When an employer and employee pursue a third-party recovery, whose lien has the first right to the net recovery, provided the lien does not exceed the net amount recovered?

• A. The employee
• B. The third party
• C. The employer's lien, which cannot exceed the net recovery
• D. The state

Answer: (C)

In this situation, the money recovered from a third party is first used to reimburse the employer for workers’ compensation benefits already paid. That reimbursement right is a lien, and it has priority over the employee’s share. The lien can take up to the net amount recovered, meaning it cannot exceed what is actually left after calculating the net recovery (the third‑party recovery after deducting attorney fees and costs). Any remaining funds after satisfying the lien go to the employee (and then, typically, to the employee’s attorney as well).

For example, if the employer paid 40k in benefits and the third party settlement leaves a net recovery of 45k, the employer’s lien can be satisfied in full at 40k, leaving 5k for the employee (before considering the employee’s own attorney fees). If the net recovery were only 30k, the lien could not exceed that 30k, leaving nothing for the employee. This is why the correct answer identifies the employer’s lien as first, but capped by the net amount recovered.