An employee who is injured in a work-related accident has the right under Sec. 5(b) of the Illinois Workers' Compensation Act to sue a third party who may be legally liable for damages. If a recovery is made against that third party, either by suit or settlement, the employee is required to reimburse the employer the amount of the compensation paid or to be paid by the employer to the employee. Out of the reimbursement, the employer is required to pay a pro rata share of the costs and expenses of the action; and if the services of the employee’s attorney have contributed to the procurement of the proceeds out of which the employer is reimbursed, then, in the absence of any other agreement between them, the employer must pay to the employee’s attorney 25% of the gross amount of the reimbursement.

In Evans v. Doherty Construction, Inc., the First District considered whether a “sale” or an “assisgnment” by the employer of its lien rights relieved it of its obligation under Sec. 5(b) to pay attorneys’ fees and a pro rata share of the plaintiff’s litigation expenses. Ashta, plaintiff’s employer, had been third-partied in plaintiff’s action against several defendants, and had reached an agreement with the third parties to “sell” its lien rights to them for $90,000.00. (The amount of its lien was $152,000.00). It claimed thereafter that it had no liability to the plaintiff for fees and expenses because it had not received “reimbursement,” within the meaning of Sec. 5(b), from any settlement made with the plaintiff. The trial judge disagreed and ordered payment by the employer of $22,500 in fees out of the $90,000 received by the employer plus a proportionate share of the plaintiff’s litigation expenses. Ashta appealed.

To read McDonnell's analysis and comments about this case, click here to read his expert commentary article.