GAMBLE v. WORKERS’ COMPENSATION APPEALS BOARD, GALLAGHER BASSETT SERVICES

Filed 8/29/06; pub. order 9/21/06 (see end of opn.)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Petition for writ of review from a decision of the Workers’ Compensation Appeals Board. Decision Annulled.

Law Offices of Lon E. Peek and Lon E. Peek for Petitioner.

Neil P. Sullivan, Deputy Commissioner and Assistant Secretary, State of California, Department of Industrial Relations for Respondent Workers’ Compensation Appeals Board.

Law Offices of Robert Wheatley, Robert Wheatley and Anthony Oropallo for Respondents Gallagher Bassett Services and United Airlines.

* * *

The Workers’ Compensation Appeals Board (the Board) ordered employer, United Airlines,[1] to provide vocational rehabilitation maintenance allowance (VRMA) benefits to an injured worker, Clifford Gamble, but allowed United a credit for wages Gamble earned at his concurrent employment at the Los Angeles Unified School District (the School District). Gamble asserts the Board erred in allowing such a credit and argues the credit unfairly penalizes an injured worker who must work two jobs to support himself and his dependents and amounts to a windfall to the employer as a result of the worker’s diligence. United contends Gamble is not entitled to any “wage loss“ because VRMA benefits cannot exceed $246 per week and because Gamble’s School District earnings alone exceed this statutory maximum. Gamble does not dispute the statutory maximum, but insists his earnings from his second job are not a proper consideration in calculating United’s liability for VRMA benefits. We agree with Gamble and conclude the Board’s finding is unsupported by the statutory or case law. Accordingly, the decision of the Board is annulled.

I. Background on Workers’ Compensation

Workers’ compensation is not an area of the law that routinely gives rise to California appellate court decisions. For this reason, we begin with a brief synopsis of this state’s workers’ compensation scheme and its development, an overview of the common jargon, and a discussion of the relevant legal provisions.

“More than 90 years ago, our Legislature was directed to ‘create and enforce a liability on the part of all employers to compensate their employees for any injury incurred by the said employees in the course of their employment irrespective of the fault of either party.’ [Citation.] . . . The Legislature complied with this directive by enacting various provisions of the Labor Code.” (Department of Rehabilitation v. Workers’ Comp. Appeals Bd. (2003) 30 Cal.4th 1281, 1288, fn. omitted (Lauher).)

“‘This system attempts to assure employees of an expeditious remedy both adequate and certain, independent of any fault on the part of employees and employers. At the same time, it provides the employer with a liability which is determinable within defined limits. It represents a philosophy that industry, as a cost of doing business, should provide for the care and rehabilitation of workers disabled by work injuries. In this way, society supports the program as a[n] integral element of commerce and industry, rather than through tax-supported plans.’ [Citation.]” (Lauher, supra,

30 Cal.4th at p. 1289.)

“In creating and maintaining a system of workers’ compensation, the people of this state made an important public policy decision and transformed how we address workplace injuries. It should be remembered, however, that the purpose of an award under the workers’ compensation scheme ‘”is not to make the employee whole for the loss which he has suffered but to prevent him and his dependents from becoming public charges during the period of his disability. . . . In short the award transfers a portion of the loss suffered by the disabled employee from him and his dependents to the consuming public. . . . Complete protection is not afforded the employee from disability because this would constitute an invitation to malinger or to be careless on the job as he would then lose nothing in assuming a disabled status.”’ [Citation.]” (Lauher, supra,

30 Cal.4th at pp. 1289-1290.)

A. The Basic Components of the Compensation Scheme

The basic compensation scheme has two key components: (1) disability indemnity, and (2) vocational rehabilitation. From these components arise “four distinct classes of benefits: TD [temporary disability]; VRTD [vocational rehabilitation temporary disability]; VRMA [vocational rehabilitation maintenance allowance]; and PD [permanent disability].” (Kopitske v. Workers’ Comp. Appeals Bd. (1999)

74 Cal.App.4th 623, 630 (Kopitske).)[2] Before delving into what these various forms of assistance are, and the differences and similarities between and among them, we will briefly discuss, in general terms, the intended purpose behind the compensation scheme’s key components.

