RODERICK ELZIE, Employee/Appellant, v. UNIV. OF MINN., self-insured employer, administered by SEDGWICK CMS, Respondents.

The employee appeals from an award of penalties, asserting the compensation judge failed to follow the applicable statute and rules in assessing penalties for delayed payment of settlement proceeds.  As the compensation judge made no error of law and acted within his discretion, we affirm.

The facts in this case are not in dispute.  The employee settled his workers’ compensation claim brought against two separate employers, the University of Minnesota and Vogt Heating and Air Conditioning (Vogt).  Under the settlement, each employer agreed to pay a net amount of $67,000 to the employee, for a total of $134,000.  On December 5, 2023, a compensation judge issued the award on stipulation approving the terms of the settlement.  The payments to the employee were due by December 19, 2023, within 14 days of the award.  The payment from the university was received by the employee’s attorney on January 3, 2024.  The employee did not specify when he received the payment from Vogt.

The University of Minnesota, the employer, is self-insured for workers’ compensation, with claims administered by Sedgwick Claims Management Services (Sedgwick).  As a public institution disbursing public funds, the employer has a multi-level approval process when a payment exceeds a certain threshold level.  The employer’s $67,000 share of the settlement in this case exceeded that threshold level.

The employer’s process to approve payments exceeding the threshold amount was described as a “cash call.”  (Ex. C, at 9.)  The cash call process begins with a Sedgwick examiner contacting a designated person at the employer.  That person and the Sedgwick examiner each approves the payment.  After that step, the employer has another person review the proposed payment and provide final approval.  Upon final approval, Sedgwick awaits confirmation of receipt of funds from the employer.  After confirmation of available funds, Sedgwick issues the benefit check, which is sent by U.S. Mail to the address specified by the employee.

The Sedgwick examiner assigned with commencing the cash call process in this case received notice of the award on stipulation on December 5, 2023, and contacted the employer’s claim specialist on December 13, 2023.  The claim specialist approved payment on December 14, 2023.  The claim specialist did not realize that the deadline for a timely payment was in a few days, and did not notify his supervisor right away.  The claim specialist emailed his supervisor of the coming deadline at 5:45 p.m. on December 18, 2023.  The supervisor approved payment at about 10:00 a.m. on December 19, 2023.  The approval was transmitted back to the examiner at about 10:30 a.m. that same day.

Once the examiner received the cash call approval, the internal Sedgwick process required approval from the “financial concierge” that the funds had been received from the employer before a check would be issued.  The examiner contacted the financial concierge on December 19, 2023, but was informed that person was unavailable until December 21, 2023.  The examiner contacted others in that work group to obtain assurance the funds had been received and to get the benefit check issued, but was informed that there was no mechanism to issue the benefit check without the involvement of the financial concierge.

The financial concierge returned to work on December 21, 2023, and by 3:00 p.m., confirmed receipt of funds from the employer.  The benefit check was mailed the next day, December 22, 2023, addressed to the employee’s attorney as requested by the employee.  At the time the check was mailed, the payment was three days late.  The check was received by the employee’s attorney on January 3, 2024.  The funds were available to the employee on January 8, 2024.  The employee maintained that he was harmed by the delayed payment in that he lost the opportunity to rent an apartment at the beginning of January 2024.

The employee brought a claim petition seeking penalties under Minn. Stat. §§ 176.225, subds. 1(2) and 5, for delayed payment.  The matter came on for hearing before a compensation judge on March 19, 2025.  At the hearing, the parties did not dispute that the employer’s payment was three days late.  On April 8, 2025, the compensation judge issued a findings and order, granting the employee a $2,500 penalty under Minn. Stat. § 176.225, subd. 1(2) and denying any penalty under Minn. Stat. § 176.225, subd. 5.  The employee appeals.

