California WCAB Panel Concludes That 100% Loss Of Future Earning Capacity Is A Factor To Consider When Calculating Permanent Disability

California WCAB Panel Concludes That 100% Loss Of Future Earning Capacity Is A Factor To Consider When Calculating Permanent Disability

By David Bryan Leonard, Esq.

The panel decision of Clark Baldridge v. Swinerton, Inc./Zurich (ADJ 636377), 2010 Cal. Wrk. Comp. P.D. LEXIS 271, highlights the role of consistency in the judicial process by recognizing that while law may change, long standing principles remain.

In Baldridge, a WCAB panel was asked to determine the impact of the 2004 reforms enacted pursuant to SB 899 on the principles set forth by the California Supreme Court in LeBoeuf v. W.C.A.B. (1983) 34 Cal.3d 234 [48 Cal.Comp.Cases 587]. The subtlety of the question presented is dramatized by the seemingly overwhelming scope of the 2004 reform legislation. In a nutshell, the 2004 reform seemed to change everything. Of relevance to Baldridge, post 2004, we now have new ways to calculate the extent of permanent disability caused by an industrial injury along with new rules regarding apportionment of disability causation.

Pre-SB 899, in order to assess the level of permanent disability, the Courts were required to consider the impact of the industrial injury on the worker’s ability to compete in the open labor market. Post SB 899, the “open labor market” consideration element of disability assessment was replaced with “diminished earning capacity.”  Now, instead of considering the open labor market, the Courts are required to consider the individual injured worker’s “diminished earning capacity” when assessing the extent of disability present. This essentially means that the focus of analysis has gone from the broad assessment of the labor market to a narrower individual assessment of capacity.

The point of discussion for appreciating the panel’s decision in Baldridge is twofold. First, the Board panel recognized that the methodology used to calculate disability has changed. Second, and perhaps most importantly, while the methodology has changed, we still have the outcome of the analysis to consider. Specifically, what happens when an injured worker has experienced a 100% loss of earning capacity? Stated differently, is the 100% loss of future earning capacity a factor that the Court may consider when determining the extent of disability present?

To answer this question, the panel turned to the guidance provided by the Supreme Court in LeBoeuf, supra. In that case, Applicant worked as a bus driver and was physically attacked and beaten. In addition to his physical injuries, Applicant developed an anxiety disorder which resulted in the Applicant’s inability to “cope with pressure, supervision, confinement and schedules.” As a result of his injury, Applicant was unable to benefit from vocational rehabilitation training.  One of the questions presented in LeBoeuf, supra concerned whether or not an injured worker’s inability to complete vocational retaining a factor relevant to the Applicant’s ability to compete in the open labor market?

The Supreme Court in Leboeuf, supra concluded that “A permanent disability rating should reflect as accurately as possible an injured employee's diminished ability to compete in the open labor market. The fact that a worker has been precluded from vocational retraining is a significant factor to be taken into account in evaluating his or her potential employability.” (Id. at 48 CCC 597.)

With the change of factors created by SB 899 and the principles set forth by the Supreme Court in LeBoeuf, supra, the WCAB panel addressed the following factual presentation in its decision of Baldridge which I will summarize as follows:

In Baldridge, Applicant, a 50 year old construction worker, sustained an industrial injury to his low back that required surgery. Complications occurred and post surgery he experienced ongoing depression and chronic pain. The parties agreed to use orthopedic and psychiatric Agreed Medical Examiners (“AME”). The orthopedic AME limited Applicant to sedentary work with intermittent breaks to allow him to “get up and move around” every 15 to 30 minutes. The orthopedic components rated to 45% whole person impairment (“WPI”). The psychiatric AME found that Applicant had significant psychiatric symptoms which included chronic pain syndrome and depression. In his report, the psychiatric AME explained that Applicant was extremely agitated, angry and emotionally labile. While he was putting forth his best efforts, the Applicant had difficulty concentrating. The AME concluded that Applicant sustained a significant psychiatric injury and disability as a result of his orthopedic injury. Applying the Global Assessment Functioning Scale (“GAF”) the AME described Applicant as having a GAF disability of 55-56.

