UNDERSTANDING & IMPLEMENTING AB 749 - III
Saturday, February 15, 2003 | 0
This is the third in a six part series on the new California laws by attorney Richard Jacobsmeyer. The first part (Temporary Disability Benefits) of this 6 part article series was published in the Attorney segment. The second article discussed the changes in permanent disability and life pension benefits. This article addresses dependency benefits and changes in penalties.
D. Dependency Benefits:
1. Rate Increases
Dependency benefits are not increased in any significant way until 1/1/2006 when the dependency benefit rates double from the current rates. The burial expense benefit however is unchanged. Additionally the calculation for partial dependents where there are no total dependents will require a multiplier of "8" times the annual amount contributed to the annual support of a partial dependent rather than the current multiplier of "4"
Dependency Benefit Rates
| Effective Date | Burial Expense | 0 or 1 Total Dependant | 2 Total Dependants | 3 or more Total Dependants | 1 Total plus 1 or more Partial Dependants | No Total & 1 or more Partial Dependants |
| 7/1/1996 | $5,000 | $125,000 | $145,000 | $160,000 | $125,000 plus 4X annual support not to exceed $145,000 | 4X annual support not to exceed $125,000 |
| 1/1/2006 | $5,000 | $250,000 | $290,000 | $320,000 | $250,000 plus 4X annual support not to exceed $290,000 | 8X annual support not to exceed $250,000 |
2. No Dependents? Leave it to the Cat. (Labor Code section 4702(a)(6))
There is a significant new benefit that becomes available for injuries after 1/1/04 contained in Labor Code section 4702(a)(6) which will require payment of a $250,000 benefit to the estate of a deceased worker who leaves no dependents. In the past defendants have looked long and hard to find any partial dependents in those circumstances where and injured worker dies and there are no apparent dependants. If the defendant was unable to coax even a minor level of dependency, the provisions of Labor Code section 4706.5 still requires a full single dependency to be paid to the Non-Dependant Death Unit of the State of California.
Where there will be a payment to the estate of double the amount of a single total dependant (at least up to 1/1/06 and a full single dependant after that date) the incentive for any distant (or even close) relative to claim any level of dependency will simply not exist. Defendants can anticipate such relatives denying any potential claims of partial dependency in order to collect the full value of the new benefit payable to the estate (rather than 4or even 8 times the value of a partial dependency). This will be particularly true if the level of partial dependency is relatively minor.
There are however problems with the payment of benefits to an estate of a deceased worker. Certainly in cases where there are not living relatives or heirs the question of not only who gets the benefit (hence the "give to the cat" reference above) but who is charged with opening the estate for the benefits to be claimed. Presumably if there are no heirs and no Will directing someone to open an estate, the benefits would end up escheating to the State of California, who might have sufficient interest to process the paperwork.
There is an additional problem with this provision for payment to an estate. The Constitution of the State of California provides that Workers' Compensation benefits are payable to injured workers or their dependents[N1]. There is no provision for payments to other individuals and in fact the Constitution specifically provides for payment where there are no dependants is to be used for the Subsequent Injuries Fund. It therefore seems quite likely that this particular provision is going to be subject to constitutional challenge particularly since the provisions of Labor Code 4706.5 were not repealed and there is still a requirement to make a full single death benefit payable to Department of Industrial Relations where employee dies with no dependants.
We are therefore left with the anomalous situation that an deceased employee during the period between 2/2/04 and 12/31/05 who leaves a totally dependant spouse and more than 2 children will have his or her family receive a payment of only $160,000 (assuming the youngest child is older than 12 so that the benefits end after full payment of the dependency benefit amount), but the injured worker who leaves behind no dependants and only his beloved cat, will see $250,000 go to maintaining the lifestyle to which his/her tabby wishes to become accustomed and an additional $125,000 go to the State of California. To call this result ironic is certainly an understatement.
Given the above discussion, it seems likely that the Legislature will be reviewing the estate payment in the 2003 session and that this is why the implementation of this provision was delayed by AB 486. This author would certainly not be surprised to see this provision removed entirely and replaced with the presumption in favor of a deceased worker's parents (where there were not other dependants) as had been included in AB 749 but was removed in the clean up bill. There is at least a rational for identifying parents as dependants particularly if the injured worker leaves no other family members.
3. Mentally or Physically Incapacitated Child of Any Age Entitled to Dependency Benefits for Life: (Labor Code section 3501(a))
In addition to the provision involving the payments to the estate of a deceased worker there is an additional change providing that any "mentally or physically incapacitated child of any age" will be entitled to dependency benefits for life. This provision is effective for injuries occurring after 1/1/03. The lifetime benefit is payable as long as the incapacitated child was either living with the employee at the time of death or the employee was legally obligated to support the child at the time of injury.
