Exception to workers' compensation subrogation in Pennsylvania

Subrogation on the part of an employer is a fundamental concept in Pennsylvania workers' compensation law.  The underlying principle is that an employer should be entitled to be repaid for the workers' compensation benefits that it paid to an injured worker as a result of the negligence of a third party.

In Pennsylvania, an injured employee is entitled to workers' compensation benefits if he or she is hurt while engaged in an activity at work that promotes the employer's business interests.  It does not matter if the injury was caused by a third party - for example, if your boss asks you to go buy something for the job at a nearby store, and you are hit by a car while going to make that purchase, you are entitled to workers' compensation.

In that scenario, however, if you then file a lawsuit against the person who hit you,  you have repay your employer the workers' compensation benefits that it paid from any award or settlement that you receive as a result of that lawsuit.  (It is not a dollar-for-dollar repayment; rather, there is an intricate formula).

The employer's right of subrogation has largely been found by the courts to be something that cannot be defeated.  However, the Workers' Compensation Act provides that a governmental entity "is immune from claims of subrogation or reimbursement from a claimant's tort recovery."

 In Frazier v. W.C.A.B. (Bayada Nurses, Inc.), 52 A.3d. 241 (Pa. 2012), a nurse was on a SEPTA bus while traveling for work.  The bus was involved in an accident, and she broke her ankle.  She subsequently settled her case against SEPTA for $75,000.  As part of the settlement, SEPTA agreed that it would "defend, indemnify and hold Claimant harmless with respect to any claim, suit, petition or other action brought against Claimant ... for payment of [the] workers' compensation lien. . ."

Even though SEPTA qualifies as a governmental entity, Bayada Nurses filed for repayment of the workers' compensation benefits that it had paid.  The workers' compensation judge found that Bayada was not entitled to subrogation, but the Workers' Compensation Appeal Board ("W.C.A.B.") reversed the judge.  The Commonwealth Court affirmed the W.C.A.B.  However, the Pennsylvania Supreme Court found that the workers' compensation judge was correct and reinstated the decision of the workers' compensation judge.

Accordingly, if an employee is paid workers' compensation benefits as a result of an accident caused by a governmental entity, the employer is not necessarily entitled to subrogate against a settlement or award between the employee and the governmental entity.