Special message regarding COVID-19

Viewpoints on Return to Work & Temporary Disability During COVID-19

April 30,
2020
Brenna Hampton
Office Managing Partner, San Diego office
bhampton@hannabrophy.com
Don Powelson
Of Counsel, Bakersfield office
dpowelson@hannabrophy.com

 

Determining TD Benefits / COVID-19 Response

April 2020

Without clear precedent on this particular issue, employers and insurers are likely take a variety of positions with regard to payment of temporary disability indemnity. Who is right? By inference, who is wrong? Well, not to be coy, but the answer is everyone and no one, all at once. You are invited to read the discussion points below by our esteemed colleagues Patty Robbins (Redding) and Bill Davis (Santa Rosa), each taking an opposing viewpoint on the matter.

 

Existing law supports the notion that in the current environment, workers’ compensation is not necessarily the first source of benefits. In fact, Labor Code 4654 indicates that the employer’s liability for temporary partial disability shall be reduced by the sum of unemployment compensation benefits and extended duration benefits received by the employee during the period of temporary partial disability. If those same employees are also eligible for enhanced COVID-19 unemployment benefits, it would seem that LC4654 could also be applied if an employer becomes obligated to pay temporary partial disability benefits for an overlapping period at a later date.

 

So how does an employer or insurer protect themselves? The easy answer is pay benefits now, seek a credit later. For some, the simplest is deny now, address resolution and evade penalties based on the uncertainty. Triggering factors are likely to include whether the entire workplace was shut down or whether it was deemed “essential” and remained open. Was this one employee denied modified work while everyone else continued working? In that case, temporary disability is more likely owed. Was the entire business shut down due to COVID-19? In that case, there is a stronger argument to deny benefits if it is the only reason that modified duties are not available.

 

Whether a decision is made to pay or not pay, appropriate notices should go out in a timely manner documenting the rationale for the decision. If the entire business shuts down temporarily and then restarts, temporary disability denials should be immediately reassessed and employers should provide modified duties if available or the employee would be entitled to temporary disability. Care should be taken to apply similar methodologies with regard to all similarly situated employees to avoid claims of discrimination.

 

If benefits are advanced, notice should go out that such benefits are being paid under protest and all rights to a credit are reserved. Written notice to the employee should go out within 20 days of the disputed payment. Defendants seeking to assert a credit against temporary disability overpayment must also now file a Petition for Credit and may not unilaterally take the credit pursuant to 8 CCR 10555.

 
 

Determining TD Benefits / COVID-19 Response


 

Key TD Codes

LC4453 & LC 4455: Minimum and Maximum Earnings / TD rates based on the date of injury.

LC 4654: Credit against TPD in the amount of unemployment benefits received for same period.

LC4656: Statute of limitations for TD based on date of injury.

LC4657: TPD rate = 2/3 [(gross earnings at time of injury, per statute) minus (gross earnings at present job)].


Argument For Paying Temporary Disability

Due to Shelter-In-Place or Business Interruption

 

William Davis

Attorney, Santa Rosa office
wdavis@hannabrophy.com

 
 

Argument For Paying Temporary Disability

Due to Shelter-In-Place or Business Interruption

April 2020

 

COVID-19 has brought with it several interesting challenges to the workers’ compensation community. Most questions focus, as they should, on the big issues of keeping employees safe and AOE\COE of claims. But, the issues have a greater reach. Consider the case of an injured worker whose employer was accommodating work restrictions and providing modified duties. These modified duties may no long be available due to a shelter in place order or a determination that the employer is not an “essential service” and thus must close for an unknown period. Is the injured worker entitled to temporary disability or should they apply for benefits with EDD like all the other laid off employees who do not have a workplace injury?

 

The COVID-19 pandemic response is unprecedented and thus the WCAB has not had to deal with these issues before. However, there are analogous situations involving injured workers whose work restrictions were being accommodated who were unable to continue working due to factors outside their control.

 

Consider the situation of an injured worker performing modified duties who was terminated for good cause. It is well settled that the employer would not be liable for TD in this situation, but there is liability if it is found that the termination was not actually for “good cause.” Defendant has the burden of proof on that issue.

 

The Court of Appeal dealt with this issue in Manpower Temporary Services v. WCAB (Rodriguez) (2006, writ denied) 71 CCC 1614. In this case, the employer was accommodating the injured worker’s work restrictions. He was terminated while on modified duty for allegedly lying to a co-worker about having authority to make up his work time if he arrived for work late. The employer argued that his termination was for good cause and TD was not provided until the point that he underwent a surgery. The employer further argued that, even if TD were due, the TD rate should have been calculated based on an averaging of the injured worker’s pre-injury and post-injury earnings.

