In a long-awaited decision, the Florida Supreme Court ruled in Marvin Castellanos v. Next Door Company, et al. that the limitations on attorneys’ fees awarded under Florida’s workers’ Compensation statute violates the due process clause of both the Florida and United States Constitutions. As a result of this holding, attorneys are no longer limited to fees based exclusively on a percentage of the benefits actually secured. They may now be awarded an hourly fee for time and effort reasonably expended on litigating workers’ compensation benefits.
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A Brief History of Florida’s “Old” Law
In 1935, the Florida Legislature adopted the workers’ compensation law to provide simple, expeditious relief to the injured worker. As an integral part of that goal, the law provided for an award of reasonable attorneys’ fees to an injured worker who successfully obtained workers’ compensation benefits. That all changed in 2009 when the Legislature amended Florida statutes section 440.34 to delete the word “reasonable” in relation to attorneys’ fees, and to provide that a claimant is entitled to recover only “an attorney’s fee in an amount equal to the amount provided for in subsection (1) or subsection (7) from a carrier or employer.” Subsection (1) requires the fee to be calculated in strict conformance with the fee schedule, and subsection (7) applies solely to the flat fee for “disputed medical-only claims.” This amendment effectively took away any discretion a judge had in determining fees in workers’ compensation cases, and created an irrebuttable presumption that only allowed for the award of a statutory guideline fee. This “guideline” limited the amount an injured worker’s attorney could recover to the following: (1) a fee based on 20% of the first $5,000 of benefits awarded; (2) 15% of the next $5,000; (3) 10% of the remaining amount of benefits received; and (4) 5% of the benefits secured after 10 years.
This statutory formula often resulted in an award that was less than reasonable. Such was the case in Castellanos, where the attorney was awarded a total fee of $822.70, despite the fact that he spent 107.2 hours litigating a complex case to secure benefits for his client. This made the attorney’s effective rate $1.53 per hour. Noting that it was constrained by the statutory formula to affirm the lower court’s result, the First District Court of Appeal certified the question to the Supreme Court.
Analysis of the Decision
The Florida Supreme Court found that the Legislature’s formula did not accomplish its intended purpose, namely, to standardize fees and avoid excessive fee awards and frivolous lawsuits. Instead, the Court explained how applying the formula to all fee awards often resulted in both excessive and inadequate fees. The irrebuttable presumption created by the Legislature eliminated the authority and discretion of the Judges to alter the fees either upward or downward as the circumstances of each case required.
The Court also held that, by restricting the amount of fees an injured worker could pay his attorney, the Legislature’s formula impaired the worker’s ability to retain an attorney, which in turn impinged upon the worker’s ability to obtain benefits or treatment that had been denied. The Court recognized that “to navigate the current workers’ compensation system” after a denial of benefits “would be an impossibility without the assistance of an attorney.” Thus, the formula often worked against the stated goal of the workers’ compensation system: “the quick and efficient delivery of disability and medical benefits to an injured worker” so as “to facilitate the worker’s return to gainful re-employment at a reasonable cost to the employer.”
Based on this analysis, the Court determined that the continued use of the Legislature’s formula – whereby the worker is denied the opportunity to present evidence to show that the application will result in an unreasonable award – poses too great a risk that the fee award will be “entirely arbitrary, unjust, and grossly inadequate.” The Court held that the statute violates the state and federal constitutional guarantees of due process.
What Should Employers Do in Response to This New Ruling?
The Court emphasized that the fee schedule should remain the starting point for all fee awards in cases seeking workers’ compensation benefits. However, the claimant must be permitted the opportunity to present evidence that application of the fee schedule will result in an unreasonable award. Where the claimant can meet that burden, the Judge will have the discretion to award a fee that deviates from the fee schedule.
This new process for determining fees raises concerns for employers that, rather than litigating claims based on a desire for benefits, attorneys might now be motivated to litigate certain claims for the purpose of securing attorneys’ fees. In order to avoid such a situation, employers and their insurance carriers should continue to apply the statutory requirements for workplace accidents in determining the type and amount of benefits and medical treatment to which an injured worker is entitled. Employers should also establish and maintain open communications with their carrier to ensure that their companies are complying with the workers’ compensation statute, in an effort to minimize creating a situation where an attorney is motivated to enter into protracted litigation on a relatively minor benefit. Implementing these types of preventative strategies could go a long way in helping employers avoid issues that result in large attorneys’ fee awards.