist, Sandquist Law Office, LLC, Mankato, Minnesota, for the Appellant. Andrew M. Grimsrud, Aafedt, Forde, Gray, Monson & Hager, P.A., Minneapolis, Minnesota, for the Respondents.




The employee appeals the compensation judge’s finding the employer and insurer are entitled to an offset of short-term disability payments against the temporary total disability benefits owed from August 26, 2016, through March 26, 2017. We reverse.


On August 25, 2016, employee Claude Bruton, Jr. fell and dislocated his right shoulder and sustained facial lacerations while working for employer Smithfield Foods, Inc. (hereinafter Smithfield). Smithfield carries a workers’ compensation policy through Safety National Casualty Corporations that is administered by ESIS, Inc. The policy requires Smithfield to fund a two million dollar deductible for each workers’ compensation claim. Despite the high deductible, Smithfield is not self-insured.[1]

On September 12, 2016, ESIS, Inc., denied primary liability for the employee’s injury. Thereafter, the employee filed a claim petition seeking temporary total disability benefits, medical expenses, and rehabilitation benefits. Maintaining a primary denial of liability, Smithfield authorized payment to the employee through John Morrell Food Group Non-Union Hourly Employees Short-Term Disability Policy (hereinafter JMFG) of short-term disability (hereinafter STD) wage loss benefits.[2] The JMFG is funded and administered by Smithfield. The policy paid the employee 80 percent wage replacement. The STD payments are subject to income tax liability. Payments under the JMFG policy are not wage continuation payments under the Workers’ Compensation Act.[3] Beyond the STD benefits, the employee received sick leave and vacation pay from Smithfield.[4]

On April 7, 2017, the employer and insurer filed an amended notice of primary liability determination admitting liability for the employee’s work injury. The employer and insurer also admitted the employee was temporarily totally disabled as of August 26, 2016. It then paid temporary total disability (hereinafter TTD) benefits from March 27, 2017, through the date of the hearing on August 4, 2017. It did not pay TTD benefits for the time from August 26, 2016, through March 26, 2017.

On July 19, 2017, ESIS, Inc. paid the employee $636.52, which represented the difference in tax treatment between the STD benefits paid under the JMFG policy and the TTD benefits owed from August 26, 2016, through March 26, 2017, had such TTD benefits been paid.

As to the TTD benefits admittedly owed from August 26, 2016, through March 26, 2017, the employer and insurer asserted their right to an offset, reducing TTD by the STD payments and the sick and vacation benefits, already made to the employee during that time frame. The employer and insurer alleged Smithfield funded all STD, all sick and vacation pay, and all workers’ compensation disability (via its high deductible). It argued the employee received, combining the STD and TTD benefits, the sick and vacation payments, plus the “tax treatment” payment, all the benefits he would have been entitled to if he had received TTD from the beginning of his disability.

The employee objected to the offsets and the matter was set for hearing.

A hearing was held on August 4, 2017. No witnesses were called at the hearing and the matter was submitted to the compensation judge on stipulated facts with three exhibits: Exhibit A, a copy of the employer’s STD policy, that is the JMFG policy; Exhibit B, which shows the payments made to the employee from August 15, 2016, through May 4, 2017; and Exhibit C, which shows the calculation used to determine the total amount of benefits paid to the employee equaling the amount of TTD benefits the employee should have received if the employer and insurer had admitted liability at the time of the injury.

The issue at the hearing was read into the record by the compensation judge. Counsel for the employee and counsel for the employer and insurer provided opening statements and other verbal arguments. The compensation judge incorporated the parties’ stipulated facts as findings and found the employer and insurer were entitled to offset the TTD by the amount of the STD benefits paid to the employee under the JMFG policy, but were not entitled to offset the employee’s vacation or sick leave pay. The employee appeals the offset of STD benefits.


On appeal, the Workers’ Compensation Court of Appeals must determine whether “the findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.” Minn. Stat. §176.421, subd. 1(3). Substantial evidence supports the findings if, in the context of the entire record, “they are supported by evidence that a reasonable mind might accept as adequate.” Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, findings of fact should not be disturbed, even though the reviewing court might disagree with them, “unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of evidence or not reasonably supported by the evidence as a whole.” Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975).

A decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which the Workers’ Compensation Court of Appeals may consider de novo. Krovchuk v. Koch Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993), summarily aff’d (Minn. June 3, 1993).


The issue at hearing and on appeal is whether the employer and insurer are entitled to offset STD benefits against TTD benefits for the period of August 26, 2016, through March 26, 2017, under the Minnesota Workers’ Compensation Act. We reverse as we find as a matter of law there can be no offset under the facts of this case.