The concept involved in this provision is certainly an understandable extension of benefits. For deceased workers who leave behind seriously disabled children; the child is more likely to be the subject of parental assistance beyond age 18 than a non-disabled child. Additionally for such children, the loss of a parent's medical and other benefits, in addition to the loss of earning capacity may be catastrophic. There is certainly a strong argument to be made of providing special protection to such disabled individuals. The problem with this extension of benefits is that it may not be limited to those who the statute is designed to assist. This problem is caused by the wording of the statute being broad enough to potentially include all kinds of disabilities/incapacities that were, in all likelihood, not intended to be a part of the entitlement to this significant extension of benefits and the process for identifying who qualifies for the enhanced benefits is very broadly defined.
The statute provides for benefits payable for life to "mentally or physically incapacitated" children. It does not indicate that the incapacity needs to be total nor even that it needs to be permanent. It is therefore not clear whether the level of incapacity that is contemplated by the statute requires complete incapacity from earning or simply a partial incapacity. Hypothetically an injured worker who is living at home with his parents while his broken leg heals, when one of the parents is killed in an industrial injury, would potentially be a physically incapacitated child. Such incapacity is not total and is certainly not permanent but at the time of the employee's death there is "incapacity from earning". Clearly some clarification will be needed from the courts or the legislature to determine what is meant by this somewhat nebulous language.
The second problem alluded to above is the process for identifying an "incapacitated" child. The stature provides that the determination of incapacity can be based upon a finding by any "trier of fact", whether regulatory, judicial, administrative or contractual. It seems likely that this language is to allow such findings as a determination by Social Security Administration as to incapacity to be binding on the W.C.A.B.. But as drafted the language is certainly broader that just the Social Security Administration. Does this statute intend that a finding by EDD awarding disability benefits to an adult child living with his parents at the time the injured worker dies is also binding? Is a determination by a local School administration that a deceased employee's child has a learning disability and providing an IEP (Individualized Education Program) also entitled to be considered such a finding? Social Security Disability (SSD) benefits are payable upon a finding that the disabled individual is "permanently and totally" incapacitated from work. However both of these terms are words of art with a specific meaning. A disability is considered "permanent" if it lasts or is likely to last for a period of 1 year or more. As an applicant attorney I had many clients qualify for closed end periods of SSD benefits who were disabled for a very limited period of time, sometimes only while recovering from the effects of a major surgery, but who intended and later did return to work. Was it truly the intent of the legislature to extend lifetime dependency benefits for temporary incapacities?
Different judicial, administrative, contractual and regulatory entities have wildly varying criterion for determining qualification for status similar to incapacity. Is eligibility for long term disability benefits under an LTD plan sufficient to qualify for incapacity under Labor Code section 3501(c)? Many LTD plans will provide benefits if the plan member is unable to earn up to 70% of the earnings that were made in the occupation at the time disability commenced. For high wage earners (who are more likely to have such coverage) a limitation to 70% or earnings may still leave a great deal of relative capacity for earning.
Given the amount of benefits that are potentially recoverable for such cases[N2] one can anticipate that ever more marginal cases will be filed and as a result of the huge exposure in the event of loss that even nuisance value settlements will be in six figures. The author anticipates that this provision of benefits in death cases will result is significant increases in litigation trying to establish entitlement to lifetime benefits in both accepted and also marginal cases.
E. Penalty Law Changes
1. Labor Code section 5814 This section has been modified to provide that multiple penalties for same specie of benefit may not be awarded unless there is a legally significant event between the initial delay and the subsequent delay(s) in payment of the same benefit or series of benefits. This section now codifies the decision of California Supreme Court in Christian v W.C.A.B. 15 Cal.4th 505, regarding multiple penalties and is therefore not a change in the law but merely a statutory change to reflect existing case law.
2. Post Award Penalties: (Labor Code section 5814.5)
Provision of Labor Code 5814.5, which formerly applied only to lawfully uninsured public entities has been extended to all Employers/Carriers & TPA's regardless of type of insurance. The code section now reads as follows:
When the payment of compensation has been unreasonably delayed or refused subsequent to the issuance of an award by an employer that has secured the payment of compensation pursuant to Section 3700, the appeals board shall, in addition to increasing the order, decision, or award pursuant to Section 5814, award reasonable attorneys' fees incurred in enforcing the payment of compensation awarded. (Labor Code section 5814.5 effective 1/1/03)
This section therefore now requires a WCALJ, in a case where there has been an award of penalty for failure to pay an award of the W.C.A.B., to also award a separate attorney's fee for the attorney's efforts in securing the penalty and enforcing the award.
This provision is undoubtedly in response to an ongoing problem of injured workers obtaining representation to enforce awards where there are little benefits and the 10% increase on an award pursuant to Labor Code section 5814did not generate sufficient sums to adequately compensate an applicant's attorney for enforcing the award.
