              IN THE COMMONWEALTH COURT OF PENNSYLVANIA


CMR Construction of Texas,              :
                Petitioner              :
                                        :   No. 693 C.D. 2016
            v.                          :
                                        :   Submitted: December 30, 2016
Workers’ Compensation Appeal            :
Board (Begly),                          :
                Respondent              :


BEFORE:     HONORABLE RENÉE COHN JUBELIRER, Judge
            HONORABLE PATRICIA A. McCULLOUGH, Judge
            HONORABLE JAMES GARDNER COLINS, Senior Judge



OPINION BY
JUDGE McCULLOUGH                             FILED: June 26, 2017


            CMR Construction of Texas (Employer) petitions for review of the
March 31, 2016 order of the Workers’ Compensation Appeal Board (Board), which
affirmed the order of a Workers’ Compensation Judge (WCJ) granting a petition for
penalties filed by Keith Begly (Claimant).    This case presents an issue of first
impression regarding an employer’s purported financial inability to pay a WCJ’s
award intertwined with payment of such award by the Uninsured Employers
Guaranty Fund (the Fund).


                            Facts and Procedural History
            The underlying facts of this case are not in dispute. Claimant originally
began working as a sales representative for CMR Construction and Roofing of
Minnesota, a different entity than Employer, in April of 2010 in the Cleveland, Ohio
area. As business opportunities depleted in that area, Claimant relocated to Pittsburgh
in May of 2011 and began working for Employer in that area. Claimant’s job
required him to solicit contracts for Employer to perform home repairs. Claimant
later moved to the Mercersburg area but continued the same work for Employer. In
the course and scope of his employment on January 5, 2012, Claimant fell from a
roof and sustained injuries in the nature of a ruptured aorta, pneumothorax, fractured
left shoulder blade, and multiple rib fractures. (WCJ’s 2014 Decision, Finding of
Fact No. 7.)
               Claimant filed a claim petition on March 28, 2012. Employer filed an
answer denying the material allegations of Claimant’s petition and alleging that
Claimant was an independent contractor, not an employee. Upon notification in April
of 2012 that Employer lacked workers’ compensation insurance coverage, Claimant
immediately filed a notice of claim against the Fund. On May 10, 2012, Claimant
filed a claim petition against the Fund. The matter was assigned to the WCJ, who
held multiple hearings. At these hearings, Claimant testified as to the facts described
above. Employer presented several witnesses in an attempt to establish that Claimant
was an independent contractor. However, Employer was unsuccessful as the WCJ
found that Employer failed to establish an independent contractor relationship with
Claimant under the applicable Construction Workplace Misclassification Act.1
(WCJ’s 2014 Decision, Findings of Fact Nos. 1-11.)

                              WCJ’s 2014 Decision and Order
               By decision and order circulated on April 3, 2014, the WCJ granted
Claimant’s claim petition and awarded him total disability benefits for the period

      1
          Act of October 13, 2010, P.L. 506, 43 P.S. §§933.1-933.17.



                                                 2
from January 1, 2012, through February 14, 2012, and partial disability benefits from
February 15, 2012, and ongoing.       The WCJ rejected Employer’s argument that
Claimant was an independent contractor and found that he was an employee of
Employer. The WCJ also found that, as of the date of the injury, Employer did not
have insurance for work injuries occurring in Pennsylvania and that its policy only
covered Texas employees.      Hence, the WCJ concluded that Employer must be
considered uninsured and directed that should Employer fail, or be unable, to pay the
ordered compensation to Claimant, such compensation shall be paid by the Fund.
Claimant, Employer, and the Fund filed cross-appeals with the Board. Employer and
the Fund also filed supersedeas requests with the Board, but the same were denied by
orders dated May 20, 2014. Subsequently, by decision and order dated October 21,
2015, the Board affirmed the WCJ’s order insofar as it granted Claimant’s claim
petition, but remanded the matter to the WCJ for further findings strictly in regard to
the appropriate amount of Claimant’s average weekly wage. (Reproduced Record
(R.R.) at 4a-17a.)