B. Disability Indemnity--Temporary Disability and Permanent Disability

The purpose of temporary disability indemnity is to provide interim wage replacement assistance to an injured worker during the period he or she is healing. (Kopitske, supra, 74 Cal.App.4th at p. 630.) Depending on the severity of the injury, workers can be deemed partially or totally temporarily disabled and will receive temporary disability until they recover or become permanently disabled. (Lab. Code,

§§ 4650, 4653-4658; Jimenez v. Workers’ Comp. Appeals Bd. (1991) 1 Cal.App.4th 61, 63 (Jimenez).) [3]

“Once the employee’s condition has become permanent and stationary, he or she is entitled to permanent disability indemnity; these benefits are intended as reimbursement for the employee’s impaired future earning capacity or decreased ability to compete in the open labor market. [Citation.]” (Ritchie v. Workers’ Comp. Appeals Bd. (1994) 24 Cal.App.4th 1174, 1179-1180 (Ritchie).) Permanent disability is expressed in percentages, and if a disability is deemed less than 100 percent, it is referred to as a permanent partial disability. (1 Cal. Workers’ Compensation Practice (Cont.Ed.Bar 4th ed. 2005) Permanent Disability, § 5.1, p. 276.)[4] The amount of compensation payable for a given percentage of permanent disability varies according to the date of injury.

(Id. § 5.8, at p. 285.)

“The distinction between compensation for wage loss [temporary disability] and permanent impairment is well established. In Nickelsberg v. Workers’ Comp. Appeals Bd. (1991) 54 Cal.3d 288, 294 . . . , the California Supreme Court reiterated in another context the fundamental distinctions, under the California workers’ compensation system, of benefits compensating for wage loss, providing medical treatment, and compensating for bodily impairment. Permanent disability indemnity is awarded injured workers in California in lieu of tort damages against employers.” (Appleby v. Workers’ Comp. Appeals Bd. (1994) 27 Cal.App.4th 184, 194 (Appleby).)

C. Vocational Rehabilitation--The Return-To-Work Program

If a worker is precluded, or anticipated to be precluded, from returning to his or her former position due to an industrial injury, it is in the public’s and the worker’s best interest for him or her to return to the labor force in a different position that accommodates the worker’s disability. So, it is not surprising the compensation laws also currently include provisions for the payment of vocational rehabilitation. (§ 139.5,

subd. (k) [for workers injured before January 1, 2004].)

The purpose of vocational rehabilitation is “‘to restore the worker to as near his or her previous income-producing status as can be reasonably and properly done.’ [Citation.]” (Ritchie, supra, 24 Cal.App.4th at p. 1180.) “The law encourages the injured worker to engage in rehabilitation. In fact the term ‘compensation’ is now defined to include vocational rehabilitation benefits.” (Jimenez, supra, 1 Cal.App.4th at pp. 63-64; § 3207.)

“In the case of a worker who will be unable to return to his or her former job due to industrial injury, rehabilitation benefits consist of the costs of vocational training, counseling, and guidance, as well as certain additional living expenses, all for the purpose of preparing and adapting the worker to perform a new job or trade and enter a new work environment. [Citation.]” (Ritchie, supra, 24 Cal.App.4th at p. 1180.) “Additional living expenses include, but are not limited to, reasonable costs for food, lodging, transportation, clothing, and dependent care. [Cal. Code Regs., tit. 8, § 10125.2 (Adm Dir Rules.)].” (1 Cal. Workers’ Compensation Practice, supra, § 6.121,

at pp. 451-452.)

