SESSION I: The Second Injury Fund — A System at War With Itself
Background: Why the 1979 Reform Still Haunts Every SIF Case
To understand the current credit debate, you have to understand what the 1979 Workers' Compensation Act reform actually did. Before 1979, permanent partial and permanent total disability were creatures of a flat schedule; the SIF did not cover aggravations or activations of pre-existing conditions; and credits to employers were limited to prior compensable conditions with actual rendered awards. The Odd-Lot Doctrine permitted totality findings even when the last accident contributed only a small proportion of total disability.
The 1979 Act changed everything. It raised the wage percentage from 66⅔% to 70%. It extended permanent partial disability to 600 weeks at 75% of the Statewide Average Weekly Wage (SAWW) and capped total permanent disability at 450 weeks — with potential lifetime extension upon reevaluation. It imposed objective evidentiary burdens for credits. And it redefined both permanent partial and total permanent disability with specificity, drawing a sharp statutory line between them: partial disability (N.J.S.A. 34:15-12(c)) compensates for physical impairment regardless of wage loss; total permanent disability (N.J.S.A. 34:15-12(b)) compensates for inability to earn wages.
The legislature's stated goal was to put 'significantly more money in the hands of the more seriously injured workers' while providing meaningful cost containment for New Jersey employers — at the time, the highest workers' compensation cost state in the nation.
That dual mandate — more for seriously injured workers, less waste on minor claims — is the lens through which every SIF dispute must be read today.
The Core Dispute: Does a Reopener for Totality Generate a New 450 Weeks?
Here is the scenario that has no controlling appellate authority and has divided the bar for years: A petitioner receives an award of permanent partial disability — say, 70% — paid out over a period of years. The petitioner's condition worsens. The case is reopened under N.J.S.A. 34:15-27. The petitioner is now found totally and permanently disabled. Does the respondent receive a credit against the 450-week total disability award for the partial disability already paid? Or does the petitioner receive a full 450 weeks from the date of totality?
Two trial court decisions — Padua v. Community Corrections Corp. (J.W.C. Loftis, 2017) and Gerity v. New Jersey Transit (J.W.C. Thuring, remand 2021) — have held: no credit. Not a single post-1980 case has been decided differently. The Appellate Division remanded Gerity for briefing without resolving the credit question, leaving the issue unresolved at the appellate level.
The Padua Reasoning
In Padua, petitioner Claribel Padua was injured in 2004, received a 55% PPD award, reopened and increased to 75% PPD for 450 weeks, and underwent repeated major surgeries. When ultimately found totally and permanently disabled as of September 14, 2016, respondent argued it should receive a credit for the 450 weeks of 75% PPD benefits already paid — which, at the same dollar amount as the total award, would wipe out the entire 450-week entitlement.
J.W.C. Loftis rejected the credit on multiple grounds:
• N.J.S.A. 34:15-12(b) uses the word 'shall' — total disability shall be paid for 450 weeks. That is mandatory, not discretionary.
• The statute contains no credit language for prior awards from the same accident. If the legislature intended one, it would have said so.
• PPD under 12(c) and total permanent disability under 12(b) are legally different benefits: different purposes, different proof requirements, different scales, different definitions.
• Applying a credit produces reductio ad absurdum: an 80% PPD (480 weeks) would exceed the total award by 30 weeks, leaving the petitioner owing money.
• The 2013 Calderone Director's memo authorizing the credit had no statutory or common law citation and cannot override the plain language of the Act.
'I am confident that this is not what the legislature intended when it amended the Compensation Act to ensure that the most seriously injured workers would receive increased awards.' — J.W.C. Loftis, Padua
The Respondent's Counterargument
The seminar materials presented the opposing view fully and fairly. The respondents' position rests on several pillars:
• The Calderone memo has been relied upon in practice for over a decade. Consistency and reliance matter.
• The legislature intended cost containment. Denying the credit exposes respondents to double payment for the same injury.
• The 'new 450 weeks' construction creates perverse incentives: a petitioner who previously received 75% PPD and then becomes totally disabled gets a windfall; Petitioner's counsel is rewarded for bringing the case; respondents — who already paid — receive no credit.
• Petitioners already receiving more than 80% of ACE between partial and Social Security effectively receive no net benefit from the 'new' 450-week period anyway.
• If the legislature intended a new period, it should have said so. The proper forum is the legislature.
The seminar presenters noted the fundamental asymmetry: under the anti-Padua/Gerity interpretation, a petitioner totally disabled from a single accident with no pre-existing conditions and no SIF involvement receives a credit that can eliminate the entire total award — while that same petitioner with pre-existing conditions (and thus SIF involvement) would receive SIF participation, leaving the respondent's exposure offset. The legislature could not have intended that similarly situated respondents be treated so differently based on the presence or absence of a SIF claim.