 

The evidence at trial regarding the basis for the termination was conflicting. The trial judge, the WCAB on recon, and the Court of Appeal all held that the employer had failed to prove that the termination was for “good cause”. It was held that the injured worker “was entitled to temporary disability benefits because Manpower had not given him prior warnings or reprimands, or otherwise demonstrated good cause for his discharge”. The trial Judge went on to hold that the injured worker “was entitled to a temporary disability rate based on his modified work and this rate reflected his actual loss of earnings”. The Court of Appeal held that the trial judge was required to consider the injured worker’s post-injury earnings to the extent that those earnings were relevant to his earning capacity at the time of injury.

 

The takeaway from the Manpower case is that the injured worker was entitled to TD because the termination of the modified duties was not due to his own actions. By failing to prove that the termination was for “good cause”, the employer failed to demonstrate that the termination was due to employee misconduct and thus TD was due because the employment terminated for reasons beyond the employee’s control. The same analysis would apply to shelter in place orders or business interruptions as the business has not been declared “essential”. Using the Manpower analysis, unless the injured worker’s termination was the result of his own actions sufficient to be “good cause”, the employer would be liable for TD even if modified duty was still available.

 

The Appeals Board in a Panel decision took the Manpower holding further in Bedoya (Ashley Furniture Industries (2018) 2018 Cal.Wrk.Comp.PD.Lexis 396). In that case, an employer was unable to offer modified duty due to a plant closure. The Board cited the Manpower case noting that “an employer remains liable for temporary disability after terminating an employee if it fails to establish good cause by showing employee misconduct.” The Board went on to note that “this is not a situation where the injured employee is not entitled to temporary disability because he or she voluntarily left work and/or chose to retire” (citing Gonzales v. Workers’ Comp. Appeals Bd. (1998) 68 Cal.App.4th 843).

 

The Board in Bedoya held that the injured worker’s inability to perform modified duty due to the plant closure “was more akin to a situation where the injured employee’s inability to work for full wages is a function of his or her industrial injury, which results in the employee being entitled to temporary disability benefits”. Importantly for the current situation, the Board held “We conclude that this same principle applies if the employee’s inability to work for full wages is a function of the employer’s decision to close a plant or otherwise layoff the employee”. The Board noted that the injured worker’s lack of employment was not due to their unwillingness to work but, rather, to factors outside their control.

 

The takeaway from the Bedoya case is that the employer remains liable for temporary disability after terminating the employee if it fails to establish good cause for the termination by showing employee misconduct. The termination in this case was not due to misconduct of the employee but instead was due to forces outside their control, “the employer’s decision to close a plant or otherwise layoff the employee”.

 

These cases are analogous to the situation of an injured worker whose employer was accommodating work restrictions and providing modified duties until those modified duties were no long be available due to a shelter in place order or a determination that the employer is not an “essential service” and thus must close for an unknown period. The inability to continue working was not “due to their unwillingness to work” or their own actions or misconduct and the termination was not for “good cause”. Rather, the inability to continue to work was due to factors outside the control of the injured worker, an order to stay at home and/or the temporary closure of the business. The WCAB would most likely find that TD was due in such a situation. But, at what rate should this TD be paid? The Manpower Court noted that the trial judge was required to consider the injured worker’s post-injury earnings to the extent that those earnings were relevant to his earning capacity at the time of injury. The employer should determine if the injured worker was earning less on modified duties and adjust that TD rate accordingly.

 

The COVID-19 shelter in place and business interruptions orders will pass and this issue will resolve itself in time. But, for now, we need to be mindful of the probable liability for TD for those injured workers no longer able to perform their modified duties due to these orders.


Arguing Against Temporary Disability

During the COVID-19 Pandemic

 

Patty Robbins

Patty Robbins

Attorney, Redding office
probbins@hannabrophy.com

 
 

Arguing Against Temporary Disability

During the COVID-19 Pandemic

April 2020

 

In light of COVID-19, businesses deemed non-essential have been asked to close if telework is not available in an effort to promote social distancing and “slow the spread” of the pandemic. This unforeseen obstacle raises new questions in workers’ compensation regarding liability for temporary disability indemnity benefits. In many cases, work would have been available but for the preventative measures. Should an employer still be liable for benefits if they could have returned an injured worker to work but for the pandemic? This article seeks to address that question and provide some guidance to employers, but every case will be unique – please consult your defense attorney with case-specific inquiries.

 

This legal issue will most likely arise in two scenarios. First, an injured worker was temporarily totally disabled before the pandemic, but has since been released to modified duty that cannot be provided only because the business has been asked to close. Second, and more problematic, an injured worker was receiving temporary partial disability (i.e. “wage loss”), but the business has now been asked to close. First, an injured worker was temporarily totally disabled before the pandemic, but has since been released to modified duty that cannot be provided only because the business has closed due to COVID-19. Second, and more problematic, an injured worker was receiving temporary partial disability (i.e. “wage loss”), but the business has now been asked to close.

 

The California Supreme Court has explained that the workers’ compensation system was created on the philosophy that an employer’s cost of doing business includes “the care and rehabilitation of workers disabled by work injuries.”[1] In short, it explained that employers – not the government – should bear the burden of the injuries caused by its own operations. Although the extent of that burden has been interpreted widely, there is consistently a logical nexus between a work injury and the resulting benefits due.

