Employment Law Alert: Total Permanent Disability Requires Adjustment of Advances in Arrears

In Warren Brower v. David Jones Construction, (State Compensation Insurance Fund, 2014–EB-4, May 21, 2014), the Workers’ Compensation Appeals Board concludes, en banc that an employer must pay permanent disability advances to an injured worker upon the conclusion of temporary total disability benefits. The Board further orders that, if necessary, the payments made as advances should be adjusted retroactively to equalize them to the temporary total disability benefit rate, when the injured worker is found to be permanently totally disabled.

Mr. Brower sustained an admittedly industrial back injury on December 20, 2005, while employed as an iron worker for David Jones Construction. He never returned to work after the injury. He was paid temporary total disability until it was exhausted after payment of 104 weeks of benefits. His employer’s insurer, State Compensation Insurance Fund, then commenced paying permanent disability advances at $270.00 a week, the statutory maximum weekly rate for an injury causing permanent disability between 70% and 99.3%. Mr. Brower disputed the rate of the permanent disability advances, and asked that they be paid at the rate appropriate for a permanent totally disabled person, the same rate as temporary total disability is paid. Further, he asked that the payments be adjusted annually as would be required if they were temporary total or permanent total disability payments.

The Workers’ Compensation Judge determined that it was premature to order that permanent disability advances be paid as though Mr. Brower was 100% disabled, because the Agreed Medical Evaluators (“AMEs”) in the case had not found that Mr. Brower had attained maximum medical improvement (MMI). Accordingly, permanent disability advances continued at $270.00 a week.

When the AMEs found the injured worker was at MMI status, the Workers’ Compensation Trial Judge issued his Findings & Award determining that the applicant was permanently totally disabled as of October 3, 2011, about 4 years after advances commenced. Permanent disability payments were ordered to commence at the temporary total disability rate appropriate for the date of injury as of that date, and the applicant was awarded Cost of Living Adjustment Benefits (COLA) as of January 1, 2012. Applicant disagreed with the these determinations and sought reconsideration from the Workers’ Compensation Appeals Board.

Based on its interpretation of Labor Code Section 4650(b), the Board concluded that the legislature intended for there to be no gap in benefits from the date temporary total disability benefits cease until permanent disability benefits commence, provided that the injured worker has not returned to work. Further, while the employer is obligated to provide permanent disability advances based on its best estimate of what the permanent disability award will be, it is obligated to retroactively adjust the permanent disability payments to reflect the rate appropriate for the awarded permanent disability, once permanent disability is determined. The Board’s analysis was anchored by the amendment to Labor Code Section 4650 made in 2013 and focused on the pertinent sentence in the section, “. . .the amount then due shall be calculated from the last date for which temporary disability indemnity was paid, or the date the employee’s disability became permanent and stationary, whichever is earlier.”

Applying its determination to Mr. Brower’s case, the Board determined that the employer was correct in paying permanent disability advances at $270.00 per week from the date temporary total disability benefits ended, as whether he would be totally disabled when he was MMI was in dispute. However, once the applicant was adjudged to be totally permanently disabled, his employer was required to retroactively pay the difference between the advances actually paid and the compensation rate appropriate for 100% disability, commencing with its first payment of permanent disability advances. Further, the COLA would apply from January 1, following that commencement date.

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May 28, 2014