Detailed Answer
Under Pennsylvania law, if you receive workers’ compensation benefits and later recover damages in a third-party personal injury claim, your employer (or its insurer) can file a lien against your recovery. This lien ensures the employer is reimbursed for benefits it paid on your behalf. Understanding how the lien applies helps you estimate your final recovery amount.
What Is a Workers’ Compensation Lien?
A workers’ compensation lien is a legal claim by your employer or its insurer to recoup benefits (medical and wage-loss) it paid after you obtain a settlement or judgment from a third party. The lien attaches to the “net recovery” you receive, meaning the amount left after attorneys’ fees and litigation costs are deducted.
Statutory Basis
Pennsylvania’s Workers’ Compensation Act, 77 P.S. § 999, authorizes the lien. Section 440(a) grants an employer/insurer a lien on third-party recoveries. Section 440(d) limits the lien to 50% of your net recovery after attorneys’ fees and costs.
Calculating the Impact
To illustrate, assume:
- You settle your third-party claim for $120,000.
- Your attorney’s fee is 33% ($39,600), plus $2,400 in costs. Net recovery = $120,000 – $42,000 = $78,000.
- Your employer paid $30,000 in compensation benefits.
- The lien is capped at 50% of net recovery = 0.5 × $78,000 = $39,000, but your actual lien equals the $30,000 paid.
After repaying the $30,000 lien, you receive $48,000 of the net recovery.
Common Scenarios
- If the employer paid more than 50% of the net recovery, you repay only 50% of that net recovery.
- If you settle early, confirm whether the lien covers future expected benefits.
- If your attorney negotiates a structured settlement, the lien may apply to each installment.
Helpful Hints
- Document all compensation benefits paid, including medical expenses and wage-loss.
- Ask your attorney to calculate net recovery before finalizing any settlement.
- Review lien demands promptly; section 440(d) caps the lien at 50% of net recovery.
- Negotiate with the employer’s insurer to reduce or waive portions of the lien when appropriate.
- Consult a personal injury attorney familiar with Pennsylvania workers’ compensation liens.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance on your specific situation.