Opinion
Labor Code section 4660, subdivision (c)
FACTUAL AND PROCEDURAL BACKGROUND
Injury
Ogilvie worked for the City and County of San Francisco (CCSF) as a “Muni” bus driver for 17 years. On April 1, 2004, the bus Ogilvie was
Roughly three years after her injury, Ogilvie applied for a disability retirement. In reviewing her application, the retirement office told Ogilvie that taking a service retirement, rather than disability retirement, would be a better financial decision. So she took it. Around this time, two qualified medical examiners, one selected by Ogilvie and one selected by the CCSF, evaluated Ogilvie to determine her permanent disability rating. As a compromise between the two medical examiners’ evaluations, the parties stipulated before the workers’ compensation judge (WCJ) that for Ogilvie’s injury the rating schedule under section 4660, as amended by Senate Bill No. 899 (2003-2004 Reg. Sess.), yields a permanent disability rating of 28 percent, as adjusted due to her diminished future earning capacity, age, occupation, and apportionment for nonindustrial and preexisting disability.
Proceedings Before the WCJ
In a trial before the WCJ, Ogilvie sought to rebut the 28 percent scheduled rating. Each party submitted an estimate of Ogilvie’s diminished future earning capacity from a vocational rehabilitation expert who essentially compared Ogilvie’s earnings before her injury with what she could be expected to earn after it. Each expert considered his evaluation to be superior to the scheduled rating because he considered such things as Ogilvie’s education, skills, motivation, local job market conditions, work history, and vocational testing in arriving at Ogilvie’s loss of earning capacity. Ogilvie contended that the opinions of both experts effectively rebutted the application of the scheduled rating and supported her claim to a permanent disability rating greater than 28 percent. The WCJ agreed based on the fact that the permanent disability indemnity associated with the 28 percent rating was less than Ogilvie’s actual diminished future earning capacity calculated by either vocational expert.
Proceedings Before the WCAB
On February 3, 2009, the WCAB issued its en banc decision holding that Ogilvie could rebut the diminished future earning capacity adjustment table that is part of the rating schedule referenced in section 4660. The WCAB reasoned that because the rating schedule is prima facie evidence of an injured employee’s disability, the diminished future earning capacity adjustment table must be rebuttable. But the WCAB also observed that the diminished future earning capacity adjustment must be rebutted in a manner that comports with section 4660. None of the methodologies used by the WCJ were consistent with section 4660, because none used “a numeric formula based on empirical data and findings” as section 4660 requires.
On rehearing, the WCAB clarified and affirmed its February 3, 2009 decision. In early October 2009, both Ogilvie and the CCSF filed the petitions for writ of review that are now before this court. While neither party is happy with the WCAB’s decision, each party is unhappy for slightly different reasons. Although Ogilvie agrees that one means to rebut the rating schedule may be to challenge the diminished future earning capacity adjustment table, she asserts that another is to challenge the final overall permanent disability rating, which, she asserts, is most accurately done using vocational experts. The CCSF asserts that the WCAB exceeded its authority when it allowed Ogilvie to challenge the diminished future earning capacity adjustment table at all. Since the diminished future earning capacity is defined by statute, the CCSF contends that only the final permanent disability rating may be rebutted by an employee, not one of its component parts like the diminished future earning capacity adjustment.
DISCUSSION
“The touchstone of the workers’ compensation system is industrial injury which results in occupational disability or death.” (Livitsanos v. Superior Court (1992)
“Permanent disability payments are calculated by first expressing the degree of permanent disability as a percentage and then converting that percentage into an award based on a table.” (Brodie v. Workers' Comp. Appeals Bd., supra,
For many years, determining the degree of permanent disability sustained due to an injury involved consideration of the opinions of vocational rehabilitation specialists concerning the employee’s ability to compete in an open labor market. (Gill v. Workers' Comp. Appeals Bd. (1985)
In 2004, the Legislature enacted omnibus changes to California’s workers’ compensation system as “an urgency measure designed to alleviate a perceived crisis in skyrocketing workers’ compensation costs.” (Brodie v. Workers' Comp. Appeals Bd., supra, 40 Cal.4th at pp. 1323, 1329; see Sen.
