Understanding What Your Employer Gets Back After a Construction Injury Settlement
Key Takeaways: Under Section 5(b) of the Illinois Workers’ Compensation Act, an employer or its comp carrier is reimbursed from a worker’s third-party recovery, but not dollar-for-dollar. When the injured worker’s attorney secured or substantially contributed to the fund, and absent a different agreement, the employer must pay that attorney 25% of the gross reimbursement. Illinois courts describe that fee as coming "off the top" of the employer’s reimbursement. In one appellate example, a $121,592.92 lien was reduced by a $30,398.23 fee, leaving the employer roughly $91,194.69. The employer must also pay its pro rata share of all costs and reasonably necessary expenses, further reducing the net lien. Liens are rarely waived absent clear contractual language, though the employer bears the burden of establishing entitlement. Careful review of itemized benefit printouts, costs, and settlement timing turns a gross lien number into an accurate net figure. This article is general information, not legal advice.
When an Illinois construction worker recovers money from a negligent third party, the workers’ compensation insurer that paid benefits generally gets reimbursed. But that reimbursement is not dollar-for-dollar. Under Section 5(b) of the Illinois Workers’ Compensation Act, when the injured worker’s attorney’s services resulted in or substantially contributed to the recovery, and absent another agreement, the employer must pay that attorney 25% of the gross reimbursement. That payment, plus the employer’s pro rata share of litigation costs, separates a gross lien from the net amount the employer receives.
If you need to understand how a lien affects your net recovery, the construction injury team at Trapp & Geller can walk you through the numbers. Call (312) 368-1444 or reach out to our team now to discuss your situation.
Where the 820 ILCS 305/5(b) Lien Comes From
The lien is a creature of statute, not of contract. Section 5(b) of the Act preserves an injured employee’s right to pursue a legally responsible third party and provides that "the employer may have or claim a lien upon any award, judgment or fund out of which such employee might be compensated from such third party." The statute also sets out procedural conditions, including notice requirements, that affect how the lien is asserted. Section 5(b) of the Illinois Workers’ Compensation Act (820 ILCS 305/5(b)) is the controlling authority on workers’ compensation liens in Illinois.
The statute spells out what the employer receives. It directs that "from the amount received by such employee or personal representative there shall be paid to the employer the amount of compensation paid or to be paid by him to such employee or personal representative." Illinois courts recognize this reimbursement right may take the form of a lien on amounts already paid or a credit against future payments, consistent with Zuber v. Illinois Power Co., 135 Ill. 2d 407 (1990). Which form applies depends on where the comp claim stands procedurally. The employer’s recovery is limited to compensation paid or owed and cannot exceed the third-party recovery amount.
Construction cases are where this issue surfaces most often. A worker who falls from a scaffold, is struck by a crane load, or is caught in a trench collapse frequently has both a workers’ compensation claim against the employer and a negligence claim against a general contractor, equipment owner, or other on-site entity. Anyone handling a serious 820 ILCS 305/5(b) lien matter should understand that the two claims are separate proceedings that interact financially through the lien.
How the 25 Percent Attorney Fee Reduction Actually Works
The statutory basis for the reduction is explicit. Section 5(b) provides that "where the services of an attorney at law of the employee or dependents have resulted in or substantially contributed to the procurement by suit, settlement or otherwise of the proceeds out of which the employer is reimbursed, then, in the absence of other agreement, the employer shall pay such attorney 25% of the gross amount of such reimbursement." The rationale: the employer benefits from a fund the worker’s lawyer created.
Illinois authority has described this fee as coming "off the top." As one Illinois Appellate Court opinion explained, the more logical reading of the statute is that the legislature intended 25% of the employer’s total reimbursement for its workers’ compensation lien to be taken off the top as fees to plaintiff’s attorneys. That opinion notes the employer must pay its proportionate share of costs and expenses in addition to the 25% attorney fee.
A Worked Example From the Case Law
A concrete illustration makes the mechanic clear. In the same decision, the court worked through a lien of $121,592.92. Twenty-five percent of that figure is $30,398.23, reducing the employer’s reimbursement to $91,194.69 before any cost-sharing deduction. The figures below are illustrative only; actual numbers depend on benefits paid and costs incurred.
| Item | Amount |
|---|---|
| Gross Section 5(b) lien | $121,592.92 |
| Statutory 25 percent attorney fee | $30,398.23 |
| Net reimbursement to employer | $91,194.69 |
Costs are a separate deduction. Beyond the fee, the statute requires that "the employer shall pay his pro rata share of all costs and reasonably necessary expenses in connection with such third-party claim, action or suit." Depositions, records, and retained experts in a construction liability case can be substantial, so this proportionate cost-sharing may further reduce the net lien figure.