1.   Statutory Authority for an Offset

The only entities, by law, that may make workers’ compensation payments are: (1) a self-insured employer, (2) the State of Minnesota and its political subdivisions, (3) the Special Compensation Fund, and (4) a workers’ compensation insurer.[5] Here, the employer and insurer agree the employee is entitled to TTD payments. Under such circumstances, by law the employer’s workers’ compensation insurer[6] must make these payments. While there is a very high deductible, meaning the insurer might end up being paid back by the employer, the insurer still must make the payments. Importantly, JMFG is not any of these four types of entities. The payments made under the JMFG policy are not workers’ compensation payments.

The Workers’ Compensation Act provide two routes by which an employer and its insurer may seek to reduce an injured employee’s benefits by the amount of other benefits the employee received. An employer and its insurer may seek an offset from payment of full wages under a wage continuation program prescribed in Minn. Stat. § 176.221, subd. 9, or the employer and its insurer may seek an offset as a result of an asserted right of intervention under Minn. Stat. § 176.361.[7] If there is an intervention by another party, the employer and insurer do not technically get an offset, so much as the benefits are split between being paid partially to an employee and partially to the intervenor.

Under the first route, payment of wages under a wage continuation program allows an employer to pay full wages to an injured employee and later make payroll adjustments to determine the amount of compensation to be considered TTD benefits. Such was not the case here. Smithfield funded 80 percent of the employee’s wage under the JMFG policy. This is less compensation then prescribed by law.[8] The STD payments made under the JMFG policy, even though funded by Smithfield, are not wage continuation benefits under the Workers’ Compensation Act. We reject the employer and insurer’s implicit argument that because the employer and JMFG are “the same entity” that this somehow is “just like” wage continuation. It is not. Just as self-insured employers must follow the law and engage in the proper procedure to be recognized as a self-insured, wage continuation payments must follow proper legal procedures. This first route is therefore not available to the employer and insurer in order to use the STD benefits as an offset against owed TTD benefits.

The second route to an offset is set forth in the intervention statutes and rules of the Workers’ Compensation Act.[9] An entity becomes a party and takes the position of an intervenor when it files an appropriate motion to intervene in order to preserve its claim to reimbursement from benefits otherwise owed by the employer and insurer to the employee. Under those circumstances, the employer and insurer still pay the full amount of the workers’ compensation benefits owed, but it pays less to the employee and pays the balance back to the intervenor. In the end, the entire amount of workers’ compensation benefits are still paid.[10]

We agree with the employer and insurer’s argument that it is not necessary for an employer to intervene or to be named an intervenor when it is already a party to the action.[11] However, it is not clear from the record that Smithfield is the same entity as JMFG, which provided the STD benefits.

Under the stipulated facts, the JMFG policy is not an ERISA plan and the “funds used to pay the Plan’s benefits are funds owned by Smithfield and the Plan is administered by Smithfield human resource department employees.” Nowhere in the policy, however, is Smithfield mentioned. In paragraph six of the parties’ stipulated facts, the JMFG policy is referred to as the “Smithfield Short Term Disability Plan” and thereafter referred to as “the Plan.” There is no explanation in the stipulation as to whether JMFG and Smithfield are the same entity or an explanation as to what the relationship is between JMFG and Smithfield. There are no findings of fact and there are no stipulations on their relationship, contractual or otherwise. We note the parties seemingly argued the case as if Smithfield and JMFG were the same entity, and the compensation judge treated them as if they were the same entity. Likewise, the parties stipulated the funds contained in the JMFG policy are “owned by” Smithfield and “administered by” Smithfield. Yet, we cannot infer from the evidence in this case that JMFG and Smithfield are the same entity and therefore we cannot conclude that an intervention claim by JMFG was not necessary to assert a right to an offset. Without such an intervention, there can be no reduction of benefits otherwise owed to the employee.

Because neither of the two avenues potentially available for the employer and insurer to reduce the TTD payments owed to the employee, apply in this case, no offset is allowable under the law. The compensation judge did not provide a statutory analysis permitting the offset. Under the law, absent wage continuation or intervention, the employee is entitled to be paid the full amount of TTD benefits for his work-related injury. Consequently, we must reverse the compensation judge giving the employer and insurer such an offset.

2.   Contractual Right to Offset (or Reimbursement)

In addition, even if we were to find Smithfield and JMFG to be the same entity, and thus an “intervenor” seeking recoupment of its paid out STD benefits, our decision would remain the same.[12] JMFG did not asset a right to reimbursement as if it were an intervenor. In fact, it asserted no rights at all. Instead the employer and insurer asserted a right to an offset, that is, the right to pay less workers’ compensation benefits to the employee, rather than fulfilling its legal obligation of paying full benefits. Its legal liability, however, was to pay TTD benefits, with part going to the employee and part going back to JMFG. If one assumes Smithfield and JMFG are the same entity, this may seem like a difference without distinction, there are significant distinctions here.

