DOUGLAS K. HOESLI, Appellant/Cross-appellee, v. TRIPLETT, INC. and FEDERATED MUTUAL INSURANCE COMPANY, Appellees/Cross-appellants.
No. 109,448
Court of Appeals of Kansas
Opinion filed March 7, 2014.
321 P.3d 18
Vincent A. Burnett and Dallas L. Rakestraw, of McDonald, Tinker, Skaer, Quinn & Herrington, P.A., of Wichita, for appellees/cross-appellants.
Before GREEN, P.J., SCHROEDER, J., and JAMES L. BURGESS, District Judge Retired, assigned.
BURGESS, J.: Douglas K. Hoesli was injured at work and filed a workers compensation claim. Because Hoesli—who was not yet retired but who was at full retirement age—had already begun collecting Social Security retirement benefits, the administrative law judge (ALJ) determined that the setoff provision in
FACTS
Sometime in 2008, Hoesli began working at Triplett as a truck driver. At that time, Hoesli was 65 years old and not yet collecting Social Security benefits. In April 2008, after Hoesli reached the age of 66, he began drawing his full Social Security benefit of $1,820 a month. His Social Security benefit was not reduced or offset by his full-time employment.
While working for Triplett part-time in June 2011, Hoesli applied for a workers compensation hearing based on his work injuries. A hearing was held on his application on January 19, 2012. The parties stipulated to the existence of Hoesli‘s injuries and the fact that those injuries arose out of and in the course of his employment, but they disputed four major issues. A primary issue and the subject of this appeal involved the applicability of the setoff provision present in
“This court is unable to identify any duplication of benefits between [Hoesli‘s] social security old age benefits and his workers compensation benefits. They were two separate, distinct and independent revenue streams, that would have contin-
ued for the foreseeable future, but for the work-related injury. However . . . the later decision in [a prior Kansas case] . . . and the plain language of K.S.A. 44-501(h) appear to mandate application of the set-off.”
The ALJ then applied the setoff to Hoesli‘s permanent partial disability (PPD) benefits but not to his 13% permanent partial functional impairment benefits. The ALJ did not discuss the setoff‘s effect on Hoesli‘s temporary total disability (TTD) compensation.
Hoesli applied for review by the Board to determine, among other things, whether the setoff should apply to his PPD award. The Board heard argument on November 6, 2012. Although the record is somewhat unclear, it appears that, at oral argument, Triplett argued that the setoff applied to both Hoesli‘s PPD and TTD awards rather than just his PPD award. The Board affirmed the ALJ‘s ruling regarding the application of the setoff to the PPD award. Regarding the application of the setoff to Hoesli‘s TTD compensation, the Board explained:
“However, the ALJ did not address whether an offset of [Hoesli‘s] social security benefits should be allowed against the TTD awarded [Hoesli]. The only limitation placed on the offset by
K.S.A. 2009 Supp. 44-501(h) deals with [Hoesli‘s] functional impairment. [Triplett] argues that the social security offset should apply to the payment of TTD as well as any permanent work disability, above the functional impairment awarded to [Hoesli]. However, this issue does not appear to have been raised to the ALJ at the time of the regular hearing nor in [Triplett]‘s submission letter to the ALJ. UnderK.S.A. 2009 Supp. 44-555c(c) the Board is limited to deciding issues raised to and determined by the ALJ. That is not the case here on the TTD offset issue.”
Notably, however, the Board reviewed Triplett‘s argument and determined that applying the offset to Hoesli‘s TTD award would run afoul of
On February 27, 2013, Hoesli subsequently filed a petition for judicial review of the Board‘s decision regarding the setoff‘s applicability and also raising the issue of the setoff‘s constitutionality. On March 18, 2013, Triplett filed a cross-petition for review, appealing the Board‘s determination that it lacked jurisdiction to consider the setoff‘s applicability to Hoesli‘s TTD benefits.
ANALYSIS
Did the board err in applying the setoff provision in K.S.A. 2010 Supp. 44-501(h) to Hoesli‘s permanent partial disability award?
Hoesli argues that the Board erred by affirming the ALJ‘s application of the setoff to his PPD award. Although Hoesli acknowledges that Kansas caselaw has repeatedly applied the provision in circumstances similar to his, he primarily distinguishes these cases due to recent changes in federal law. Triplett, however, argues that these cases are not distinguishable and that not applying the setoff would run afoul of the statute‘s purpose.
Final orders of the Board are subject to review under the Kansas Judicial Review Act (KJRA),
The statute at issue in this case,
“If the employee is receiving retirement benefits under the federal social security act or retirement benefits from any other retirement system, program or plan which is provided by the employer against which the claim is being made, any compensation benefit payments which the employee is eligible to receive under the workers compensation act for such claim shall be reduced by the weekly equivalent amount of the total amount of all such retirement benefits, less any
portion of any such retirement benefit, other than retirement benefits under the federal social security act, that is attributable to payments or contributions made by the employee, but in no event shall the workers compensation benefit be less than the workers compensation benefit payable for the employee‘s percentage of functional impairment.”