We can now anticipate that even where the delays involve relatively small levels of benefits, that applicant attorney's are much less likely to overlook delays in payment of benefits because of the amounts involved. It is likely that the attorney's fees will be based either on the attorney's hourly efforts or 12-15% of the penalty amount, whichever is higher. Applicant attorney's are currently receiving attorneys fee awards for depositions under Labor Code section 5810based upon rates ranging from $150 to $250 per hour depending on the location of the attorney, level of skill exercised etc. We can anticipate similar rates under this statute.
Implementation Issues:
This author would recommend that careful consideration should be given to the risk/benefit analysis in litigating a post-award penalty claim. If an award has been paid late and a penalty is likely, negotiate the issue and get rid of it.
It is important to remember that this penalty only applies if there has been a prior award of benefits that has been delayed and a Labor Code section 5814 penalty is then assessed. It does not apply to all awards of penalty.
How late is too late?
Cases on late payment of an award are all over the map as to how late is too late. Certainly if there is language in the settlement agreement allowing inclusion[N3] of interest for a specified period of time (such as 20 or 25 days) payment outside that time frame without a very good excuse is probably a basis for penalty. In some recent research on this issue for a Petition for Reconsideration, I found in general[N4], payments made before the 26th day were usually considered to be within a reasonable time (there was one case with a penalty for payment on the 22nd day, but this seemed to go against the grain); payments made from day 26 to day 31 were in a grey zone, sometimes penalty awarded, sometimes not; and after 31 days there was very little hope of avoiding a penalty without a whopper of a story as to the delay. The only case I found with a longer than 32 day delay where penalty was not awarded involved a complicated award where the defendant had legitimate questions as to how to pay the award, they made legitimate requests for clarification, and paid the undisputed portions timely. In that case even the 44 day delay was excused because of the complexity and the defendant's efforts to obtain clarification. In the case I was researching, I argued that a delay of 28 days was not sufficient to incur a penalty and also argued that the delayed benefit ($435 in awarded travel expense) with the resulting $15,000 penalty (over $150,000 in medical care) violated the criterion in the County of San Luis Obispo v W.C.A.B. (Barnes), 92 Cal. App. 4th 869 case, that there should be fundamental fairness in assessing the reasonableness issue which required considering the size of the penalty relative to the harm caused. The W.C.A.B. reversed the penalty award but I have to think that at 28 days the issue was very borderline. If Labor Code section 5814.5 had been in effect, I would certainly have recommended settlement of the issue with substantial consideration for the potential penalty (I only handled the appeal in this case not the actual trial).
This section is effective 1/1/03. There will certainly be litigation over whether the provision will apply to injuries after 1/1/03 or awards issued after 1/1/03. This author believes that the sections will likely be interpreted to apply to any penalty that is awarded on failure to pay a post 1/1/03 award regardless of the date of injury. However the issue has yet to be determined and there is certainly a significant possibility that I will be proven wrong. While this section has been in effect for over some 20 years for self-insured public entities, this author was unable to find any cases which addressed the issue of application based upon date of injury vis a vis date of award.
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FOOTNOTES
1 State Constitution Article XIV, SEC. 4. The Legislature is hereby expressly vested with plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers' compensation, by appropriate legislation, and in that behalf to create and enforce a liability on the part of any or all persons to compensate any or all of their workers for injury or disability, and their dependents for death incurred or sustained by the said workers in the course of their employment, irrespective of the fault of any party....The Legislature shall have power to provide for the payment of an award to the State in the case of the death, arising out of and in the course of the employment, of an employee without dependents, and such awards may be used for the payment of extra compensation for subsequent injuries beyond the liability of a single employer for awards to employees of the employer. (emphasis added by author)
2 If one assumes a 50 year life expectancy for an incapacitated child the potential dependency benefits (without even considering adjustment pursuant to Labor Code section 4661.5) will approximate $1.5 million for injuries after 1/1/03; $1.9 million after 1/1/04; and $2.2 million for post 1/1/05.
3 Interest and penalty language should always indicate that those claims are included in the settlement if payment is made within the specified manner and not waived as workers' compensation benefits cannot be waived as a matter of law. ( I observed a lengthy discussion at the W.C.A.B. one day wherein an applicant attorney was arguing that the language "waiving" penalty was not valid on this basis. He appeared to be winning the argument but the issue settled.
4 Keep in mind the old adage that "no generalization is worth a damn, including this one", each fact pattern in penalty cases should be judged on its own merit. This discussion is a guide at best.
This is the second of a six part series authored by attorney Jake Jacobsmeyer, of the firm Adelson, Testan & Brundo. He can be reached by e-mail at RichardJacobsmeyer@atblaw.net, or by phone at (925) 609-1990.
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