Simply stated, a commutation is the legal term for a petitioner asking the court to accelerate the payment of an award to answer some pressing need of the claimant.
Commutation reduces exposure in two ways:
- Any commuted payment made is discounted 5%. Therefore, payments of compensation which are made under Order For Commutation save the insured money. (So, a commutation reduces the amount the respondent has to pay).
- The payment of commutation is deemed to shorten the period of overall benefits. A claimant, under the New Jersey Workers’ Compensation Act, has two years to re-open a claim from the time the last payment was paid. By commuting payments, the period for re-opener is shortened.
So, when is commutation available in New Jersey workers’ compensation cases? It turns out that it is only available in specific circumstances.
What the Law Allows
The Statute states as follows:
34:15-25. Commutation of award
Compensation may be commuted by the bureau at its present value, when discounted at five per centum (5%) simple interest, upon application of either party, with due notice to the other, if it appears that such commutation will be for the best interest of the employees or the dependents of the deceased employee, or that it will avoid undue expense or undue hardship to either party, or that the employee or dependent has removed or is about to remove from the United States, or that the employer has sold or otherwise disposed of the greater part of his business or assets.
Unless so approved, no compensation payments shall be commuted.
In determining whether commutation will be for the best interest of the employee or the dependents of the deceased employee, or that it will avoid undue expense or undue hardship to either party, the bureau and the Superior Court will regard the intention of this chapter that compensation payments are in lieu of wages, and are to be received by the injured employee or his dependents in the same manner in which wages are ordinarily paid. Commutation is to be allowed only when it clearly appears that an unusual circumstance warrants a departure from the normal manner of payment and not to enable the injured employee or dependents of a deceased employee to satisfy a debt, or to make payment to physicians, lawyers or others.
A respondent does not usually object to paying a commuted award.
Case Law Example
Piskorz v. Beno Stucco Systems Corp. discusses the availability of commutation. The petitioner filed a motion for commutation of his workers’ compensation award, stating he wanted to leave America and open a business in Poland. According to the petitioner, he needed his money NOW because he had obtained the promise of a financial subsidy from the European Regional Development Fund for $60,000.00 to open the business. However, as a condition of the approval, he had to provide his own matching personal funds of $60,000, otherwise he would not receive the subsidy.
The Judge of Compensation inquired as to whether the petitioner (a) had the matching funds, or (b) had any experience running a business. The petitioner could not verify that even with the grant of a commutation he would have the funds necessary to get a matching grant and had no experience running a business.
The Judge of Compensation denied the motion because the petitioner failed to prove: (1) he planned to actually move from the U.S., and (2) his particular circumstances warranted a departure from the usual method paying a workers’ compensation award.