California Labor Code Section 139.48 – The Return To Work Fund: What We Know and What We Don’t Know

 By Robert G. Rassp, Esq.

DISCLAIMER: This article was written before regulations have been proposed to implement the Return To Work Fund. You are encouraged to pay close attention to all rules and regulations promulgated by the DIR and WCAB to implement the $120,000,000 Return To Work Fund.

As part of the comprehensive workers’ compensation reform in SB 863 that was signed into law by Governor Edmund G. Brown on September 18, 2012, the legislature passed a provision in the Labor Code, section 139.48, that provides an annual fund of $120,000,000.00 from which eligible injured workers may receive money that compensates them in cases where there is a disproportional difference between their permanent disability ratings and their loss of future earning capacity. How is this fund going to be established, who pays for it, who administers it, how will it be implemented, and what role, if any, will attorneys have in representing or defending claims for these benefits?

In order to understand the new law, you must deconstruct the new section and determine the “clear meaning” of the statute. Benefits under section 139.48 may be called the “Return To Work Fund” or “RTWF benefits.” Here is what the statute actually says:

139.48. There shall be in the department a return-to-work program administered by the director, funded by one hundred twenty million dollars ($120,000,000) annually derived from non-General Funds of the Workers' Compensation Administration Revolving Fund,  Eligibility for payments and the amount of payments shall be determined by regulations adopted by the director, based on findings from studies conducted by the director in consultation with the Commission on Health and Safety and Workers' Compensation. Determinations of the director shall be subject to review at the trial level of the appeals board upon the same grounds as prescribed for petitions for reconsideration.

Let’s look at each meaningful sentence in the statute and de-construct it:

There shall be in the department a return-to-work program administered by the director, funded by one hundred twenty million dollars ($120,000,000) annually derived from non-General Funds of the Workers' Compensation Administration Revolving Fund…

What is known is that the statute’s reference to the phrase “administered by the director” means the Director of the Department of Industrial Relations (DIR), Christine Baker, and not the Administrative Director (AD) of the Division of Workers’ Compensation (DWC), who has an Acting AD, Destie Overpeck.

The Workers’ Compensation Administration Revolving Fund is the formal reference to the fact that the administration of the state’s workers’ compensation system is 100% user funded, i.e. paid for by annual surcharges on workers’ compensation insurance premiums from employers. The Return To Work Fund will be a segregated account from the general funds that are earmarked for running the rest of the workers’ compensation system under the DWC. However, the RTWF will also be funded by employer premiums but the benefits will not be paid by insurance companies to injured workers.

Eligibility for payments and the amount of payments shall be determined by regulations adopted by the director…

Eligibility for RTWF benefits will be determined under the auspices of Christine Baker, the Director of the Department of Industrial Relations (DIR), and not the Administrative Director of the Division of Workers’ Compensation. This is not a distinction without a difference – the DIR is the umbrella agency that is under the cabinet level Department of Labor and Workforce Development. The Division of Workers’ Compensation is under the DIR as one of the sub-agencies of the DIR.

A very important point is necessary – the claims examiner for the claims administrator for the employer will have nothing to do with determining eligibility for Return To Work Fund benefits. These claims will be solely between the injured worker and the State of California DIR claims administrator. Attorneys who represent injured workers must make it clear to the injured worker that eligibility for these benefits are determined by a state agency and have nothing to do with the insurance company or claims adjuster in the workers’ compensation case in chief against the employer.

It was originally thought that the claims examiners who adjust claims for uninsured employer benefits trust fund and subsequent injuries benefits trust fund would have the additional duties to adjust Return To Work Fund benefits. However, that turns out to be not true. Eligibility for Return To Work Fund direction and control of the DIR and not the UEBTF/SIBTF which is part of the DWC.

Regulations to implement section 139.48 will be developed as soon as possible. However, other provisions of SB 863 take priority for the DIR, DWC, and WCAB to write proposed regulations, obtain public hearings on them, submit them to the Office of Administrative Law, and obtain approval from that agency so that SB 863 can be implemented on time. Proposed regulations for implementing the Return To Work Fund benefits program will be issued in late 2012 or early 2013.

[B]ased on findings from studies conducted by the director in consultation with the Commission on Health and Safety and Workers' Compensation.

This very interesting provision in section 139.48 sounds like the legislature has codified Methods 1 and 3 of the Ogilvie decision [Ogilvie vs. Workers’ Compensation Appeals Board, (2011) 197 Cal. App. 4th 1262, 129 Cal. Rptr. 3d 704, 76 Cal. Comp. Cases 624] – where the DFEC adjustment factor is rebuttable in cases where the permanent disability rating is disproportional to the loss of earnings after an industrial injury, or where medical complications from an industrial injury cause a disproportional loss of earnings since the permanent disability rating is based on average WPI ratings to proportional wage loss for the same or similar employees. Future earnings of injured workers can be tracked through the EDD if injured workers stay and work within California. Average earnings of workers similarly situated as an injured worker can also continue to be tracked by the EDD.

The Commission On Health, Safety And Workers’ Compensation (CHS&WC) through studies it commissions with the RAND Corporation has the requisite data that shows WPI average ratings to proportional wage loss for injuries that have occurred since 1/1/05. CHS&WC has had this data for years which is constantly being updated. In fact, in 2007 RAND provided enough average WPI to proportional wage loss data to support revision of the 2005 PDRS to a proposed 2009 PDRS that did account for average WPI to wage loss data. That 2009 PDRS was never adopted by a prior DWC Administrative Director for political reasons. But the data is still there and is easily updated.

