The issue of commuting attorney’s fees from the far end of the Award when a case is settled by Stipulations with Request for Award is one that is normally not fought over or discussed. Recently, I heard an argument over this issue on a Mandatory Settlement Conference line and it was clear the Judge did not understand how attorney’s fees are commuted from the far end of the Award. In that case an applicant’s attorney was complaining that defendant had subtracted more from the end of applicant’s Award than the amount of the attorney’s fees. This is exactly what is supposed to happen when attorney’s fees are commuted from the far end of the Award. You should be familiar with this concept if it comes up in a case you are handling.
Commutation is not limited to the payment of attorney’s fees on a Stipulated Award. An applicant can request commutation of future payments from an Award for a lot of different reasons. Whether or not to order commutation is in the discretion of the WCAB. There are quite a few cases dealing with situations where a commutation was appropriate and just about as many where it was not appropriate. The commutation of permanent disability is governed by Labor Code Section 5101(b).
Labor Code Section 5101(b) requires that the WCAB use a 3% annual interest rate when calculating a present value for calculating commutation. The calculations themselves are somewhat complicated but it is important to understand the general concept that if you commute an amount necessary to pay $10,000.00 today, the commuted amount is going to be higher than $10,000.00. This means that an amount higher than $10,000.00 is going to be deducted from the far end of the Award in order to pay a lump sum of $10,000.00 today. The exact amount to be deducted from the far end will depend on how much longer it would take to pay out the Award at the permanent disability rate. The length of time remaining on the Award is important because the commutation amount is calculated using an interest rate of 3% per year. The longer the time remaining on the Award the higher the amount deducted from the end of the Award is going to be.
These concepts apply to all commutations no matter the reason for the commutation. Ordering that an attorney’s fee is to be paid from the far end of the Award amounts to an order of commutation. Price v. WCAB (1992) 57 CCC 743 (Published)
Generally speaking both defendant and applicant’s attorney prefer that attorney’s fees on a Stipulated Award be commuted from the far end. The alternative is to pay attorney’s fees out of every check that gets issued to applicant after the Award. This is inconvenient for everyone except possibly the applicant.
In most cases no one is going to complain that the amount deducted from the end of the Award to pay attorney’s fees is higher than the actual amount of attorney’s fees listed on the Stipulations with Request for Award. This will likely only come up if applicant’s attorney does not understand the commutation. What is most disappointing about this is that we know if the attorney does not understand it then they did not explain it to applicant when the Stipulations were signed. Now you have the information needed to explain this concept to applicant’s attorney and maybe even a Judge.
At Yrulegui & Roberts, our California workers’ compensation defense attorney is a diligent, effective, and solutions-driven advocate for clients. If you have questions about commutation with Awards, we are here to help. Contact our law firm now to set up a completely confidential, no obligation appointment with an attorney. We provide workers’ compensation defense representation in Fresno, Sacramento, Sacramento County, and throughout the whole region of Central California.