A Drafting Guide for 8(i) Settlements
A primary U.S. Department of Labor complaint in longshore cases is the inability of the parties to draft an 8(i) agreement which complies with applicable statutes and regulations. It is the author's experience that between thirty and forty percent of 8(i) applications are initially rejected by the United States Department of Labor. A notice of deficiency generally issues when a proposed 8(i) agreement lacks an essential ingredient or contains an unacceptable "add-on" provision. A deficiency notice can be avoided by reference to the 8(i) checklists, the sample 8(i) agreement and the drafting examples contained in the following article. The main statutes and regulations regarding the settlement of claims are provided herewith for handy reference. Use of these materials will result in better 8(i) agreements and swifter approval.
The following materials found in this article serve as drafting guides for preparing 8(i) agreements:
1. Section 8(i) of the Act;
A recent informal survey conducted at a Department of Labor District Office shows the following common missing ingredients resulting in a Notice of Deficiency. The list below is not meant to be all encompassing. Rather, it is a guide for what needs to be included and the legal authority for inclusion. Regulatory citations are placed first so that the draftsman will remember that the content of 8(i) agreements is governed by statute and regulation, not whim and caprice.
1. 702.242 (b) 1 - The parties need to list separate amounts for compensation and future medicals in the agreement. A combined lump-sum will not suffice.
2. 702.242 (b)(7) - The parties need an itemization of past medicals by year for the past three years if future medicals are to be closed. Any agreement attempting to close future medicals should contain an estimate of future medicals. The parties may request a waiver of a doctor's estimate by pointing to existing medicals showing that claimant has been released from care or that he only need return "pm". The application should note whether recent medical expenses have been minimal or non-existent in the event that future medicals are to be closed.
3. 702.242(b)(6) - A detailed explanation of adequacy is needed. The explanation must be stated in dollar amounts. The old "best interests of the claimant" is not enough. The explanation must be based on the particular facts of the case. The parties should cite disputed facts and why the 8(i) agreement.is adequate in terms of probable or possible outcomes. The explanation must be based on evidence in dispute, not speculation or fantasy. In a "waive and pay" combined 8(i)/third-party settlement, the net third-party recovery to claimant needs to be broken out so that there is a basis for determining adequacy. The stipulation on adequacy should not list every office visit and physical therapy session that claimant attended. The medical information relevant to the issue of adequacy is what is important. Therefore, items such as initial treatment, hospitalization, positive tests, surgery, the attainment of maximum medical improvement, impairment ratings, physical restrictions and long-term prognosis should be included.
4. 702.242(a) - The summary of compensation or average weekly wage in the stipulation should match the information in the Department of Labor's file. The U.S. Department of Labor will check the proposed 8(i) agreement against forms LS-208 in the administrative file. If there is a discrepancy, it will need to be reconciled. It is best to review this material before submitting the application, not later.
5. 702.242(b)1 and Section 28: Settlement agreements often provide a specific attorney's fee for claimant's counsel. An application may well be held up until a fully documented fee application is submitted.
6. 702.242(a) and 702.242(b)(5): The parties need to include an impairment, or ppd rating, and permanent physical restrictions, if any. These cannot generally be provided by a physician until claimant has reached maximum medical improvement (MMI).
7. 702.241 (b) - The 8(i) agreement needs to be submitted to the right place. If the case is at the District Office level, it can be submitted to the proper USDOL office. If the case is pending at the Office of Administrative Law Judge level, the 8(i) agreement can be submitted to the Administrative Law Judge, or remanded to the District Office level for approval.
8. 702.242(b)(3) - The 8(i) agreement needs to contain a date of birth for the claimant, or the survivors if it is a death case.
9. 702.242(b)(4) - An agreement needs to contain the claimant's work, wage, earnings and educational history. If claimant has no actual wages post-injury, a labor market survey can prove suitable alternate employment.
