Does deducting the new 5% VRS retirement contribution from an injured Virginia state worker's pay create a workers' comp penalty?

Plain-English summary

In February 2012, two Commonwealth administrators, the Department of Human Resource Management director and the State Comptroller, asked the AG how a new 5% Virginia Retirement System (VRS) member contribution interacted with the workers' compensation statute. The General Assembly had recently required state employees in VRS Plan 1 to begin paying a 5% pre-tax retirement contribution, offsetting it with a 5% raise. The administrators worried that deducting the new contribution from the paycheck of an injured worker still on payroll might trigger the 20% penalty in § 65.2-524 for late workers' compensation payments, or might violate the no-assignment rule in § 65.2-531.

The AG said no on every front. The exception to the § 65.2-524 penalty kicks in "[w]hen the Commonwealth has issued a regular payroll check to the employee in lieu of compensation covering the period of disability." The administrators wanted to know whether "regular" meant only the timing, or also the amount, of the check. Looking at dictionary definitions of "regular" (American Heritage: "customary, usual, or normal . . . conforming to set procedure . . . occurring at fixed intervals"; Black's: "steady or uniform in course, practice, or occurrence . . . formed after uniform type"), the AG concluded "regular" reached both timing and content. A paycheck issued at the normal interval, with the normal mix of standard deductions (including the new 5% retirement contribution, withholding, FICA, health, garnishments, support, and other authorized deductions), is a "regular payroll check."

The administrators also asked whether their proposed amendment to § 65.2-524, which would replace "check" with "payment" (to accommodate electronic payroll) and expressly say that "regular payroll payment" includes payments net of deductions for elected and mandatory benefits, would solve the problem. The AG said yes; the current statute already produced the right result, and the amendment would make it explicit.

The third question was whether the timing of the deduction relative to the date of injury mattered (i.e., whether it mattered if the 5% started being deducted before or after the worker was hurt). The AG said no. The contribution applies uniformly to all employees, and singling injured employees out to pause the deduction would defeat that uniformity.

The fourth and fifth questions asked whether the 5% deduction (or other employee-elected deductions like health-care premiums or flexible reimbursement) violates § 65.2-531's bars on assigning workers' comp benefits or letting creditors attach them. The AG said no, twice. He noted he could find no judicial opinion directly addressing the no-assignment provision, but by its terms § 65.2-531 reaches only a "claim for compensation under this title." Payroll payments and their deductions are not claims for compensation, so they fall outside that protection. The contribution is also not a classic assignment: it is mandated by the General Assembly, and the employee cannot set its amount, recipient, or whether to participate. Plus, the 5% contribution is not a creditor claim: it does not arise from a debtor-creditor relationship; it is a legislative scheme applied to all Commonwealth employees. Voluntary deductions like health premiums are likewise initiated by the employee, not by a creditor.

The AG limited his analysis to the scenario described: injured workers who remain on agency payroll. The administrators stated they were not applying the 5% contribution to workers' comp benefits paid directly by DHRM after a worker transitioned off payroll, so the AG offered no opinion on that situation.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

The Virginia Workers' Compensation Act governs compensation for work-related injuries. Two provisions framed the question:

§ 65.2-524 adds a 20% penalty to any workers' compensation payment not made within two weeks of becoming due, unless the Commission finds good cause outside the employer's control or, for self-insured employers, the payment was made as part of the next regular payroll. The last sentence creates a special carve-out: "No penalty shall be assessed against the Commonwealth when the Commonwealth has issued a regular payroll check to the employee in lieu of compensation covering the period of disability."

§ 65.2-531(A) declares no claim for compensation under the Act is assignable, and compensation is "exempt from all claims of creditors," even if used to buy credit union shares or commingled with other funds in a bank account, subject only to support obligations.

The 2011 General Assembly required state employees in VRS Plan 1 (those hired before July 1, 2010 who were grandfathered out of paying a contribution) to start paying the 5% member contribution effective July 1, 2011, offset with a 5% raise. Earlier 2010 legislation had already imposed the contribution on new employees.

Common questions

Q: Did deducting the new 5% VRS contribution from a paycheck trigger Virginia's 20% workers' comp penalty?
A: Per this opinion, no. A "regular payroll check" includes the contribution, since it was a uniform standard deduction applied across all state employees. The penalty in § 65.2-524 was not triggered.

Q: Did the timing of when the 5% deduction started relative to the date of injury matter?
A: No, in the AG's view. The contribution applied to all state employees uniformly. Pausing it for injured employees would defeat that uniformity and was not what the General Assembly intended.