An employer is required to provide vocational rehabilitation “[w]hen an employee is determined to be medically eligible[,]” i.e., a Qualified Injured Worker. (§ 139.5, subd. (c)). Historically, a Qualified Injured Worker must meet two criteria:

(1) medical eligibility; and (2) vocational feasibility. Medical eligibility contemplates the injured worker will be permanently precluded from returning to his or her usual occupation or position held at the time of the injury. (1 Cal. Workers’ Compensation Practice, supra, § 6.23, at p. 375.) The vocational feasibility requirement relates to the question of whether rehabilitation services would help the worker “return to suitable gainful employment.” (Id. § 6.31, at p. 383.) This requires evaluation of the employee’s qualifications, interests, aptitudes, and earning capacity, as well as, the labor market and the type of disability. (Ibid.)

D. Statutory History of Section 139.5

The definition, scope, and limits of vocational rehabilitation benefits are contained in section 139.5. A discussion of this provision’s evolution is helpful to gain insight as to why rehabilitation services will differ depending on the particular circumstances of the injured worker.

Section 139.5, subdivision (c), was first enacted in 1965, and made the employer’s initiation of and the employee’s participation in the rehabilitation program voluntary. (Ritchie, supra, 24 Cal.App.4th at p. 1181.) In 1975, the statutory provision was amended to make rehabilitation programs mandatory for employers and to expressly authorize the continuation of temporary disability indemnity payments during rehabilitation. (Ibid.) “The Legislature envisioned vocational rehabilitation as a service to be provided before disability becomes stationary.” (Webb v. Workers’ Comp. Appeals Bd. (1980) 28 Cal.3d 621, 634.)

Consequently, after the 1975 amendment, “a [Q]ualified [I]njured [W]orker who enrolled in a rehabilitation program continued to receive [temporary disability], as well as benefits such as additional living expenses necessitated by the [vocational rehabilitation] program. (Former § 139.5, subd. (c), Stats. 1982, ch. 922, § 2, p. 3364.) Temporary disability indemnity received in conjunction with a vocational rehabilitation program is sometimes referred to as ‘VRTD’ to distinguish it from medical TD [temporary disability] received outside a rehabilitation program.” (Jimenez, supra,

1 Cal.App.4th at pp. 63-64.)

However, it soon became apparent vocational rehabilitation services frequently did not commence until after the disability had become permanent. This prompted the Legislature to amend section 139.5 “in 1989 to provide for the payment of a ‘maintenance allowance’ benefit” for those workers already deemed permanently disabled, i.e., the creation of VRMA. (Ritchie, supra, 24 Cal.App.4th at p. 1182.) It was specified that “[i]n no event shall temporary disability indemnity and maintenance allowance be payable concurrently.” (§ 139.5, subd. (d)(2).) The new maintenance allowance took effect January 1, 1990.

To summarize, under the 1989 amendment, an injured worker who is medically eligible, may choose to enroll and receive vocational rehabilitation services while also receiving temporary disability indemnity. When the worker’s medical condition becomes permanent and stationary, he or she may continue with vocational rehabilitation services. However, temporary disability indemnity payments must cease, and the worker may receive a section 139.5 maintenance allowance, permanent disability indemnity, or a combination of both if the total sum does not exceed the maximum payment limit (discussed in more detail anon). (§ 139.5, subd. (c).)

The maintenance allowance is measured at two-thirds of the worker’s average weekly earnings at the date of the injury. (§ 139.5, subd. (d)(2).) However, the maximum payment is capped at $246 a week, which is a much lower maximum rate than permitted for workers receiving temporary disability or VRTD. (§ 139.5, subd. (d)(1); Jimenez, supra, 1 Cal.App.4th at p. 64, fn. omitted.)[5] It is believed the Legislature created this discrepancy “to provide an incentive to the injured worker to quickly complete vocational rehabilitation[]” while he or she is still temporarily disabled. (Ritchie, supra, 24 Cal.App.4th at p. 1183.)