In allowing the employer and insurer an offset, the compensation judge applied a public policy analysis, stating that public policy disfavors double recovery. Such an offset, however, must follow the requirements of the Workers’ Compensation Act.[13] The employer did not pay TTD benefits until March 27, 2017, unilaterally deciding the STD payments under the contract of the JMFG policy were the same as payment of TTD benefits. The compensation judge failed to address or analyze the contractual terms of the JMFG policy in his findings and order, and instead simply relied on public policy disfavoring double recoveries.

The JMFG policy language gives it no right to reimbursement. In fact, the policy specifically forbids payments when there is an entitlement to workers’ compensation benefits to the employee. Yet, it creates no right to reimbursement when, like here, there is a denial of workers’ compensation liability, payments of STD benefits, and a later admission of workers’ compensation liability resulting in STD payments that in retrospect should not have been paid. Thus, while the policy will seemingly allow STD benefits to end when there is a reversal of the position of the employer and insurer from a denial to an admission, it does not contain a “claw back” provision in its language. Without a right to reimbursement under the policy language, there is a serious question whether JMFG has the legal right to intervene or, more importantly, what such a right provides to JMFG. Whether a contract is ambiguous is a question of law and we construe ambiguous language against the drafter. Peterson v. Honeywell, Inc., slip op. (W.C.C.A. June 26, 1996). Here, the language gives JMFG no right to reimbursement, and we will not read one in here. As JMFG has no right of reimbursement, its right to intervene is devoid of a remedy, as there is no language allowing it to collect any overpaid STD benefits.

Further, when an employer and insurer make payments of workers’ compensation benefits there are various statutory implications including assessments owed to the Special Compensation Fund.[14] The record is unclear as to whether the employer and insurer are being assessed for the entire amount of TTD benefits owed, or whether they are being assessed just for the amounts paid after it changed from paying STD. Regardless, because the law mandates the assessment be paid on workers’ compensation benefits, we must also order there actually be workers’ compensation benefits paid, not simply an offset.

Finally, the STD benefits are taxable, while the TTD benefits are not. While the insurer here made a “tax treatment” payment to the employee, there is no evidence of the “tax treatment” payment putting the employee on equal footing.[15]


Because there is no evidence to support Smithfield and JMFG to be the same entity, and because JMFG did not intervene, we reverse the compensation judge’s determination that the employer and insurer are entitled to offset the owed TTD benefits by the STD benefits paid to the employee. Further, even if Smithfield and JMFG were the same entity thereby placing JMFG in the role of an intervenor, because the JMFG policy gives it no right to reimbursement, we conclude the compensation judge erred in applying equitable principles to allow an offset.

[1] See Minn. Stat. ch. 79A.

[2] $12,419.90 was paid as STD benefits from August 26, 2016, through March 26, 2017.

[3] See Minn. Stat. § 176.221, subd. 9.

[4] $2,030.48 was paid as sick and vacation leave.

[5] Minn. Stat. §§ 176.181, 176.183.

[6] The employer is not self-insured, not the state or a political subdivision, and not the Special Compensation Fund.

[7] The process to intervene is set out in Minn. R. 1415.1100 and 1415.1250.

[8] See Minn. Stat. § 176.221, subd. 9.

[9] Minn. Stat. § 176.361 and associated rules.

[10] If a potential intervenor fails to intervene, the employer and insurer does not get to reduce the amount of its workers’ compensation payments to the employee. In these circumstances, the employee in essence obtains a “double recovery.” The employer and insurer might argue this to be unfair. Of course, the contrary, where an employer and insurer pays less than what it owes under the law, would also be unfair. As the Workers’ Compensation Act is a creature of statute and not common law, these clashing equitable arguments become irrelevant.

[11] See Heise v. Honeywell, Inc./AXIA, Inc., 48 W.C.D. 523, 538-39 (W.C.C.A. 1993); see also Immerman v. Ind. Sch. Dist. No. 625, 51 W.C.D. 31 (W.C.C.A. 1994).

[12] For the purpose of the analysis in this portion of the decision, we will treat JMFG as a potential intervenor.

[13] Moreover, sometimes “double recoveries” happen. See footnote 10.

[14] Minn. Stat. § 176.129, subd. 2a.

[15] We are unable to discern from the record that the adjustments made in 2017 for compensation owed in 2016 provide the proper income tax treatment for the payment prescribed by law.