More simply put, an employee‘s worker compensation award will be set off by any retirement benefits he or she receives from a retirement benefit program, less any amount the employee contributed to his or her plan.
This court and our Kansas Supreme Court have considered the purpose and intent of the setoff provision several times in its history. In the first case concerning the setoff provision—which at that time was
In its decision, this court noted that the 1974 revision to the workers compensation laws in Kansas “sought to eliminate any duplication of wage-loss benefits by different programs” because workers compensation existed ” ‘to replace some proportion of wage loss.’ ” Boyd, 2 Kan. App. 2d at 426-27. In gleaning the purpose of
” ‘Once it is recognized that workmen‘s compensation is one unit in an overall system of wage-loss protection, rather than something resembling a recovery in tort
or on a private accident policy, the conclusion follows that duplication of benefits from different parts of the system should not ordinarily be allowed. . . .’ ” ” ‘Wage-loss legislation is designed to restore to the worker a portion . . . of wages lost due to the three major causes of wage-loss: physical disability, economic unemployment, and old age. The crucial operative fact is that of wage loss; the cause of the wage loss merely dictates the category of legislation applicable. Now if a workman undergoes a period of wage loss due to all three conditions, it does not follow that he should receive three sets of benefits simultaneously and thereby recover more than his actual wage. He is experiencing only one wage loss and, in any logical system, should receive only one wage-loss benefit. This conclusion is inevitable, once it is recognized that [the three categories of benefits] are all parts of a system based upon a common principle.’ ” 222 Kan. at 130-31 (quoting 4A Larson, The Law of Workmen‘s Compensation §§ 97.00, 97.10 [1976]).
See Boyd, 2 Kan. App. 2d at 427.
This court in Boyd determined that the purpose of
However, this court noted the difference between those individuals receiving workers compensation who then later retire and those who, after retirement, returned to work. Retirees who resume working, the court reasoned, “suffer a second wage loss when they are injured in the course of their employment.” 2 Kan. App. 2d at 428. To apply the setoff to those individuals would “totally preclude any replacement of the wages which they are entitled to earn over and above old age social security benefits,” preventing not wage duplication but rather the very wage replacement that workers compensation laws exist to provide. 2 Kan. App. 2d at 428. Because a strict reading of the setoff provision ran afoul of the “spirit and reason” of the workers compensation act in place at the time, this court determined that the setoff did not apply to retirees who returned to work and were then injured on the job. 2 Kan. App. 2d at 429.
Our Supreme Court essentially adopted this reasoning in Dickens v. Pizza Co., 266 Kan. 1066, 974 P.2d 601 (1999), a case with facts very similar to the facts in Boyd. There, our Supreme Court noted that the primary concern in cases applying the setoff to retirees who later returned to work was the “disparate treatment of individuals such as [the claimant in Dickens], seeking to supplement social security income, compared to other social security beneficiaries.” 266 Kan. at 1071. The court reaffirmed that although the setoff aims to prevent duplicative benefits, there is no duplication of benefits when a retired worker who is already receiving Social Security benefits returns to work, is injured, and receives a workers compensation award. 266 Kan. at 1071.
In 2004, this court revisited the rationale of Dickens in McIntosh v. Sedgwick County, 32 Kan. App. 2d 889, 91 P.3d 545, rev. denied 278 Kan. 846 (2004). In that case, the claimant began receiving Social Security benefits after turning 65 in the spring of 1999 but continued working full time. He scheduled an August retirement date but was injured on the job a few months prior to retiring. The court determined that because the claimant was not retired at the time of his injury as in Dickens, the income from his full-time job “was not post-retirement income used to supplement his retirement income.” 32 Kan. App. 2d at 897. In summarizing the function of the setoff provision, the court stated: “The cases show two consistent patterns: (1) injury, then retirement: no duplication of benefits allowed . . . and (2) retirement, then injury: multiple benefits allowed.” 32 Kan. App. 2d at 897. The court further explained that when an injury occurs before the employee‘s retirement,
“the appellate courts have consistently held that social security retirement benefits are designed to restore a portion of an employee‘s wages lost due to age and, therefore, duplicate workers compensation benefits, which are designed to restore a portion of an employee‘s wages lost due to injury.” 32 Kan. App. 2d at 897.
Because the claimant began receiving Social Security benefits before retirement only in anticipation of “the wage loss that would result from his eventual retirement,” the court held that the setoff applied. 32 Kan. App. 2d at 897-98.
