California: Temporary Disability and the "For Cause" Termination

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There are many cases where the employee seeks temporary disability benefits for a period of time after their termination. Invariably, the employer argues that they would have offered applicant modified duty had he not been terminated, and the employee argues that modified work was not offered and he should receive temporary disability benefits. As the WCAB is addressing an increasing number of these cases, these cases seem to turn on whether or not the employer’s termination was “for cause”.

Recently, a panel of commissioners with the WCAB confronted just such an issue. In Flores v. Wal-Mart Associates Inc., 2012 Cal. Wrk. Comp. P.D. LEXIS 24, defendant sought reconsideration of the Findings and Award issued by the workers' compensation administrative law judge (WCJ). Therein, the WCJ found, that applicant was entitled to "temporary disability indemnity, less a reasonable attorney's fee, less credit for any period(s) paid, and less payments for applicable period(s) by the [Employment Development Department (EDD)]."

On reconsideration, defendant contended that the WCJ erred in awarding temporary disability. Defendant argued that the employer would have provided applicant with modified work within applicant's restrictions but for applicant's termination for cause.

The underlying facts in Flores were that at trial the parties had stipulated that "[a]pplicant was terminated for failure to comply with company policy... on or about August 27, 2009." The Minutes of Hearing and Summary of Evidence also noted that:

“Defendant argues this was a good faith basis for his termination. The policy which led to his termination was in effect on the date of his termination. That is why applicant has not been provided with temporary disability benefits because but for his termination for good cause, in the wake of his violation of company policy, Wal-Mart would have provided applicant with a modified job, which is presently available.”

The only medical report placed into evidence at trial was a treating physician's report stating that applicant was returned to modified work consisting of a lifting restriction of 10 pounds.

At the start of the panel’s analysis, the commissioners first observed that “there is no controlling authority addressing this precise issue”; however, the commissioners went on to state “we found the argument set forth in defendant's Petition for Reconsideration to be persuasive”. Therefore, the panel reversed the WCJ and found applicant not entitled to temporary disability.

In coming to this conclusion, the panel’s discussion is quite intriguing. First, the panel noted that “temporary disability indemnity is a workers' compensation benefit which is paid during the time an injured worker is unable to work because of a work-related injury and is primarily intended to substitute for lost wages” (citations omitted). The panel continued by stating that the “purpose of temporary disability indemnity is to provide a steady source of income during the time the injured worker is off work” (citations omitted).

In coming to their decision, the panel relied, in part, on Huston v. Workers' Comp. Appeals Bd. (1979) 95 Cal.App.3d 856, 868 [44 Cal.Comp. Cases 798]. There the court of appeal noted that "In general, temporary disability indemnity is payable during the injured worker's healing period from the injury until the worker has recovered sufficiently to return to work, or until his/her condition reaches a permanent and stationary status”. The court continued “if the temporary partial disability is such that it effectively prevents the employee from performing any duty for which the worker is skilled or there is no showing by the employer that work is available and offered, the wage loss is deemed total and the injured worker is entitled to temporary total disability payments." (Huston, supra, 44 Cal.Comp.Cases at p. 806.)

Thus, the panel pointed out “the language used by the Huston court at the very least implies that an employer's showing that modified work is available and offered affects an injured worker's entitlement to temporary disability”. The panel then noted that “this interpretation is consistent with the following two writ denied cases”. The panel proceeds to discuss Butterball Turkey Co. v. Workers' Comp. Appeals Bd. (1999) 65 Cal.Comp.Cases 61 (writ den.) and Manpower Temp. Services v. Workers' Comp. Appeals Bd. (Rodriguez) (2006) 71 Cal.Comp.Cases 1614 (writ den.). In these two writ denied cases, the defendant essentially failed to show that applicant’s misconduct warranted either his termination or his disqualification from receiving temporary disability benefits.

Based on the facts in Flores, the panel noted:

“In this case, defendant presented uncontroverted evidence that it would have provided applicant with modified work within his restrictions but for the termination for cause. Moreover, unlike in the two writ denied cases discussed above, here the parties stipulated at trial that "[a]pplicant was terminated for failure to comply with company policy... on or about August 27, 2009." This stipulation enabled defendant to establish that applicant was terminated for cause. Therefore based on this record and the authority discussed above, we will reverse the WCJ to find that applicant is not entitled to temporary disability from September 2, 2010 through June 10, 2011.”

So, based on a court of appeal decision that did not address the question, and two writ denied cases wherein the applicant was not denied benefits, it appears, at least to this panel, that the WCAB should evaluate whether an applicant, who by all other measures is entitled to temporary disability benefits, was terminated “for cause” and thus “disqualified” from the receipt of temporary disability benefits. Serious questions need to be asked as to whether the “no fault” system of workers’ compensation, in an “at will” employment state, is the appropriate venue for determining whether or not an employer’s termination was “for cause”. Is the WCAB equipped or qualified to address questions surrounding allegations of justified or “wrongful discharge”? This appears to be an issue that is ripe for the court of appeal’s attention.

© Copyright 2012 LexisNexis. All rights reserved. This article will appear in a forthcoming issue of the California WCAB Noteworthy Panel Decisions Reporter (LexisNexis).

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