California: The Ogilvie DCA Decision: Is Algebra Out and LeBoeuf In?

California: The Ogilvie DCA Decision: Is Algebra Out and LeBoeuf In?

 By Robert G. Rassp, Esq.

On July 29, 2011, the First District Court of Appeal issued its long awaited decision on Wanda Ogilvie vs. WCAB. The decision reverses the WCAB en banc decision and remands the matter back to the WCAB to determine whether Ogilvie effectively rebutted the application of the 2005 PDRS. In its decision, the Court reversed use of an individualized diminished future earning capacity adjustment factor as a means to rebut a scheduled DFEC adjustment that came directly from the 2005 PDRS.

In this article, we will discuss the specific findings of the Court. So what does the Court say and how do we apply its findings and conclusions in our cases? Is algebra out and you no longer need to calculate WPI to wage loss ratios using EDD data and a control group? The answer to both is “yes.” Is LeBoeuf back into play? “Yes”, LeBoeuf has been resurrected by the Court of Appeal. Does “diminished future earning capacity” mean the same thing as “loss of ability to compete in the open labor market?” Apparently, according to the Court, the answer is “yes.”

For the purpose of this article and our analysis, assume that Ogilvie injured her back and right knee as a Muni bus driver for 17 years and had to retire on a disability retirement due to her injuries. Believe it or not, the facts will prove to be good in terms of how this case may turn out for Ms. Ogilvie when her attorneys try again to rebut the DFEC adjustment.

HERE IS WHAT THE COURT SAID

In summary, the Court reversed the WCAB and concluded as follows:

“Thus we conclude that an employee may challenge the presumptive scheduled percentage of permanent disability prescribed to an injury by showing a factual error in the calculation of a factor in the rating formula, or application of the formula, the omission of medical complications aggravating the employee’s disability in preparation of the rating schedule, or by demonstrating that due to industrial injury the employee is not amenable to rehabilitation and therefore has suffered a greater loss of future earning capacity than reflected in the scheduled rating.”

First, the Court explained how the WCAB rejected the three proposed methods of rebutting the diminished future earning capacity adjustment tables (Tables A and B in the 2005 PDRS, located in Section 3, pages 1-5 through 1-8). The WCAB adopted use of the RAND formula that formed the basis of the eight DFEC adjustment categories and allowed rebuttal of a schedule DFEC adjustment by using evidence of an injured worker’s actual post-injury wage loss, the wage data of a control group over the same period and the WPI to wage loss ratio compared to the scheduled one.

The Court cites the language in Brodie vs. WCAB (2007) 40 Cal.4th 1313, 72 Cal. Comp. Cases 565 and asserts that: “A permanent disability is the irreversible residual of a work-related injury that causes impairment in earning capacity, impairment in the normal use of a member or a handicap in the open labor market.” The Court then again cites Brodie and states: “Payments for permanent disability are designed to compensate an injured employee both for physical loss and reduction in earning capacity.” Then the Court talks about how the law originally was meant to compensate an injured worker for loss of ability to compete in the open labor market.

The changes in the law from SB 899 altered Labor Code section 4660 to eliminate the language referring to loss of ability to compete in the open labor market to new language in 4660(a) that now requires a permanent disability award give consideration to an injured employee’s “diminished future earning capacity.” The Court then astonishingly concludes that this is a distinction without a difference – that “loss of ability to compete in the open labor market” is the same thing as “diminished future earning capacity” and that they are “interchangeable.”

The Court goes to pains to indicate that the terms have been used interchangeably in case law prior to the enactment of SB 899. Then the Court concludes: “Indeed the terms “diminished future earning capacity” and “ability to compete in an open labor market” suggest to us no meaningful difference, and nothing in SB 899 suggests that the Legislature intended to alter the purpose of an award of permanent disability through this change of phrase. Nor does its use suggest that a party seeking to rebut a permanent disability rating must make any particular showing.”

The Court then points out that Labor Code section 4660(b)(2) mandates that an employee’s diminished future earning capacity “shall be a numeric formula based on empirical data and findings” as developed by the RAND Institute. The Court then states:

“The language of section 4660 provides no alternative means to take into account the diminished earning capacity of an employee as a factor in rating a permanent disability. While the rating schedule is to be “prima facie evidence of the percentage of permanent disability to be attributed to each injury covered by the schedule” (section 4660 subd. (c)), there is no indication some other measure may be substituted for the earning capacity component in order to arrive at an overall rating most suitable for a particular employee. In considering the Legislature’s intent to “promote consistency, uniformity and objectivity” in permanent disability awards, we see nothing ambiguous or unclear in section 4660’s directive that the earning capacity adjustment factor “shall be” the numeric formula based upon the RAND Institute’s report. It must be initially applied.”

This paragraph, quoted from the Court, will become the keystone for rebutting the DFEC adjustment factor. The Court then points out that there is case law over the past 41 years that allows a party two ways to rebut a scheduled rating “unchanged by passage of SB 899.”

