Interest and Penalties

A. Interest

When indemnity benefits are paid pursuant to an order, a mediation agreement or consent decree, regardless of whether they are specifically ordered, the employee is entitled to interest at 10% per year from "the date each payment was due, until paid." The Law Court has held that the date the payments are due is the date that they should have been paid if the employer/insurer had accepted liability and voluntarily paid timely benefits. There is an exception to this rule, however, when the Board determines that benefits were wrongfully suspended under 205(9)(A) or (B) (return-to-work and 21-day suspension). Under those circumstances, interest is due at a rate of only 6% per year.

Effective May 23, 1999, the Board passed a rule standardizing the formula to be used in the calculation of interest and further provides a table that must be used. The website http://www.comptools.com/me_interest.htm presents with a most efficient method of calculating benefits. The Board Rules provides two formulae for calculating interest, they are as follows:

1. To calculate interest when payment is made during the period of entitlement to benefits, the following formula shall be used:

(Weekly compensation x weeks of benefits) x Factor from Table A = Interest due

For example: A decree dated September 4, 1998 awards compensation at a rate of $300.00 per week from February 2, 1997 to the present and continuing. On September 5, 1998, compensation is paid for incapacity from February 2, 1997 through September 5, 1998. Calculate interest due as follows:

($300 x 83) x 0.079084 = $1,969.19

2. To calculate interest due between the date the last payment was due and the date of payment, the following formula shall be used:

((Weekly compensation x weeks of benefits) + Interest due) x days x 10%
365

The total amount of interest due will be the sum of formulae 1 and 2.

For example: A decree dated September 4, 1998 awards compensation at a rate of $300.00 per week from February 2, 1997 through July 26, 1997. On September 9, 1998, compensation is paid for incapacity from February 2, 1997 through July 26, 1997. Calculate interest as follows:

($300 x 25) x 0.022328 = $167.46 (representing interest due through July 26, 1997)

Then calculate the interest due between the date the last payment was due and the payment date:

(($300.00 x 25) + $167.46) x 405 x 10%  = $850.77 
365

This figure represents interest due from August 1, 1997 through September 9, 1998.

Finally, calculate the total amount of interest due:

$167.46 + $850.77 = $1,018.23

Interest is due whether or not there is any express reference to interest in the decision. It is also payable when past-due benefits are paid voluntarily without an award since the employee need only file a petition for an award in order to obtain mandatory payment.

B. Penalties

Penalties under Title 39-A apply to all dates of injuries. The Board Rules Ch. 15 sets forth guidelines and procedures for penalties for each relevant section of the Act. Here is a summary of penalty provisions of the Act : Delayed Indemnity Payments. $50/day (to a maximum of $1,500) added to benefits paid to a worker for each day past 30 that benefits are overdue unless there is an "ongoing dispute" (39-A M.R.S.A. §205(3)). Benefits are overdue 14 days after the claim is made (see BENEFIT PAYMENT). If late payment is due to the employer's failure to notify the carrier, then the employer is responsible for the penalty (39-A M.R.S.A. §205(5)).

• Delayed Medical Payments. In absence of dispute, $50/day (to a maximum of $1,500), paid to WCB Administrative Fund, for payments past 30 days after notice of nonpayment, and sent by certified mail (see MEDICAL FEE PAYMENT).
• Delayed Payment on Award. $200/day for each day after the 10th day following an order or decision (split $50 to the employee, the rest to the WCB) (39-A M.R.S.A. §324(2)).
• Questionable Claims Handling. The Board may audit claims handling procedures and assess up to $10,000 for patterns of questionable claims-handling techniques or unreasonably contesting claims in a repetitive manner (39-A M.R.S.A. §359).
• Reporting Violations. $100 for each failure to file requisite reports, such as First Reports, wage statements, rehabilitation forms, and the employee's required report upon returning to work (39-A M.R.S.A. §360).
• Mediation Sanctions. $100 for failure of an employer, insurer or employee representative to have full authority to make decisions regarding the claim. For failure to cooperate at mediation or until requested materials are provided, the Board may assess costs and attorneys' fees or suspend benefits (39-A M.R.S.A. §313(4,5)).
• Refusal To Fund Rehabilitation. If an employer refuses to implement a rehabilitation plan and it is mandated and the employee then returns to suitable employment (see REHABILITATION), the Board must order the employer to repay the Employment Rehabilitation Fund 180% of the plan costs (39-A M.R.S.A. §§217(3), 355(7));
• General Penalty. The Board may assess an individual up to $1,000 and a company up to $10,000 for any willful violation of law, fraud, or intentional misrepresentation. The Board can also require an employee to repay compensation obtained through such conduct, with interest (39-A M.R.S.A. §360).