Find Legal Information

No. 2--04--0508WC

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT

Illinois Workers' Compensation Commission Division

PRESIDING JUSTICE McCULLOUGH delivered the opinion of the court:

The employer, Armour Swift-Eckrich, appeals from the order of the circuit court of KaneCounty that confirmed the Industrial Commission's⁽¹⁾ (Commission) decision on remand awardingpenalties and attorney fees pursuant to sections 19(k) and 16 of the Workers' Compensation Act(Act) (820 ILCS 305/16, 19(k) (West 2002)). The issue on appeal is whether the Commission's orderof August 8, 2001, denying penalties and attorney fees should be reinstated. We reverse the orderof the circuit court of Kane County and reinstate the Commission's order of August 8, 2001, denyingpenalties and attorney fees.

On January 15, 1998, claimant sustained repetitive trauma injury to both arms while workingfor the employer. On November 27, 2000, an arbitrator entered an award under the Act forpermanent partial disability benefits in the amount of $30,191.63, representing 20% loss of use of theleft arm and 25% loss of use of the right arm. Neither party sought review of the decision of thearbitrator.

On March 14, 2001, claimant filed a petition for penalties and attorney fees. On that date,the employer sent, via overnight delivery, a draft which was received by claimant's counsel on March15, 2001. In addition to the amount of the award of $30,191.63, the employer paid $304.44 interest,for a total of $30,496.07.

On May 10, 2001, the Commission held a hearing on claimant's petition for penalties andattorney fees. At the hearing, the employer contended that the delay in payment was due to personnelchanges at the third-party administrator, Gallagher Bassett Services. Employer contended that all ofthe original staff, as well a newly hired examiner, had recently left Gallagher Bassett.

On August 8, 2001, the Commission entered an order denying claimant's petition for penaltiesand attorney fees. The Commission noted the employer's claim that there had been personnel changesat the third-party administrator. The Commission also noted that the employer had voluntarily addedinterest to the amount awarded. Claimant sought review. The circuit court reversed the Commission. The court took note of the additional interest payment but noted that the determination of the amountof penalty for delay was in the power of the Commission and not the employer and that the solejustification for delay given by the employer was a change in personnel. The court reversed thedecision of the Commission and remanded the matter with instruction that a penalty in the amountof 50% of the award be assessed in conformance with section 19(k) (820 ILCS 350/19(k) (West2002)) and to assess what attorney fees were due under section 16 (820 ILCS 350/16 (West 2002)).

The employer appealed to this court. Williams v. Industrial Comm'n, 336 Ill. App. 3d 513,784 N.E.2d 396 (2003). This court dismissed the appeal for want of jurisdiction, stating that whena circuit court reverses a decision of the Commission and remands the case for further proceedingsinvolving disputed questions of law or fact, as opposed to mathematical calculations oruncontroverted incidental matters, the order is not final for purposes of appeal.

On remand from the circuit court, the Commission entered an award of penalties in theamount of $15,095.82 pursuant to section 19(k) of the Act, that being 50% of the delinquently paidaward of $30,191.63, and attorney fees in the amount of $6,038.33 pursuant to section 16 of the Act,that being 20% of the delinquently paid award of $30,191.63. The circuit court confirmed theCommission and the employer appeals.

Section 19(k) provides:

"In case where there has been any unreasonable or vexatious delay of payment orintentional underpayment of compensation, or proceedings have been instituted or carried onby one liable to pay the compensation, which do not present a real controversy, but are merelyfrivolous or for delay, then the Commission may award compensation additional to thatotherwise payable under this Act equal to 50% of the amount payable at the time of suchaward." 820 ILCS 350/19(k) (West 2002).

Section 16 allows for the sanction of attorney fees in the same circumstances. Mechanical Devicesv. Industrial Comm'n, 344 Ill. App. 3d 752, 763, 800 N.E.2d 819, 829 (2003).

The employer has the burden of proving that its delay was justified. Roodhouse Envelope Co.v. Industrial Comm'n, 276 Ill. App. 3d 576, 579, 658 N.E.2d 838, 840 (1995). Whether the employeracted unreasonably or vexatiously is a question of fact to be determined by the Commission, and itsfindings should not be disturbed unless the determination is against the manifest weight of theevidence. Roodhouse Envelope, 276 Ill. App. 3d at 579, 658 N.E.2d at 840.

The penalty was imposed upon remand after the circuit court reversed the initial decision ofthe Commission denying any penalty. Therefore, the question presented to us is whether the circuitcourt erred when it reversed the Commission's initial decision. Inter-City Products Corp. v. IndustrialComm'n, 326 Ill. App. 3d 185, 196, 759 N.E.2d 952, 961 (2001).

The delay in this case was 78 days after the award became final. The briefs refer toRoodhouse Envelope, 276 Ill. App. 3d at 580, 658 N.E.2d at 840 (payment was made 87 days "after[employer] received notification of the award"), Board of Education of the City of Chicago v.Industrial Comm'n, 351 Ill. 128, 131, 184 N.E. 202, 203 (1932) (payment was 90 days late), Zitzkav. Industrial Comm'n, 328 Ill. App. 3d 844, 848, 767 N.E.2d 405, 408 (2002) (delay of one yearunreasonably based on erroneous interpretation of the law), and Sanchez v. Industrial Comm'n, 53Ill. 2d 514, 518, 292 N.E.2d 724, 726 (1973), where the Commission declined to issue a penaltythough payment was not made until 52 days after the award became final, and the appellate courtaffirmed the denial on the basis that payment was delayed because there were negotiations to arriveat a lump-sum settlement.

