Defense Base Act & Settlement of Claims

After almost 40 years representing injured workers covered by the Defense Base Act (along with those covered by the Longshore and Harbor Workers Compensation Act and Non-Appropriated Funds Instrumentalities Act), it is clear that almost every claim is resolved via a final settlement under Section 8(i) of this law. That section simply requires the application for settlement be approved by the Deputy Director of the Office of Workers’ Compensation Programs (OWCP) or the Administrative Law Judge (OALJ). It does not inform the injured worker how to get a better settlement offer from his Employer and its workers’ compensation carrier. To understand how to increase your chances to recover a fair and reasonable settlement, the worker must dive deep into both the evidence and the DBA law that applies to each injury claim.

The Parties to a Claim for Compensation

The initial burden of a Defense Base Act (DBA) claimant is to show that his work-related injury has made him unable to return to his usual work. This is what is called establishing a “prima facie” case that he is totally disabled from employment under the DBA. At that point, the burden of proof transfers from the injured worker to the employer/carrier. In order to avoid having to pay the claimant total disability benefits under the DBA, the employer must then show that there is alternative work available that the injured claimant is capable of performing. If the employer succeeds in showing such alternate work availability, it will claim that total disability benefits are no longer payable and at most, claimant is entitled to either temporary or permanent “partial disability benefits.”

Let’s see how this law may apply to an injured claimant’s evidence, for a good understanding of how this works in the real world. For example, John Smith, a military veteran, gets a job working as a security guard for a defense contractor as his first employment upon retiring from the Marines. He injures his back when he trips and falls on ammunition shells left on the grounds of a forward base in Iraq, resulting in a herniated disc in his lumbar spine for which he has surgery upon his transfer home. He files his Defense Base Act claim with OWCP within the one year limitations period, and the employer’s workers’ compensation carrier pays him Temporary Total Disability (TTD) benefits from his injury date in Iraq and continuing through his initial medical care, surgery, and post-operative recovery. As Mr. Smith had been earning about $117,000.00 per year doing this security work, he receives two-thirds of his usual pay of $4,500 bi-weekly (or about $3,000 every 2 weeks) as his TTD benefits.

Put another way, Mr. Smith established his “prima facie” case by submitting his DBA claim to OWCP along with medical evidence from his treating physicians and surgeon, establishing that his work-related back injury made him unable to return to his job as a security guard for his employer, at this normal non-stateside employment at the forward base in Iraq. His surgeon’s medical report stated specifically that his fall on base caused the herniated lumbar disc, which prevents Mr. Smith from doing the heavy security guard work, and which required the back surgery and need for rehabilitation. Thus, the carrier was obligated to pay these TTD benefits during such medical treatment, recovery and rehabilitation.

Of course, Mr. Smith’s employer (and its workers’ compensation carrier) is not satisfied with its recurring financial obligation to pay these wage-loss benefits. Rather, they seek to reduce (or even totally eliminate) this economic reality, the sooner, the better. As noted above, once a claimant establishes his “prima facie” case of total disability, the burden of proof switches over to the employer/carrier to show the availability of “alternative work” that Mr. Smith is capable of performing on a regular and continuing basis. Once this alternative work is established, the employer claims that total disability benefits are no longer payable to the injured claimant and at most, only partial disability benefits are owed. Again, let’s see how this law might apply to the evidence put forth by the employer in the real world.

Compensation for spinal injuries to the neck or back is valued based upon the loss of a worker’s earning capacity. Thus, even where the employer/carrier agree that Mr. Smith is unable to return to his usual employment as a security guard for this defense contractor at a forward base in Iraq, they do not agree that there is no work Mr. Smith is capable of performing. So the employer and its carrier will try and prove this fact by demonstrating that plenty of realistic jobs exist that Mr. Smith is capable of performing on a full-time, continuing basis.

