With the divorce rate for U.S. marriages hovering at almost 50 percent, courts and legislatures are called upon to weigh two conflicting rules related to workers’ compensation benefits when it comes to the appropriate division of marital property. One the one hand, the personal nature of the benefits generally results in their being nonassignable under the typical act and generally beyond the reach of creditors. On the other hand, an important rationale for the workers’ compensation bargain in the first place was the protection of some modest level of income flow for those dependent upon the employee for their health, education and welfare. Why should the divorcing employee be freed from that obligation? As discussed in the state survey chart below, the strong recent trend among jurisdictions is to characterize the spouse and dependent children as something other than mere “creditors” and, therefore, to allow workers’ compensation benefits to be reached, at least in some instances, for the benefit of persons, such as spouses, children, or even former spouses, to whom the injured employee has an obligation to support [see Larson’s Workers’ Compensation Law, § 89.08]. A recent Washington case, In re Marriage of Persinger, 2015 Wash. App. LEXIS 1382 (June 30, 2015), bucks the trend, however, finding a couple’s 50–50 split of the husband’s pending, yet unliquidated, workers’ compensation claim void.
The Persingers married in 1991and dissolved their marriage in 2013, with Holly Persinger assuming her maiden name (Tatum). In their pro se dissolution action, Persinger and Tatum submitted an agreed proposed division of assets and liabilities that in relevant part indicated the parties would each receive “50% of L&I settlement and or pension.” At the time of the marriage dissolution, Persinger had a workers’ compensation claim pending before the state’s Department of Labor and Industries (“L&I”). The dissolution court entered a decree of dissolution, accepting the couple’s division of property.
After the marriage dissolution, the Board of Industrial Insurance Appeals determined that Persinger was permanently totally disabled and entitled to disability compensation. Seeking counsel as to the effect of the dissolution action’s settlement agreement, Persinger then moved to vacate the dissolution decree, arguing that the agreement’s award to Tatum of L&I benefits was void. The dissolution court not only denied Persinger’s motion; it found him in contempt for failing to abide by the dissolution decree. Persinger appealed.
Assignment Void Under Washington State Statute
The appellate court indicated the issue was governed by the wording of Wash. Rev. Code § 51.32.040(1), which states:
No money paid or payable under this title shall, before the issuance and delivery of the payment, be assigned, charged, or taken in execution, attached, garnished, or pass or be paid to any other person by operation of law, any form of voluntary assignment, or power of attorney.
Moreover, the court said the question of whether the statute prohibited assignments in dissolution proceedings had been asked, and answered, in In re Marriage of Dugan-Gaunt, 82 Wn. App. 16, 915 P.2d 541 (1996). In Dugan-Gaunt, the parties’ dissolution decree awarded the wife 40 percent of any future workers compensation settlement. A state appellate court held that the husband’s workers’ compensation benefits were not before the dissolution court and the decree, therefore, could not be used to overcome the clear statutory language prohibiting the transfer of workers’ compensation benefits.
Persinger’s workers’ compensation claim was pending; neither he nor Tatum had any ownership interest in the benefits to grant the dissolution court the authority to assign the benefits (citing Larson). Moreover, the court indicated that any court order awarding a portion of compensation benefits to another party, whether directly or indirectly, violated the mandate of RCW 51.32.040(1). The court concluded that based on both the plain language of RCW 51.32.040 and relevant case law, Tatum did not have a right to receive a portion of Persinger’s L&I benefits because it was a statutory entitlement personal to him. Accordingly, that portion of the parties’ property distribution was void and it was an abuse of discretion for the trial court to deny Persinger’s motion to vacate.
Dissolution Court May Consider Comp Benefits in Making Property Division
The appellate court added that while an assignment of compensation benefits was void under RCW 51.32.040(1), the statute did not expressly limit a court’s ability to take into account such benefits in making a just and equitable property division. This left open the door that the dissolution court could modify the dissolution decree; that issue was not before the appellate court.
Trend Toward Allowing Compensation in Some Domestic Relations Situations
As indicated above, there is a “decided trend toward allowing compensation to be reached for the benefit of persons, such as spouse, children, or even former spouses, that the employee has in any event an obligation to support” [Larson, § 89.08] Here’s a non-inclusive list of statutes and/or decisions that allow workers’ compensation benefits to be reached in at least some instances for child support or spousal support obligations:
- Arkansas: Goode v. Goode, 286 Ark. 463, 692 S.W.2d 757 (1985)
- California: Cal. Lab. Code § 4903 (where the employee has deserted or is neglecting his or her family); As to classification of workers’ compensation benefits for community property purposes, see Raphael v. Bloomfield, 113 Cal. App. 4th 617, 624 6 Cal. Rptr. 3d 583, 588 (2003). “[W]e hold that only that portion of a workers’ compensation permanent disability award received before a marital separation that is intended to compensate for the injured spouse’s reduced earnings during the marriage (before separation), or for injury-related expenses paid with community funds, constitutes community property. The remainder of any such award is the separate property of the injured spouse.”
- Colorado: Colo. Rev. Stat. § 8–42–123(6)
- Florida: Department of Revenue v. Springer, 800 So. 2d 700 (Fla. 5th DCA 2001)
- Idaho: Cook v. Cook, 102 Idaho 651, 637 P.2d 799
- Illinois: Illinois Dep’t of Healthcare and Family Servs. ex rel. Black v. Bartholomew, 397 Ill. App. 3d 363, 920 N.E.2d 542, 336 Ill. Dec. 333 (2009)
- Kentucky: Day v. Day, 302 S.W.3d 86 (Ky. Ct. App. 2009)
- Maryland: Queen v. Queen, 308 Md. 574, 521 A.2d 320 (1987)
- Montana: Mont. Code Ann. § 39–71–743
- New Hampshire: N.H. Rev. Stat. Ann. § 281-A:52
- New York: Siciliano v. State of N.Y., 294 A.D.2d 238, 742 N.Y.S.2d 282 (2002)
- Michigan: Smith v. Smith, 113 Mich. App. 148, 317 N.W.2d 324 (1982)
- North Dakota: N.D. Cent. Code § 65–05–29
- Oregon: Or. Rev. Stat. § 656.234 (up to one-fourth of the employee’s benefits)
- South Dakota: S.D. Codified Laws § 62–4–42 allows workers’ compensation benefits to be subject to claims for child and spousal obligations.
- West Virginia: Fitzgerald v. Fitzgerald, 219 W. Va. 774, 639 S.E.2d 866 (2006) .
- Wyoming: Wyo. Stat. § 27–14–703 allows benefits to be subject to any obligations for child support.
Should the Washington State legislature desire to go along with the current trend, it should amend Wash. Rev. Code § 51.32.040(1) appropriately.