Although the DFEC adjustment factors were eliminated from the 2013 PDRS and each WPI rating is multiplied times a uniform 1.4 adjustment factor for injuries occurring on or after 1/1/13, average WPI to proportional wage loss data is still current and could be converted into proposed eligibility criteria for RTWF benefits.

An Injured worker who seeks RTWF benefits will have the burden of proving a disproportionate permanent disability award to wage loss in order to qualify for RTWF benefits. That proof may require a fixed time period – such as wages earned from the first stated (or ultimate) permanent and stationary date for a minimum of 3 years. Although the RAND data marks earnings loss for three years from the date of injury, a more realistic approach would be to evaluate WPI to proportional wage loss 3 years from a permanent and stationary date rather from the date of injury. But all of this will be vetted by DIR regulations.

The amount of RTWF benefits

Determinations of the director shall be subject to review at the trial level of the appeals board upon the same grounds as prescribed for petitions for reconsideration.

This provision looks like at some point, an injured worker may be represented by his or her attorney who appeals a determination of the Director of the DIR before a trial judge of the WCAB. Although the statute does not say the attorney who assists an injured worker in obtaining RTWF benefits is entitled to an award of attorneys fees, the fact that an appeal is taken to a trial judge implies that fees will be allowed.

You might recall under the prior vocational rehabilitation statute, Labor Code section 139.5, attorneys fees were allowed not under that section but under a regulation from Title 8 of the California Code of Regulations. The same process may occur under section 139.48 RTWF benefits that are appealed to a WCJ. It is even possible that attorneys fees will be allowed simply for an attorney assisting an injured worker in applying for RTWF benefits in the first place. This is why  close attention has to be made to the regulatory development for RTWF benefits.

Remember, the grounds for an appeal by way of a Petition for Reconsideration are governed by Labor Code section 5903 which states in pertinent part:

(a) That by the order, decision, or award made and filed by the appeals board or the workers' compensation judge, the appeals board acted without or in excess of its powers.

(b) That the order, decision, or award was procured by fraud.

(c) That the evidence does not justify the findings of fact.

(d) That the petitioner has discovered new evidence material to him or her, which he or she could not, with reasonable diligence, have discovered and produced at the hearing.

(e) That the findings of fact do not support the order, decision, or award.

Nothing contained in this section shall limit the grant of continuing jurisdiction contained in Sections 5803 to 5805, inclusive.

It appears that appeals of an “eligibility award” from the DIR to a WCAB trial judge would fall most likely under sub-sections 5903(c), (d), or (e). Hypothetically, an injured worker who appeals a determination of eligibility of RTWF benefits to a WCJ would seem to be entitled to a trial de novo on entitlement if the grounds for an appeal was because the decision, order or the award of the Director of the DIR was not supported by substantial evidence or the evidence did not support her “order, decision or award.”

There are additional things that have not yet been resolved:

What dates of injury does the Return To Work Fund apply to? Notice that the statute does not say “The following applies to injuries occurring on or after 1/1/13.” Many other specific provisions of SB 863 do have effective dates clearly as part of the statute. See new Labor Code section 4660.1, for example. Section 139.48 does not. Section 139.48 may apply regardless of the date of injury unless proposed regulations say otherwise. However, the “clear meaning of the statute” does not limit application of the statute to injuries that occur on or after 1/1/13.

Does this mean that in a hypothetical case where the injured worker’s date of injury is 2009, a Stipulated Award or Findings and Award issued in 2012 for 10% permanent disability, the injured worker can apply for Return To Work Fund benefits after 1/1/13 if his or her post injury earnings are disproportional to his permanent disability award? If the injured worker files for these benefits within five years of his or her date of injury, probably so.

What happens if the injured worker also files a Petition to Reopen his claim against the employer for new and further permanent disability within five years of his date of injury. Can he or she also file a claim for RTWF benefits? Probably not since a new and further permanent disability rating may eliminate any disproportionate loss of future earnings, making application for RTWF benefits moot.  Regulations may allow an injured worker to file for RTWF benefits concurrently with a Petition To Reopen with proceedings in the RTWF claim stayed pending the final outcome of the Petition to Reopen.

How will RTWF benefits be paid to the injured worker? Weekly, monthly, or paid in one lump sum?

Who will defend the DIR in legal proceedings if an eligibility determination by a claims examiner for the DIR is appealed by an injured worker to a WCAB trial judge?

Will RTWF benefits be considered to be taxable earnings?

These and many other questions will be answered by the regulatory authority granted in the statute to the DIR. In the coming months all of us must pay attention to that process. Go to www.dir.ca.gov/dwc and click on SB 863 which will lead you to all of the essential aspects of SB 863 including the bill itself and the proposed regulations. The entire workers’ compensation community is encouraged to become part of the process and to participate in the rule making public forums that are announced on the DIR and DWC websites for all proposed regulations that implement SB 863 in the coming months.

© Copyright 2012 Robert G. Rassp, Esq. All rights reserved. Reprinted with permission. 

Read The Rassp Report, a law blog by Robert G. Rassp, Esq.