                                  Penalty Petition
             In the meantime, on August 1, 2014, Claimant filed a penalty petition
alleging that Employer had failed to commence payments in accordance with the
WCJ’s April 3, 2014 decision and order. Employer filed an answer denying the
substantive allegations of Claimant’s petition. However, at a hearing before the WCJ
on September 8, 2014, Employer stipulated that it had not made any payments to
Claimant.   Employer noted that the Fund began making biweekly payments to
Claimant as of September 1, 2014. (R.R. at 18a-21a, 64a.)
             Employer also presented the deposition testimony of Steven Soule, its
vice president. Soule stated that he is in charge of Employer’s operations and was


                                          3
aware of the WCJ’s April 3, 2014 decision awarding Claimant benefits, including past
due benefits and medical expenses. Soule alleged that Employer could not afford to
comply with the WCJ’s order due to its poor financial condition, noting that
Employer had recently entered into a plan to repay approximately $1 million in debt
and that Employer had an additional $100,000.00 to $200,000.00 in credit card
obligations. Soule also noted that Employer’s financial condition had improved late
in 2014 such that it entered into an agreement to make monthly payments to the Fund
in the amount of $1,000.00.2 (R.R. at 24a, 28a-33a.)
               On cross-examination, Soule acknowledged that Employer had not made
any disability payments to Claimant or paid any of Claimant’s medical bills as
directed by the WCJ’s April 3, 2014 order. Soule also stated that the repayment to the
Fund was set to begin in December 2014 and that Employer had transmitted funds to
its counsel, but he was not aware if counsel had forwarded the same to the Fund.
Soule noted that Employer was still operating in Pennsylvania. (R.R. at 47a-55a.)

                              WCJ’s 2015 Decision and Order
               By decision and order circulated June 11, 2015, the WCJ granted
Claimant’s penalty petition. Based on Soule’s admissions, the WCJ found that the
evidence of record clearly established that Employer was in violation of his previous
order. (Finding of Fact No. 5.) The WCJ also found that Employer’s purported
inability to afford to comply was “not justification for being in violation of the Act.”

       2
         Section 1605(b) of the Workers’ Compensation Act (Act), Act of June 2, 1915, P.L. 736,
added by the Act of November 9, 2006, P.L. 1362, 77 P.S. §2705(b), authorizes the Department of
Labor and Industry, on behalf of the Fund, to “exhaust all remedies at law against the uninured
employer in order to collect the amount of a voluntary payment or award . . . costs, interest,
penalties, [attorney] fees . . . and costs of the fund’s attorney, which have been paid by the fund.”




                                                 4
Id. Further, the WCJ found that Employer had an obligation to pay the 2014 award
and the “mere fact that the Fund did not start doing so until September, 2014, does
not relieve them [sic] of that general obligation.” Id. The WCJ thereafter imposed a
50% penalty against Employer on all past due compensation owed to Claimant. 3
      Employer appealed to the Board, but the Board affirmed the WCJ’s decision.
Employer thereafter filed a petition for review with this Court, along with a petition
for supersedeas. By opinion and order dated July 25, 2016, we denied the latter
petition.


                                           Discussion
               On appeal to this Court, Employer argues that the Board erred as a
matter of law in affirming the WCJ’s decision as the same ignores the legislative
intent behind creation of the Fund and its demonstrated financial inability to comply
with the WCJ’s award. We disagree.
               Section 435(d) of the Workers’ Compensation Act (Act)4 addresses
penalties and provides, in pertinent part, that:
               (d) The department, the board, or any court which may hear
               any proceedings brought under this act shall have the power
               to impose penalties as provided herein for violations of the
               provisions of this act or such rules and regulations or rules
               of procedure:
                       (i) Employers and insurers may be penalized a
                       sum not exceeding ten per centum of the
                       amount awarded and interest accrued and
                       payable: Provided, however, That such penalty

      3
         The WCJ further concluded that Employer’s contest was unreasonable and awarded
Claimant counsel fees in the amount of $2,125.00.

