Lessons Learned from the City of Joliet v. IWCC Decision: Section 8(j) Credit at Trial
When trial is necessary, employers should carefully check on the availability of credits to mitigate workers’ compensation exposure. An example of a simple credit is making the claim for any temporary total disability (TTD) already paid. The more difficult credits are described under Section 8(j) of the Illinois Worker’s Compensation Act and cover any benefits the injured employee receives from sources other than the employer or the employer’s insurance carrier.
The Act under 8(j) states:
- “In the event the injured employee receives benefits, including medical, surgical, or hospital benefits under any group plan covering non-occupational disabilities contributed to wholly or partially by the employer, which benefits should not have been payable if any rights of recovery existed under this Act, then such amounts so paid to the employee from any such group plan shall be credited to or against any compensation payment for temporary total incapacity for work or any medical, surgical, or hospital benefits made or to be made under this Act.”
Example: City of Joliet v IWCC
In a recent Appellate decision, City of Joliet v IWCC, 2023 IL App (3d) 220175WC, the employer, City of Joliet, sought credits for a variety of payments or compensation that the claimant received from other sources. Most of the employer’s requests for credits were denied when analyzed under 8(j) of the Act.
Pursuant to the collective bargaining agreement (CBA) in effect at the time, the employer was obligated to “make whole” payments between the TTD amount and the average weekly wage (AWW). Thus, if the employee had a $1,000.00 AWW and received TTD at $666.67 per week, the employer was required to make an additional payment to bring total compensation to $1,000.00.
Soon after the claimant returned to work, a second injury occurred. The employer denied the claim and withheld TTD. The claimant nonetheless collected her full pay by applying available sick, vacation, or other accrued time.
At trial, the employer wanted credits for:
- The “make whole” payments issued in addition to TTD.
- Compensation after the second accident date using sick, vacation, or other accrued benefit time.
There was no dispute regarding credit for the TTD payments.
For reasons not explained or appealed, the employer was denied a credit under 8(j) for more than $100,000 in medical bills paid through a group insurance plan that the employer contributed to. On appeal, the question was whether “make whole” payments or sick day pay could be credited to the employer.
The employer claimed another credit for compensation received by the use of sick time; payroll records for at least one period did not show a deduction of sick days.
The credit was denied even though a human resources witness testified that sick days were not reduced.
- This suggests the worker received regular pay, not sick pay.
- The Commission found that the human resources employee was not credible because he was not employed at the time of compensation payment and relied on payroll records in his testimony.
However, the payroll records upon which the witness relied should be admissible as “business records” because the employer chose to present them. The records were offered, but the Commission described the pay vouchers as unreliable due to inaccuracies, which were not noted in the decision.
The employer also argued that the claimant was not certain whether some compensation was her regular gross pay. The court noted that the employer was improperly attempting to shift the burden to the employee rather than meeting their own burden.
Limitations and Scope of Credits Under Section 8(j)
The City of Joliet decision revisits the limitations and scope of credits that may be claimed under Section 8(j) and highlights an employer’s difficulties in claiming credits at trial.
- Employers will not be allowed a credit for compensation received by use of sick time, vacation days, or similar accrued benefits.
- Such compensation can be claimed by employees even if the condition is not related to a work injury and thus is not allowed as a credit under 8(j).
However, payment of regular salary for lost time after a work-related injury can be claimed as a credit against TTD to the extent of its value under the Elgin Board of Education School District U-46 decision. The City of Joliet offered records that did not list sick days or similar compensation as the basis for payments and which its witness described as “actual regular gross pay.” The Commissioner nonetheless did not find the records credible.
What This Means for Employers Claiming Credits
The lesson from the decision is that the Act will only allow the employer to claim a TTD credit limited by the amount that would be due under the Worker’s Compensation Act which allows compensation at a rate of 66 2/3% of the AWW. The employer undoubtedly sought credit for other additional payments because they were obligated by their CBA to make additional payments. Because a credit under 8(j) is limited to the compensation amount due for TTD, the employer received that credit and all compensation above that amount was denied.
Another lesson is that an employer usually wants to rebut a claimant’s attempt to prove elements of a case; however, an employer has the burden of proof for claiming credits. Moreover, since a credit is an exception to liability created under the Act, it is narrowly construed. As a result, the employer needs a competent and credible witness to present such proof.
This case shows the importance for employers of understanding how the credit system functions, checking the availability of credits when trial is necessary, and meeting the burden of proof.