Q: Was the 5% VRS contribution an assignment of workers' comp benefits prohibited by § 65.2-531?
A: No. § 65.2-531 protects only "claim[s] for compensation under this title." Payroll payments and their standard deductions are not claims for compensation, so they fall outside that protection. The AG also noted the contribution is not a classic assignment because the General Assembly, not the employee, sets it.

Q: Were employee-elected deductions like health-care premiums also fine?
A: Yes. Like the mandated VRS contribution, they were treated as ordinary payroll deductions, not assignments of workers' comp benefits or creditor claims, and so not prohibited by § 65.2-531.

Q: Did this analysis apply to workers' comp benefits paid directly by DHRM after a worker moved off payroll?
A: No. The AG limited the analysis to injured workers still on agency payroll. The administrators told him they were not applying the 5% deduction to direct benefit payments, so he declined to opine on that scenario.

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2012/11-113_Wilson.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

February 7, 2012

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

Sara Redding Wilson
Director
Department of Human Resource Management
101 North 14th Street, 12th Floor
Richmond, Virginia 23219

David Von Moll
State Comptroller
The James Monroe Building
101 North 14th Street, 2nd Floor
Richmond, Virginia 23219

Dear Ms. Wilson and Mr. Von Moll:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You pose several questions regarding application of the Virginia Workers' Compensation Act (the "Act") and the new 5 percent member contribution toward retirement. Specifically, you ask:

1. When the employing agency issues to the injured worker a payroll check that is net of all standard deductions, including the new 5 percent member contribution toward retirement, is that payroll check a "regular payroll check" for purposes of § 65.2-524? In other words, does "regular" refer to timing of the check, or does it refer to the amount of the check?

2. Does the proposed legislative change to § 65.2-524 solve the problem; i.e. does it adequately define "regular payroll payment" to avoid any penalty?

3. Does it make any difference that the deduction for the new retirement contribution begins before or after the injured employee is injured?

4. Is the new 5 percent mandated member contribution toward retirement, or any other employee-elected deduction, such as a health-care premium or flexible reimbursement account deduction, considered an assignment of benefits prohibited by the Act?

5. Is the new 5 percent mandated member contribution toward retirement, or any employee-elected deduction, such as a health-care premium or flexible reimbursement account deduction, a claim of a creditor prohibited by the Act?

Response

It is my opinion that the term "regular payroll check" refers to both the timing of the check and the amount of the check, so that the proposed legislative change to § 65.2-524 adequately defines "regular payroll payment" to avoid any penalty. It is further my opinion that it makes no difference whether the deduction for the new retirement contribution begins before or after the injured employee is injured. Finally, it is my opinion that because neither the new 5 percent mandated member contribution toward retirement or other deductions elected by the employee, including health-care premiums and flexible reimbursement account deductions, constitute an assignment of benefits or a claim of a creditor, they are not prohibited by the Act and may be deducted in appropriate circumstances.

Background

As you relate, the General Assembly in its last session passed, and the Governor signed, legislation requiring state employees covered under the Virginia Retirement System's Plan 1 to begin paying a 5 percent member contribution toward their retirement on a pre-tax salary reduction basis. The legislation also provided these employees a 5 percent raise. The measure was effective July 1, 2011 and was reflected in employees' July 16 paychecks. Previous legislation was enacted in 2010 that required new employees, hired after July 1, 2010 and with no existing membership in the Virginia Retirement System, to pay the 5 percent member contribution toward their retirement on a pre-tax salary reduction basis.

You express concern that some of these affected state employees will have suffered workplace injuries compensable under the Act and will be entitled to wage loss benefits under the Act. Of those injured state employees, some will remain on agency payroll, receiving semi-monthly payroll checks, while others will transition off payroll and will receive, on a bi-weekly basis, workers' compensation indemnity benefits directly from the Department of Human Resource Management, the agency that administers workers' compensation benefits for claims made by state employees. Thus, your inquiry encompassed two distinct scenarios, an injured employee entitled to workers' compensation indemnity benefits remaining on agency payroll, and an injured employee entitled to workers' compensation indemnity benefits who is off payroll, receiving direct payment of benefits. As I understand your request, you are limiting your inquiry to the first scenario: injured employees who remain on an agency's payroll.