      4
          Added by the Act of February 8, 1972, P.L. 25 , as amended, 77 P.S. §991(d).



                                                 5
                      may be increased to fifty per centum in cases
                      of unreasonable or excessive delays. Such
                      penalty shall be payable to the same persons to
                      whom the compensation is payable.

77 P.S. §991(d)(i).
             Even if a violation of the Act is established, the assessment of penalties,
as well as the amount of penalties imposed, is discretionary, and absent an abuse of
discretion by the WCJ, this Court will not overturn the WCJ's decision on appeal.
Westinghouse Electric Corporation v. Workers' Compensation Appeal Board
(Weaver), 823 A.2d 209, 213 (Pa. Cmwlth. 2003). “An abuse of discretion is not
merely an error of judgment but occurs, inter alia, when the law is misapplied in
reaching a conclusion.” Id. at 213-14. In other words, a WCJ’s decision as to
penalties will only be reversed where the WCJ has misapplied the law.
             Section 428 of the Act, 77 P.S. §921, essentially provides that an
employer violates the Act if it fails to make payments within thirty days of the date on
which its obligation to pay arises. Additionally, section 430(b) of the Act specifically
cautions that “[a]ny insurer or employer who terminates, decreases or refuses to make
any payment provided for in the [WCJ’s] decision without filing a petition and being
granted a supersedeas shall be subject to a penalty as provided in Section 435. . . .”
77 P.S. §971(b). Indeed, only a grant of supersedeas relieves an employer of an
obligation to pay.      Indiana Floral Co. v. Workers’ Compensation Appeal Board
(Brown), 793 A.2d 984, 991 (Pa. Cmwlth. 2002). In Indiana Floral Co., we held that
the employer was obligated to pay the claimant disability benefits once its request for
supersedeas was denied, that a violation of the Act occurred when the employer did
not begin paying claimant’s benefits, and that the employer’s subsequent four-month
delay in making such payments justified the WCJ’s award of a 50% penalty.



                                            6
               Here, Employer admittedly violated the Act by failing to make any
disability payments to Claimant or pay Claimant’s work-related medical expenses
within 30 days of the WCJ’s April 3, 2014 decision.                  While Employer sought
supersedeas from the Board, the Board denied Employer’s request by order dated
May 20, 2014. Moreover, while Employer cited a financial inability to pay the
WCJ’s award, it has not offered any authority to support an argument that a purported
inability to pay forecloses the imposition of penalties. Indeed, Employer made the
decision not to seek workers’ compensation insurance coverage for its out-of-state
employees. Employer’s actions amounted to a refusal to pay the award.
               Nevertheless, Employer asks this Court to ignore its blatant violation of
the Act in light of the existence of the Fund and the Fund’s obligation to pay Claimant
benefits. Employer points to section 1602(c) of the Act, which sets forth the purpose
of the Fund as follows:

               The administrator shall establish and maintain the fund for
               the exclusive purpose of paying to any claimant or his
               dependents workers’ compensation benefits due and
               payable under this act and the act of June 21, 1939 (P.L.
               566, No. 284), known as The Pennsylvania Occupational
               Disease Act, and any costs specifically associated therewith
               where the employer liable for the payments failed to insure
               or self-insure its workers’ compensation liability under
               section 305 at the time the injuries took place.
77 P.S. §2702(c).5 The Fund itself is not considered an insurer and is not subject to
penalties or unreasonable contest attorney fees. See Section 1601 of the Act, 77 P.S.
§2701 (definition of “Fund”).6