Total Disability Calculations: The Calderone Memo
Whether or not you agree with its authority, the 2013 Calderone memo establishes the default calculation procedure used by most practitioners and the Division. Two scenarios:
Scenario 1: Same Accident Reopener (Partial Award Fully Paid)
Respondent gets a credit in weeks: total dollar amount paid on the partial award divided by the weekly total disability rate. Those weeks are subtracted from respondent's share of the first 450 weeks. Example: Respondent paid $55,650 on a 35% partial total award. Total rate is $794/week. Credit = 70 weeks. Respondent pays 155 weeks of total benefits (225 minus 70), then Fund picks up.
Scenario 2: Partial Award for Different Accident Still Being Paid
Both awards continue concurrently. The total respondent pays only the differential (total rate minus partial rate) while the partial runs. When the partial is paid out, respondent pays the full total rate. The partial award dollar amount paid after the date of totality is divided by the total rate for additional weeks of total responsibility, which can push the respondent beyond its nominal 225-week share.
Handling SIF Cases: Practical Checklist
The seminar materials included comprehensive guidance from both the petitioner's attorney and the judges' perspectives. Here are the critical practical points:
Before You Walk In the Door
• Have a total perm report that addresses both the last compensable injury AND all pre-existing disabilities — and that says petitioner is 100% permanently and totally disabled.
• Know the final date of temporary total disability. This is the date of totality.
• Know the Social Security disability onset date. Know the type and onset date of any pension (service, accidental, or ordinary disability).
• Have all lien information: TDB, Medicare conditional payments, Medicaid, private health insurance, union health, child support, third-party case status.
• Have ACE information: names and dates of birth of dependents and amounts of auxiliary payments.
• Do NOT send medical records to the DAG unless specifically requested. Send outlines of pre-existing records instead.
The Threshold Question: Last Accident Alone?
• Apply the pitcher/beaker test. If the last compensable accident fills the beaker — renders the petitioner totally and permanently disabled on its own — there is no SIF liability. See Katz v. Township of Howell, 68 N.J. 125 (1975).
• Don't just add up prior awards, especially if small or remote in time. Perez v. Pantasote, Inc., 95 N.J. 105, 109 (1984) held that the validity of a medical finding of permanent injury may decrease with the passage of time.
• Examine how the petitioner was actually functioning before the last compensable accident.
The SIF Conference and Trial
• The SIF trial is bifurcated: totality tried first (respondent's regular day); SIF conference separately on a day the DAG appears.
• The judge will NOT apportion between respondent and Fund at the end of the bifurcated portion. If totality is found, respondent starts paying immediately; Fund reimburses if liable at the end.
• Be wary of respondents who want to concede totality — it may be cheaper to pay a total rate with SSD offset than a large partial award.
• The Fund does not pay fees or costs. The Fund does not pay for medical treatment. SIF benefits do not vest and cease upon the petitioner's death.
• The Second Injury Fund CANNOT commence paying benefits before the date the verified petition for SIF benefits was filed.
The Order
• Prepare using the Division's interactive order form on the web site. Calculate dates using OSCAR.
• All parties must agree on the date of totality before the order is submitted.
• Review the completed order yourself before giving it to the DAG, respondent's attorney, or the court.
• The DAG fax number for advance review is 609-984-1940.
Respondents' Strategic Calculus
• Do the math before the first conference. Calculate: straight total cost; effect of all offsets (SSD, ordinary disability pension); the financial risk of a high partial award spawning a Gerity/Padua reopener.
• In the gig economy, accepting a high partial total may not be the windfall it once was — eBay, DoorDash, and Etsy income can supplement a partial award alongside SSD (which carries an earnings ceiling near $10,000/year).
• Order the Social Security file before the Fund does, months before the fund conference.
• Consider engaging your own internist or neurologist to corroborate pre-existing and non-compensable conditions — the Fund does not typically retain its own medical experts.
SESSION II: PEOs and Coverage — The Wild West of Workers' Comp Insurance
What Is a PEO and Why Does It Matter?
A Professional Employer Organization (PEO) is a company that assumes human resource functions — payroll, benefits, workers' compensation coverage — for client companies under a leasing arrangement. New Jersey first sanctioned PEOs in 2001 under N.J.S.A. 34:8-67 et seq. In effect, the PEO becomes the employer of record for payroll and coverage purposes, while the client company retains day-to-day operational control.
