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Practical Litigator: Employer negligence? Make sure the order spells it out

By MARK McGRATH, Special to Lawyers Weekly



We all know that minor settlements need to be approved by a judge. But try and find the statute or case law requiring this exercise.

Speaking objections cannot be made during depositions. But other than a handful of local rules that prohibit the use of speaking objections, try to find binding North Carolina case law or statutory authority that establishes such a rule.

And so it is with the issue of employer negligence when plaintiffs move to reduce or strike a workers’ compensation lien. Whenever lawyers discuss third-party workplace cases the first question in the conversation typically relates to the amount of the subrogation lien.

The second question almost always focuses on the issue of employer culpability. “The employer received five OSHA citations! No court in the state will enforce that lien. You have it made in the shade.”

But where is the authority for this principle? Finding it is not nearly as easy as one would think.

In the past year, at least three attorneys from prominent firms have relied upon G.S. § 97-10.2(e) when attempting to enforce their subrogation lien.

This section provides that “if the verdict shall be that actionable negligence of the employer did join and concur with that of the third party in producing the injury or death, then the court shall reduce the damages awarded by the jury against the third party by the amount which the employer would otherwise be entitled to receive therefrom by way of subrogation hereunder and the entire amount recovered, after such reduction, shall belong to the employee or his personal representative free of any claim by the employer. …”

It is true that the cases interpreting and applying this section have uniformly held, and stated in explicit terms, that negligent employers cannot enforce their lien against the proceeds of a settlement or judgment obtained by an employee from a third party.

Defendants frequently invoke the principle that employers who are accused of negligence are entitled to have the issue resolved by a jury, not a judge. Therefore, the reasoning goes, a court may not unilaterally consider the issue of employer negligence when deciding a motion to reduce or eliminate a workers’ compensation lien.

This reasoning has one fatal flaw: motions to reduce or strike the subrogation lien are governed by a separate section of the statute, G.S. § 97-10.2(j).

This section states that when a court hears a motion under subsection (j), it may “consider the anticipated amount of prospective compensation the employer or workers’ compensation carrier is likely to pay to the employee in the future, the net recovery to plaintiff, the likelihood of the plaintiff prevailing at trial or on appeal, the need for finality in the litigation, and any other factors the court deems just and reasonable, in determining the appropriate amount of the employer’s lien.”

   No language regarding employer negligence. The “any other factors” language sounds promising. But surely there must be something more specific to the issue than this general language, no?

Alas, there is something more specific, but it does not jump right out at you. The case is Wiggins v. Bushranger Fence Co., 126 N.C. App. 74, 483 S.E.2d 450 (1997). True, its articulation of the “no lien for negligent employers” rule is muted, at best. But clearly, the case makes plain that trial courts may consider employer negligence in determining the amount of the employer’s lien.

What is the operative language to tease out of the opinion? In reviewing the order entered by the trial court, the Court of Appeals focused on three findings of fact that focused on the issue of employer negligence.

The defendant claimed that the trial court improperly considered these issues and made these findings. The Court of Appeals disagreed, holding that in exercising its discretion the court properly considered and made findings regarding the negligence of the employer.

The opinion does not come right out and say that employer negligence is a permissible consideration on motions to reduce a workers’ compensation lien; rather, it identifies the findings of employer negligence by paragraph number, and then holds that the court properly considered those issues and made findings as to employer negligence.

Remember, the General Assembly specifically considered the possibility that the striking of a subrogation lien might yield a windfall to the employee in the form of a double recovery. Our courts have unanimously held, however, that trial courts are free to allow a double recovery, so long as they exercise their discretion properly and make reasoned findings of fact and conclusions of law.

What if the plaintiff prevails and the employer appeals? The Court of Appeals will not second-guess and reverse a § 97-10.2(j) order unless the trial court abused discretion.

The lesson here? Make the findings of fact as specific as possible. Identify the evidence considered by the trial court. Make the deliberations of your trial judge appear Solomon-like by identifying specific items of evidence and corresponding findings of fact arising from that evidence.

Remember, the party preparing an order wields the power and ability to make it bulletproof. Expending time and effort on the trial court order will prevent appeals in most cases and will ensure that the remainder to a slow and painful death in the Court of Appeals.

 Editor’s note: McGrath is a partner with the firm of Jensen McGrath Podgorny in Research Triangle Park, where he focuses his practice on representing plaintiffs in catastrophic injury cases, including cases arising from nursing home neglect and abuse, electrical injuries, inadequate security, medical malpractice and third-party workplace injuries.

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