In addition, section 4660 now requires the administrative director of the Division of Workers’ Compensation to amend the schedule for determination of the percentage of permanent disabilities every five years. (§ 4660, subd. (c).) The nature of the physical injury or impairment to be rated in the schedule is to be based upon the American Medical Association’s Guides to the Evaluation of Permanent Impairment, and “an employee’s diminished future earning capacity shall be a numeric formula based on empirical data and findings . . . prepared by the RAND Institute for Civil Justice . . . .” (§ 4660, subd. (b)(1) & (2).) The schedule is to “promote consistency, uniformity, and objectivity” (§ 4660, subd. (d)), and the scheduled rating continues to be “prima facie evidence of the percentage of permanent disability to be attributed to each injury covered by the schedule” (§ 4660, subd. (c)).
The question posed here is whether, in light of the amendments to section 4660 enacted in Senate Bill No. 899 (2003-2004 Reg. Sess.), it is permissible to depart from a scheduled rating on the basis of vocational expert opinion that an employee has a greater loss of future earning capacity than reflected in a scheduled rating. In order to answer this question, we must consider the effect of amendments to the workers’ compensation law contained in Senate Bill No. 899 and the relevant case law that preceded its enactment.
In considering this issue, “our goal is to divine and give effect to the Legislature’s intent.” (Brodie v. Workers' Comp. Appeals Bd., supra,
An injured employee’s impaired future earning capacity had been a consideration in awarding permanent disability long before the phrase was substituted into section 4660, subdivision (a) by Senate Bill No. 899 (2003-2004 Reg. Sess.). At the time Senate Bill No. 899 was enacted, the established purpose of permanent disability was “to indemnify for impaired future earning capacity or decreased ability to compete in an open labor market.” (Livitsanos v. Superior Court, supra,
The specification in section 4660, subdivision (b)(2), 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 presents a slightly more difficult question. 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” (§ 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
Rather, the ambiguity lies in determining just how an employee’s overall rating and its component parts may be rebutted while remaining loyal to the Legislature’s design to provide a system that is objective and uniform in application. Looking back at over 41 years of case law interpreting section 4660, there appear to be at least two rebuttal methods that are unchanged by passage of Senate Bill No. 899 (2003-2004 Reg. Sess.). First of all, the cases have always recognized the schedule to be rebutted when a party can show a factual error in the application of a formula or the preparation of the schedule. (See Fidelity & Cas. Co. v. Workmen's Comp. App. Bd. (1967)
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 RAND Institute for Civil Justice released a working paper in 2004 that describes the methodology employed to arrive at empirical adjustments to disability ratings due to diminished future earning capacity. (RAND Inst, for Civil Justice, Data for Adjusting Disability Ratings to Reflect Diminished Future Earnings and Capacity in Compliance with SB 899 (2004) (Working Paper).) The Working Paper places several caveats on the use of the empirical data relied upon by the RAND
An interpretation that the diminished earning capacity adjustment factor must be applied as formulated by the administrative director in all cases irrespective of its accuracy would require us to read into section 4660 a conclusive presumption. Such a restrictive interpretation of section 4660 would be inconsistent with the Legislature’s clear expression that the rating schedule is rebuttable. (See Milpitas Unified School Dist. v. Workers' Comp. Appeals Bd., supra,
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. This is the rule expressed in LeBoeuf v. Workers' Comp. Appeals Bd. (1983)
This application of LeBoeuf hews most closely to an employer’s responsibility under sections 3208 and 3600 to “compensate only for such disability or need for treatment as is occupationally related.” (Livitsanos v. Superior Court, supra,
The briefs and arguments of the parties and amici curiae also point out a third basis for rebuttal of a scheduled rating that is consistent with the statutory scheme. 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-related injury. After all, the adjustment is a calculation based upon a summary of data that projects earning losses based upon wage information
Although Senate Bill No. 899 (2003-2004 Reg. Sess.) enacted extensive changes to California’s workers’ compensation system, the rebuttable presumption in section 4660 was unaltered. “Given the apparent absence of any legislative intent to change the law in this regard, we have no occasion to resort to reliance on the statutory rule of liberality . . .” that is commonly employed to construe ambiguities in the workers’ compensation laws to favor the extension of benefits. (Brodie v. Workers' Comp. Appeals Bd., supra,
By requiring that a worker’s challenge to a scheduled award due to earning capacity be tied to an error in the formula or industrial factors and not other causes, we serve another important policy consideration. An employer who hires or promotes an employee to a position the employee would not appear qualified to perform will bear only the expense related to the employee’s future reduction in earnings due to an industrial injury. By ensuring the employer should bear no expense for general factors that may affect the employee’s future, there is no economic disincentive for an employer to either hire or promote an employee to a position that would appear to exceed
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.
