Office of Workers' Compensation Programs (OWCP)

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Division of Longshore and Harbor Workers' Compensation (DLHWC)

CHAPTER 8-202 — LATE PAYMENT: SECTION 14(E) PENALTY

1. Purpose and Scope. This Chapter contains guidelines, procedures, and instructions for computing and applying the 10 percent additional compensation due. It is payable to a claimant when an installment (or any part of an installment) of compensation that is payable without an award is not paid within fourteen days after it becomes due. In these cases, the 10 percent additional compensation is to be applied and awarded in addition to the interest granted for delayed and past due payments. (See PM 8-201 for details on interest.)
2. General. Section 14(e) provides that if any installment of compensation payable without an award is not paid within fourteen days after it becomes due, an additional 10 percent shall be added to the compensation. This 10 percent is applicable unless a notice of controversion, stating good-faith grounds for non-payment, is filed pursuant to section 14(d) of the Act within 14 days after the employer obtains knowledge of the injury or after a controversy arises (e.g., the unilateral reduction or termination of payments). However, the delay in payment may also be excused by the DD if timely payment could not be made as a result of conditions beyond the employer's control.
3. Definition of Late Payment.
   1. Section 14(b) requires that compensation be paid initially on the fourteenth day after the employer is notified or aware of the injury, and that all compensation then due shall be paid. Following the initial payment, compensation is to be paid bi-weekly unless the DD determines otherwise. The usual practice is to pay compensation at two-week intervals. Since the 10 percent penalty does not apply to the first installment until fourteen days after the "due" date, this in effect allows 28 calendar days (from the date the employer first obtains knowledge of the injury) in which to pay the first installment. Compensation is “paid” when it reaches the claimant. If payment is not made within 28 days, 10 percent additional compensation must be paid. Note that in cases of delay between the injury (or the onset of disability) and employer awareness, all back compensation then accrued is due and subject to 10 percent augmentation if not paid with 14 days or controverted within 28 days (see PM 8-202.5). This often occurs in hearing loss and other occupational disease cases.
   2. The 10 percent may also be applied to each bi-weekly installment not paid within fourteen days after it becomes due. Until fourteen days have passed following the due date of any installment, however, the additional payment is not applicable.
   3. If partial payments are made by the employer, the Section 14(e) provisions apply only to the difference between the amount owed and the amount paid. This usually occurs when the employer pays benefits under a State Workers' Compensation Act and is then held liable under the LHWCA and a timely controversion has not been filed.
4. Effect of Controversion of Claim. If the claim is controverted within the time allowed by section 14(d) of the Act, the additional 10 percent is not assessed against the employer/insurer. The controversion notice should be submitted to the DO on or before the fourteenth day after the employer had knowledge of the injury or death. In the event that the controversion is not filed within that period, the 10 percent penalty applies to each unpaid installment until payments are current. However, the period of assessment stops on the date the notice of controversion is filed in the DO or the date an informal conference is held, whichever came first.
5. Claim for Further Compensation.
   1. If an employee sustains a compensable injury and the employer pays compensation without an award, in accordance with the provisions of Act, payments for temporary total disability continue until maximum medical improvement is reached and/or the injured employee returns to work at his/her usual rate of pay. When the EC suspends payments, Section 14(c) mandates that the employer immediately notify the DD by filing a Form LS-208, Notice of Final Payment or Suspension of Payments (Exhibit 21, PM 10-200), that payments have been stopped or suspended. If, however, the worker actually remains disabled, totally or partially, at that time, the additional 10 percent will apply to all payments thereafter that are not made timely, unless the EC has also filed a notice of controversion.
   2. The fact that the injured worker has reached maximum medical improvement, or has returned to work, or both, is not an adequate ground, in and of itself, for the suspension or termination of payments. The occupational duties may have to be modified to accommodate the claimant's work restrictions (so that there may be a continuing loss of wage-earning capacity, temporary or permanent, even if there is no continuing loss of actual earnings), or the worker may have a permanent schedule impairment that constitutes a permanent partial disability. Therefore, as long as the employer has actual knowledge of the injury, any payments that in fact turn out to have been due that are not paid within 14 days of the due date are augmented by 10 percent, unless the EC has filed a notice of controversion of the right to that payment by 28 days after the due date of that payment.
6. Payment by Check.
   1. Payment by check is considered proper tender for compensation, unless the check is found to be invalid because of insufficient funds, it is not promptly honored upon presentation, or for other reasons.
   2. No distinction is made between payment by check or by draft. If the check or draft is promptly honored by the drawee bank, the time of payment relates back to the date the check or draft is received by the payee. If the check or draft is not promptly honored by the drawee bank, payment is not considered to have been made until the check or draft is honored.
7. Delayed Payment Excused by DD.
   1. The DD may excuse delay in payment of compensation, thereby obviating assessment of the 10 percent penalty.
   2. Procedure. Delayed payment of compensation may be excused by the DD after the EC shows that, due to conditions over which it had no control, such payments could not be paid within the period prescribed for the payment. The CE handling the case shall request the reason in writing from the EC for any delayed payments, and on receipt of the reply recommend to the DD either that the 10 percent penalty be assessed or that it be excused. The DD will make the determination as to whether the explanation is sufficient to excuse the 10 percent penalty.
8. Calculation.
   1. This is not a "time-interest" payment based on a per annum rate; consequently, the 10 percent penalty is to be applied to all past due installments wherein compensation has not been paid within fourteen days following the due date. For example, if there are ten payments of $200 each, all of which are overdue, the total amount of unpaid compensation is $2,000, and 10 percent of that figure is $200, which is to be added to the $2,000, making $2,200 payable to the claimant.
   2. If, for example, the worker is entitled to $300 a week under the Act but the EC timely pays on the $200 a week due under state law, its first biweekly of $400 is $200 short; the second payment of $400 should be applied first to what is then already past due under the Act ($200 plus an additional 10 percent, or $220), so that only $180 of it is treated as satisfying the employer’s liability for the second $600 payment due. Since this leaves $420 due and unpaid, an additional $42 falls due under section 14(e) by the time the of the third biweekly payment. All of the third $400 payment goes to satisfy the EC’s overdue liability of $462 under the Act, and none of that payment counts as a timely satisfaction of the Claimant’s LHWCA rights. Thus section 14(e) will apply to all of the $600 payment then due under the Act, and of any subsequent payments until and unless the EC becomes current with respect to its LHWCA liability or files a valid notice of controversion.
   3. Interest is also applicable to all cases of delayed payments of compensation. That calculation must be made subsequent to and separately from the 10 percent penalty. The 10 percent penalty is applied only to the actual untimely paid compensation due, not including interest.
9. Period of Assessment. The Benefits Review Board and the courts have held that the employer's liability under section 14(e) does not apply to payments falling due on or after the date notice of controversion is filed in the office of the DD or the date of the informal conference, whichever occurs first. However, if the employer makes any further voluntary payments of compensation it is once again liable under section 14(e), and the various rules mentioned above are effective, if payments are again suspended without the filing of a new notice of controversion.