EFFECTIVE/PUBLICATION DATE: 12/6/94
SSR 94-6: SECTION 224 OF THE SOCIAL SECURITY ACT (42 U.S.C. 424a) DISABILITY -- WORKERS' COMPENSATION OFFSET -- EXCLUDING LEGAL EXPENSES INCURRED IN CONNECTION WITH INITIAL AWARD OF WORKERS' COMPENSATION BENEFITS -- WASHINGTON
20 CFR 404.408(d)
- Section 224 of the Social Security Act (the Act) requires an offset of title II disability insurance benefits if the worker is also entitled to workers' compensation (WC) benefits. Social Security Administration (SSA) regulations, 20 CFR 404.408(d), further provide that legal expenses paid or incurred in connection with a WC award or settlement are excluded from the computation of the WC offset to the extent such expenses are consonant with State law.
- Under the WC laws of the State of Washington, an attorney may charge a reasonable fee of not more than 30 percent of the increase in the award secured by the attorney's services. An "increase" in a Washington WC award can include initial awards that increase the amount of the WC from zero to the amount awarded. Therefore, such attorney fees, if paid or incurred by the worker, may be excluded from the WC offset provisions of section 224 of the Act.
A question has arisen as to whether legal expenses incurred by the claimant in connection with an initial WC award in the State of Washington were properly excluded from SSA's offset calculation.
Pursuant to SSA regulations at 20 CFR 404.408(d), legal expenses paid or incurred in connection with a WC settlement are excluded to the extent such expenses are consonant with State law. This regulation reflects Congress' intent that, since workers' compensation awards are generally understood to include compensation for legal expenses, for the purposes of offset, SSA would not include any part of the WC lump sum or benefit which is equal to the amount of such expenses paid or incurred by the worker. (See S. Rep. No. 404, 89th Cong., 1st Sess. (1965).) Under the WC laws of the State of Washington, an attorney may charge a reasonable fee of not more than 30 percent of the increase in the award secured by the attorney's services.
We believe one could reasonably consider the initial award to be an increase in the workers' compensation award from nothing to the amount awarded. Under such an interpretation, the attorney who successfully represents a claimant in obtaining an initial award of workers' compensation benefits would be permitted to charge a fee of up to 30 percent of the benefits awarded.
- There are three reasons supporting this interpretation.
- First, contact with the appropriate Washington State agencies revealed no prohibition on charging attorney fees in connection with establishing the initial award of benefits.
- Second, there have been a number of cases presented to SSA in which attorney fees were charged to the claimants for services in obtaining the initial award of WC benefits. We do not believe it would be appropriate to conclude, without compelling evidence, that these WC attorneys acted in direct contravention of the State's WC laws.
- Third, in Regnier v. Department of Labor and Industries, 749 P.2d 1299, 1301 (Wash. 1988), Washington's highest court described R.C.W. 51.52.120 as allowing the department "to determine what is a reasonable fee for a lawyer to charge a claimant for assistance in establishing an industrial insurance claim," a description which would seem clearly to encompass the obtaining of an initial award of benefits. (Emphasis added.)
Because Washington State law lacks a clear prohibition on the charging of attorney fees in connection with initial claims for WC benefits, other than the 30 percent cap, the amounts up to that limit paid by the claimants to their attorneys for services in the WC claims may be considered to be consonant with State law and thus are excluded for purposes of SSA's offset pursuant to 20 CFR 404.408(d).