      5
          Section 1602 of the Act was added by the Act of November 9, 2006, P.L. 262.

      6
          Section 1601 of the Act was added by the Act of November 9, 2006, P.L. 262.



                                                7
               However, Employer misconstrues the intent behind the creation of the
Fund. While Employer correctly noted that the establishment of the Fund created a
third-party that would be responsible for the payment of claims, it was created to
protect an injured worker and his right to be compensated for work-related injuries.
The Fund was not created to protect the uninsured employer or otherwise shield such
an employer from its obligations under the Act, as evidenced by section 1605(b) of
the Act, noted above, which authorizes the Department of Labor and Industry, on
behalf of the Fund, to seek reimbursement of any award paid by the Fund, as well as
penalties, interest and attorney fees, from the responsible employer.7
               Employer also attempts to shift the focus in this case to the Fund’s delay
in paying benefits until September 1, 2014. Employer notes that the Fund “was
aware of the fact that [it] had not paid the Claimant compensation benefits prior to the
initiation of the Penalty Petition and, thus, its delay in providing benefits to the
Claimant was unreasonable.” (Employer’s brief at 16.) However, as the WCJ aptly
noted, the obligation to pay the 2014 award was on Employer and the fact that the
Fund ultimately commenced such payments did not relieve Employer of its
obligation. While Employer has claimed a purported financial inability to satisfy its
obligation, it has not cited to any precedent or specific statutory language which
would allow for such an exception to the payment of benefits.8
               Because the WCJ’s April 3, 2014 decision and order directed Employer
to pay Claimant compensation benefits and any work-related medical expenses, and


       7
         The Fund itself is not considered an insurer and is not subject to penalties or unreasonable
contest attorney fees. See Section 1601 of the Act, 77 P.S. §2701 (definition of “Fund”).

       8
         To the extent that Employer asks this Court to revisit and grant its supersedeas request in
the underlying appeal, we decline to do so in light of our disposition of this case.



                                                 8
Employer admittedly failed to do so, Employer violated the Act and the WCJ
properly awarded penalties to Claimant. Neither the existence of the Fund nor the
Fund’s corresponding duty to commence said payments in light of Employer’s
uninsured status, altered Employer’s obligations under the Act.


                                   Attorney Fees
            Finally, we address Claimant’s request for attorney fees pursuant to
Pa.R.A.P. 2744.    Pa.R.A.P. 2744 provides that an appellate court may award
reasonable counsel fees and damages for delay at the rate of six percent if the court
determines that the “appeal is frivolous or taken solely for delay or that the conduct
of the participant against whom costs are to be imposed is dilatory, obdurate, or
vexatious.” This Court has held that a “frivolous” appeal implies that “no justiciable
question has been presented and that the appeal is readily recognizable as devoid of
merit in that there is little prospect of success.” Hewitt v. Commonwealth, 541 A.2d
1182, 1185 (Pa. Cmwlth. 1988), appeal denied, 554 A.2d 511 (Pa. 1989).
            In this case, Employer consistently maintained its arguments before the
WCJ, the Board, and this Court that its financial inability to pay the WCJ’s award,
coupled with the responsibility of the Fund to commence payments of the same,
precludes a further award of penalties in Claimant’s favor.       While Employer’s
arguments were ultimately unsuccessful, we cannot conclude that the same were
frivolous or meant solely for delay. Thus, we decline to impose attorney fees on
Employer under Pa.R.A.P. 2744.




                                          9
            Accordingly, the order of the Board is affirmed and Claimant’s request
for attorney fees under Pa.R.A.P. 2744 is denied.




                                          ________________________________
                                          PATRICIA A. McCULLOUGH, Judge




                                          10
             IN THE COMMONWEALTH COURT OF PENNSYLVANIA


CMR Construction of Texas,               :
                Petitioner               :
                                         :    No. 693 C.D. 2016
            v.                           :
                                         :
Workers’ Compensation Appeal             :
Board (Begly),                           :
                Respondent               :


                                     ORDER


            AND NOW, this 26th day of June, 2017, the order of the Workers’
Compensation Appeal Board, dated March 31, 2016, is hereby affirmed. The
request of Keith Begly for attorney fees pursuant to Pa.R.A.P. 2744 is denied.



                                             ________________________________
                                             PATRICIA A. McCULLOUGH, Judge
