Automatic Longshore Settlement Approvals and the Government Shutdown

Since last week, Longshore practitioners have debated whether Section 8(i) settlement agreements can be automatically approved during the government shutdown.  Typically, all Longshore settlements are reviewed by the assigned district director.  The district director has thirty days to review the settlement.  If the settlement is reasonable, the district director issues a compensation order directing the parties to pay the amount identified in the order–most likely the same amount contemplated in the settlement agreement.  But what if the district director does not issue a compensation order within thirty days?  Or, as in this case, what if there are no district directors to issue compensation orders because of the government shutdown?

Section 8(i) of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) contains a provision that allows for automatic approval of settlements when all parties are represented by attorneys.  Specifically, Section 8(i) states: “If the parties to a settlement are represented by counsel, then agreements shall be deemed approved unless specifically disapproved within thirty days after submission for approval.”  The Code of Federal Regulations contains a similar provision: “However, if the parties are represented by counsel, the settlement shall be deemed approved unless specifically disapproved within thirty days after receipt of a complete application.”  See 20 C.F.R. § 702.243.  The thirty day time period does not begin until all necessary settlement information has been submitted.

The reason why the automatic approval provision is important is because of Section 14(f) of the LHWCA.  If an employer and carrier fails to pay “any compensation, payable under the terms of an award . . . within ten days after it becomes due, there shall be added to such unpaid compensation an amount equal to 20 per centum thereof . . . .”  In other words, failure to pay awarded compensation within ten days after it becomes due could result in a hefty 20% penalty.  Because Section 8(i) has an automatic approval provision, a Section 14(f) penalty can be assessed against an employer or carrier that fails to pay the settlement amount within ten days of the automatic approval.

The issue now is whether settlements can be automatically approved during the government shutdown.  In my opinion, it depends.  Workers’ compensation schemes are meant to be self-executing.  Payments are made without having to resort to a court order.  In the absence of contrary law, the safer bet is to adhere to the automatic approval provisions and avoid the potential Section 14(f) penalty.

That’s not to say that distinctions can’t be drawn.  Consider a settlement that was submitted by represented parties 28 days before the government shutdown.  Day 30 comes after the Division of Longshore and Harbor Workers’ Compensation (“DLHWC”) closed its doors.  More likely than not, the automatic approval provision would take effect and the settlement would be deemed approved.  (Or at least that is how a cautious employer and carrier would approach this situation.)

In contrast, consider a settlement between represented parties that was submitted on October 2, 2013, after the shutdown started.  Would the 30-day automatic approval rule apply to this settlement?  There are arguments for both sides.  I lean towards the argument that the rule would not apply, and that the 30-day window would not start until the government shutdown ended.  I do not think that there would be “receipt of a complete [settlement] application” if there is no one at the DLHWC to actually receive the application.

Hopefully we will not have to consider these issues for much longer…