Don't Pay That High Interest Rate!
A disturbing new trend is making its way across the State of Illinois – claimants demanding nine percent judgment interest on Commission awards based on the date of the circuit court's affirmation on judicial review. While this is a complex issue, it is nevertheless one we want to bring to your attention because it can dramatically impact the cost of your case.
The typical scenario plays out like this – a claimant secures a favorable award of benefits and the employer appeals the decision to the circuit court, and perhaps the appellate court, and the Commission's award is upheld. As we all know, the arbitration decision sets forth an interest rate applicable to each award "at a rate equal to the yield on indebtedness issued by the United States Government with a 26-week maturity next previously auctioned on the day on which the decision is filed." 820 ILCS 305/19(n).
In some cases of recent vintage, this rate has been as low as 0.11 percent. Thus, if the total award due and owing to the claimant is $150,000, the amount of interest due under section 19(n) equals $165 annually.
In stark contrast, nine percent judgment interest on that same award equals $13,500 annually –an appreciable difference. And if there is a several year period between the date of the arbitrator's award and the date of payment – say after a lengthy appeal to the appellate court – this amount can skyrocket. For example, four years could mean the difference between section 19(n) interest of $660 and section 2-1303 interest of $54,000.
In the vast majority, if not super-majority of cases, employers and their carriers tender payment of the award plus interest immediately following a decision to forgo further appeal. Again using our example, in such a case we would simply tender the $150,000 in benefits plus $165 in section 19(n) interest per annum and close our files.
What we are now seeing, particularly in the so-called "collar counties" and in southern Illinois, is a growing tendency for petitioner's counsel to demand that employers to pay interest at the nine percent judgment rate based on section 2-1303 of the Code of Civil Procedure. This rate applies to any judgment rendered by the circuit court.
Section 2-1303, in relevant part, provides:
Judgments recovered in any court shall draw interest at the rate of 9% per annum from the date of the judgment until satisfied …. When judgment is entered upon any award, …, interest shall be computed at the above rate, from the time when made or rendered to the time of entering judgment upon the same, and included in the judgment.
735 ILCS 5/2-1303.
According to the petitioner's bar, section 2-1303 judgment interest applies because, in their mind, the circuit court's order affirming the Commission's decision is a "judgment" under the first sentence of section 2-1303.
In most cases, the petitioner's bar makes this demand to employers, who in some cases are paying the higher amounts. If the employer pays, the claimant wins easily. If the employer balks, some attorneys will simply drop the issue and accept the section 19(n) interest. But in a growing number of cases, when the employers refuse to succumb, claimants are pursuing the nine percent interest claims as part of a section 19(g) proceeding to reduce the Commission's award to an enforceable judgment. At that time counsel then formally seeks the nine percent interest, claiming the employer has failed to pay the award due and owing, and that the employer is being unreasonable and vexatious. The problem lies not only with the higher nine percent interest rate; section 19(g) also authorizes the imposition of attorney's fees.
We currently have three cases pending in the circuit court within our office on the issue of whether the section 19(n) interest rate or higher section 2-1303 judgment rate applies.
The Status of the Law on Interest
Section 19(n) of the Act is the statutory provision setting forth the interest rate applicable to all Commission awards until the award is paid. 820 ILCS 305/19(n); Radosevich v. Industrial Comm'n, 367 Ill. App. 3d 769, 777 (4th Dist. 2006). This rate, of course, assumes that the employer/carrier has not actually refused to pay the award and justifiably found itself in a true section 19(g) scenario. But that is another column.
The Commission Decision is Not a Judgment
Contrary to what many claimants counsel believe, a Commission's decision, standing alone, is not a judgment. Blacke v. Industrial Comm'n, 268 Ill. App. 3d 26, 28 (3d Dist. 1994); Radosevich, 367 Ill. App. 3d at 780; Aurora East School Dist. v. Dover, 363 Ill. App. 3d 1048, 1054-1055 (2d Dist. 2006). The sole means to enter judgment on a Commission award is via a section 19(g) proceeding. 820 ILCS 305/19(g); Juergens Bros. Co. v. Industrial Comm'n, 290 Ill. 420, 424 (1919).
The Circuit Court's Order Confirming the Commission's Award is Not a Judgment
When presenting a demand for section 2-1303 judgment interest, claimants often argue that the circuit court's order confirming the Commission's decision creates a "judgment" providing the foundation for application of section 2-1303. In a civil case, a circuit court certainly does enter judgment on its orders.
Here, the petitioner's bar overlooks the limited nature of the circuit court's jurisdiction on judicial review. Jurisdiction means simply the power to hear a particular type of case or issue. Section 19(f)(2) of the Act, which governs judicial reviews (appeals) from the Commission to the circuit court, provides very limited power to review the Commission's decision; in essence, the Act restricts the court to either affirm or reverse and remand, or to make such rulings as permitted by law. Esquivel v. Illinois Workers' Compensation Comm'n, 402 Ill. App. 3d 156, 159 (2d Dist. 2010); Nierman v. Industrial Comm'n, 329 Ill. 623, 627 (1928). The court has no other authority to act.