Demonstrating Alternate Employment

The most common method of demonstrating the availability of suitable jobs that the injured worker is able to perform is through the services of a “vocational” or job expert. The employer/carrier usually hire this person to perform a “Labor Market Survey” in order to demonstrate that the injured worker has lost little or no earning capacity despite his injury. By surveying the relevant labor market, this vocational expert seeks to locate jobs that fall within the worker’s education, skills, physical limitations and other capacities imposed by his treating physicians and their consulting physicians, that are available to him. In Mr. Smith’s case, the employer’s vocational expert may list ten or more jobs within the Labor Market Survey believed to be available to him if he would just seek out these jobs. And if these jobs pay less that what Smith was making as a security guard, then they argue that he is only “partially disabled” and thus only entitled to two-thirds the difference between what he was making on his accident date, and what he is capable of making now.

Putting this into numbers, the employer’s argument goes like this:            

  1. On Mr. Smith’s accident date, he was being paid $117,000 per year;
  2. Due to his injury and surgery, his doctors testify that while he can no longer do the “heavy work” of a security guard in Iraq, he is capable of doing “light work” in the future;
  3. According to the employer’s Labor Market Survey, the vocational expert located 10 jobs at the “light duty” level of physical exertion, paying in the range of $50,000 and $120,000 per year, and located both stateside and for 2 jobs, outside of the United States.

Obviously, the Labor Market Survey creates the playing field in which the parties argue for the amount of a settlement of Mr. Smith’s DBA claim. For instance, Mr. Smith’s lawyer argues that if a settlement is based upon the light work that pays only $50,000/year, then his client has lost the difference between his pay before injury ($117,000) and pay after his injury ($50,000), which loss is equal to $67,000 lost earning capacity per year. By pointing to the number of years a normal 55-year-old worker would continue to work full time (until going on Social Security Retirement Income Benefits at age 67), the lawyer suggests that the minimum partial disability benefit settlement should be two-thirds (2/3) of the total 12 years lost, at $67,000 per year, which sum equals exactly $67,000 x 12 = $804,000.00.

On the other hand, the employer takes the other side by pointing to the light duty jobs within the Labor Market Survey paying the same or even more than Mr. Smith’s security job of $117,000. By pointing to alternate light duty jobs paying $100,000 per year or more (even though such jobs exist only outside the U.S.), the employer argues that the total 12 years of lost earning ability should be calculated using the offsetting $100,000/year job located by its vocational expert, and offer only the difference between his $117,000/year job and the $100,000/year he can now earn, on this value in settlement, i.e., $17,000/year x 12 years = $204,000.00. The employer exerts pressure on Mr. Smith to take this offer, by telling his lawyer that if the Administrative Law Judge believes that the $120,000/year light duty job is realistically available, then there would be no lost earning capacity damages because this new job pays more than Smith’s job on his accident date ($117,000) and thus, he would get nothing at all if he goes to trial and rejects the $204,000 settlement offer.

 What to Do – Accept or Reject Settlement Offer?

So what does Mr. Smith do, accept the low $204,000 offer or stand pat on his $804,000 offer and go to trial? What would you do?

The point of this article is to show how the parties involved in a Defense Base Act claim seek to reach a settlement value, not how to negotiate claims nor when to go to trial in the face of unreasonable offers of settlement. From the above-noted review, one can see that most settlement offers made by your employer and its workers’ compensation carrier are based upon calculating an injured worker’s lost earning capacity as demonstrated by the employer’s Labor Market Survey (LMS) relied upon to argue that the worker has little to no lost ability to earn money, despite his permanent injury even after a surgery. Yet as anyone who has a DBA, LHWCA or NAFIA claim will tell you, employers regularly make you a settlement offer to drop your claim. It is an entirely different matter to convince the employer to make a more reasonable offer, closer to your calculation than the one made to you by its workers’ compensation insurer.

But I can give you a snapshot of how a good lawyer representing Mr. Smith in his Defense Base Act claim will attack the employer’s settlement proposal. It can be described as “hard work,” the subject of our next DBA article!