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- Purpose and Scope. This Chapter presents the policy,
procedures, and criteria for assessing interest, which is to be applied to all
compensation payments which are delayed or past due. The Chapter also includes
formulas and guidelines for computing interest by both the sliding interest and
straight interest methods.
- Policy.
- Interest Allowed on a Debt. Although the Longshore and Harbor
Workers' Compensation Act is silent regarding application of interest on
delayed compensation payments, such interest has been allowed under general law
imposing interest for failure to pay a debt when it becomes due and payable.
- Compensation Regarded as a Debt. The Federal Courts have
allowed the assessment of interest even though a particular statute contained
no provision for interest. Workers' compensation benefits, which are delayed
have been regarded as a debt, and, like any other past due debt, are liable for
interest assessed at the legal rate.
- Interest To Be Paid. In the case of Strachan Shipping Co.
v. Wedemeyer, 452 F.2d 1225 (5th Cir. 1971), the Circuit Court, affirming
the district court and the deputy commissioner, held that if payments were
unjustly withheld (and under the law, payments are wrongfully withheld if it is
eventually determined that they should have been paid), the party who withheld
payment should be compelled to pay lawful interest from the date the
claimant’s entitlement to the payment arose until the date the payment was
actually made.
- Mandatory Application of Interest. The BRB and the Federal
Courts have determined that payment of interest is mandatory. As a matter of
general procedure, reference to application of this interest shall be included
in all compensation orders awarding benefits after specifying the amount of the
award, by including the following language: together with interest payable on
each past due installment of compensation in accordance with the rate
established under 28 U.S.C. Section 1961.
- Timely Controversion does not relieve the responsible party
from paying interest on unpaid compensation.
- Interest Applicable to Unpaid Balance.
- Interest Applies Only to Unpaid Compensation. If an EC has
made partial payments, for example, under the terms of a state compensation
law, or has made payments at a pay rate less than that which is determined to
be correct, the interest applies only to the portion of the compensation which
was not paid.
- Payments Made Under a State Compensation Law are to be given
full credit. Where such payments do not equal those payable under the Longshore
and Harbor Workers' Compensation Act, however, the interest applies to the
difference between the amount of weekly payment made and that which is due for
the number of weeks during which the correct amount was not paid.
- Title 28 U.S.C. Section 1961. Interest is to be paid at the
rate determined under 28 U.S.C., Section 1961 as of the time an award is filed
(or payment of past-due benefits without an award is made). Grant v.
Portland Stevedoring Co., 16 BRBS 267 (1984), on recon. 17 BRBS 20
(1985). It is a uniform rate based on the 52-week United States Treasury Bill
yield immediately prior to the date the compensation order is filed in the
office of the District Director.
On a monthly basis, the NO mails the current applicable interest rate,
as published by the Department of Treasury, to each DO. The rate changes every
thirty days. The NO can be contacted by phone for specific requests.
- Two Formulas Used To Determine Interest.
- Most cases involving interest fall into two major categories:
- Payments at an unchanging fixed compensation rate that are unpaid
and every two weeks another payment accumulates during a period of entitlement;
and,
- Payments at a certain rate are past due, and the period of
entitlement at that rate has ended, regardless of whether additional payments
at a different rate are due after the end of the entitlement period at the
former rate.
- The first situation requires application of a formula which is
designated as sliding interest. The second situation requires the application
of a formula identified as straight interest.
- Sliding Interest Formula.
- This formula gives the accumulated bi-weekly interest between
the due dates of the first and last payments. It is based on the fact that the
payments due accumulated on a regular basis, i.e., there was no break in the
continuing of the entitlement and no change in the compensation rate.
INTEREST = |
(B x r) x (p2-p) |
|
26 x 2 |
Where:
B = The value of one bi-weekly payment
r = Rate of interest
p = Number of bi-weekly payments at the rate of B past due
26 = Number of bi-weekly payments in one year
- Application of Sliding Interest Formula. Following injury to
his right leg, claimant was paid appropriate temporary total disability
compensation through December 25, 1986, at which time he returned to work.
Maximum medical improvement was attained on February 11, 1987. On February 26,
1987, a compensation order, award of compensation was issued for 50% permanent
partial loss of use of the right leg. The award covered a period of 144 weeks
from February 12, 1987 to November 15, 1989, inclusive, at the rate of $70.00
per week in the amount of $10,080.00. The award was payable in bi-weekly
installments of $140.00. The first biweekly installment of $140.00 covering the
period February 12, 1987 to February 25, 1987, inclusive, was payable on
February 26, 1987. The insurance carrier objected to the order, but was
unsuccessful in its attempt to secure a stay. It failed to pay any of the first
twenty-two bi-weekly payments from February 12, 1987 to December 16, 1987,
inclusive. Payment was finally made on December 16, 1987 for this period. The
claimant's attorney requested that interest, at the rate of 6%, be added to the
overdue payments.
For this example:
B = $140
r = .06
p = 22
$140 x .06 |
x |
484 -
22 |
= |
$8.40 x
462 |
= |
$3,880.80 |
= |
$74.63 |
26 |
|
2 |
|
52 |
|
52 |
|
|
SLIDING INTEREST = |
$ 74.63 |
ACCRUED PAST DUE COMPENSATION = 22 x 140 = |
3,080.00 |
TOTAL PAST DUE PLUS INTEREST = |
$3,154.63 |
- Straight Interest Formula.
- If the award period at a given rate is completely expired
prior to payment a different formula is used to compute the interest accrued
following the due date of the last delayed payment at that rate. This type of
interest is termed "straight" interest and a formula, based upon bi-weekly
periods, must be used:
INTEREST = A x n x v
Where:
A = Total value of award without interest
n = Number of bi-weekly periods between date of final due installment
and date of payment
v = bi-weekly factor value, i.e., annual interest rate divided by 26
bi-weekly annual payments.