A line of Illinois Supreme Court decisions has specifically held that a circuit court on judicial review cannot enter judgment and cannot tax costs or interest or authorize enforcement. Interlake Steel Corp. v. Industrial Comm'n, 60 Ill. 2d 255, 262 (1975); Juergens Bros. Co., 290 Ill. at 424; Grand Trunk Western Ry. Co. v. Industrial Comm'n, 291 Ill. 167, 178 (1919); Nierman, 329 Ill. at 627; J.E. Crowder Seed Co. v. Industrial Comm'n, 347 Ill. 86, 91 (1931). In each case, the Court based its decision on the limited scope of judicial review as provided for by section 19(f) of the Act. 820 ILCS 305/19(f)(2). While circuit courts are general jurisdiction courts, when they hear cases pursuant to a special statutory jurisdiction they are limited by the language of the statute (here, section 19(f)). When such a statute prescribes a specific form of review, all other forms of review are excluded. Esquivel, 402 Ill. App. 3d at 159.
The long and short is simple – a circuit court's order confirming a Commission award creates a final judgment solely for the purposes of finality and subsequent appeal, and has no impact on its enforceability. Therefore, judgment interest cannot be based on the circuit court's order confirming the Commission's decision.
Nine Percent Judgement Interest is Only Available Following the Entry of a Section 19(g) Judgment Order, and Then Only on Those Amounts Outstanding at that Time.
There is no question that once a judgment order is entered under section 19(g), any amount of the award that remains due and owing at that time is then subject to the higher nine percent judgment interest rate. Thus, if an employer fails to timely pay an award in full, the claimant may file a section 19(g) petition and obtain entry of judgment on the Commission's award, with that order reflecting the outstanding amount due and imposing section 2-1303 judgment interest.
In our example, assume the employer has a $150,000 benefits award, and pays a portion of that during the pendency of the appeal (because certain issues are not in dispute), but fails to make timely payment of the balance following the conclusion of the appeal. In our hypothetical, assume the employer failed to pay $50,000 of the award. At the time of the circuit court section 19(g) judgment order, judgment will be entered on the Commission's order, and will note that $50,000 remains due and owing. Moreover, section 2-1303 judgment interest at the rate of nine percent per annum applies to the outstanding amount, and from the date of the original arbitration award.
Thus, if the arbitrator's award was entered on May 1, 2012, a timely payment of the full amount would have resulted in the employer paying $55.00 per year in interest on the $50,000, for a total of $220.00 (assuming payment on May 1, 2016). However, if that amount is not timely paid and a section 19(g) proceeding follows, the nine percent interest yields $4,500 per year, for a total amount of interest of $18,000.
Nine percent judgment interest cannot apply prior to the entry of a section 19(g) order entering judgment on the Commission's decision. A claimant is entitled to section 2-1303 judgment interest "if and when the arbitrator's award or the Commission's decision becomes an enforceable judgment." Sunrise Assisted Living v. Banach, 2015 IL App (2d) 140037, ¶ 32. And it cannot be based on the circuit court's affirmance order.
Despite this body of law, the petitioner's bar is filing section 19(g) petitions even where an employer has tendered the entire award plus proper section 19(n) interest. These attorneys then argue that the employer has refused to pay the higher rate of interest (based on the circuit court's affirmance order) and is, therefore, acting unreasonably and vexatiously.
Yet recent case law holds that where an award is paid at the time a section 19(g) petition is filed, there is no refusal to pay, and the petition should be denied. Sunrise Assisted Living, 2015 IL App (2d) 140037, ¶ 32.
Another issue with the claimant's efforts to proceed under section 19(g) is the fact that some petitioner's attorneys wrongly believe that such a petition may be filed in the judicial review case following the conclusion of the appeal. In other words, the claimants are filing the section 19(g) motion to enforce in the judicial review captioned case. This is wrong. A circuit court cannot entertain section 19(g) relief in a judicial review proceeding; a separate proceeding filed in the circuit court, and noticed via the Commission, must be filed and served. This distinction is important because any proceedings before the circuit court on an improperly filed section 19(g) petition would be deemed void and a separate filing would have to follow. The result is a waste of the employer and carrier's time and money.
How to Respond to Demands for Nine Percent Judgment Interest
Avoiding section 2-1303's higher nine percent judgment interest rate is imperative and begins with the simple notion of paying an award as soon as it is due and owing and further appeal is ruled out. Moreover, the check should include all interest due on all amounts owed in accordance with section 19(n). If these principles are followed, an employer will be in the best position moving forward. If the tendered interest is accepted, the case is over and the file may be closed.
If only some of the amounts are readily determinable, and others, such as medical bills subject to the medical fee schedule, remain to be determined, the known amounts should be immediately paid and accompanied by a letter explaining that the known benefits are being paid (with applicable section 19(n) interest) and that the employer intends to pay all remaining amounts of medical due in accordance with the Commission's decision, but that the medical bills have been submitted for medical fee schedule review. In that instance, it is very difficult to make a claim of unreasonable delay stick. If the claimant's attorney decides to push for higher judgment interest, the stage will be set to defeat any subsequent section 19(g) proceeding filed in the circuit court.
In defending a section 19(g) proceeding, the fact of payment in full must be stressed, as well as the law stating that the circuit court on judicial review does not have the power to enter judgment or to enforce the Commission's decision. Section 2-1303's judgment interest (which must be based on an entry of judgment) cannot apply.
As we have alluded, this issue is racing across the state and many employers are unnecessarily paying the higher judgment interest rate when the section 19(n) rate clearly applies. You should never find yourself in this predicament. Awards should be paid timely and interest should be tendered and explained in an accompanying letter. And in all cases, all conversations with petitioner's counsel must be properly documented.