PEOs represent a genuine efficiency for mid-size businesses: greater leverage in negotiating insurance rates, economy of scale in HR administration, and cost savings on compliance. But the legislature did not amend the Workers' Compensation Act when it created the PEO statute — meaning the two statutory frameworks do not neatly align.
The Coverage Gap Problem
Here is the core problem: PEO contracts with carriers like Paychex and ADP typically insure only employees on the payroll 'census' — those for whom paychecks have been processed. But real employers hire day laborers. They fill shifts with seasonal workers. They use undocumented workers. Off-the-books workers get injured.
When a claim is filed by an off-census worker, the carrier denies coverage under the PEO contract's census limitation. But N.J.S.A. 34:15-87 appears to prohibit any policy limitation of insurer liability below the full statutory obligation. It provides that no policy of insurance 'shall contain any limitation of the liability of the insurer to an amount less than that payable by the assured on account of his entire liability under this chapter'; and that no provision shall restrict liability 'to any stated business, plant, location, or employment carried on by an assured' unless separately insured or exempted as provided by the Act. The enforceability of a census-based exclusion against N.J.S.A. 34:15-87 is an open and important question.
The time-honored practice of auditing a policy to conform to the employee census, which has governed workers' compensation insurance for generations, is supplanted by a contractual exclusion of questionable enforceability.
The Transition Problem
When a company moves from a traditional insurance carrier to a PEO, the standard CRIB cancellation notice requirements are triggered — but a PEO is not technically 'coverage' in the traditional sense. Prior carriers may remain bound indefinitely for a risk for which they are no longer collecting premiums. After Sroczynski v. Milek, 396 N.J. Super. 248 (2007), substantial compliance with cancellation requirements is not enough. Getting the transition right requires formal notice that the company now has no traditional employees and needs no direct coverage.
Dual Employer and Third-Party Liability
The special employer and dual employer analysis developed under Blessing, Kelly, and Chickachop v. Manpower predated the PEO concept. It remains to be determined how those immunities and liabilities apply when the 'employer' is a leasing entity with no physical presence at the work site, and when WC vs. third-party election of remedies turns on who the true employer is. The ABC Test's growing acceptance in New Jersey's labor law context adds yet another layer of analysis to claims involving PEO-leased workers.
Practical Guidance for PEO Litigation
• When you receive a PEO case as respondent's counsel, immediately determine who the actual boots-on-the-ground employer is. The PEO is a processing agency; it may have no relationship whatsoever with the worksite.
• The first report of accident under N.J.S.A. 34:15-99 is not discoverable. But it is typically in the carrier's investigation package sent to defense counsel — raising the question of how counsel received information about the employer before any attorney-client relationship was established. See Arboleda, below.
• Challenge census-based coverage exclusions aggressively under N.J.S.A. 34:15-87.
• If the PEO contract allocates responsibility for WC coverage to the client company, verify whether the client actually obtained that coverage. If not, the PEO's carrier likely steps in under the PEO statute.
• Evaluate whether the injured worker was performing work within the scope of what the PEO's policy was meant to cover, regardless of census status.
SESSION III: Ethics — The Arboleda Warning
The Peculiar Ethics of Insurer-Driven Defense
Workers' compensation defense practice has always presented unique ethical terrain. Insurance company counsel answers to the carrier that pays the bill — but the duty of loyalty runs to the employer. That fundamental tension, recognized since Ethics Opinion 165 in 1969, is now acutely complicated by PEO arrangements, the ABC Test, immigration issues, and the new wave of coverage disputes.
RPC 1.7 prohibits concurrent conflicts. RPC 1.9(a) prohibits successive conflicts — representing a client in a matter materially adverse to a former client on the same or substantially related matter, without informed written consent. RPC 1.2 requires that the scope of representation be communicated to and understood by the client.
Arboleda v. Prop 'N Spoon — The Case That Changes How You Answer
In October 2024, petitioner Johann Mejia Arboleda filed a claim against Prop N Spoon. The claim was tendered to Paychex (the PEO) and American Zurich Insurance. Zurich assigned Goldberg Segalla as defense counsel. On October 31, 2024, Goldberg Segalla filed a verified answer listing its client as Prop N Spoon — disputing Arboleda's claims, reserving all defenses, requesting medical records, and reserving the right to call witnesses. Four days later, the firm filed an amended answer stating it was entering a special appearance only for Paychex/Zurich, did not represent Prop N Spoon, and denied coverage — a position directly adverse to Prop N Spoon.
