Liens and related claims against workers’ compensation benefits in Illinois.
Editor’s comment: Issues you may face in managing an Illinois workers’ compensation claim is what to do when you receive a notice of claim for a lien or order for withholding against pending workers’ compensation benefits or lump sum settlements. In looking at our Workers’ Compensation Act, Section 21 addresses the issue of lien, assignment, attachment or garnishment. The Act states
“no payment, claim, award or decision under this Act shall be assignable or subject to any lien, attachment or garnishment, or be held liable in any way for any lien, debt, penalty or damages, ….”
In reviewing the case law interpreting this section of the Illinois Act, the court in Mentzer v. Van Scyoc held workers’ compensation benefits cannot generally be applied to debts of claimant, even when reduced to judgment, unless some specific statutory provision so provides. Therefore, the specific statute which authorizes or provides for enforcement of the lien must be examined to determine whether there is a specific provision which would require enforcement of the lien against workers’ compensation benefits. If not, that specific lien is not enforceable against workers’ compensation benefits.
If you receive an order or claim for lien which is unenforceable against workers’ compensation benefits, we suggest you contact us or your selected defense counsel for updated advice. There are five common liens or other claims you may encounter.
a. Garnishment/wage deduction order
The Illinois Wage Garnishment Act permits a judgment creditor to obtain an order requiring a judgment debtor’s employer to pay a portion of the employee’s income directly to the creditor. There is no specific statutory provision indicating that workers’ compensation benefits are subject to wage deduction orders.
In addition, the case of East Moline Works Credit Union v. Linn held exemption from garnishment attaches to workers’ compensation benefits that have been paid as well as compensation that may be due or become due. Therefore, wage deduction orders are not enforceable against workers’ compensation benefits.
b. Child support order and spousal maintenance order
Withholding of income for payment of child support and/or maintenance of a spouse is addressed in both the Illinois Marriage and Dissolution of Marriage Act and the Non-support of Spouse and Children Act. Both Acts contain identical provisions for withholding of income to secure payment of support.
The Act specifically provides that “Income” includes workers’ compensation payments. In addition, the Act also contains a provision specifically stating any other state or local laws which limit or exempt income or the percentage of income that can be withheld shall not apply. Therefore, any order for child support or spousal maintenance is enforceable against workers’ compensation benefits. These orders may include withholding for current support payments as well as including additional dollar amounts or percentage of income amounts for delinquent payments.
Both Acts specifically provide penalties for noncompliance. If an employer willfully fails to withhold or pay income pursuant to a properly served order, then the obligee (individual to whom the support payment is owed), public office or employee may file a complaint against the employer. The Circuit Court would then notify the employer of the time and place for hearing on the complaint. If the court finds in favor of the complaining party, the court enters a judgment directing the employer to pay the total amount which it willfully failed to withhold.
There is an additional provision which indicates that an employer, who knowingly fails to pay any amount withheld within 10 calendar days of the date income is paid to the employee, is subject to a penalty of $100.00 for each day the amount withheld is late after the expiration of 10 calendar days. Therefore, it is important that funds withheld from workers’ compensation payments due to a child support order or spousal maintenance support order are paid promptly.
c. Physicians’ liens
The Illinois Physicians Lien Act provides that physicians practicing in Illinois who provide services by way of treatment to injured persons have a lien upon all claims and causes of action for the amount of reasonable charges up to the date of payment of damages. The Act specifically makes an exception so it does not cover services rendered under the provisions of the Workers’ Compensation Act.
Therefore, like wage deduction orders, physicians liens are not enforceable against workers’ compensation benefits.
d. Public aid lien
The Department of Public Aid has a right of subrogation to any right of recovery the recipient of that aid may have under terms of any private or public health care coverage or casualty coverage. The Public Aid Code specifically includes coverage under the Workers’ Compensation Act. In order to enforce its rights, the Department may either intervene or initiate proceedings for the cost of services provided by the Department.
If Public Aid paid medical expenses as a result of injuries later deemed to be compensable under workers’ compensation, you may receive a subrogation notice. Medical expenses must be reimbursed from funds owed petitioner in settlement of the workers’ compensation claim.
e. Federal tax lien
The Internal Revenue Service, pursuant to Section 6321 of Tax Code, has advised that federal tax liens attach to all property. With such broad power, the Internal Revenue Service may issue a tax lien which would be enforceable against workers’ compensation benefits. This lien would attach to any benefits, settlement or permanency award.
Summary
We suggest that, upon receiving notice of a lien claim involving workers’ compensation benefits, you contact us or your selected defense counsel for updated advice. You probably should notify both claimant and his attorney in writing to confirm both receipt of the claim and your course of action with regard to same.
Please do not hesitate to reply with thoughts and comments.
