The Florida Supreme Court recently decided a case of great significance to workers’ compensation law. The case, Castellanos v. Next Door Company, addressed the constitutionality of Florida’s workers’ compensation attorney’s fee statute. On April 28, 2016, the court concluded that the statutory limit on attorney’s fees was unconstitutional under the due process clause of the state and federal constitutions.

If an injured employee retains an attorney to represent him or her in a workers’ compensation claim against their employer, and the attorney successfully obtains benefits for the employee, then the claimant’s attorney is entitled to an attorney’s fee which will be paid by the employer or the employer’s workers’ compensation insurance carrier. In the past, the amount of the fee payable to the claimant’s attorney was obtained by multiplying the number of hours required to obtain the benefits by a reasonable hourly rate. Citing rising premiums for workers’ compensation coverage, the Florida Legislature amended the relevant statute (section 440.34) and required the use of a statutory formula for the calculation of attorney’s fees. Under this statute, the claimant’s attorney was entitled to an attorney’s fee which was equal to 20% of the first $5,000.00 in benefits obtained, 15% of the next $5,000.00 in benefits obtained, and 10% of the value of any benefits obtained over $10,000.00.

As a result, in cases where the value of the benefit secured for the claimant was low, the amount of the attorney’s fee was low as well. For example, in Castellanos v. Next Door Company, the claimant’s attorney obtained a benefit valued at $822.70. The corresponding attorney’s fee for obtaining this benefit, based upon the statutory attorney’s fee formula, was $165.54. The claimant’s attorney expended 107.2 hours of time procuring the $822.70 benefit. As a result, the attorney was effectively paid $1.53 per hour to obtain the benefit for his client.

On October 1, 2003, the statute which seemingly required the utilization of the statutory fee (as opposed to an hourly fee) took effect. The constitutionality of the statute was challenged, but the Florida Supreme Court addressed the issue and held that the statute’s reference to a “reasonable” fee meant that an hourly fee could still be awarded. Seemingly in direct response to this ruling, the legislature struck the word “reasonable” from the statute in 2009. This created the version of the statute which was examined by the court in Castellanos, which had been construed to require the use of the above-referenced formula to calculate the attorney’s fee.

On appeal before the Florida Supreme Court, the attorneys for Castellanos raised numerous constitutional arguments challenging the statutory limitation on the fee amount. They raised arguments relating to separation of powers, due process, equal protection, free speech, and access to the courts. The due process argument asserted, in part, that the use of a statutory formula to conclusively determine an attorney’s fee, without the possibility of rebutting that presumptive fee, violated the right to due process.

The supreme court focused upon, and ultimately accepted, the due process argument. The court noted that the relevant statute created a fee schedule which did not allow for consideration of whether the fee was reasonable. It also did not allow the judge of compensation claims or the judiciary to alter the fee. Therefore, the statute created an irrebuttable presumption. The court applied a judicial test to determine the constitutionality of the conclusive statutory presumption. It concluded that there was no reasonable basis to assume that the conclusive fee schedule served the intended purpose of the statute: avoiding excessive fees. It also concluded that the feasibility of individual assessments of what constitutes a reasonable fee in all cases did not justify the use of a conclusive presumption. Ultimately, the court reasoned that an injured worker requires the assistance of an attorney, and the imposition of a statutorily mandated fee without the ability to demonstrate that the fee is inadequate may remove the incentive for an attorney to represent that injured worker. Therefore, the court held that the statutory formula was unconstitutional and reinstated the potential for claimants’ attorneys to receive an hourly attorney’s fee.

During oral argument, it was argued by the claimant’s attorney that there was a workers’ compensation premium decrease of 60% following the 2003 change to the attorney’s fee statute. Therefore, it was suggested that the original justification for the utilization of a statutory formula for attorney’s fees (i.e., to lower premiums) no longer existed when the current 2009 statute was enacted. Since the decision in Castellanos effectively reinstates the pre-2003 attorney’s fee scheme, workers’ compensation premiums may increase accordingly.

As noted above, the Florida Legislature responded to the Florida Supreme Court’s last decision addressing workers’ compensation attorney’s fees by amending the law. It will be interesting to see whether the Florida Legislature responds to the court’s most recent decision and, once again, amends the attorney’s fee statute.