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Docket No. 87474-Agenda 10-March 2000.

In re ESTATE OF HERMAN J. DIERKES (Estate of Herman J. Dierkes, Appellee; The Department of Transportation, Appellant).

Opinion filed May 18, 2000.

JUSTICE FREEMAN delivered the opinion of the court:

Under section 5(b) of the Workers' Compensation Act, an injured employee who has received workers' compensation benefits must reimburse the employer for those benefits from any recovery the employee receives from a liable third party. The provision grants the employer a lien on the recovery equal to the amount of workers' compensation benefits paid or owed. See Ramsey v. Morrison, 175 Ill. 2d 218, 237 (1997). The employer must pay the employee's attorney "25% of the gross amount of such reimbursement." 820 ILCS 305/5(b) (West 1996).

In this case, the circuit court of St. Clair County reduced the employer's reimbursement under its workers' compensation lien by awarding two attorney fees to the employee's law firm: one fee based on a private fee agreement between the employee and the firm, and the second attorney fee pursuant to the Act. The appellate court affirmed. 303 Ill. App. 3d 927.

We agree with the employer that the additional reduction of the employer's reimbursement based on the employee's private attorney fee agreement was contrary to the Act. We reverse the appellate and circuit courts, and remand the cause to the circuit court with directions.

BACKGROUND

The appellate court detailed the undisputed facts. 303 Ill. App. 3d at 928-30. Therefore, we will repeat only those facts necessary for our disposition of this appeal.

This case arises out of the administration of the estate of Herman Dierkes (decedent). Decedent was fatally injured by a third-party tortfeasor while employed by the Department of Transportation (Department).

Decedent's widow, who was the administrator of his estate, retained a law firm to pursue all claims against the third-party tortfeasor. Decedent's widow agreed to pay the law firm one-third of any amount recovered from the third party. The estate and the third party reached a proposed settlement; the third party offered the estate $100,000.

Also, the Department and the estate reached a settlement on workers' compensation benefits. In their settlement contract, the Department agreed to pay decedent's widow $2,176.11 per month for 20 years. According to the Department's calculation, which the estate's law firm does not dispute in its brief, the net present value of the compensation to decedent's widow far exceeds $100,000.

Decedent's widow petitioned the circuit court of St. Clair County to approve and distribute the proposed third-party settlement. The petition contained the terms of the third-party settlement and the terms of the settlement contract with the Department. The petition also contained the following charges against the proposed settlement: one-third of the proposed settlement ($33,333.33) to the estate's law firm for attorney fees based on its private contingency fee agreement with decedent's widow, 25% of the remainder of the proposed settlement ($16,666.67) to the firm for attorney fees pursuant to the Act, and the remainder of the proposed settlement ($49,999.99) to the Department as reimbursement under its workers' compensation lien.

At the close of a hearing on the petition, the circuit court approved the third-party settlement and its proposed distribution. The appellate court upheld the distribution. 303 Ill. App. 3d 927. We allowed the Department's petition for leave to appeal (177 Ill. 2d R. 315(a)).

DISCUSSION

The Department does not dispute that its reimbursement under its workers' compensation lien should be reduced, pursuant to section 5(b) of the Act (820 ILCS 305/5(b) (West 1996)), by an attorney fee to the estate's law firm of 25% of the $100,000 proposed settlement. However, the Department contends that the circuit court violated section 5(b) of the Act by further reducing its reimbursement by the additional attorney fee to the estate's law firm based on its private fee agreement with decedent's widow. This narrow issue is one of statutory interpretation, which is a question of law. Therefore, our review is de novo. Choi v. Industrial Comm'n, 182 Ill. 2d 387, 392 (1998).

Section 5(b) of the Act states in pertinent part:

"(b) Where the injury or death for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages, then legal proceedings may be taken against such other person to recover damages notwithstanding such employer's payment of or liability to pay compensation under this Act. In such case, however, if the action against such other person is brought by the injured employee or his personal representative and judgment is obtained and paid, or settlement is made with such other person, either with or without suit, then from the amount received by such employee or personal representative there shall be paid to the employer the amount of compensation paid or to be paid by him to such employee or personal representative ***. ***

Out of any reimbursement received by the employer pursuant to this Section the employer shall pay his pro rata share of all costs and reasonably necessary expenses in connection with such third-party claim, action or suit and where the services of an attorney at law of the employee or dependents have resulted in or substantially contributed to the procurement by suit, settlement or otherwise of the proceeds out of which the employer is reimbursed, then, in the absence of other agreement, the employer shall pay such attorney 25% of the gross amount of such reimbursement." 820 ILCS 305/5(b) (West 1996).

The cardinal rule of interpreting statutes, to which all other canons and rules are subordinate, is to ascertain and give effect to the intent of the legislature. In determining legislative intent, a court should first consider the statutory language. King v. Industrial Comm'n, 189 Ill. 2d 167, 171 (2000); McNamee v. Federated Equipment & Supply Co., 181 Ill. 2d 415, 423 (1998). Specifically in construing the Act, all portions thereof must be read as a whole, and in such a manner as to give them the practical and liberal interpretation intended by the legislature. McNamee, 181 Ill. 2d at 428; K. & R. Delivery, Inc. v. Industrial Comm'n, 11 Ill. 2d 441, 445 (1957).

The plain language of section 5(b) shows that an employer's reimbursement of workers' compensation payments from an employee's third-party recovery is crucial to the workers' compensation scheme. The practical and liberal operation of the Act is quite settled. The Act is primarily meant to provide prompt and equitable compensation for employees who are injured while working, regardless of fault. J.L. Simmons Co. ex rel. Hartford Insurance Group v. Firestone Tire & Rubber Co., 108 Ill. 2d 106, 112 (1985); accord Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 180-81 (1978). Thus, an employer may be required to pay compensation to an injured employee even though the employer was without fault. "Section 5(b) allows both the employer and the employee an opportunity to reach the true offender while preventing the employee from obtaining a double recovery." J.L. Simmons, 108 Ill. 2d at 112. The Act accords with "the moral idea that the ultimate loss from wrongdoing should fall upon the wrongdoer." 6 A. Larson & L. Larson, Larson's Workers' Compensation Laws