The first way is “when a party can show a factual error in the application of a formula or the preparation of the schedule.” The Court then cited cases where either the disability was not “scheduled” or where the employee’s duties did not match a scheduled occupational group. We know, for example, that disabilities to upper extremities were not scheduled under the 1988 and 1997 PDRS. The DEU came up with consensus ratings for upper extremity injuries that were not successfully challenged in court. The Court then states:

“A challenge to an employee’s presumptive disability rating thus appears to remain permissible on the basis that the schedule, or one of its component factors, was incorrectly calculated or applied.”

So any party can still challenge and rebut a scheduled rating.

Then the Court gets interesting by applying these principles of old case law to a potential rebuttal of a scheduled DFEC adjustment factor by saying:

“The possibility an employee can demonstrate such an error in the earning capacity adjustment factor is more than theoretical, particularly in cases like this one involving a back injury.”

The Court then specifically cites the RAND Institute for Civil Justice 2004 working paper that shows the relationship between permanent disability ratings to wage loss data. The document can be accessed publically at the RAND Institute for Civil Justice web site and you search for “Data for Adjusting Disability Ratings to Reflect Diminished Future Earnings and Capacity In Compliance With SB 899.” In the working paper, as it is called, the researchers pointed out certain flaws in their data that would affect how the DFEC adjustments were actually calculated and what data they were based on. Remember, the DEU used this data to develop the 2005 PDRS. As to Ms. Ogilvie’s back injury the Court specifically states:

The [RAND] working paper also makes certain assumptions that are critical when the diminished earning capacity ratings are applied to back injuries (citing pages 10-12 of the working paper). If any of the assumptions are incorrect, the estimated ratings could be biased.”

The Court then says:

“A challenge to the ratings schedule on the basis that there was a factual error in the calculation of one of its component factors, or it was incorrectly applied in a particular case does not undermine the schedule’s “consistency, uniformity, and objectivity.”

The Court cites “Guzman III” [Milpitas Unified School District vs. WCAB (Guzman) 187 Cal.App.4th 808, 75 Cal. Comp. Cases 837] and reaffirms that any aspect of a permanent disability rating can be rebutted and the DFEC adjustment is not subject to a conclusive presumption.

Next, the Court addresses the second way prior case law allows rebuttal of a scheduled permanent disability rating and that is if the claim is that the injured worker cannot be rehabilitated. The Court specifically affirms that the principles of LeBoeuf [LeBoeuf vs. WCAB (1983) 34 Cal.3d 234, 48 Cal. Comp. Cases 587] apply and live under the 2005 PDRS and despite the use of the AMA Guides:

“Another way the cases have long recognized that a scheduled rating has been effectively rebutted is when the injury to the employee impairs his or her rehabilitation, and for that reason, the employee’s diminished future earning capacity is greater than reflected in the employee’s scheduled rating.”

Didn’t someone who briefed the Court tell the justices that no one receives vocational rehabilitation any longer? Nevertheless, the Court limits application of the principles of LeBoeuf to the most widely accepted view of the Supreme Court’s holding in that case:

“… and that which appears to be most frequently applied by the WCAB, is to limit its application to cases where the employee’s diminished future earnings are directly attributable to the employee’s work related injury, and not due to nonindustrial factors such as general economic conditions, illiteracy, proficiency to speak English, or an employee’s lack of education.”

The Court then cites a list of writ denied cases and in footnote 7 justifies its use of writ denied cases! It concludes that LeBoeuf lives and states:

“An employee effectively rebuts the scheduled rating when the employee will have a greater loss of future earnings than reflected in a rating because, due to the industrial injury, the employee is not amenable to rehabilitation.”

The Court then recognizes a third way to rebut a scheduled permanent disability rating:

“In certain rare cases, it appears the amalgamation of data used to arrive at a diminished future earning capacity adjustment may not capture the severity or all of the medical complications of an employee’s work injury. A scheduled rating may be rebutted when a claimant can demonstrate that the nature or severity of the claimant’s injury is not captured within the sampling of disabled workers that was used to compute the adjustment factor.”

The Court cites as an example of a case where an injured worker has a foot fracture that also involves nerve damage and the scheduled DFEC adjustment did not include foot injuries with nerve damage and this particular individual has a greater diminished future earnings loss than what types of foot injuries were used as a basis for determination of the DFEC adjustment factor for foot injuries in the 2005 PDRS. The Court uses the following language for this type of rebuttal to a scheduled DFEC:

“In such cases, the scheduled rating should be recalculated taking into account the extent to which the claimant’s disability has been aggravated by complications not considered within the sampling used to compute the adjustment factor.”

Here’s the funny part of this decision, where the Court defers (punts?) to the WCAB to determine how all of this will play out under the WCAB:

“We leave it to the WCAB in the first instance to prescribe the exact method for such a recalculation that factors the employee’s anticipated diminished earning capacity into the data used by the RAND Institute.”

HOW DOES THIS DECISION AFFECT YOU? There’s more to Ogilvie than you think. A complete discussion of the ramifications of Ogilvie and how and why the facts may prove good for Ogilvie are set forth in an Emerging Issues Analysis article by Robert G. Rassp on sale NOW at the LexisNexis Bookstore. Lexis.com users can access the article for an additional fee by clicking here.

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