In 1993, section 139.5 was amended once more to impose additional monetary restrictions on VRMA benefits. For example, the Legislature placed a cap on the length of time (52 weeks) and the total amount of money spent ($16,000). (§ 139.5, subd. (c).) Notably, the Legislature expressly excluded workers receiving VRTD from this same time and payment limitations. Again, it was believed the new limitations would encourage injured workers to enroll in rehabilitation as soon as possible, while still medically temporarily disabled, to avoid receiving less money and services when permanently disabled. (See Ritchie, supra, 24 Cal.App.4th at p. 1185.)

Ten years later, the Legislature decided to scrap the entire vocational rehabilitation program, and repealed section 139.5. However, within three months, the section was re-enacted to accommodate injured workers already enrolled in the program. Consequently, section 139.5 now has limited application to workers injured before January 1, 2004, and the program will expire on January 1, 2009, unless a new statute is enacted extending the benefit. (§ 139.5, subds. (k), (l).)

II. Factual and Procedural Background

Keeping in mind the background and evolution of the compensation scheme, we turn to the particulars of this case. The parties do not dispute the underlying facts. After 22 years of employment with United as an air freight agent, Gamble injured his back. At the time of his injury, Gamble was also working for the School District, where he had been employed for 27 years. Although the injury precluded him from continuing his labor-intensive job at United, Gamble was able to continue working as a teacher and dean with the School District. In January 2001, the parties stipulated to a permanent disability indemnity award and Gamble’s right to various benefits. Thereafter, a dispute arose over Gamble’s claim for VRMA benefits.

A. Gamble’s Application for VRMA benefits

After stipulating to a permanent disability indemnity payment, Gamble applied for vocational rehabilitation benefits. The Vocational Rehabilitation Unit (the Unit), which oversees all aspects of vocational rehabilitation (§ 139.5, subd. (a)), determined Gamble was a Qualified Injured Worker, and therefore, eligible to receive VRMA benefits. United disputed Gamble’s designation as a Qualified Injured Worker and disputed his eligibility for VRMA benefits. It asserted that if these benefits were awarded, it was entitled to pay Gamble the maintenance allowance component “on a wage-loss basis” and receive a credit for Gamble’s School District wages.

A hearing was held in July 2003, and on November 9, 2003, the Workers’ Compensation Administrative Law Judge, Honorable Jules L. Greenberg, issued his “Findings and Order” and his “Opinion on Decision.” Giving the Unit’s determination the great weight to which it was entitled, Judge Greenberg denied United’s appeal and found Gamble was a Qualified Injured Worker entitled to vocational rehabilitation benefits and services. The judge also concluded the January 2001 stipulation resolved all claims for any past VRMA owed, but Gamble was entitled to these rehabilitation benefits after the date of the stipulation. United was ordered to provide the services requested. In the order, Judge Greenberg added United was “entitled to assert its credit for wages paid to the applicant as part of applicant’s concurrent employment with the [School District].” (Italics and underscoring added.)

B. Gamble’s Petition for Reconsideration

Gamble petitioned the Board for reconsideration of Judge Greenberg’s decision. Before the hearing, Judge Greenberg issued a “Judge’s Recommendation on Petition for Reconsideration.” Rather than address the issues for the benefit of the Board, the judge rescinded his November 9, 2003, ruling and set a new hearing. Judge Greenberg explained the action was warranted to “allow for time to consider carefully the arguments advanced by the applicant in his petition, which also appear to have some merit.” The judge noted the inconsistency between the “Opinion on Decision” which stated United “would be entitled to credit” and his “Finding and Order” that stated United was “entitled only to assert its right to credit.” (Italics added.)

At the hearing, the parties discussed the credit issue and resubmitted the matter on the existing record. A new “Findings and Order” was issued on July 19, 2004. Gamble was again determined to be a Qualified Injured Worker who was entitled to VRMA benefits after the date of the January 2001 stipulation. In addition, United was ordered to provide these benefits and expressly denied a credit for Gamble’s School District wages. The “Opinion on Decision” was issued in conjunction with the new “Findings and Order.”

