Despite the best efforts of the Michigan Compensation Appellate Commission to allow a worker’s compensation claimant to keep an erroneous overpayment, the Michigan Appeals Court supported the employer and their carrier and reversed the Commission’s ruling allowing for the overpayment.

In this case there was no dispute about whether the injury occurred or whether they should receive workers compensation pay for the injury. Further the claimant did not commit fraud in filing or receipt of workers’ compensation benefits. Instead the workers’ compensation agency set the benefit too high resulting in an overpayment during the period the employee received payments.

The employer and its insurer filed a petition requesting recoupment of the overpayment. At the magistrate level, where the plaintiff-employee did not even appear, the magistrate denied the employer-defendant’s petition stating they could not prove the overpayment was the result of fraud. This of course was never alleged, but that is what the good magistrate hung his ruling “hat” on.

Employer-defendant appealed to the Michigan Compensation Appellate Commission rightly arguing the employer has a right to recoup an overpayment of benefits. But the Commission disagreed holding that it would be unjust to require recovery of benefits paid outside commission of a fraud.

On appeal to the Michigan Court of Appeals the employer-defendant argued they have the right to recoupment disability payments even though the employee-plaintiff did not commit fraud, which the lower agency bodies held was the only reason a recoupment of overpaid benefits could occur. Ruling on a matter of pure law, the Appeals Court found ample legislative and judicial rule to find the two Workers’ Compensation Agency bodies denying recoupment just plain wrong.

The Appeals Court noted that there could be no confusion about the employer’s right to recoup because the law includes a recoupment limitation period for the express purpose of limiting an employee-claimant’s potential financial impact of repayment. Under the law it is limited to one year of benefits. The Workers’ Compensation Appellate Commission attempted to create a rule whereby recoupment was only permissible if the employee engaged in fraud. The Appeals Court pointed out that neither the Workers’ Compensation Act nor its supporting rules ever stated fraud was the only basis by which recoupment of benefits could happen. The Commission’s only authority to hold as it did was conjured up from a 1997 decision in Whirley v. JC Penney Company #247 that stated in part, “It seems to us that voluntarily made payments, in the absence of any fraudulent behavior, should remain undisputed.”

The Appeals Court rightly found that the Commission exceeded its statutory authority by crafting its employee-fraud requirement in order to allow the overpayment to stand. The Court reversed and remanded the case back to the Commission for further proceedings consistent with its opinion.

This case reminds employers to be prepared to fight the Michigan legacy bureaucracies that have no problem giving away money they are entrusted to fairly manage on behalf of the employers that pay the workers’ compensation insurance.

Source: Iesah Fisher v. Kalamazoo Regional Psychiatric Hospital and State of Michigan State of Michigan Court of Appeals 9/10/2109 NO 343283