Statutory Interest in PA Workers’ Comp is Simple, not Compound

Sometimes the issue is a workers’ compensation case in Pennsylvania is a very straightforward one. For example, is interest on past due workers’ compensation benefits in PA to be calculated using simple interest or compound interest?

This was the issue faced by the Commonwealth Court of Pennsylvania in Tobler v. Workers’ Compensation Appeal Board (Verizon Pennsylvania, Inc.). Here, the injured worker won a petition to reinstate workers’ comp benefits for damage to her hand. This involved a complicated litigation, so by the time the injured worker prevailed, she was owed several years of benefits.

As background, Section 406.1(a) of the Pennsylvania Workers’ Compensation Act (Act) says, “Interest shall accrue on all due and unpaid compensation at the rate of ten percentum per annum.” The Act does not specify whether that interest is simple or compound. In the past, the Pennsylvania Bureau of Workers’ Compensation had an interest calculator on their website, so the “correct” interest could be calculated by either party, removing most disputes. Since there is now no “official” method, this issue was inevitable.

In Tobler, the workers’ comp insurance carrier paid the injured worker the past due workers’ comp benefits with simple interest. The injured worker filed a Petition for Penalties, saying the interest should have been compound. After considering the facts of the case, all of which were agreed upon, the Workers’ Compensation Judge (WCJ) denied the Petition for Penalties. This was affirmed by both the Workers’ Compensation Appeal Board and the Commonwealth Court of Pennsylvania.

Essentially, since there is no language in the Act dictating the answer to this question, the Court looked to cases in other areas of law, and noted that the Supreme Court of PA has observed, ” . . . compound interest is not favored in the law and is permitted only where explicitly provided for by statute or in a contract.” Other legislation, and previous decisions by Commonwealth Court, with similar findings, were also observed. Ultimately, the Court concluded, “Claimant is entitled to an award of 10 percent simple interest on all past due compensation.”