Sections 19(k) and 16 do not mandate that penalties be imposed after a certain period ofdelay. In contrast to other penalties under the Act which are mandatory, the awarding of substantialpenalties under section 19(k) and attorney fees under section 16 is discretionary. McMahan v.Industrial Comm'n, 183 Ill. 2d 499, 515, 702 N.E.2d 545, 553 (1998). The Commission "may awardcompensation additional to that otherwise payable." (Emphasis added.) 820 ILCS 305/19(k) (West2002). The employer contends that penalties under these sections are limited to situations where theCommission finds the delay is deliberate, the result of bad faith, or for an improper purpose. Sections19(k) and 16 call for penalties for "unreasonable or vexatious delay" in payment. (Emphasis added.) 820 ILCS 305/19(k), 16 (West 2002).

The Commission, in its August 8 order denying penalties, stated:

"Upon consideration of all the circumstances, the Commission decides that [theemployer] is not guilty of 'unreasonable or vexatious delay of payment, or intentionalunderpayment of compensation' as required for penalties under Section 19(k). The total delayin payment is 78 days, not an unusually long payment delay. The voluntary payment ofinterest on the awards further shows lack of any 'vexatious' intent delaying the payment of thisaward."

The supreme court in McMahan addressed the Commission's prerogative with respect tosection 19(k) penalties and section 16 attorney fees. The supreme court stated:

"[I]mposition of section 19(k) penalties and section 16 attorney fees requires a higherstandard than an award of additional compensation under section 19(1). Although all threeprovisions refer to unreasonable delay, the standard under section 19(1) must differ from thatset forth in section 19(k) and repeated in section 16. Otherwise, whenever there was an'unreasonable delay' for purposes of section 19(1) there would automatically be an'unreasonable delay' for purposes of section 19(k). The two provisions would essentially beredundant.

Viewing the statute as a whole, we believe that section 19(k) and section 19(1) wereactually intended to address different situations. The additional compensation authorized bysection 19(l) is in the nature of a late fee. The statute applies whenever the employer or itscarrier simply fails, neglects, or refuses to make payment or unreasonably delays payment'without good and just cause.' If the payment is late, for whatever reason, and the employeror its carrier cannot show an adequate justification for the delay, an award of the statutorilyspecified additional compensation is mandatory.

In contrast to section 19(1), section 19(k) provides for substantial penalties,imposition of which are discretionary rather than mandatory. See Smith v. Industrial Comm'n,170 Ill. App. 3d 626, 632 (1988). The statute is intended to address situations where thereis not only a delay, but the delay is deliberate or the result of bad faith or improper purpose. This is apparent in the statute's use of the terms 'vexatious,' 'intentional' and 'merely frivolous.' Section 16, which uses identical language, was intended to apply in the same circumstances." McMahan, 183 Ill. 2d at 514-15, 702 N.E.2d at 552-53.

In McMahan, the court found that "[t]he employer's conduct was not the result of simpleinadvertence or neglect. More was involved than a lack of good and just cause. The employer madean intentional decision not to honor its statutory obligations to the employee." McMahan, 183 Ill.2d at 515, 702 N.E.2d at 553.

In the instant case, the Commission, in its discretion, determined that the employer was notguilty of unreasonable or vexatious delay. We agree.

The order of the circuit court of Kane County is reversed and the Industrial Commission'sAugust 8, 2001, decision denying penalties is reinstated.

Circuit Court of Kane County reversed; Industrial Commission's decision reinstated.

HOFFMAN and CALLUM, JJ., concur.

JUSTICE GOLDENHERSH, dissenting:

I respectfully dissent. I disagree with the majority on two basic elements of its disposition. First, the majority note that section 19(k) penalties may be awarded in cases of unreasonable orvexatious delay of payment. Their disposition, however, deals glancingly with the question ofunreasonableness and concentrates essentially on vexatiousness or the lack of vexatiousness. Thecrux of the issue met by the parties in this appeal is the question of unreasonableness, notvexatiousness.

Relying on McMahan, the majority limit the application of section 19(k) to situations wherethere has been vexatious conduct on the part of the employer. McMahan does not apply to the caseat hand. McMahan addressed issuing penalties for delay in continuing weekly compensation benefitsdue an employee during the period of temporary total disability (TTD). McMahan, 183 Ill. 2d at 514-15, 702 N.E.2d at 552-53. McMahan limited section 19(k) to cases of vexatious conduct in thosesituations in order to distinguish section 19(k) from section 19(l), which also allows for penalties fornot making continuing payments for TTD. McMahan, 183 Ill. 2d at 514-15, 702 N.E.2d at 552-53. Extending McMahan to cases involving delay after the entry of an award ignores the plain languageof section 19(k).

As to the real issue at hand, the reasonableness or unreasonableness of employer's conduct,the circuit judge, Judge Colwell, who reversed the initial Commission decision, rendered these wordsof wisdom in his order:

"The sole excuse in justification of the delay, offered by the [employer], seems to bean unexplained change in personnel.

It is unreasonable that the [claimant] should be required to undertake the burden ofthe consequences of [the employer's] personnel practices or of its work place policies."

Judge Colwell was right. Accordingly, I would affirm the circuit court of Kane County.

HOLDRIDGE, J., joins this dissent.

1. The name of the Industrial Commission was changed to the Illinois Workers' Compensation Commission on January 1, 2005. However, for the sake of consistency, we will continue to use the name "Industrial Commission" in this case.