💡 Pro Tip: Ask early for an itemized, up-to-date benefit printout from the comp carrier. Gross lien figures are often overstated because of duplicate medical entries or charges unrelated to the work injury.
Why the Lien Rarely Just Disappears
Employers do not lose the lien by silence. As discussed in Illinois State Bar Association commentary on Timothy Cooley v. Power Construction Company, LLC, absent clear and specific contractual language, an employer’s Section 5(b) lien was not deemed waived. A worker should assume the lien and the corresponding 25 percent attorney fee obligation will apply unless a written waiver plainly says otherwise.
At the same time, the employer bears a burden. ISBA commentary on Hunt v. Herrod notes that an appellate court found an employer was not entitled to a Section 5(b) lien merely because it paid workers’ compensation benefits. Workers’ compensation newsletters published by the ISBA return to these lien disputes repeatedly, signaling that entitlement and amount are genuinely contested issues.
Credits Against Future Benefits
The lien question does not always end at settlement. A 2025 ISBA case summary of LaBud v. L.A. Truck Leasing, Inc. describes the Commission addressing the credit due a respondent against future permanent total disability benefits following settlement of a third-party claim where its Section 5(b) lien had not been satisfied in its entirety. In catastrophic construction injury cases with ongoing PTD exposure, the future-credit issue can matter more than the past lien.
Timing and Cash Flow
Lien resolution affects when money actually reaches you. Settlement proceeds generally are not disbursed until lien amounts are resolved and documented. Workers who are already wondering when a compensation check arrives should understand that a disputed lien can extend the timeline.
Common Challenges Illinois Injured Workers Face
Several recurring issues complicate lien reduction:
- Gross lien statements including unrelated or duplicative medical charges
- Disputes over whether particular litigation costs qualify as "reasonably necessary"
- Multiple accidents or carriers claiming overlapping reimbursement rights
- Structured or partial settlements leaving future credit questions unresolved
- Contract language between contractors that may or may not address waiver
None of these have one-size-fits-all answers. Whether a particular charge belongs in the lien, or whether a credit applies to future benefits, is fact-dependent and may be resolved differently by different tribunals.
Practical Steps Before You Settle a Third-Party Claim
Order matters when resolving parallel claims. Because the comp claim and civil suit are separate proceedings, settling one without accounting for the other can create avoidable problems, including consent and notice issues under Section 5(b). Confirm the lien figure, the fee reduction, and any future credit before signing releases.
Documentation drives the outcome. Keeping medical bills, benefit payment records, and cost invoices organized supports both the statutory lien and fee provisions argument and any challenge to inflated numbers. In many cases, the difference between a gross and net lien turns on records rather than argument.
💡 Pro Tip: If your employer’s carrier asserts a credit against future benefits, ask for the calculation in writing. Credits and liens are computed differently and should not be conflated.
Frequently Asked Questions
1. Does the 25 percent fee reduction apply automatically?
Not automatically. Under 820 ILCS 305/5(b), it applies where the employee’s attorney’s services resulted in or substantially contributed to the recovery, and "in the absence of other agreement." A different written agreement may change the result.
2. Is the 25 percent taken from my share or the employer’s share?
The statute directs the employer to pay the fee, and Illinois case law describes it as taken off the top of the employer’s total reimbursement, reducing the net amount the employer retains rather than adding a charge to the worker.
3. Can the employer also recover its costs of the lawsuit from my recovery?
Generally no. The statute runs the other direction: the employer must pay its pro rata share of all costs and reasonably necessary expenses connected to the third-party claim, which reduces the net reimbursement.
4. Can my employer waive its 820 ILCS 305/5(b) lien?
Waiver is possible, but Illinois commentary on Cooley indicates that absent clear and specific contractual language, the lien was not deemed waived. Assume it applies unless a written provision says otherwise.
5. What happens if the lien is not fully satisfied?
Under certain circumstances, the employer may claim a credit against future benefits, an issue the Commission addressed in the LaBud case summary. The analysis is fact-specific.
Protecting the Value of Your Recovery
The 25 percent attorney fee provision is a meaningful statutory protection for Illinois injured workers, but it operates alongside pro rata cost-sharing, waiver questions, and future-credit issues that can change the practical value of a third-party settlement. The statutory text controls, appellate decisions explain how the arithmetic works, and the specific facts of your construction case determine the result.
If a workers’ compensation lien is affecting your construction settlement, the attorneys at Trapp & Geller are ready to review the numbers with you. Call (312) 368-1444 or schedule your free consultation today.