The parties also agreed to an Agreed Vocational Examiner (“AVE”).  A comprehensive vocational evaluation that included a labor market survey and transferable skills analysis was performed. Then, using standard occupational classification data, the AVE conducted a job search for Applicant. The AVE found that there were no close employment matches available. Additionally, the AVE performed a separate “manual” search applying the Dictionary of Occupational Titles and data based on information from O'Net (a primary source of occupational information) relative to Applicant’s key attributes and work restrictions. The manual search did not yield any employment opportunities. Issues hindering Applicant employment included mental distraction, poor response to employment stressors and the physical inability to complete a normal work week. The AVE summarized the barriers to Applicant’s employment and concluded that Applicant would be a poor candidate for on the job training or home based employment. Taking all these factors into consideration, the AVE concluded that Applicant presented with a 100% total loss of earning capacity and was unable to work.

The case proceeded to trial before a WCJ on issues that included the extent of Applicant’s disability. The AVE testified. There was no contradiction to the AVE’s findings. The WCJ issued rating instructions based on Applicant’s 100% loss of earning capacity and his inability to return to the work force. Based on the WCJ’s instructions, the DEU rater concluded that Applicant had 100% permanent total disability. Defendant cross-examined the rater who supported her conclusions with reference to the 2005 rating schedule at pages 1.2 and 1.3. The WCJ issued a Findings and Award of 100% permanent and total disability.

Defendant sought reconsideration. Among other issues, Defendant asserted that that the AVE’s opinion was not substantial evidence. It reasoned that the AVE failed to consider Applicant’s ability to work, age, health, willingness and opportunities to work, his skills and education. Defendant also challenged the AVE’s assessment of the labor market and the current employment opportunities for persons similarly situated to Applicant.

Defendant also contended that the AVE failed to perform a true job search. It reasoned that the AVE’s labor market assessment and job availability findings were simply the result of queries into a computer software program.

In the Report and Recommendation on Reconsideration, the WCJ disagreed. The WCJ found that the AVE’s labor market assessment was based on the AVE’s comprehensive vocational evaluation, vocational testing, transferable skills analysis and a labor market assessment. The WCJ concluded that the AVE did “not simply plug Applicant's employment history into a computer program” and that the appropriate evaluation process supported the AVE’s findings. The WCJ also observed that Defendant was unable to produce any information that rebutted or contradict the AVE’s findings.

Defendant also alleged that a 100% loss of future earning capacity did not equate to 100% permanent total disability. Addressing Defendant’s argument that the award of 100% permanent total disability was inappropriate because the award did not comply with the 2005 rating schedule, the Court observed that the DEU rater explained that her rating was based upon the specific wording of the 2005 rating schedule. The WCJ noted that the 2005 schedule defines permanent total disability as “a level of disability at which an employee has sustained a total loss of earning capacity.” (Citing 2005 Rating Schedule, pg. 1-2 and 1-3.) The WCJ concluded that the rater’s explanation was consistent with the 2005 rating schedule. The WCJ reasoned that Defendant did not present any evidence that would rebut or contradict the AVE’s conclusions.  The AVE’s opinion was substantial evidence. Furthermore, the WCJ observed that an injured worker is not required to establish 100% permanent total disability solely by reference to Labor Code Section 4660 but rather Labor Code Section 4662 which allows a determination of 100% permanent total disability in accordance to the facts of a given case.

Citing LeBoeuf  v. W.C.A.B. (1983) 34 Cal. 3d 234 [48 Cal. Camp. Cases 587], the WCJ noted that the California Supreme Court has recognized that an injured workers’ “ability or inability” to benefit from vocational rehabilitation is a significant factor influencing the level of permanent disability.  Turning to the changes effectuated by SB 899, the WCJ noted that the reform legislation did not change the language of Labor Code Section 4660 which mandates the use of the 2005 rating schedule. Because the 2005 rating schedule is only prima facie evidence of the level of permanent disability for work injuries, it may be contraverted by other evidence.

