SB 899 - A Detailed Review, Part 4: PD, Apportionment

Sunday, June 6, 2004 | 0

This is the fourth in a series of articles extracted and edited from a new booklet attorney Michael Sullivan has prepared on the substantial changes to California workers' compensation laws instituted by SB 899. The earlier articles are available for reading by clicking on the links to the right.

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10. Permanent Disability Redefined

A number of changes have been made to the concept of permanent disability.

A. Continuity of Payments.

Labor Code section 4650(b) had provided that if injury caused permanent disability, the first payment was to be made within fourteen days after the last payment of temporary disability indemnity. It was provided that where the standard of permanent disability could not be determined at the date of the last payment of temporary disability, the employer nevertheless should commence the timely payment required of permanent disability.

New language has been added here to reinforce the requirement of continuous payments without a break. It is indicated that "When the last payment of temporary disability indemnity has been made pursuant to subdivision (c) of section 4656, and regardless of whether the extent of permanent disability can be determined at that date, the employer nevertheless shall commence the timely payment required . . ." Payment is still to be made based upon a reasonable estimate of the amount due at the end of the period for the payment of temporary disability, regardless of whether the permanent disability can be precisely defined.

B. Permanent Disability Redefined.

According to Labor Code section 4600(a), permanent disability is determined based upon the nature of the physical injury or disfigurement, the occupation of the injured employee, his or her age at the time of the injury, and the employee's diminished ability to compete in an open labor market.

This has been changed. No longer is permanent disability based upon an assessment of the applicant's loss of ability to compete in an open labor market. The new standard for permanent disability is what the applicant's lost future earning capacity is as a result of the injury.

Furthermore, the "nature of the physical injury or disfigurement" is now to incorporate descriptions and measurements of physical impairments and corresponding percentages of impairments that has already been published in the American Medical Association's (AMA) Guide to the Evaluation of Permanent Impairment, Fifth Edition.

Under the new Labor Code section 4660(b)(2), the Administrative Director is now charged with producing a new schedule for rating permanent disabilities. This schedule is to produce a measure of the applicant's diminished future earning capacity by producing a numeric formula based upon empirical data and findings that aggregate the average percentage of long-term loss of income resulting from each type of injury for similarly situated employees. In making this numeric formula, the Administrative Director is to use the Evaluation of California's Permanent Disability Rating Schedule Interim Report. This was published in 2003 by the Rand Institute, and at this writing the final needed numbers are coming. Unfortunately, we will have to wait to really understand the impact this will have on permanent disability in our system until this information is out and the new schedule is published.

It appears that the target date for this is January 1, 2005. By that date the Administrative Director is to adopt regulations to implement the changes made here. Labor Code section 4660(d) states that the new schedule shall apply only prospectively for those dates of injury occurring on or after the publication of the new schedule. It also makes provisions for cases with dates of injury before the publication. Interpretation of these provisions shall await the formation and issuance of the schedule, as well as the rules promulgated.

The Administrative Director is to review and amend this schedule at least once every five years. The schedule "shall promote consistency, uniformity and objectivity."

C. Increase in Permanent Disability for Serious Injuries.

Labor Code section 4658 lays out the number of weeks of permanent disability which are to be paid depending on the percentage of permanent disability. New subsection (d)(1) sets forward a new standard here. This Labor Code applies to injuries on or after the effective date of the revised permanent disability schedule described herein under Labor Code section 4660. There is other language here regarding the implementation of this increase, but a firm understanding will await the new schedule's publication.

For those injuries which result in permanent disability of 70 to 99.75% (life pension cases), the number of weeks for which permanent disability is paid is raised to sixteen. This is a dramatic increase from prior allowances.

D. Permanent Disability Benefits Modified for Return To Work.

Labor Code section 4658(d)(2) specifies that the applicant may receive an increase in some permanent disability if he or she is not put back to work by the original employer. Subsection (d)(3) also decreases permanent disability if the applicant is put back to work. This concept does not apply to those employers with less than fifty employees.

If within sixty days of permanent and stationary status the employer does not offer the applicant regular, modified or alternative work under certain conditions, one of which is a 12-month duration for this work, the applicant is entitled to a 15% increase in the payments of permanent disability. Note that this is not a 15% increase to permanent disability in general. Rather, it is a 15% add-on to each check sent to the applicant for permanent disability following the close of the 60-day period.

On the other hand, if within the same 60 days the employer does offer the applicant regular, modified or alternative work that would last the 12-month period, each permanent disability payment made after the date of the offer is decreased by 15%. If the applicant is terminated by the employer before the end of the permanent disability payout, the payments are again increased by 15%. If the applicant voluntarily terminates employment, he or she does not get the increase.

This structure is curious, especially in light of the provisions in the 2003 legislation respecting modified or alternative work in the "voucher" system. Those provisions had provided for an offer to be made to the applicant at the end of temporary disability payment-not the permanent and stationary status as specified in these statutes-and seem to coincide somewhat. This is made even more interesting by the new Labor Code Section 4658.1. This defines regular work, modified work and alternative work, and lays out the conditions under which these terms may be properly utilized for purposes of employing an increase or decrease in permanent disability as noted herein.