Although our Supreme Court has not reconsidered the two-category approach established in McIntosh, this court has continued
“The statutory exception set forth by Dickens is based on the rationale that workers who already are retired and receiving social security retirement benefits before starting work on a part-time job to supplement those benefits suffer a second wage loss when they are injured in the course of their employment.” 2013 WL 1010438, at *5.
Because there was no evidence showing that Morales had retired and that her employment at Wal-Mart existed to supplement her retirement income, the court determined that the setoff provision applied. 2013 WL 1010438, at *5.
The ALJ‘s and the Board‘s decisions were each based on the rule established in McIntosh and determined that because Hoesli had not yet retired, the setoff applied. Hoesli admits that he worked at Triplett prior to receiving Social Security retirement benefits and that he continued working after those benefits began. In fact, Hoesli referred to retirement in his May 2011 resignation letter, demonstrating that up until that time, he did not consider himself retired. Based on the principles in Dickens and McIntosh, it seems clear that Hoesli falls into McIntosh‘s second category: he was an unretired worker receiving Social Security benefits when injured
However, Hoesli raises a novel argument regarding the interplay between the setoff provision and federal Social Security law. Hoesli contends not that McIntosh and Dickens were wrongly decided but rather that their application is altered by the Senior Citizens’ Freedom to Work Act of 2000, Pub. L. 106-182. See
Although the relationship between the setoff provision and this federal statutory change is a matter of first impression in Kansas, other states have tackled the issue. In Reesor v. Montana State Fund, 325 Mont. 1, 8, 103 P.3d 1019 (2004), when considering a setoff provision similar to that in Kansas, the Montana Supreme Court explained the federal statutory change as follows:
“[S]ocial security retirement benefits are not wage loss benefits. There is no requirement that to be entitled to social security benefits a person must stop working. In 2000, the federal government enacted the Senior Citizen‘s Freedom to Work Act (
42 U.S.C. 402 ) which eliminated the earnings limit for workers over the age of 65. Thus, there is no longer a reduction in social security retirement benefits due to wages regardless of the amount of wages earned by individuals age 65 and older.”
The Utah Supreme Court agreed with this position. See Merrill, 223 P.3d at 1097. In fact, the court there noted that the change in federal Social Security law “invalidat[ed] the rationale that social security retirement benefits are a wage replacement,” and that under the change, the benefits were “not simply wage-loss replacement benefits, but serve[d] other, important purposes.” 223 P.3d at 1097-98. Although that court did note that other jurisdictions, including Kansas, construe Social Security benefits as wage re-
Triplett contends that Hoesli‘s reliance on the 2000 federal act is a ” ‘red herring’ ” because “it does not abrogate the legislative purpose of [the setoff provision]—to prevent duplication of wage loss benefits.” Additionally, Triplett attempts to analogize Hoesli‘s situation to that of the claimant in McIntosh by arguing that Hoesli‘s resignation letter in May 2011 and brief time off work qualifies as retiring. Triplett essentially argues that Hoesli‘s resignation letter proves he was injured before retiring and that when his hours were reduced and he experienced wage loss the benefits became duplicative.
Although Triplett‘s argument aligns itself with Kansas caselaw, it is illogical under the federal Social Security scheme as modified in 2000. As the ALJ observed in his order, there was no “duplication of benefits between [Hoesli]‘s social security old age benefits and his workers compensation benefits. They were two separate, distinct and independent revenue streams, that would have continued for the foreseeable future, but for the work-related injury.” Whereas Hoesli‘s Social Security benefits may have increased upon his injury and reduced hours under the old federal scheme, Hoesli—of full retirement age—was permitted both to receive his full Social Security benefits and a full-time salary from Triplett prior to his injury due to the 2000 federal statutory change. As the two income streams existed fully independent of one another and Hoesli received each without any limitation or reduction, it is difficult to justify relabeling one as duplicative simply due to Hoesli‘s injury.
Clearly, the plain language of
Unlike in McIntosh, Hoesli had no retirement date in mind, which suggests he did not begin collecting Social Security benefits in anticipation of “the wage loss that would result from his eventual retirement.” 32 Kan. App. 2d at 897. Instead, he began collecting Social Security benefits when he reached his full retirement age and was entitled to do so—and incidentally continued to work at Triplett. His 2010 injury limited his ability to continue working full time, reducing one of his income streams. Although Hoesli never retired, his choice to continue working past retirement age can be viewed as a decision to supplement his Social Security benefits as in Dickens, 266 Kan. at 1071. Applying the setoff provision in this case fails to protect Hoesli from the wage loss he suffered after his injury, ultimately running afoul of the purpose of workers compensation legislation. See Baker, 222 Kan. at 131.