The WCJ concluded that:

In view of the Legislature's decision to leave these sections of the Labor Code unchanged, it is logical to conclude that the LeBoeuf analysis and Labor Code Section 4662--which allows applicant to establish permanent total disability in accordance with the facts and not just by reference to Labor Code Section 4660--is still appropriate for determinations of permanent total disability. This approach allows the injured worker to establish permanent total disability when it is shown that applicant has lost the ability to work in the open Labor market and/or has 100% loss of future earning capacity even though the impairment rating under the AMA Guides is less than 100%.

The WCJ recommended that Defendant’s Petition be denied. The WCAB panel (“Board”) adopted and incorporated the WCJ’s Report and Recommendation.  In addition, the Board stated that in its view, the decision of LeBoeuf v. W.C.A.B. (1983) 34 Cal.3d 234 [48 Cal.Comp.Cases 587] does not apply directly to injuries that are subject to the 2005 Permanent Disability Rating Schedule.

The W.C.A.B. panel explained that when Richard LeBoeuf was injured, the pre SB 899 component warranting a 100% permanent disability rating was LeBoeuf’s diminished ability to compete in the open labor market. Stated differently, the Board reasoned that the Supreme Court concluded that the fact that an injured worker cannot be retrained for suitable gainful employment was a factor that could adversely affect the injured workers’ ability to compete in the labor market and, therefore, should be considered in the permanent disability rating.

Turning to the changes instituted by SB 899, the Board recognized that in 2004, the Legislature substantially amended Section 4660(a), rendering the former open labor market concept an inapplicable element for the determination of permanent disability. Citing post SB 899 reform, the Board recognized that pursuant to  Labor Code Section 4660(b)(2), even though the ability to compete in the open labor market is not longer a factor for consideration,  the injured employee's diminished future earning capacity is one of the core elements of a permanent disability rating.

The Board concluded LeBoeuf, supra still supports the principle that a permanent disability rating may be impacted when the industrial injury results in a total loss of earning capacity. The Board held that “a complete loss of future earning capacity is analogous to a complete inability to compete in the open labor market.”

Noting the WCJ’s Report and Recommendation, the Board reiterated that the 2005 permanent disability schedule at pages 1.2 – 1.3 expressly states that “‘permanent total disability represents a level of disability at which an employee has sustained a total loss of earning capacity.’”  Furthermore, Labor Code Section 4662 provides that certain disabilities are conclusively presumed to be total and provides for all non-conclusive types of disabilities, permanent total disability shall be determined in accordance with the facts.

The agreed vocational and medical experts support the finding that Applicant’s industrial injury resulted in a 100% total loss of earning capacity resulting in 100% permanent disability. Specifically, the AVE concluded that Applicant “sustained a 100% loss of earning capacity.” To support his conclusions, the AVE relied on the medical opinions of to the orthopedic and psychiatric AMEs. The AVE concluded that “when the orthopedic limitations are viewed in concert with the psychiatric impairment, then combined with the vocational factors, Applicant would not present as a viable employment candidate were he capable of securing an interview.”

The WCAB denied reconsideration.

Baldridge presents as a perfect example of the subtleties that the Court has to wrestle with when the factors of analysis change but the principles of law remain the same. Post SB 899, consideration must be placed on the injured worker’s future earning capacity. Stated differently, loss of earning capacity is now a factor that must be considered when assessing the extent of permanent disability presented in any given case. With this new factor of consideration in place, the legal principle that “a permanent disability rating should reflect as accurately as possible an injured employee's diminished ability” remains. While the methods of calculating disability have changed, the impact caused by the 100% loss of earning capacity is a factor to consider.

© Copyright 2010 David Bryan Leonard, Esq. Reprinted with permission.

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