The Facts About De Facto Awards
In contrast to an actual award, a de facto award is “a legal fiction crafted by the courts, ‘a creature of case law not statutory law.'” Lysable Transport, Inc. v. Patton, 57 Va. App. 408, 414, 702 S.E.2d 596, 598 (2010) (quoting Ryan’s Family Steak Houses v. Gowan, 32 Va. App. 459, 465, 528 S.E.2d 720, 723 (2000) (Bumgardner, J., concurring)). Because it is a judge-made doctrine, [the courts] have been careful not to expand de facto awards beyond their initial purposes and parameters. Id. at 415, 702 S.E.2d at 599; Roske v. Culbertson Co., 62 Va. App. 512, 523, 749 S.E.2d 550, 556 (2013). De facto awards are based on Va. Code § 65.2-701(A), which provides that if, after an injury, “the employer and the injured employee or his dependents reach an agreement in regard to compensation or in compromise of a claim for compensation under this title, a memorandum of the agreement in the form prescribed by the Commission shall be filed with the Commission for approval.”
The Virginia Court of Appeals first recognized this legal fiction in National Linen Service v. McGuinn, 5 Va. App. 265, 362 S.E.2d 187, a case in which the employer paid temporary total disability payments to the claimant for thirteen months but failed to execute or submit a memorandum of agreement to the Commission. Affirming the Commission’s award of benefits, the Court concluded that the combination of a failure to file a memorandum of agreement as required by law, the payment of compensation for thirteen months, and the failure to contest the compensability of the injury justified the imposition of a de facto award of benefits against the employer. Id. at 269-70, 362 S.E.2d at 189.
Subsequently the Court, in Lysable, “later clarified that the de facto order doctrine was not invoked simply because the employer made voluntary payments, but there must be an ‘actual agreement or stipulation,’ instead of an ‘imputed or stipulation.’” Lysable, 57 Va. App. at 416. Specifically, in Lysable, the Court stated, in pertinent part, as follows:
The de facto award doctrine applies only when “the employer has stipulated to the compensability of the claim, has made payments to the employee for some significant period of time without filing a memorandum of agreement, and fails to contest the compensability of the injury . . . .” Gowan, 32 Va. App. at 463, 528 S.E.2d at 722 (emphasis added). Only then is it “reasonable to infer that the parties have reached an agreement,” id. (quoting McGuinn, 5 Va. App. at 269-70, 362 S.E.2d at 189), regarding the compensability of the claim.
Making voluntary payments, by itself, falls far short of satisfying the preconditions of the de facto award doctrine. “An employer and carrier are not estopped from denying future payments merely because they have paid them in the past.” Rucker v. Thrift Transfer, Inc., 1 Va. App. 417, 420, 339 S.E.2d 561, 562 (1986)(citing Salem v. Colegrove, 228 Va. 290, 295, 321 S.E.2d 654, 656-57 (1984)). An employer’s “voluntary payment of compensation or disability benefits does not waive its right to assert defenses,” Watts [v. P & J Hauling, Inc.], 41 Va. App. at 286, 584 S.E.2d at 461 (making exceptions for “fraud or concealment”), because employers should be free “to make voluntary payments without running the risk of being held thereby to have made an irrevocable admission of liability,” 7 Arthur Larson & Lex K. Larson, Larson’s Workers’ Compensation Law § 127.04 (2010). It would be wholly unreasonable for a claimant to think otherwise. As the Commission warned Patton in this very case: “The fact that you may have been paid benefits without an award does not protect your legal rights.”
The de facto award doctrine permits the Commission to impute an award based upon an actual agreement or stipulation. It does not authorize the Commission to impute an award based upon an imputed agreement or stipulation. Doing so would be little more than piling one legal fiction upon another. For this reason, an actual agreement or stipulation has been an essential element in every case in which we have applied the doctrine.
Lysable at 415-416.
In the case of Mitchell v. Weather Control, Inc. Record No. 0415-21-4 (Oct. 5, 2021), agreement forms were mailed to the claimant and/or his attorney for an injury alleged in the first of two claims for benefits, but they were never returned. The employer continued to pay the claimant temporary total disability benefits as well as medical benefits which included the cost of two surgeries. The claimant subsequently filed a second claim for benefits alleging additional injuries and requested a hearing when asked about the status of the previously sent agreement forms. The parties subsequently engaged in discovery and, at hearing, the employer disputed the compensability of the claimant’s injuries.
At hearing, the claimant sought a de facto award based upon the employer’s voluntary payment of benefits. The deputy commissioner denied the claimant’s request for a de facto award. On appeal, the Commission affirmed, holding, in pertinent part, as follows:
In this case, the evidence does not show that the employer accepted the claimant’s claim and simply failed to file the appropriate agreement forms reflecting acceptance of the claim. Instead, the carrier sent agreement forms to the claimant shortly after the accident, and the claimant never signed or returned them. The defendants contested the compensability of the claim prior to the hearing, based upon the evidence as to how the accident occurred. Furthermore, even if they did for some period agree to a compensable accident, when the claimant filed his claim on April 13, 2020, he alleged additional injuries to his right leg, back, and neck, beyond his treated left leg injury. As the compensability of the accident was in question and the injuries claimed were beyond any potentially agreed upon left leg injury, there is no evidence of an actual agreement or stipulation, and a de facto award is not appropriate.
Mitchell v. Weather Control, Inc., JCN VA00001502418 (March 29, 2021).
On appeal to the Court of Appeals, the claimant argued that a de facto award existed because the employer voluntarily paid indemnity and medical benefits for over two years without contesting the compensability of the claimant’s claim, that the employer’s “affirmative actions [went] beyond voluntary payments, telling the Commission that there was an agreement, [which] would have allowed the Commission to impute an award based upon an actual agreement” and that there was a “miscommunication” between the parties which caused him to request a hearing rather than sign the agreement forms.
The Court of Appeals rejected the claimant’s arguments and found as follow:
The de facto award doctrine does not apply in this case because the record shows that there was no actual agreement between the claimant and the employer. As the Commission found, the claimant neither signed nor returned the agreement forms to the employer, manifesting that he had not actually agreed to the terms employer offered. While the claimant summarily concludes on brief that a miscommunication between the parties caused him to request a hearing rather than sign the agreement forms, he cites no evidence in the record of such a miscommunication. Instead, the record demonstrates that there was no agreement between the parties and the employer consistently contested the compensability of the claimant after the claimant amended and enlarged his claim and requested a hearing.
The holding in Mitchell is consistent with long-standing case law and highlights the issues to be aware of when defending a claim in which the circumstances may be present for the existence of a de facto award. It is important to keep in mind that the de facto award doctrine only applies when an employer (1) agrees to the compensability of the claim, (2) makes payments to the claimant over an extended period of time, and (3) does not contest the compensability of the claim. McGuinn, 5 Va. App. at 269, 362 S.E.2d 187 at 189. Voluntary payments of compensation, on their own, do not satisfy the elements of the de facto award doctrine nor does it waive an employer’s right to assert defenses. In order for there to be a de facto award, there must be an actual agreement or stipulation which is what allows the Commission to impute an award. The Commission cannot, as it was invited by the claimant to do in Mitchell, impute an award based upon an imputed agreement or stipulation. To successfully defend against the entry of a de facto award, always remember that an actual agreement or stipulation must be present and that, when appropriate and supported by the evidence, the compensability of the claim is contested. One Commissioner issued a concurring opinion in which he conceded that, “[u]nder the current law . . . the record before us is lacking in sufficient evidence to establish the employer accepted the claim.”
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