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).  When the findings are supported by substantial evidence, the Workers’ Compensation Court of Appeals must defer to the compensation judge. Lagasse v. Horton, 982 N.W.2d 189, 202 (Minn. 2022).  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); see also Smith v. Carver Cnty., 931 N.W.2d 390, 79 W.C.D. 495 (Minn. 2019).

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); see also Busch v. Advanced Maint., 659 N.W.2d 772, 778-79 (Minn. 2003).

The employee raises the following issues on appeal: 1) that the Order does not conform with Chapter 176; 2) the compensation judge committed errors of law; 3) the Findings of Fact and Order are unsupported by substantial evidence in view of the entire records as submitted; 4) whether the compensation judge erred in awarding only $2,500 in penalties pursuant to Minn. Stat. § 176.225, subd. 1(2); and 5) whether the compensation judge erred in denying the Employee’s request for penalties pursuant to Minn. Stat. § 176.225, subd. 5.^[1]  As the compensation judge’s award of penalties is within the judge’s discretion, supported by the record, and not contrary to law, we affirm.

The employee appeals the compensation judge’s penalty award under Minn. Stat. § 176.225, subd. 1(2), arguing that the compensation judge abused his discretion in awarding only $2,500 in penalties against the employer.  The employee further argues that the compensation judge failed to follow Minn. R. 5220.2760, subp. 2.  By contrast, the employer maintains that the compensation judge did not abuse his discretion and further that the amount of the award is supported by substantial evidence in the record.

Minn. Stat. § 176.225, subd. 1, provides that a compensation judge “shall award compensation, in addition to the total amount of compensation award, of up to 30 percent of that total amount” when the employer has “unreasonably or vexatiously delayed payment.”  This statute gives the compensation judge the discretion to determine whether the delay in payment was unreasonable.  Here, the compensation judge determined that the delay in payment was unreasonable and that finding is not appealed.  Prior courts have recognized that the propriety of an award of penalties under the statute is a question of fact.  Zwieg v. Pope Douglas Solid Waste, 704 N.W.2d 752, 758 (Minn. 2005); see also Fishback v. Am. Steel & Indus. Supply, 77 W.C.D. 269, 282 (W.C.C.A. 2017).  Where the compensation judge’s determination on penalties is supported by substantial evidence, that determination is affirmed on appeal.  Carroll v. Allina Mercy Hosp., 74 W.C.D. 567 (W.C.C.A. 2014).

The employee contends that the compensation judge erred by awarding too little in penalties under Minn. Stat. § 176.225, subd. 1, because the three-day delay resulted in hardship to the employee, justifying a higher award of subdivision 1 penalties.

For subdivision 1 penalties, by authorizing “up to” 30 percent as the penalty amount, “the judge has some flexibility to keep the amount of the penalty commensurate with the harm done.”  Cassem v. Crenlo, Inc., 470 N.W.2d 102, 108, 44 W.C.D. 484, 496 (Minn. 1991).  In this instance, a three-day delay in mailing the employee’s benefit check resulted in a penalty of $2,500, or 3.7 percent of the late-paid award.  Minimally late payments have typically resulted in subdivision 1 penalties at the lower end of the available range.  See, e.g., Peulen v. Andersen Corp., No. WC09-120 (W.C.C.A. July 1, 2009) (one-day delay in attorney fee payment resulted in subdivision 1 penalty of $250.00); Myers v. Minn. Vikings Football Club, Inc., 69 W.C.D. 367 (W.C.C.A. 2009) (three-day delay resulted in subdivision 1 penalty of $250.00, in addition to subdivision 5 penalties).

The employee further contends that the compensation judge was required to award at least a six percent penalty pursuant to Minn. R. 5220.2760, subp. 2.A.  We disagree.  In implementing the penalty provisions of the statute, the Minnesota Department of Labor and Industry (DLI) adopted Minn. R. 5220.2760, which indicates that penalties “in an amount up to 30 percent of the total amount of compensation shall be assessed by the division”^[2] for delayed payments.   For a payment made one to five days late, the penalty would be assessed at six percent of the compensation owing under subpart 2.A.  The rule specifically states, “This part does not affect the employee’s independent right to seek penalties by filing a claim petition under Minnesota Statutes, section 176.271.”  Minn. R. 5220.2760, subp. 1.C. (emphasis added.)