Nothing in Senate Bill No. 899 (2003-2004 Reg. Sess.) authorizes or compels the calculation of an alternative diminished earning capacity adjustment factor as the WCAB devised in order to resolve Ogilvie’s claim. When it devised this new methodology, the WCAB acted in excess of its authority. The means an employee may use to challenge a scheduled rating due to diminished earning capacity are described in the reported cases that predate Senate Bill No. 899. Here, vocational experts determined that Ogilvie’s anticipated loss of future earnings will be greater than reflected in a permanent disability award based on the rating schedule. Because we cannot determine on this record the degree to which the experts may have taken impermissible factors into account in reaching their conclusions, we remand for further proceedings.
CONCLUSION
The application of the rating schedule is not rebutted by evidence that an employee’s loss of future earnings is greater than the earning capacity adjustment that would apply to his or her scheduled rating due to nonindustrial factors. Rather, to rebut the application of the rating schedule on the basis that the scheduled earning capacity adjustment is incorrect, the employee must demonstrate an error in the earning capacity formula, the data or the result derived from the data in formulating the earning capacity adjustment. Alternatively, an employee may rebut a scheduled rating by showing that the rating was incorrectly applied or the disability reflected in the rating schedule is inadequate in light of the effect of the employee’s industrial injury. We cannot conclude on this record whether Ogilvie can make any such showing.
The decision of the WCAB is reversed, the award of permanent disability benefits to Ogilvie is annulled, and this matter is remanded to the WCAB for further proceedings consistent with our opinion. Each party to bear its own costs.
Pollak, Acting P. J., and Jenkins, J., concurred.
The petition of respondent City and County of San Francisco for review by the Supreme Court was denied October 26, 2011, SI96257.
Notes
All further statutory references are to the Labor Code unless otherwise noted.
The vocational experts estimated that Ogilvie had between a 51 and 53 percent loss of earning capacity.
The three methodologies considered by the WCJ provide background, but differ from the formula applied by the WCAB and challenged in the petitions for review. Under the first method employed by the WCJ, the rating substantiated in the expert vocational reports was reduced by the 25 percent of Ogilvie’s disability the parties agreed should be apportioned to prior injuries. This method resulted in a permanent disability rating of 38 to 40 percent. Under the second method, the WCJ calculated Ogilvie’s total loss of future earnings based upon the expert testimony, and then reduced it by a third based upon the usual benefit payable for lost wages under section 4658. The resulting wage loss was then compared to the tables to arrive at a corresponding percentage of permanent disability (71.5 percent). This percentage of disability was then reduced due to the prior injuries. The final method considered by the WCJ modified the impairment attributed to Ogilvie’s prior knee injury and enhanced her final rating after taking into account the prior injury and her loss of finture earnings as estimated by the expert testimony. The result was a 42 percent permanent disability rating.
Section 4660, subdivision (b)(2) states that, “an employee’s diminished future earning capacity shall be a numeric formula based on empirical data and findings that aggregate the average percentage of long-term loss of income resulting from each type of injury for similarly situated employees. The administrative director shall formulate the adjusted rating schedule based on empirical data and findings from the Evaluation of California’s Permanent Disability Rating Schedule, Interim Report (December 2003), prepared by the RAND Institute for Civil Justice, and upon data from additional empirical studies.”
The WCAB’s methodology involves using the injured employee’s actual postinjury wage data, the wage data for similarly situated noninjured employees over the same period, and the application of some mathematical calculations to yield ratios that can be compared to the diminished future earning capacity ratios in the rating schedule.
The majority noted that the use of vocational experts may be required under its methodology, but that such use would be limited to exceptional cases where information from California’s Employment Development Department or other such empirical data is not available.
We recognize that the cited cases are writ-denied summaries of decisions by the WCAB, and have no stare decisis effect. However, the WCAB has approved the citation of writ-denied summaries published in California compensation cases. Accordingly, courts may and do cite them in published decisions. (See, e.g., Robertson v. Workers' Comp. Appeals Bd. (2003)