Overpayment In Oregon? You better explain it!
As you probably know, employers and insurers in Oregon are entitled to recover overpayments by withholding a certain percentage of future benefits that may be due to the worker on any claim. ORS 656.268(14). You may know that overpayments have to be asserted and documented in writing. OAR 436-060-0170. But you may not appreciate that the rule requires written overpayment notices to “explain” the “reason” for the overpayment. OAR 426-060-0170(2).
It is not clear how much explanation is necessary, and attorneys are beginning to challenge overpayment notices more frequently as “improperly claimed,” simply because the explanation or reason is insufficient. This can lead to penalties and attorney fees, even when an employer or insurer is entitled to the overpayment and have calculated it correctly.
A case from the Board this year addressed the “reason” requirement of OAR 436-060-0170(2). In Chelsea Avila-Mejia, 77 Van Natta 73 (2025), the Board noted the rule and caselaw are silent as to what constitutes a sufficient “reason” for an insurer to recover an overpayment. The Board noted the “reason” requirement is vague, so it can be difficult to determine whether the requirement has been met. The Board encouraged the Workers’ Compensation Division to amend the rule to provide further guidance, but that has not happened yet. This issue is being litigated more frequently. In addition to the case above, we recently responded to the issue at the hearings division.
With the requirement being vague and getting more attention, it is best to be safe and to provide as much explanation as possible. The reason cited for the overpayment could be inaccurate wage information, a good faith estimate that was too high, or incorrectly assuming ongoing disability authorization. Whatever it is, at least some explanation or reason must be provided to comply with the rule and avoid an attorney fee. An overpayment notice without any reason is probably going to trigger a hearing request.
It should be noted that an attorney fee might be payable if an overpayment notice provides insufficient reason, even if the overpayment calculation and withholding is correct, and even if there is no penalty to the worker. If the record does not indicate any “amounts then due” upon which to base a penalty, no penalty to the worker is warranted under ORS 656.262(11)(a). However, an attorney fee can still be due. In Gabino-Rivas, 67 Van Natta 777 (2015), an overpayment notice from SAIF did not provide an explanation, but the Board said that, even if SAIF did not explain it, SAIF was still entitled to recover the overpayment. Accordingly, there were no “amounts then due” and claimant was not entitled to a penalty. With that said, an attorney fee under ORS 656.262(11)(a) is not contingent on the assessment of a penalty. Nancy Ochs, 59 Van Natta 1785 (2007); Peter Bass, 60 Van Natta 2936 (2008). Based on Ochs, an attorney fee for an unreasonable delay in compensation or processing is still assessable even in the absence of “amounts then due” on which to base a penalty. Accordingly, it is important to include a sufficient reason in every written overpayment notice.
At SBH we are ready to answer any questions you may have regarding an overpayment. We can help calculate overpayments and we can help you draft or revise written notices to ensure they include a proper explanation and reason. If you need any guidance, please feel free to contact me at 971-383-2838 or .
Posted by Matt Williams.
