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Sep 13, 2019

Michigan Commission May Not Establish Overpayment Rules Re: Workers’ Comp Benefits on its Own

Where the Michigan Legislature had promulgated one right of reimbursement for overpayment of workers’ compensation benefits—allowing recovery of the overpayment made within one year of the recoupment action under MCL 418.354(9)—and the state’s Compensation Appellate Commission followed a different path—allowing recoupment only where the employer could show fraud on the part of the injured employee—the legislative edict controlled, held a Michigan appellate court in Fisher v. Kalamazoo Reg’l Psychiatric Hosp., 2019 Mich. App. LEXIS 5341 (Sept. 10, 2019). Accordingly, the Court reversed a denial of an employer’s petition for reimbursement where it overpaid benefits for approximately three months following an injury, but had alleged no fraud on the part of the employee.

Background

Fisher sustained a workplace injury and her employer voluntarily paid her workers’ compensation disability benefits for approximately three months. Subsequently, the employer contended that it paid the benefits at an incorrect rate, resulting in an overpayment to Fisher. It sought reimbursement and the magistrate held a hearing on the issue of reimbursement.

Commission’s Findings: No Fraud

The magistrate denied the employer’s petition, observing that the Commission had previously held in several administrative cases that when an employer or carrier voluntarily but mistakenly overpaid a claimant, it could not recoup the overpayment without proving that the overpayment resulted from the employee’s fraudulent act. Since there was no question of fraud in the instant case, the magistrate ruled, and the Commission affirmed, that the employer was not due any reimbursement.

Appellate Court’s Analysis

The Court noted that there were instances in which an employee was overpaid workers’ compensation benefits, that the situation could cause several types of unfairness, that the question of how best to minimize the resulting unfairness was a policy question. The Michigan Legislature had determined, via MCL 418.354(9) that the best way would be to limit the reimbursement to the amount overpaid within the year prior to the recoupment action.

The Commission, on the other hand, in Whirley v. JC Penney Co, Inc., 1997 ACO #247, had further qualified the right of reimbursement by strictly limiting it to cases where the employee engaged in fraud to obtain the overpayment. Examining Whirley, the Court noted that the Commission made its pronouncement without further explanation or citation to authority, and subsequent decisions of the Commission had simply relied on Whirley as support.

Commission Exceeded its Authority

The Court concluded that in crafting and applying this employee-fraud requirement, the Commission had exceeded its statutory authority. Neither the Workers’ Compensation Act nor any promulgated rule entrusted the Commission with crafting an employee-fraud requirement to a recoupment action. Whether the requirement might be sound policy was neither for the Commission nor the Court to decide; that decision was with the Legislature. In as much as there was no authority for the Commission’s decision in the case, it was reversed.