Regular work means "the employee's usual occupation or the position in which the employee was engaged at the time of injury, and that offers wages and compensation equivalent to those paid to the employee at the time of the injury and located within a reasonable commuting distance of the employee's residence at the time of injury." Modified or Alternative work offered must be within reasonable commuting distance as well, and must be within 85% of the original wage. Modified work is essentially a return to the original position, with accommodations made so that the employee can continue to perform the functions of the job. He or she must be able to perform the functions of the alternative job too.

Further guidance is given by section 4658.1, subsections (d), (e) and (f). Subsection (d) specifies that increasing working hours does not count for purposes of specifying comparative wages. Subsection (e) specifies that when determining the actual wages and compensation, the minimums and maximums for purposes of permanent disability are not considered. Subsection (f) indicates that the reasonable distance of the employee's residence may be waived by the employee, that any objection is deemed waived if the employee accepts the work and does not object to the location within 20 days of being informed of the right to object; and finally, if the offered work is at the same location and the same shift as the employment at the time of injury, it is conclusively deemed to be a non-issue.

The Administrative Director is directed to create rules and regulations for implementation of this scheme. This will likely clarify a lot of the issues here.

11. Apportionment

Traditionally, apportionment of permanent disability was only allowed within specific parameters. These parameters were judged by some to be rather strict. Certainly an attempt at a finding of apportionment would meet with specific challenges. In addition, the maxim that apportionment applies to disability, and not to causation, was a long-standing principle of workers' compensation law. All this has been radically changed.

There were three Labor Code sections which defined apportionment. Labor Code section 4750 provided for apportionment to disability which existed at the time of the industrial injury that was the result of a prior injury that the applicant had suffered. Labor Code section 4750.5 provided for apportionment to a subsequent incident of injury which created a definable disability. Labor Code section 4663, arguably the most difficult of the three, provided that apportionment could result from a non-industrial progressive disease. All of this has been completely repealed.

It has been replaced by a new Labor Code section 4663, which makes the astounding revision in subsection (a) that "Apportionment of permanent disability should be based on causation."

This section goes on to state that any physician preparing a report has to specifically address the issue of the causation of permanent disability. That is necessary for any physician's report to be considered complete. The physician is to identify "what approximate percentage of the permanent disability was caused by the direct result of injury arising out of and occurring in the course of employment, and what approximate percentage of the permanent disability was caused by other factors, both before and subsequent to the industrial injury, including prior industrial injuries." Newly enacted Labor Code section 4664 states that "The employer shall only be liable for the percentage of permanent disability directly caused by the injury arising out of and occurring in the course of employment."

If a physician is unable to make an apportionment determination, he or she is to state specific reasons why he or she could not do it. The physician is then to consult with other physicians or refer the employee to another physician "from whom the employee is authorized to seek treatment or evaluation," in order to make his final determination.

Under Labor Code section 4663, an applicant is mandated where requested to disclose all previous permanent disabilities and physical limitations. This seems to result in a new rule for discovery in workers compensation, and there appears to be no reason why the defense would not routinely make this demand.

Labor Code section 4664(b) takes this to the next step and closes a classic "apportionment loophole." This "loophole" applied to situations where a Findings and Award or Stipulation was made regarding permanent disability in the past, but which was subject to the applicant's argument that he or she had recovered from that permanent disability, and thus apportionment should not apply. This argument often worked in litigation up until this point.

However, this new subsection indicates that a prior award of permanent disability is conclusively presumed to be just that - permanent disability, and apportionment automatically applies. To use a traditional example, a back injury that results in 40% disability would be reduced by 20% if there were a prior injury which resulted in a prior Award of 20%. Given the changes in this reform legislation in the way permanent disability is to be valued, understanding how to apportion a prior Award will be difficult once the new schedule issues. The two (or more) assessments of permanent disability will have been made under different standards.

Labor Code section 4664(c) chimes in along these lines and states that applicants may not accumulate, over one lifetime, permanent disability awards on the same body part and exceed 100%. An exception applies if the applicant's injury or illness is conclusively presumed to be total in character, pursuant to section 4662. Specific regions of the body are listed in Labor Code section 4664(c), even beyond those of the statute it references, including: a) Hearing; b) Vision; c) Mental and behavioral disorders; d) The spine; e) The upper extremities, including the shoulders; f) The lower extremities, including the hip joints; g) The head, face, cardiovascular system, respiratory system, and all other systems or regions of the body not listed in subparagraphs a to f inclusive. This obviously is every part of the body, and it is wondered why the Legislature bothered to list them specifically.

Subsection (c)(2) states that "Nothing in this section shall be construed to permit the permanent disability rating for each individual injury sustained by an employee arising from the same industrial accident, when added together, from exceeding 100%."

It appears that this emergency legislation applies for all dates of injury as of Monday, April 19, 2004, as long as such application is prospective; that is, it does not follow an Award or Order. .

Article by attorney Michael Sullivan. Mr. Sullivan can be reached by e-mail at mike@mikeslaw.com, or by phone at (310) 337-4480.

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