Court Ruling on Cost-of-Living Adjustments Is Workers’ Comp Victory for Employers
California employers and insurers scored a victory in a recent California Supreme Court decision on annual cost-of-living adjustments for certain workers’ compensation claimants.
In the case of Christine Baker v. Workers’ Compensation Appeals Board and X.S., the court looked at how the Legislature intended cost-of-living adjustments to be calculated for total permanent disability and life pension payments.
The question before the court was whether a 2002 law required the total permanent disability and life pension payment cost-of-living adjustments to be calculated:
- prospectively from January 1 following the year in which the worker first becomes entitled to receive benefits;
- retroactively to January 1 following the year in which the worker is injured; or
- retroactively to January 1, 2004 for every case regardless of the date of injury or the date the first benefit payment becomes due.
Supreme Court Ruling
The Supreme Court ruling agreed with a friend-of-the-court brief filed by the California Chamber of Commerce that the Legislature intended that cost-of-living adjustments be calculated and applied prospectively beginning on the January 1 following the date on which the injured worker first becomes entitled to receive and actually begins receiving benefit payments.
Background
The case involved “X.S.,” a shortened version of a fictitious name assigned by the presiding workers’ compensation administrative law judge to protect the applicant’s medical privacy.
X.S. was injured in January 2004 while employed as an accountant/controller, and eventually was deemed eligible to receive $728 weekly for life.
A dispute arose when the applicant claimed the weekly payments that began on October 20, 2006 should be increased to reflect annual increases in the state’s average weekly wage by calculating retroactive cost-of-living adjustments from the January 1 following the date on which he was injured to the date on which his total permanent disability payments began.
The Workers’ Compensation Appeals Board said the cost-of-living adjustment should apply on the January 1 following the date of injury, regardless of when the first payment was received.
The Court of Appeal, however, annulled the board’s decision and sided with the California Applicants’ Attorneys Association, finding that the cost-of-living adjustment begins to accrue January 1, 2004, without regard to the date of injury. The appeals court reasoned that otherwise a worker whose total permanent disability does not become permanent and stable for a number of years would see payments “exposed to the ravages of inflation over time, eroding the real value of the benefits.”
Double Windfall Nixed
The Supreme Court overruled the Court of Appeal, finding the lower court’s interpretation to be at odds with the language of the law and could result in a “windfall ‘double escalator’” by applying the cost-of-living adjustment retroactively from January 1, 2004 until the date the worker was injured. Because the indemnity payments owed to the injured worker were already increased by statute, there was no reason for the Legislature to have further included a cost-of-living adjustment increase.
Pointing to the very same legislative records highlighted by the CalChamber during oral argument in May, the state high court also cited the language of the law in finding “no compelling reason” to conclude the Legislature intended the cost-of-living adjustments in the law to “broadly redress all the potentially erosive effects of inflation” in the two categories of disability benefits covered by the section of law in dispute.
This ruling results in the most favorable interpretation possible for California employers and insurers, representing potential savings of billions of dollars in these two categories.
Copyright: HR California/CCC
Temporary Disability and Total Permanent Disability are two distinct species in the workers compensation scheme. Total Disability is a much serious disability determination than Partial Disability (ie less than 70% versus above 70% PD rating.). Furthermore, There is only one escalation for Temporary and one escalation to PD. In addition, the PD base line could have been 33% of an injured workers pre-injury wages but instead legilature chose the baseline as the TD maximum rate during temporary PD status. In most cases for those high-earners loss of income and loss of future earnings has significantly reduced by more than 50 to 70% base on imperical studies done by Rand. Lastly, as a result of SB899, injured workers benefits were unintendedly reduced significantly.
The Supreme Courts decision divorced the true meaning of cost-of-living-adjustment as commonly defined and known by the general public. It’s decision did not accomplish the protection from the ravages of inflation for the most seriously injured workers and particularly for those in the higher earning brackets like those in XS’s profession (Accountant). The Supreme Court overlooked at a number of facts in this case.
1) TD & PD are distinct from each species.
2) The trigger for any benefits is the date of injury.
3) In the SIF claim, PD rate is determined by pre-existing PD up-to the date-of-industrial injury.
4) PD rate subsequent to date of injury is rated is generally higher than that of the future rating after P&S determination.
Generally it has a sliding scale when the injured worker becomes stable and recovers but has some residual PD from the Date of Injury. P&S is not the trigger for entitlement because industrial injuries did not occur at date of P&S, it actually occured at date of injury. The PD rating determined under SIF up-to-the date of injury combined with the PD rating of the subsequent industrial injury from the date of industrial injuries becomes the final PD rating which is determined sometime in the future (it may take days, months or years, depending on how quickly final determination is reached.). This process, more likely than not, may take years of for claims adjuster to finalize and if there are disputes may take years of litigation. These circumstances are beyond the control of the Injured Worker; just as the injury that occured are subject to investigation which can take days. months, or years,
The COLA is designed to protect the injured workers’ annuity from the ravages of inflation. The COLA protection is removed from the timeline the PD annuity that has been high-jacked due to the delays that is beyond the control of the injured worker; as in this case (baker v WCAB XS) for several years from the date of injury.
The premise behind SB899 was to reduce cost of workers compensation premiums for the employers, without compromising the benefits of the injured workers. Since the commencement of SB 899, impirical studies has shown that IW benefits were infact significantly reduces. If the Supreme Court is to examine the legislative intent and the legislative history in this matter, it should do so completely and in its totallity. Supreme Courts duty is to protect the public interest and preserve justice. That means honoring the LAW. If the law is unclear, Honorable U.S. Justice Scalia reminded the public and the justices at the bench, that the actions of the judges must comport to the U.S. Constitution. There are three branches of government. The Judges recognizes that LAWS are not perfect and may be written in a way that may need clarification. In this case, there is a legal process called Amendments, That is the role of the Legislative branch. Not the Court. If the language of the LAW is clear, it is not the role of the Judges to change the meaning to reach a certain conclusion, influenced by other means outside the framework of that LAW the judges is subject to interpret. To make such expansion beyond the narrow language of the law is a disservice to the public and a dishoner to the due process by the separate branch of power. Such action so removed is unconstitutional. That is the brilliance and geniuw of the US Constitution. It forces due process by each branch of government.