You advise that you are not considering applying the new 5 percent member contribution toward retirement to workers' compensation benefits paid directly to an injured worker by the Department of Human Resource Management in its role as administrator of workers' compensation benefits for injured state employees. You state this decision is based on your understanding that the workers' compensation benefit is not "creditable compensation" for purposes of the new 5 percent member contribution. I therefore offer no opinion as to whether the new 5 percent member contribution toward retirement, if applied to workers' compensation benefits paid directly to an injured employee of the Commonwealth, constitutes an assignment of benefits or claim of a creditor prohibited by § 65.2-531. Nor do I offer any opinion as to whether workers' compensation benefits are "creditable compensation" for purposes of the new 5 percent member contribution.

You further note that, in an attempt to resolve any potential statutory ambiguity, the Department of Human Resource Management has submitted language to amend the Act, specifically § 65.2-524.

Applicable Law and Discussion

Your first inquiry regards the meaning of "regular" for purposes of § 65.2-524. Section 65.2-524 establishes a penalty for failure to pay workers' compensation benefits in a timely manner. Specifically, it provides:

If any payment is not paid within two weeks after it becomes due, there shall be added to such unpaid compensation an amount equal to twenty percent thereof, unless the Commission finds that any required payment has been made as promptly as practicable and (i) there is good cause outside the control of the employer for the delay or (ii) in the case of a self-insured employer, the employer has issued the required payment to the employee as a part of the next regular payroll after the payment becomes due. No such penalty shall be added, however, to any payment made within two weeks after the expiration of (i) the period in which Commission review may be requested pursuant to § 65.2-705 or (ii) the period in which a notice of appeal may be filed pursuant to § 65.2-706. No penalty shall be assessed against the Commonwealth when the Commonwealth has issued a regular payroll check to the employee in lieu of compensation covering the period of disability.

The last sentence of this Section creates an exception to the penalty provision when the Commonwealth issues a "regular payroll check" to the injured employee in lieu of compensation. You are concerned that deducting the 5 percent member contribution toward retirement might subject the Commonwealth to liability under the penalty provision of § 65.2-524. You therefore ask whether a payroll check that is net of all standard deductions, including the new 5 percent member contribution toward retirement constitutes a "regular payroll check" for purposes of § 65.2-524. Put another way, you ask whether "regular" refers to the timing of the check or to the amount of the check.

The Code does not provide a definition for the term "regular" as used in § 65.2-524. In the absence of a statutory definition, words in statutes are to be given their ordinary meaning within the statutory context. The American Heritage Dictionary defines "regular" as "[c]ustomary, usual, or normal . . . [c]onforming to set procedure, principle, or discipline . . . [o]ccurring at fixed intervals; periodic . . . [c]onstant; not varying." Black's Law Dictionary defines "regular" as "[c]onformable to law. Steady or uniform in course, practice, or occurrence; not subject to unexplained or irrational variation. Usual, customary or general . . . Made according to rule, duly authorized, formed after uniform type; built or arranged according to established plan, law or principle."

Applying these definitions to the term "regular payroll check," I conclude that the adjective "regular" refers to both the timing and the contents of the payroll check. A "regular" payroll check is a payroll check issued in the normal course of the Commonwealth's issuance of payroll checks, and therefore uniform in occurrence and issued at fixed intervals. A "regular" payroll check is also a payroll check that is like the payroll checks issued to the injured worker prior to his injuries, i.e. a payroll check conforming to his pre-injury payroll checks in terms of its components, e.g. gross amount, deductions made, etc. Payroll checks issued in the normal course of operations, which include the 5 percent member contribution toward retirement, are still "customary, usual and normal" and conform to set procedures. Such payroll checks are issued according to an established plan, law or principle.

Indeed, had the General Assembly intended to limit the penalty exclusion to a timing issue, it could have chosen words to manifest that intention. Likewise, had the General Assembly intended to limit the penalty exclusion to payroll checks identical to pre-injury payroll checks, it could have so stated. I conclude the General Assembly, in using the term "regular payroll check," intended to encompass both the timing and composition of the checks Commonwealth agencies normally provide their employees. I therefore further conclude that payroll checks issued to injured workers receiving workers' compensation benefits, that now include the new 5 percent member contribution toward retirement, are "regular payroll checks" for purposes of § 65.2-524.

Relatedly, you next ask whether a proposed legislative change to § 65.2-524 would resolve the problem of a potential ambiguity in the provision, i.e., whether it adequately defines "regular payroll payment" to avoid any penalty.

The proposed amendment substituted "regular payroll payment" for "regular payroll check" and added language defining "regular payroll payment issued under this provision by the Commonwealth" to include "payments issued net of deductions for elected and mandatory benefits and other standard deductions." I understand the change from "check" to "payment" is unrelated to your questions, but is instead suggested to acknowledge the reality that Commonwealth employees are often paid electronically.