Judge Greenberg’s written opinion contained much of the same reasoning as the previous one, but also included a discussion of VRMA benefits and an employer’s right to an offset. He noted, there was unrebutted trial testimony Gamble and his family were dependent on his two incomes, and concluded Gamble should not be penalized for his continuing work in a much less physically demanding occupation with the School District. In addition, Judge Greenberg concluded Gamble was entitled to receive the maintenance allowance to allow him to successfully complete a rehabilitation plan and pursue another second employment consistent with his stated desire.

C. United’s Petition for Reconsideration

United petitioned the Board for reconsideration of the July 2004 decision. United again disputed Gamble was a Qualified Injured Worker and reasserted it should be given credit for wages earned by Gamble at the School District. Judge Greenberg submitted a thorough, six-page, “Judge’s Report on Petition for Reconsideration” recommending denial of United’s petition. In the report, he included a procedural history of the case, a statement of the issues, a lengthy discussion of the law, and his reasoning for denying United a credit.

The Board granted United’s petition for reconsideration. It reaffirmed Judge Greenberg’s finding Gamble was a Qualified Injured Worker entitled to VRMA benefits. However, it amended the “Findings and Orders“ to allow United a credit “for wages” paid to Gamble by the School District “on a wage-loss basis.” It is from this decision Gamble seeks appellate review.

III. The Credit Issue

The sole issue raised by Gamble’s petition is a challenge to the Board’s award of a credit “on a wage-loss basis” against his VRMA benefits due solely to his concurrent employment with the School District. United did not file a petition to challenge the Board’s determination Gamble was a Qualified Injured Worker or its finding Gamble was entitled to receive VRMA benefits.

A. Board’s Opinion and Order

In its opinion and order, the Board stated there were cases indicating an employer is entitled to credit for amounts an injured worker earned while also receiving vocational rehabilitation. The Board also specifically noted, and attached significance to, the fact Gamble failed to prove he looked for a second job in the past four years. The Board recited Gamble’s testimony he believed he “may be able” to find work as a reservations clerk for a different airline. The Board concluded that rather than looking for work with another employer, the record showed Gamble waited to see if United would allow him to come back as a reservation clerk or give him early retirement. In addition, the Board observed a second job did not seem feasible, stating, “It is not at all obvious how [Gamble] could be available for rehabilitation services while he is working full-time for the [School District] as an educator and as dean of students.”

We conclude the factual circumstances discussed by the Board are relevant only to the question of whether Gamble could satisfy the vocational feasibility requirement to be deemed a Qualified Injured Worker. Those facts have no bearing on the credit issue. Moreover, we conclude the Board misinterpreted the applicable law concerning an employer’s right to receive a credit “for wages” when calculating the monetary allowance component for living expenses and costs incurred by a vocational rehabilitation recipient.

B. Standard of Review

We are bound by the Board’s factual findings and decision if supported by substantial evidence. (Western Growers Ins. Co. v. Workers’ Comp. Appeals Bd. (1993) 16 Cal.App.4th 227, 233.) We “may not reweigh evidence or decide disputed . . . fact[s].” (Ibid.) On the other hand, interpretation of governing statutes is decided de novo by the appellate court, even though the Board’s construction is entitled to great weight unless clearly erroneous. (Boehm & Associates v. Workers’ Comp. Appeals Bd. (1999) 76 Cal.App.4th 513, 515-516.)

C. Case Authority Discussing Credits “For Wages”

The parties agree there is no explicit authority that provides an employer may receive a credit against the VRMA benefits owed to a permanently disabled worker simply because he continued to receive wages from a second job. United advances several theories for its entitlement to a wage credit based on cases discussing the credit issue in other contexts. We have carefully reviewed this authority, and conclude none are sufficiently analogous to be controlling here.

