Workers’ Compensation Settlements and Claimants’ Child Support Obligations

R.K. Grounds Care v. Wilson, 235 Md.App. 20 (2017)

What obligations child support statutes place on the employer and insurer is an evolving area of the law, but R.K. Grounds Care v. Wilson offers some protection.

In R. K. Grounds Care, the parties reached a settlement of the entire workers’ compensation claim, which was approved by the Workers’ Compensation Commission.  Eleven days after the approval of the settlement, the Carroll County Bureau of Support Enforcement filed a Notice of Child Support Lien in the Circuit Court and notified the employer and insurer of the lien that same day. The sum of the child support lien was more than the entirety of the workers’ compensation settlement. The employer and insurer timely paid the attorney’s fees and medical evaluation fee from the settlement to the claimant’s attorney and expert but held the entirety of the claimant’s funds. Once the employer and insurer were served with writs of garnishment from the Circuit Court, they issued payment (the entire amount of the claimant’s funds) to pay the child support lien. The claimant also received a copy of these writs of garnishment but did not file with the Circuit Court to contest the garnishment, instead opting to wait three months to file Issues with the commission for non-payment of the settlement.

After a hearing, the commission ordered that only 75% of the claimant’s funds should have been paid to satisfy the lien and if child support does not have any of those funds still in escrow, the employer and insurer were tasked with paying additional funds to the claimant so he would receive 25% of the total amount he was due. On appeal to the Circuit Court for Carroll County, the judgment was changed such that child support should only receive 25% of the total amount due and the employer and insurer should pay the 75% of the total funds to the claimant, even though the monies were already paid to satisfy his child support obligation.

The Court of Special Appeals ultimately determined the commission did not have jurisdiction to decide garnishment matters or child support liens, and therefore the decisions below must be overturned and remanded.  However, in reaching that decision, they did review the relevant statutes, discussed later in this article.  The court confirmed child support may be withheld from workers’ compensation benefits once a notice of lien for that child support is filed with the Circuit Court. The child support agency may then garnish property of the claimant. The parties disagreed as to whether they may garnish all, part, or none of the settlement and the court offered no guidance as to which interpretation was correct, stating simply “these arguments are well-thought-out and present difficult legal questions.”  Sidestepping that legal question, they explained that the claimant needed to contest the garnishment in the Circuit Court (the court with jurisdiction over garnishments), not at the commission. Having failed to contest the garnishment in the appropriate court within the appropriate time, the claimant could not put the employer and insurer in a position where they had already complied with a valid, uncontested order from the Circuit Court and would need to pay additional funds to the claimant.

Overall, R.K. Grounds Care helps to protect the employer and insurer from inconsistent court orders and places the burden on the claimant to contest any garnishments before the funds are applied to child support liens.

The Statutes at Play

Under Labor and & Employment Article § 9-732, money payable in connection with a workers’ compensation claim “may not be assigned, charged, or taken in attachment,” except as provided under Title 10 of the Family Law Articles. Under Family Law § 10-140 and § 10-141, unpaid child support (CS) due under an order constitutes a lien on all real and personal property of the claimant parent owing the support.

In order to enforce a CS lien, the Maryland Child Support Administration (CSA) files a notice of lien with the relevant Circuit Court.  Upon filing, the CS lien has the “full force and effect of a judgment lien.”  The OCSE must also file for garnishment per Maryland Rule § 2-645.  Upon filing, the Circuit Court clerk will issue a writ of garnishment. The writ of garnishment must be served upon the employer/insurer (garnishee), and a copy must be sent to the claimant at his/her last known address.

Under § 11-504 of the Courts and Judicial Proceedings Article, there is certain property exempt from the execution of a judgment.  In order to claim the exemption that only 25% of his/her net recovery should be attached, the claimant debtor must file a motion to release property within 30 days after service of the writ of garnishment.

The bottom line: if the claimant seeks – and is granted – the exemption at the Circuit Court, then the maximum amount that can be garnished from a workers’ compensation settlement is 25% of what the claimant nets.  If he/she does not seek/is not granted the exemption, then potentially all of the settlement monies payable to the claimant could go to satisfaction of the lien.

How Do the Employer/Insurer Comply? Settlement Considerations

When negotiating settlement of a workers’ compensation claim wherein the claimant has a CS support lien, consider the following:

1. Call the local CSA, which is on a county-by-county basis, to get the updated lien information. See: http://dhs.maryland.gov/local-offices for more information.
2. Remember: the lien is subject to the net recovery by the claimant from settlement. Therefore, you will deduct attorneys’ fees and costs as well as fees for IMEs/medical experts before assessing what will be subject to the lien.
3. If the claimant has not filed anything with the relevant Circuit Court to exempt the funds from the workers’ compensation claim, then:
   1. If the claimant’s net recovery from the settlement is less than the lien, then the settlement monies are sent in partial satisfaction of the lien and the claimant recovers nothing.
   2. If the claimant’s net recovery from the settlement is more than the lien, then the lien is satisfied first, and the claimant is given the remainder of the settlement funds.
4. If the claimant has the exemption from the Circuit Court, then here is the calculation.
   1. Settlement amount minus attorney fees and costs = net amount to the claimant.
   2. Net amount to claimant x 0.25 = total max allowed to pay toward CS lien.
   3. Net amount to claimant minus CS lien (up to max noted above) = amount payable to the claimant.
      1. Example
         1. At time of settlement approval, claimant’s CS lien is $1,555.82.
         2. Settlement is $5,000.00. Attorney fees and costs are $1,100.00. IME fee is $750.00.
         3. $5,000.00 – $1,100.00 – $750.00 = $3,150.00. This is the net amount to the claimant.
         4. $3,150.00 x 0.25 = $787.50. This is the maximum amount payable toward the CS lien.
         5. $3,150.00 – $787.50 (payable to OCSE for CS lien) = $2,362.50 to the claimant.

Additional Settlement Tips

The court in R.K. Grounds protected the employer and insurer from overpayment of a settlement by noting the affirmative duty of the claimant to contest the lien, but they need to be quick about it. The statutes allow a savvy claimant to recover 75% of their settlement funds simply by contesting the full garnishment in the Circuit Court.

Remember to include/look for waivers of rights against the employer/insurer with child support issues in settlement agreements.

Timing- if your notice of lien is new and/or unexpected, then hold everything for full 30 days from garnishment

For more information about this article, please contact April Kerns at (410) 230-2975 or (akerns@fandpnet.com) or Natalie Johnson at (410) 230-3614 or (njohnson@fandpnet.com).