I further understand that there is no concern related to the timing of payroll payments, so that your question is focused on the amount of the payment. As stated above, I believe that the term "regular payroll check" refers both to the timing of the payment and the amount of the payment. If the payments are processed in a uniform course or practice, are of a uniform type with other employees' payroll checks, and are issued according to the established plan of the Commonwealth for payroll checks for all Commonwealth employees, both as to the timing and the amount, then the penalty provision does not apply. To the extent there is an argument that the General Assembly intended "regular payroll check" to refer only to timing, I believe the proposed amendment addresses that concern by expressly incorporating that element into what constitutes a "regular payroll payment."

Your third question asks if there is any difference in whether the deduction for the new retirement contribution begins before or after the injured employee is injured.

Because the new 5 percent member contribution toward retirement applies to all employees and is instituted uniformly and consistently, it is my opinion that it makes no difference whether the new 5 percent member contribution toward retirement is instituted before or after an employee suffers a work injury. Otherwise, injured employees would have to be segregated from the main workforce and not contribute to their retirement. The 5 percent member contribution would therefore cease to be uniformly and consistently applied, contrary to the intent of the General Assembly. Again, I render no opinion as to any deductions from workers' compensation benefits paid directly to injured employees.

Your remaining questions pertain to the application of § 65.2-531 to the new 5 percent mandated member contribution toward retirement. Section 65.2-531 provides, in pertinent part:

A. No claim for compensation under this title shall be assignable. All compensation and claims therefor shall be exempt from all claims of creditors, even if the compensation is used for purchase of shares in a credit union, or deposited into an account with a financial institution or other organization accepting deposits and is thereby commingled with other funds. However, benefits paid in compensation or in compromise of a claim for compensation under this title shall be subject to claims for spousal and child support subject to the same exemptions allowed for earnings in § 34-29.

In sum, this provision prohibits both the voluntary assignment of benefits by the injured worker, and the attachment by creditors of the injured worker's benefits.

You ask whether the mandated contribution, when deducted from payroll, or other employee-elected deductions, such as health care premiums and flexible reimbursement account deductions, constitute an impermissible assignment under the Act. I could find no judicial opinions directly addressing the prohibition against assignment provision of this statute; however, by its terms, the prohibition applies only to a "claim for compensation under this title."

Neither payroll payments nor deductions from such payments are claims for compensation under the Virginia Workers' Compensation Act, and thus, fall outside the scope of the prohibition. Further, unlike a classic assignment, where an assignor chooses to assign something to an assignee, the member contribution is mandated by the General Assembly. The employee cannot determine the amount of the contribution, and he cannot determine the recipient. Likewise, he cannot choose whether to participate. Thus, neither the member contribution nor other employee-elected deductions made from payroll payments are assignments prohibited by § 65.2-531.

Finally, you ask whether the new 5 percent mandated member contribution toward retirement or other employee-elected deductions, such as health-care premiums and flexible reimbursement account deductions, are considered claims of a creditor and therefore prohibited.

Section 65.2-531 exempts workers' compensation benefits from the collection efforts of employees' creditors. This requires a creditor. The new 5 percent mandated member contribution is not a claim of a creditor. The 5 percent mandated member contribution is a creation of the General Assembly, applicable to all Commonwealth employees; it does not arise from a debtor-creditor relationship and is not deducted to satisfy some other obligation to the Commonwealth or a third-party creditor. Further, as stated above, § 65.2-531 applies only to a "claim for compensation under this title." Because payroll payments and deductions are not claims for compensation under the Virginia Workers' Compensation Act, they fall outside the scope of the exemption. Thus, the mandated retirement contribution is not a claim of a creditor subject to the restriction of § 65.2-531. Moreover, other employee-elected deductions are requested by the employee and are instituted and terminated at his direction. They are not claims made by creditors against the employee's payroll payments. Thus, other employee-elected deductions made from payroll payments also do not constitute "a claim of a creditor" and are not prohibited by § 65.2-531.

Conclusion

Accordingly, it is my opinion that the term "regular payroll check" refers to both the timing of the check and the amount of the check, so that the proposed legislative change to § 65.2-524 adequately defines "regular payroll payment" to avoid any penalty. It is further my opinion that it makes no difference whether the deduction for the new retirement contribution begins before or after the injured employee is injured. Finally, it is my opinion that because neither the new 5 percent mandated member contribution toward retirement or other deductions elected by the employee, including health-care premiums and flexible reimbursement account deductions, constitute an assignment of benefits or a claim of a creditor, they are not prohibited by the Act and may be deducted in appropriate circumstances.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General