Recent opinions by our Kansas Supreme Court indicate that the Dickens exception continues to be good law, but they fail to express any clear approval or disapproval of the two categories established in McIntosh. See, e.g., Robinson v. City of Wichita Retirement Bd. of Trustees, 291 Kan. 266, 285-86, 241 P.3d 15 (2010). Based on McIntosh and those unpublished opinions following it, the Board‘s decision in applying the setoff provision to Hoesli‘s workers compensation award would be logical. However, application of the
The final analysis boils down to several essential facts. At the time of Hoesli‘s work-related injury, he was entitled to receive and was receiving two streams of income. Neither source of income was subject to setoff or any other limitation. Hoesli would have continued to receive both undiminished streams of income into the future but for his work-related injury. The grant of a workers compensation award in this case would serve to make Hoesli whole. It would replace an income he was legally receiving and would place him in a position similar to the position he was in prior to his injury. To apply the setoff would act as a penalty, placing Hoesli in a worse position than he was in prior to the injury. To apply the
Hoesli also raises an issue concerning the constitutionality of the setoff provision in
CROSS-APPEAL
Should the setoff provision in K.S.A. 2010 Supp. 44-501(h) apply to Hoesli‘s temporary total disability award?
In cross-appealing the Board‘s decision, Triplett argues that the Board erred in finding it lacked jurisdiction to consider the applicability of the
As previously stated, appellate courts have an unlimited review of questions involving the interpretation or construction of a statute. Ft. Hays St. Univ. v. University Ch., Am. Ass‘n of Univ. Profs, 290 Kan. 446, 457, 228 P.3d 403 (2010). Additionally, whether jurisdiction exists is a question of law over which this court also exercises unlimited review. Frazier v. Goudschaal, 296 Kan. 730, 743, 295 P.3d 542 (2013).
The Board has “exclusive jurisdiction to review all decisions, findings, orders and awards of compensation” by an ALJ in a workers compensation case.
Three of Triplett‘s arguments are by their nature intertwined. Pointing to
In so arguing, Triplett relies on Woodward v. Beech Aircraft Corp., 24 Kan. App. 2d 510, 515-16, 949 P.2d 1149 (1997), where this court observed that the Board is not limited “to issues raised in the written request for [Board] review.” There, the parties raised an issue before the Board at oral argument that, although considered and decided by the ALJ, did not appear in their briefs. Similar to the Woodward case, neither party in this case raised the TTD
Triplett attempts to combat this by pointing out that the
Furthermore, the specific issue of setting off TTD benefits to the extent of a claimant‘s Social Security benefits appears to be a matter of first impression in Kansas. No statute or case stands for the proposition that TTD benefits and PPD benefits should be treated the same way under the setoff. It therefore cannot fairly be said that the ALJ‘s finding that it applies to PPD benefits is similar enough to finding it applies to TTD benefits to consider it a “question[] of law . . . presented and shown by a transcript of the evidence and the proceedings as presented, had and introduced before the [ALJ]” under
Triplett also contends that the Board‘s discussion of the setoff‘s applicability to TTD benefits constitutes a decision on the issue. Triplett points to the Board‘s discussion of TTD benefits, noting that the Board concludes by stating that “[t]he Award will not be modified to offset claimant‘s TTD by his weekly social security benefit.” Triplett insists this statement constitutes a decision of the issue on its merits.
However, prior to its discussion, the Board affirmatively stated that it was “limited to deciding issues raised to and determined by the ALJ,” which was “not the case here on the TTD offset.” In Flax v. Kansas Turnpike Authority, 226 Kan. 1, 4, 596 P.2d 446 (1979), our Supreme Court noted that ” ‘[d]ictum often develops in opinions from comments upon arguments advanced by counsel for the respective parties’ ” and that it ” ‘may be respected but should not control a judgment in a subsequent case when the precise point is presented, argued, and considered by the entire court.’ ” Although the Board discussed the setoff‘s applicability, it was “not determinative of the issue[]” and continues to not be so. See 226 Kan. at 4. Instead, the TTD issue was determined by the Board finding that it lacked jurisdiction to consider Triplett‘s new argument.
Triplett finally contends that even if the Board lacked jurisdiction to determine the TTD issue, the appellate court may consider it for the first time on appeal as it is a question of law on established facts. Triplett raises this argument for the first time in its reply brief, relying on Kansas caselaw that indicates that an issue may be raised for the first time on appeal provided that it is a question of
It appears on the face of the statute that none of the exceptions apply in this case. As such, this court cannot hear the TTD issue for the first time on appeal.
Because the ALJ did not hear the TTD issue, the Board properly concluded that it lacked jurisdiction to consider it on appeal. Moreover, hearing this issue for the first time on appeal would run afoul of the KJRA. As such, the Board‘s decision that it lacked jurisdiction is affirmed.
Affirmed in part, reversed in part, and remanded.