Reviewing Section 4658

Saturday, February 10, 2007 | 0

By Allan Leno

Correction

In last month's edition, the effective date for the new return to work small employer reimbursement regulations (Sections 10004, 10005) was inadvertently shown as 8/1/06. The correct date is 8/18/06.

PD-RTW Adjustments (L.C. Section 4658(d))

The subject of the 15% return to work adjustments to Permanent Disability seem to be causing as much confusion among claim professionals as the SJDB voucher so this month we will take a look at some of the issues. As with the voucher, the language for L.C. Section 4658(d) fails to accommodate a substantial number of common situations.

So what does the L.C. Section 4658(d) provide? The intent was to provide an incentive for employers to retain their industrially injured employers and a disincentive for employers who choose to let these employees go rather than providing a return to work opportunity. The following provisions apply only to dates of injury on/after 1/1/2005.

Briefly, Section 4658(d)(2) requires the claims administrator to increase weekly PD payments by 15% if the employer does not offer regular, modified, or alternative work within 60 days of the employee becoming P&S. This section only applies to employers with 50 or more employees (effective on the date of policy inception or renewal). The offer of regular work must be made on DWC AD Form 10003 and offers of modified or alternative work must be made via DWC AD Form 10133.53. The 15% increase in PDAs begins on the 61st day after P&S and continues until all PD is paid out. If the case is settled via a lump sum (usually a C&R), the lump sum payment is supposed to accommodate the 15% PD adjustment for the remaining weeks including in the settlement. Note that the 15% adjustment applies to the weekly PD payment and NOT to the PD rating.

Section 4658(d)(3)(A) allows the claims administrator to reduce weekly PD payments by 15% where the employer offers regular, modified, or alternative work within 60 days of the employee becoming P&S. As above, the offer of regular work must be made on DWC AD Form 10003 and offers of modified or alternative work must be made via DWC AD Form 10133.53. Once the offer is made, the claims administrator may immediately begin reducing weekly PD payments by 15%. Note that the PD reduction begins on the offer of work and is not dependant on an acceptance by the employee. The PD reductions continue as long as PD payments are made and any lump sum settlement should include the 15% reduction for the balance of the weeks of PD remaining. Note that Section 4658(d)(3)(B) provides for changes to the PD adjustment where employment terminates within one year (PD payments must be increased by 15% - that means going from a -15% to a +15%). If the employee voluntarily terminates employment, the claims administrator can continue taking the 15% PD reduction.

Note that Section 4658(d)(3)(A) does not specify whether it applies to employers with 50 or more employees or les than 50 employees. Some claim administrators have taken the position that it applies only to employers with 50 or more employees while others believe it applies to all employers, regardless of size. Absent guidance from case law, this is a policy decision for employers and I would urge you to discuss this issue with counsel prior to establishing your company policy. My opinion (I am NOT an attorney) is that the language includes all employers, regardless of size. However, it does seem inequitable for small employers to be included because (1) they reap the benefits of retaining an injured employee without suffering the cost for not allowing an injured employee to return, and (2) the small employer gets to "double dip" in a way because they can be reimbursed for the costs of physical job modification via L.C. Section 138.48 (see also CCR Sections 10004-10005).

Like the voucher statutes and regulations, the PD adjustment statute and regulations seem to miss as many situations as they cover, as indicated by the following questions:

An employee returns to work at regular duties but no offer of regular work (DWC AD Form 10003) is sent. Do you increase weekly PD payments after 60 days?

The statute (L.C. Section4658(d)(3)(A)) says weekly PD payments are increased unless the employer offers regular, modified, or alternative work within 60 days of P&S. CCR Sections 10001-10003 specifies that the offer of regular work is via the 10003 form so the answer to this question would be "Yes." Some argue that the actual return to work constitutes a de facto offer of work by the employer and an acceptance by the employee so the 10003 form should be irrelevant and requiring the form constitutes "form over substance." That is a very logical argument but the history of workers' compensation in California is replete with examples of cases where a failure to meet technical requirements (such as sending mandatory notices) has proven expensive to defendants. I therefore expect that a failure to send a 10003 form to offer regular work will result in a finding that the 15% PD increase is due after the 60th day.

If the offer of regular/mod/alt work comes through the employer via an interactive process, is the offer valid if not served by the claims administrator?

Presumably the claims administrator does not serve a DWC AD Form 10003 so the answer would be the same as above. This question points out the absurdity of relying on "form over substance" and we can hope the courts will recognize that an employer that has utilized an interactive process resulting in a return to work has meet the intent of L.C. Section 4658(d). Until that happens, send the 10003 (or 10133.53 for mod/alt jobs) before taking your 15% PD credit.

L.C. Section4658(d)(2)(3) indicates that you have 60 days to send an offer of regular work