California: Labor Code Section 4658d Not Applicable Where Employee Does Not Miss Time From Work

California: Labor Code Section 4658d Not Applicable Where Employee Does Not Miss Time From Work

The 1st Appellate District has resolved one of the continuing controversial issues surrounding Labor Code § 4658d (the 15% adjustment to PD created in SB 899) in its published decision in City of Sebastopol v W.C.A.B. (Braga) and in doing so resolved conflicting W.C.A.B. panel decisions to provide some guidance in this otherwise confusing area. The case resolves the question of whether employees who do not collect TD are still subject to the 15% bump up/bump down provisions of Labor Code § 4658d. The W.C.A.B. had issued conflicting panel decisions with Audiss v. City of Rohnert Park (Apr. 2, 2007, SRO 0137956) [2007 Cal. Wrk. Comp. P.D. LEXIS 9] (the section applies) and Tsuchiya v. County of Los Angeles Sheriff’s Dept. (Apr. 13, 2009, ADJ2508984 (VNO 0541888)) [2009 Cal. Wrk. Comp. P.D. LEXIS 399] (the section does not apply) being the most recognized and frequently cited.

In this case it was the employer, the City of Sebastopol, arguing it was entitled to a reduction in PD. The employee was reported as having a hearing loss with an 18% PD. The employer provided a timely offer of regular work upon receipt of the P & S report and commenced payment of benefits reduced by 15%. The parties submitted stipulations with request for award for approval to the W.C.A.B. with the 15% decrease included in the agreement. However, the WCJ suspended action on the Stipulations directing the City to advise if it would agree to retract the PD reduction ($194.50) and pay benefits at the baseline rate ($230). The City did not respond to the WCJ’s action and the Judge issued his order rejecting the reduction in benefits based on Tsuchiya. The City appealed the WCJ’s rejection of the PD reduction which was denied by the W.C.A.B. The appeal to the 1st District followed.

The Court of Appeals provided a detailed analysis of the statutory scheme, the cited cases and also the public policy behind statutory scheme. Rejecting the City’s argument that Labor Code § 4658d makes no mention of TD as a necessary benefit before the section is applied, the Court was most impressed with the public policy arguments in Tsuchiya suggesting the overall public purpose behind the statute was not met by reducing the applicant’s PD benefit where there was no lost time:

“On their face, section 4658, subdivisions (d)(2) and (3) do not distinguish between employees who have lost time from work and those who have not, and do not provide that an injured worker must have lost time from work as a condition precedent to increasing or decreasing a PDI award “When statutory language is clear and unambiguous—that is, has only one reasonable construction—courts usually adopt the literal meaning of that language. [Citations.] An exception to this general rule exists for situations where a literal construction would frustrate the purpose of the statute or produce absurd consequences. [Citation.]” (Smith v. Selma Community Hospital (2010) 188 Cal.App.4th 1, 21.) In order to determine whether an employee’s time lost from work is an implied condition precedent to application of those subdivisions, we consider the provisions of the workers’ compensation law and the purpose of section 4658…”

After posing the question, the Court addresses it after a discussion of the purpose of Workers’ Compensation, TD and PD noting the incentive to provide a return to work was placed squarely on the employer with the employee being all but an afterthought in the process:

“The legislative history indicates that the intent of section 4658(d)(2) and (3) was to provide “return to work incentives,” and “provide for differing permanent disability . . . payments based on a[n] employee’s return to work.” (Sen. Com. on Labor and Industrial Relations, Proposed Conference Rep. No. 1 on Sen Bill No. 899 (as amended July 14, 2003) Apr. 15, 2004, p. 1.) Since the 15 percent increase or decrease in PDI is contingent on whether or not the employer timely offers the injured employee regular, modified, or alternative work, and is not contingent on the employee’s acceptance of the offer, the return to work incentives are directed at the employer. Providing this incentive to employers serves the purpose for which Senate Bill No. 899 was enacted, that is, to reduce workers’ compensation costs for California employers. There would seem to be no reason to create a return to work incentive when the employee is currently working at his or her regular job and has lost no time from work as a result of the injury which ultimately renders him or her permanently disabled. An injured employee, like Braga, who is ultimately entitled to PDI and remains on his or her regular job with no time lost from work, does not “return to work” in any common understanding of that phrase. Therefore, the employer needs no incentive to return that employee to work, and we fail to see any statutory purpose served by application of section 4658(d)(2) and (3) to such situations.”

The Court also rejected the City’s argument that the purpose of the statute was to encourage accommodation to employees with disabilities. The Court noted the record was devoid of any accommodation by the employer and suggested the employee was working at his regular employment without any accommodation.

“The record establishes that Braga continued to perform his “regular work.” As we noted previously “regular work” is defined as “the employee’s usual occupation or the position in which the employee was engaged at the time of injury . . .” (§ 4658.1, subd. (a).) Even assuming section 4658(d)(2) and (3) were intended to encourage employers to provide employees reasonable accommodations, no evidence establishes that City “accommodated” Braga in order for him to continue to perform his regular work. City may not be rewarded by decreasing Braga’s PDI pursuant to section 4658(d)(3)(A) for an accommodation it did not provide.”

The Court also rejected the final argument presented by the City that failure to apply Labor Code § 4658d to employees without loss of time placed those employees in a more favored position than employees who lost time. The Court was equally unimpressed with this argument:

“Finally, City argues that, pursuant to the WCAB’s interpretation of section 4658(d)(3)(A), regardless of an employer’s compliance in making a timely offer of work, an injured employee who loses no time from work is treated more favorably than an employee who sustains an industrial injury that results in a period of temporary disability. But this point does not undermine the statutory purpose to provide the employer with an incentive to return the injured employer to work. Where, as here, the injury causes no time lost from work and the employee continues to perform his or her regular work, application of section 4658(d)(3)(A), to impose a 15 percent decrease in the employee’s PDI gives a windfall to the employer because no return to work incentives are necessary.”…


This is a classic example of losing the battle but winning the war. While the City lost this decision, in the final analysis, the Court’s decision is one that Employers should by and large applaud. While technically only finding that the decrease is not applicable where there is no TD, the holding is equally applicable to the flip side and should also apply to increases under Labor Code § 4658d where no TD is paid. The number of employees who do not lose time from work but have PD, while limited, is certainly not rare. However, the number of occasions where an employer actually makes an offer in compliance with Labor Code § 4658d, where an employee has missed no work, is very rare (at least in my experience).

It is therefore likely this holding will have much more applicability to relieve employers of the obligation to increase PD where an employee has not lost time from work that allow employees to avoid a PD reduction where an employer makes an offer under Labor Code § 4658d.

The Court’s decision does not seem to imply this interpretation is applicable where an employee returns to their usual and customary employment after a period of TD and in those circumstances, an employer should be cognizant of the need to make an offer of alt/mod/reg employment to avoid the obligation to increase PD under Labor Code § 4658d.

© Copyright 2012 Richard M. Jacobsmeyer. All rights reserved. Reprinted with permission.

Shaw Jacobsmeyer Crain Claffey LLP

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