10. 42 U.S.C. 1395(y)(b) and 42 C.F.R §411.46. Medicare or Medicaid settlement considerations in an 8(i) agreement. (See attached description of Medicare/Medicaid considerations and sample affidavit.)
Just as the failure to include an essential ingredient will result in a notice of deficiency, the inclusion of an offending "add-on" provision will likely achieve the same result. The draftsman who approaches an 8(i) agreement with the same mindset used in drafting a third-party release will find the final work-product rejected. That is because the scope of an 8(i) agreement cannot approach the breadth of a personal injury release. Here are some of the more common offending provisions likely to cause rejection of an 8(i) agreement:
1. 702.241(g) - "Any and all claims" or "any and all accidents/injuries". The global release implies that, for example, a subsequent death claim would be settled by approval of the underlying inter-vivos injury claim. Since only claims in existence can be settled, these types of "kitchen sink" provisions will ultimately not pass scrutiny. Similarly, any attempt to settle a state worker's compensation claim within the language of an 8(1) agreement should result in rejection because the Department of Labor is not empowered to approve state claims in instances where there is contemporaneous jurisdiction. Likewise, attempts to settle "back pay", "EEOC" "ADA" issues, non-LHVVCA issues or actions in other courts/jurisdictions will run afoul of 702.241(g) and likely result in rejection of the proposed settlement agreement.
2. 702.242(b)(7) and 8(i)(1) of the Act. "Past medical benefits". Past medical benefits can present a vexing problem for the drafter of an 8(i) settlement agreement. The Department of Labor will not approve "pig in a poke" settlement agreements. If the employer's liability for past unspecified medical costs is terminated, how can the adjudicator determine adequacy? The Department of Labor will not shift liability to claimant for medical costs that should have routinely been paid in the normal course of business. For a more detailed explanation of the problem presented in closing past medicals, see the attached notice of deficiency detailing what needs to be addressed when the parties seek to close past medicals.
3. Section 15(e) and 702.241 (g) - "All penalties". While there are legitimate reasons why a carrier does not want to pay penalties in connection with a settled claim, the parties cannot settle any penalties that might accrue after the settlement, such as the-Section 14(f) penalty for late payment. The "all penalties" provision should result in rejection of an 8(i) agreement. in order to avoid the late payment penalty, the Department of Labor encourages stipulations regarding claimant's address to avoid Section 14(f) issues.
4. Section 39 - The attempted settlement of future vocational rehabilitation expenses presents its own set of problems. An 8(i) agreement can discharge any potential "Abbott" liability for compensation. However, the attempted closure of future vocational rehabilitation services is beyond the proper scope of an 8(i) agreement. It is the within the sole authority of the District Director to authorize vocational rehabilitation. The industry notice regarding the U.S. Department of Labor's policy of continuing vocational rehabilitation services even after the approval of an 8(i) agreement is provided herewith for a better understanding why future vocational rehabilitation services are not properly closed pursuant to the terms of an 8(i) agreement. It should be noted that the notice/award process at the Department of Labor regarding proposed vocational plans provides adequate carrier input post-settlement.
THE REWARD FOR UNDER AND/OR OVER-INCLUSION: NOTICE OF DEFICIENCY
In the event that a proposed 8(i) agreement fails to include
an essential ingredient or contains an offending "add-on" provision,
the result will probably be a notice of
The settlement of a longshore claim is the only realistic way in which a claimant can obtain closure. In order to finalize a claim, it is important to follow the aforementioned provisions of the Longshore and Harbor Workers' Compensation Act and its implementing regulations. The failure to prepare a well thought out 8(i) agreement only serves to frustrate all parties in a dispute and to waste the time of those who adjudicate claims. Hopefully, the materials provided herewith will serve to streamline the process of bringing cases to an end without undue delay.
LEWIS S. FLEISHMAN
Special thanks to those who have provided materials used as basic reference tools for drafting 8(i) agreements:
Chris Gleasman, District Director, 8th Compensation District
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© 2007 Lewis Fleishman