 

Temporary disability, for example, is intended to replace lost wages resulting from a workplace injury such that it may be terminated when an injured worker returns to work, is deemed able to return to work, or achieves permanent and stationary status.[2] The “deemed able to return to work” prong is most relevant to this discussion. In Lemons, the Court of Appeal explained that temporary disability ends “physically and legally” when an injured worker is physically able to resume his or her former job.[3] This underscores the cause-and-effect relationship between a work injury and entitlement to workers’ compensation benefits. The benefits only go as far as the injury itself.

 

At present, many employees are losing wages because of the preventative measures currently in place for COVID-19. The legislature has recently sought to address that concern by enacting the Families First Coronavirus Response Act, which includes the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act further clarifies the benefits available to employees that have lost wages due to the crisis. Those benefits are available to all employees regardless of whether they are presently recovering from a workplace injury. That raises a question of fairness. Should an injured worker be able to obtain those benefits from the government and also workers’ compensation temporary disability indemnity when his or her uninjured colleagues cannot? The answer depends on whether the injured worker would have been entitled to workers’ compensation benefits even without the pandemic.

 

If an injured worker is still (1) medically temporarily totally disabled (“TTD”) or (2) temporarily partially disabled (“TPD”) where work would not be available even without the Shelter in Place order, temporary disability indemnity is still due. There is plenty of case law that allows temporary disability benefits to continue when an injured worker remains medically unable to work even though “other factors” would have kept that individual from working (e.g. enlisting in the army,[1] becoming pregnant,[2] etc.).

 

With that said, if temporary disability indemnity would not be due without the pandemic, it does not become due because of it. It has been held that if an injured worker cannot work due to factors that would exist despite the industrial injury such as inclement weather[3] or refusal to cross a picket line,[4] workers’ compensation benefits are not due. Similarly, COVID-19 and the effects of the related preventative measures would exist absent any workplace injuries. If work is not available because of it, both formerly injured workers and their uninjured colleagues should be directed to the State’s unemployment benefits.

 

Note that the Applicant’s bar will likely argue for benefits by pointing to the statutory rule that all issues in workers’ compensation are to liberally construed in favor of the injured worker.[5] However, for the nexus reasons outlined above that provide the basis of the worker’s compensation system, the law is in the employer’s favor in terminating temporary disability indemnity benefits when the injured worker could have returned to work but for the preventative measures currently in place. This is not an issue of how far workers’ compensation benefits should reach, but whether workers’ compensation benefits are applicable at all. Quoting the Court of Appeal, “…it is not the purpose of the Workmen’s Compensation Act to provide general insurance or compensation for those who are unemployed through no fault of their own.”[6]

 

In practice, an employer’s cost-benefit analysis for this approach should give consideration to potential litigation costs associated with this triable issue, public perception, and uniformity. Any decisions to terminate benefits should always be made by notice in writing with a specific explanation of the grounds upon which benefits are being terminated. Please consult your defense attorney for further analysis and recommendations.

 

(**Note that similar issues may arise with respect to determining liability for a Supplemental Job Displacement Voucher (“SJDV”). The focus should remain on whether restrictions could have been accommodated but for the preventive measures. A written return to work offer should still be made within the 60 day time limit if the restrictions can be accommodated when the Shelter in Place Order is lifted.). Recent case law also inures jurisdiction over vouchers to the WCAB and not to the Administrative Director.

 
 

[1] Department of Rehabilitation/State of California v. WCAB, Lauher (2003) 68 Cal. Comp. Cases 831 quoting 1 Herlick, Cal. Workers’ Compensation Law (6th ed. 2001) § 1.01[4], p. 1-4) and Universal City Studios, Inc. v. WCAB (1979) 99 Cal.App.3d 647, 660.

[2] Laugher citing Huston v. WCAB (1979) 95 Cal.App.3d 856, Bethlehem Steel Co. v. Ind. Acc. Com. (Lemons) (1942) 54 Cal.App.2d 585, and Industrial Indem. Exch. V. Ind. Acc. Com. (1949) 90 Cal.App.2d 99, respectively.

[3] Lemons at 253 quoting Witt’s Dairy v. Ind. Acc. Com. (1940) 5 Cal. Comp. Cases 27.

[1] Ratto v. Amador Lumber Co., SCIF (1946) 12 Cal. Comp. Cases 2.

[2] Bullock’s Inc. v. Ind. Acc. Comm. (1951) 16 Cal. Comp. Cases 253.

[3] Hulbert v. Allied Painters and Decorators, SCIF (1945) 10 Cal. Comp. Cases 251.

[4] Seale v. WCAB, Shell Oil Co. (1974) 39 Cal. Comp. Cases 676 (writ denied).

[5] Labor Code § 3202.

[6] Lemons at 251.

 

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