Instead, we found the Legislature has clearly designated specific formulas to be applied when calculating each category of compensation benefits, including VRMA benefits. Below, we will discuss the statutory-based calculations used for each kind of benefit, demonstrating the wage credit concept applies only in limited circumstances involving temporarily disabled workers and is not applicable here.

Looking first at permanent disability indemnity, we found the wage credit concept does not apply when calculating payments (regardless of whether the worker is totally or partially permanently disabled). As mentioned earlier, compensation for permanent disability indemnity relates “to the employee’s diminished ability to compete in an open labor market rather than to whether a wage loss was being incurred at the time the disability became permanent and stationary[.]” (1 Cal. Workers’ Compensation Practice, supra, § 5.6, at p. 279, italics added.) Consequently, the payment scheme contained in sections 4453 and 4659, only take into account the year of injury and the percentage of disability. (See § 4453.)

Moreover, “It is settled law in this state that an employee may receive a permanent disability rating of 100 percent and be entitled to the disability payments incident to such rating although he is able to return to work at the wages he received before the injury which caused disability. ‘[T]he right to compensation is not lost or diminished by the injured employee’s return to work at the same or a different wage than that theretofore earned by him. The statute does not require a showing of loss of earning power as a prerequisite to the payment of compensation for a permanent disability, but, on the contrary, provides for the payment in installments of a fixed and definite

sum of money therefor.’ [Citations.]” (Smith v. Industrial Acc. Com. (1955) 44 Cal.2d 364, 367.) Thus, it is “unnecessary for the [injured] employee to have a current wage loss in order to be entitled to permanent disability payments.” (1 Cal. Workers’ Compensation Practice, supra, § 5.6, at p. 279.) For this reason, there is no dispute Gamble’s permanent disability indemnity payment is unaffected by his wages from the School District.

The formulas used for temporary disability indemnity payments are more complicated. Different calculations must be applied depending on whether the worker is (1) totally temporarily disabled and unable to continue working, versus (2) partially temporarily disabled, and may be able to work a reduced number of hours or at an alternative lower-paying position.

The starting point for both kinds of workers is the measurement of his or her average weekly earnings (AWE), which is a concept defined by statute. Section 4453, subdivision (c), provides several different methods for computing the AWE depending on whether the employee has more than one employer, works less than 30 hours a week, or is paid at a regular and constant rate. Generally, when a worker has more than one employer, the AWE is the total of all weekly earnings capped at the rate earned on the job in which the employee was injured. The computation can change depending on the hours worked at each employment and whether it produces a fair and reasonable result. (See § 4453, subd. (c).)

The payment given to a temporarily totally disabled worker (like payments for the permanently disabled) does not contemplate a wage credit because the worker is not expected to be capable of earning supplemental wages. The formula applied is simply two-thirds of the worker’s AWE at the date of injury. (§ 4453, subd. (a)(7) [subject to a maximum of $735 for workers injured in 1999 (when Gamble was injured)].)

To be continue as Part II ……..

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[1] Respondents are Gallagher Bassett Services and United Airlines. For ease of reference, we refer to the Respondents collectively as “United.”

[2] We note the parties and some of the cases use acronyms extensively when discussing the various benefits. For the sake of clarity and to avoid confusion, the only acronyms we will use in this opinion are VRTD for Vocational Rehabilitation Temporary Disability and VRMA for Vocational Rehabilitation Maintenance Allowance benefits.

[3] All further statutory references are to the Labor Code, unless otherwise indicated.

[4] In this case, Gamble was found to be 60 percent permanently disabled. In 2001, he entered a stipulation permanent disability indemnity was “payable at $170.00 per week beginning [March 2, 2000], in the sum of $58,862.50, less credit for such payments previously made.” Gamble’s permanent disability award is not challenged, and accordingly, is not discussed at any significant length in this opinion.

[5] To put this figure in context, the maximum rate for a worker receiving temporary disability in 1999 was $735.