Prop N Spoon retained new counsel and moved to disqualify Goldberg Segalla under RPC 1.9(a). The workers' compensation judge granted the motion on May 1, 2025. The firm moved for reconsideration, arguing: (1) the initial answer was a technological artifact of the electronic filing system; (2) no attorney-client relationship was formed because there was no offer, acceptance, or informed consent; (3) no proceedings took place in the four-day interregnum; (4) no harm occurred.
The Appellate Division affirmed the disqualification in February 2026:
'The firm clearly represented Prop N Spoon, even if it was for just four days, when it undertook its defense by filing an answer. No factfinding or statement of reasons was required to point out the obvious. The correctness of the judge's ruling was only underscored when the firm later switched sides and took a position adverse to Prop N Spoon.'
The court rejected the 'no harm no foul' argument, the technological excuse (manual filing was available), and the claim that filing an answer on behalf of a party is standard practice in PEO cases. It declined to engraft an exception onto RPC 1.9(a) where a duty to a client is implicated.
What Arboleda Means in Practice
The decision carries major practical implications for every respondent-side workers' compensation attorney in New Jersey:
• Filing an answer creates an attorney-client relationship. Period. Even for four days. Even if no advice is given. Even if the 'client' never knew you existed.
• You cannot then pivot to represent an adverse party — the carrier whose interests diverge from the employer — in the same matter. The duty of loyalty attaches at the moment the answer is filed.
• The electronic filing system's auto-population of respondent fields is not an excuse. If the system defaults to the wrong party, file manually.
• Before filing any answer in a PEO case, know who your client is. Get written confirmation of the representation scope from the carrier. Communicate that scope to the employer at inception — so the employer understands that your narrow WC representation does not extend to immigration compliance, tax liability, criminal exposure, or general employment law.
• When you receive the carrier's investigation package — including the first report of accident — you have already received proprietary information about an entity that may become adverse to you. That alone should trigger a conflict analysis before you file anything.
Scope of Representation and the Immigration Problem
The seminar materials flagged an increasingly urgent issue: the intersection of workers' compensation representation and immigration law. As federal enforcement of immigration law intensifies, employers' use of undocumented workers creates potential criminal and civil exposure. WC defense counsel's representation is narrow — limited to the compensation matter. But employers may withhold information about the employment relationship precisely because of immigration concerns. Counsel must make clear from the outset that the WC representation does not cover immigration, criminal, or tax matters — and that withholding information about the employment relationship could prejudice the compensation defense.
The Beckerman Lesson: Fee Splitting
The seminar included the 2013 Disciplinary Review Board decision censuring attorney Jeffrey Beckerman for referring 111 workers' compensation cases to a co-tenant attorney (David Bolson) who was not in the same law firm, receiving one-third of total legal fees; $104,152.37 — without satisfying the requirements of RPC 1.5(e). Bolson performed all the legal services. The censure was issued because no clients were harmed and Beckerman acknowledged his wrongdoing, but the Board made clear that fee-splitting between attorneys not in the same firm requires strict compliance with RPC 1.5(e): the fee division must be proportional to services performed, or the attorneys must assume joint responsibility; the client must consent in writing; and the total fee must be reasonable.
Conclusion: Three Issues, One Lesson
The May Day Seminar 2026 covered three distinct areas of law, but they share a common thread: the gap between how practitioners have always done things and what the law actually requires.
On the SIF: the credit for prior partial awards on reopener has been taken for years, justified by a Director's memo that has no statutory foundation. Two trial courts have now said it is wrong. The Appellate Division has not yet resolved it. If you are handling total disability cases — whether as petitioner's counsel, respondent's counsel, or a judge — you need to know both sides of this argument cold, because the stakes are enormous.
On PEOs: the entire structure of PEO coverage litigation rests on a misalignment between the PEO statute and the Workers' Compensation Act that the legislature never corrected. Coverage exclusions that seem contractually clear may be unenforceable under N.J.S.A. 34:15-87. The dual employer immunities developed before PEOs existed may not map cleanly onto PEO arrangements. Arboleda is only the beginning.
On ethics: Arboleda is a bright line. If you file an answer, you have a client. Know who that is before you file. Communicate the scope of your representation. Run a conflict check every time a new party or new counsel enters the case. The workers' compensation bar has operated for decades in a relatively informal environment of carrier-assigned counsel. That informality is now a liability.
The most dangerous assumption in workers' compensation practice is that the way things have always been done is the way they are supposed to be.
*Jon L. Gelman of Wayne, NJ, is the author of NJ Workers' Compensation Law (West-Thomson-Reuters) and co-author of the national treatise Modern Workers' Compensation Law (West-Thomson-Reuters).
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