- Application of the Straight Interest Formula. For the sake of
illustration, assume that all the payments in an award of 144 weeks are delayed
and that payment of the entire amount of the award is made 19 weeks after the
due date of the last payment (November 15, 1989). The date payment was actually
made by the carrier would be March 28, 1990. Computation of the interest would
be as follows:
First compute the sliding interest using the formula in subparagraph
6.b, above:
For this example:
B = $140
r = .06
p = 72
140 x
.06 |
x |
5184 -
72 |
= |
$42940.8 |
= |
$825.78 |
26 |
|
2 |
|
52 |
|
|
Sliding Interest = $825.78
The straight interest is based on the number of bi-weekly periods from
November 15, 1989 to March 28, 1990 inclusive which is 9.5. The entire amount
of the award is equal to 72 times $140 or $10,080.
For this example:
A = $ 10,080
n = 9.5
v = .0023076 (.06 divided by 26)
$10,080 x 9.5 x .0023076 = $220.98
Straight Interest = $220.98
Summary:
- Accrued, past due compensation, covering the period of the award
from February 12, 1987 to November 15, 1989, inclusive = 72 x $140.00 =
$10,080.00
- Sliding interest on 72 biweekly payments due February 12, 1987 to
November 15, 1989, inclusive = $825.78
- Straight interest on total award for period November 16, 1989 to
March 28, 1990, inclusive = 220.98
- Past due payments plus interest equals the total of (1), (2) and
(3) = $11,126.76.
- Computation of Interest in Permanent Total Disability and Death
Cases and Others Where the Compensation Rate Has Changed During the Period of
Past-Due Entitlement.
- Neither the sliding nor the straight formula alone results in
an accurate calculation of interest due when applied to permanent total
disability and death cases, because the bi-weekly rate of compensation changes
each October 1. This is true except for those death cases where benefits are
paid for the death of a claimant who was permanently totally disabled and died
from unrelated causes (pre-1984 Amendment cases). In order to compute the
correct interest due, where the rate of past-due compensation has varied, both
formulas must be used as follows:
- When an award is made, break down the unpaid bi-weekly benefits
into yearly periods starting October 1 (or any date thereafter, if the first
period is less than a year) and ending on September 30 (or other separate
periods during which different rates were payable).
- Use the sliding interest formula for each period separately and
then add the results together.
- Apply the straight interest formula separately to the total
compensation due for each period, except the current one, and add these
together.
- The amount obtained from (2) added to the amount obtained from (3)
equals the total interest due.
- For purposes of illustration let us assume that an employee is
injured in July of 1986 and is permanently totally disabled. The employee is
awarded compensation plus interest, commencing on August 1, 1989. Assume that
the initial bi-weekly rate is $596, and the interest rate is 6%. In October of
1986, 1987 and 1988, the rate changes to $642, $688 and $744 respectively.
In order to fully understand the formula it is prudent that you
construct a table like the following example listed below:
Period |
Bi-weekly
Compensation Rate |
No. of Bi-weekly
Payments Due |
Total
Benefits |
08/06/86 - 09/30/86 |
$596 |
4 |
$ 2,384 |
10/01/86 - 09/30/87 |
$642 |
26 |
16,692 |
10/01/87 - 09/30/88 |
$688 |
26 |
17,888 |
10/01/88 - 07/31/89 |
$744 |
22 |
16,368 |
- First calculate Sliding Interest using the
formula: |
(B x r) x (p2 - p) |
|
26 x 2 |
Period 1
($596 x .06) |
x |
( 16 - 4) |
= |
$ 8.25 |
26 |
x |
2 |
|
|
Period 2
($642 x .06) |
x |
(676 - 26) |
= |
481.50 |
26 |
x |
2 |
|
|
Period 3
($688 x .06) |
x |
(676 - 26) |
= |
516.00 |
26 |
x |
2 |
|
|
Period 4
($744 x .06) |
x |
(484 - 22) |
= |
396.61 |
26 |
x |
2 |
|
|
Total Sliding Interest = $1,402.36
- Then calculate Straight Interest for all but the current period
using the formula: A x n x v
Period 1 |
$ 2,384 |
x |
74 |
x |
.0023076 |
= |
$ 407.10 |
Period 2 |
16,692 |
x |
48 |
x |
.0023076 |
= |
1,848.89 |
Period 3 |
17,888 |
x |
22 |
x |
.0023076 |
= |
908.12 |
Total Straight Interest = $3,164.11
- Adding the results of (1) and (2) gives a total of $4,566.47,
which is the interest due on the unpaid compensation of $53,332, this
accumulated over four years.
- If interest has been paid for all intents purposes and the
amount appears approximately correct, and there is no inquiry from either
party, it is not necessary for the CE to compute the precise amount due. For
the most part courts leave the calculation and payment of interest awarded in
judgments to the parties, so District Directors may allow the parties to
calculate the interest due for unpaid compensation, as long as there is no
dispute. However, in some instances the ALJ will delegate his authority and
specify in the Order that all calculations of interest will be computed by the
District Director.
- The interest formulas are contained in the LCMS. Problems
should be brought to the attention of the Director, DLHWC.
- There could well be discrepancy as to whether the twenty
percent penalty provisions of section 14(f) are applicable to interest
payments. Reference Nelson v. Stevedoring Services of America, 29 BRBS
99 (1995) and Sproull v. Director, OWCP, 30 BRBS 49(CRT)(9th Cir. 1996), for conflicting opinions. Refer questions regarding such a conflict
to the Director, DLHWC.
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