On appeal from the Division of Workers' Compensation.
Petrella, Havey and Stern. The opinion of the court was delivered by Havey, J.A.D.
In this workers' compensation case, the primary issue raised on appeal is whether an employer may modify or rescind a pre-hearing offer of compensation to an employee for partial-permanent disability made pursuant to N.J.S.A. 34:15-64. The judge of compensation concluded that an unpaid offer may be modified or rescinded prior to entry of the award. We agree and now affirm.
The facts are not in dispute. Petitioner suffered a compensable injury to his right hand on May 18, 1987. Respondent paid petitioner 20 weeks of temporary disability until October 5, 1987, at the rate of $268.80 per week, for a total of $5,376. Respondent also made an "Offer and Tender" to petitioner of 52.5 weeks at $80 per week for partial-permanent disability, totaling $4,200. Pursuant to this offer, payments were made in the amount of $80 per week from October 5, 1987 until February 21, 1988. The offer was based on respondent's estimate that petitioner had sustained a 75% partial-permanent loss of use of the first finger of the right hand, and 2 1/2% partial-total relating to skin removed from a donor site.
On March 7, 1988, respondent notified petitioner that he had been overpaid temporary disability in the amount of $1,456 based on an incorrect rate applied by respondent. Payment was made at the rate of $268.80 per week, rather than at the correct rate of $196. Respondent advised petitioner that it was suspending the $80 per week payments on partial-permanent until June 29, 1988.
As of the time of the hearing, conducted on October 5 and November 16, 1988, respondent had paid $2,744 to petitioner for his partial-permanent disability. At the hearing, petitioner argued that since respondent had made an offer of $4,200, it should be compelled to pay the entire amount. The judge of compensation disagreed, concluding that an offer to pay made pursuant to N.J.S.A. 34:15-64 is not a "voluntary offer until the payment is made" and therefore, respondent may modify or withdraw the offer to pay the unpaid balance at any time prior to the entry of the award. The judge thereupon reviewed the evidence adduced at the hearing and concluded that petitioner sustained a 50% permanent-partial disability of the right first finger and 25% of the right second finger, entitling him to 35 weeks at the rate of $80 per week, for a total of $2,800. Also, the judge rejected respondent's demand for a recoupment of the $1,456 in overpayment for temporary disability, concluding that he had no authority under the Workers' Compensation Act to order such a recoupment.
The thrust of petitioner's argument on appeal is that an offer once made by respondent is irrevocable unless petitioner rejects the offer prior to the hearing. He argues that respondent's pre-hearing suspension of the $80 per week payments deprived him of the benefit of the offer since, if respondent had not suspended payments, petitioner would have received the entire $4,200 as of the date of the hearing.
N.J.S.A. 34:15-64 allows a judge of compensation to award petitioner attorney fees not to exceed 20% of the judgment. It also provides, in pertinent part, that:
When, however, at a reasonable time, prior to any hearing compensation has been offered and the amount then due has been tendered in good faith or paid within 26 weeks from the date of the notification to the employer of an accident or an occupational disease or the employee's final active medical treatment or within 26 weeks after the employee's return to work whichever is later or within 26 weeks after employer's notification of the employee's death, the reasonable allowance for attorney fee shall be based upon only that part of the judgment or award in excess of the amount of compensation, theretofore offered, tendered in good faith or paid.
The Legislature's evident intent in passing N.J.S.A. 34:15-64 was to encourage employers to offer compensation at a reasonable time prior to the hearing by providing a mechanism for reducing the amount of attorney fees that may be awarded when the employer has made such an offer in good faith. See Young v. Western Elec. Co., Inc., 96 N.J. 220, 226, 475 A.2d 544 (1984). The provision serves the remedial purpose of encouraging employers to comply promptly with their affirmative obligation to pay compensation benefits when they first receive notice of a work-connected accident and resulting disability. Moore v. Magor Car Corp., 27 N.J. 82, 86, 141 A.2d 536 (1958). Thus, N.J.S.A. 34:15-64 has a dual purpose: first, to create "additional incentive for a prompt response by the employer to the workman's claim for benefits," and second, to give greater protection to the claimant's attorney who invests substantial time and effort prior to the offer to pay. Moore, supra, 27 N.J. at 87, 141 A.2d 536; see also Davala v. American Bridge Co., 36 N.J. Super. 274, 278, 115 A.2d 581 (App.Div.1955). Of course, the offer, tender or payment must not only be timely, but be made unconditionally and in good faith. Coponi v. Federal Industries, 31 N.J. 1, 6-8, 155 A.2d 1 (1959).
We do not glean from this statutory language a legislative intent to make such good faith offers binding and irrevocable to the extent that payments pursuant thereto have not yet been made. Firstly, the provision does not state that the offer is irrevocable. Secondly, to so hold would deny the employer the right to rescind an offer improvidently made, perhaps based on an inaccurate or insufficient medical examination of petitioner. Such a result frustrates the statutory purpose of providing permanent disability to an employee only to the extent he or she has suffered physical impairment. See Young, supra, 96 N.J. at 226, 475 A.2d 544; Perez v. Pantasote, Inc., 95 N.J. 105, 111, 469 A.2d 22 (1984). Moreover, it ...