When an employer and employee file third-party actions and obtain a recovery, who has the first right of recovery?

• A. The ER, if the lien does not exceed the amount of the recovery
• B. The EE
• C. The employer
• D. One-third to EE, one-third to ER, one-third to ER attorney

Answer: (A)

When a third-party recovery is obtained for a work injury, the employer has the first right to be reimbursed for benefits paid under workers’ compensation. This is handled through a subrogation lien, which is satisfied out of the third-party recovery before any money goes to the employee. The lien covers the amount of benefits the employer paid (and related costs) so the employee does not double-collect. If the third-party recovery is at least as large as the lien, the employer receives the lien amount first, and any remaining proceeds go to the employee (subject to any attorney fees from the employee’s portion). If the recovery is smaller than the lien, the employer can only recover what the third-party payment provides, and there may be little or no funds left for the employee.