The statute and the rule are clear.  Before a compensation judge, under Minn. Stat. § 176.225, subd. 1, a penalty of up to 30 percent of the total award is to be imposed where an employer or insurer unreasonably delays making payment.  Under Minn. R. 5220.2760, subp. 2.A., when the delay is unreasonable and lasts up to five days, the amount of the penalty “assessed by the division” shall be six percent.  This case, however, is not before the workers’ compensation division at DLI.  Further, the rule clarifies that subpart 1.C. “does not affect the employee’s independent right to seek penalties” under Minn. Stat. § 176.271.  Therefore, the six percent penalty set out in Minn. R. 5220.2760, subp. 2.A., does not mandate the calculation of such an award in this case.

We conclude that, under the facts of this case and considering the harm suffered by the employee, the compensation judge did not abuse his discretion in awarding a subdivision 1 penalty in the amount of $2,500.

The employee also appeals the determination by the compensation judge to deny any penalties under Minn. Stat. § 176.225, subd. 5.  The employee maintains that the statute and the accompanying rule, Minn. R. 5220.2790, mandate such an award.  By contrast, the employer asserted that the compensation judge properly followed the statute and that the rule is not applicable in this case.

Minn. Stat. § 176.225, subd. 5, reads, in pertinent part, “Where the employer is guilty of inexcusable delay in making payments, the payments which are found to be delayed shall be increased by 25 percent.”  The statute describes one example of inexcusable delay, where an employer conditions payment on the release of claims for other benefits, but there is no general definition in the statute of “inexcusable delay.”

DLI adopted Minn. R. 5220.2790 to implement the inexcusable delay provision of Minn. Stat. §§ 176.221 and 176.225.  Similar to the approach in the statute, no definition is provided, but two situations are “deemed” to constitute inexcusable delay.  Minn. R. 5220.2790, subp. 1.A., states, “When a claim has not been denied but payment is not made as provided by Minnesota Statutes, section 176.221, the failure is deemed inexcusable delay under Minnesota Statutes, section 176.225, subdivision 5.”  In this case, the employer denied the employee’s claim, initiating the litigation process which resulted in the settlement on December 5, 2023.  Subpart 1.B. deems as inexcusable delay a disability payment made more than three business days late on more than three occasions in a 12-month period.  In the undisputed facts of this case, the payment was not more than three days late and there were no other late payments in a 12-month period.  As neither items A nor B are met, Minn. R. 5220.2790 does not mandate the imposition of the penalty for inexcusably delayed payments.

A compensation judge’s determination of “unreasonable delay” does not necessarily demonstrate an inexcusable delay.  Shelton v. Indep. Sch. Dist. #625, 63 W.C.D. 650 (W.C.C.A. 2003).  Case law has considered late payments arising from workload and delays resulting from payment approval processes to be excusable delays and therefore do not trigger imposition of subdivision 5 penalties.  This court has affirmed a compensation judge’s denial of a penalty for an inexcusable delay where the “delay in issuing settlement checks was due to the insurer’s procedure in issuing checks as well as to the adjuster’s workload.”  Larson v. RR Donnelley, 74 W.C.D. 703, 710 (W.C.C.A. 2014) (citing Kriesel v. University of Minn., 72 W.C.D. 39 (W.C.C.A. 2012)). 

In this case, the compensation judge noted the claims adjuster’s workload, bank processing times, and key staffing absences as reasons for finding the late payment in this case to be excusable under the facts of this case.  As this determination is supported by substantial evidence and is consistent with case law, we affirm.