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| Archived Articles of Interest:
04/09/07 CAAA Cringes as WCAB Reverses 4-3 En Bancs 05/25/07 First Appellate Court Opinion Cements WCAB En Bancs 05/04/07 Justices Say SB 899 |
| Justices Say SB 899 Left Appointment Formula Alone:
05/04/07
The California Supreme Court decided Thursday that the 2004 workers' compensation reform law did not replace the Fuentes apportionment formula used for three decades, ending a two-year-old debate over how lawmakers intended to do the math. The high court unanimously held in the consolidated Brodie-Welcher v. WCAB cases that the 1976 Fuentes decision still stands. The ruling established a method of apportionment computation known as formula A. "Having reviewed both the language of Senate Bill No. 899 and its legislative history, we conclude formula A, the formula approved by Fuentes, remains the law," Justice Kathryn Werdegar wrote. Senate Bill 899, passed in 2004, created doubt as to whether the apportionment formula adopted in Fuentes had been superseded. Three separate appellate courts came to different conclusions, though two of them agreed that the formula changed with passage of SB 899. "We conclude it has not been superseded," the court said in Thursday's released opinion. A 'severe blow' President Linda Atcherley of the California Applicants' Attorney Association said the 7-0 opinion was a "severe blow" for injured workers. Disabled workers must now turn to lawmakers to restore some of the benefits lost under Senate Bill 899 and Thursday's decision about permanently disabled people who are reinjured at work, she said. "The only relief injured workers are going to have is through the Legislature," Atcherley said. The justices reasoned that because the adoption of either formula B or C would significantly increase the amount of disability awards charged to employers and their carriers, the Legislature would have discussed that likelihood and expressly allowed for it in enacting the law. In rejecting the change of formula, the justices said they found no legislative intent other than to lower workers' compensation costs to businesses. "If the Legislature had intended a departure from formula A, one would expect to find some trace of this intent in the legislative history, just as the legislative history explicitly identifies more than two dozen other intended reforms enacted by Senate Bill No. 899," Werdegar wrote. However, applicants' attorney Mark Gearhart, who argued the case before the Supreme Court, said that the Legislature also voted to increase some disability benefits through SB 899. That increase, on its face, clashed with the stated goal of reforms to lower the costs to businesses, and yet lawmakers OK'd it, he said. "They increased permanent disability benefits for people with disability over 70% and that had a financial effect, and they didn't say anything about that," said Gearhart, who represented Contra Costa firefighter Stan Brodie. Governor says reforms protected Gov. Arnold Schwarzenegger issued a statement Thursday calling the Supreme Court's decision a victory for the reforms he championed. "Today's ruling is a huge victory in protecting the successful reforms to the workers' compensation system that the Legislature and I accomplished together three years ago," Schwarzenegger said. "Thanks to these reforms, we have eliminated a poison to our economy and cut premiums by almost 65% -- resulting in more than $15 billion in savings." Defense Attorney Danny Chou for the county and city of San Francisco said he was gratified that justices focused on what lawmakers wanted to accomplish in their 2004 reform efforts. He was a co-counsel for employers at oral arguments on April 3 in Los Angeles. Because the Legislature was silent on a "monumental" change in the law, Chou argued that statutory construction led to the conclusion that lawmakers did not set out to repeal formula A. "I also appreciate the speed in which the court made its decision because it finally resolves the issue promptly," Chou said Thursday. Gearhart said that it seemed the justices discounted the statutory language of the revised 4663 section of labor code and new 4664 and instead looked for signs of legislative intent. "They deviated from strict construction and relied on the more nebulous concept of legislative intent. I think was unclear in this case. That's my main complaint with them." Financial impact One of the claims that led to Thursday's decision started with a conveyor belt accident in July 1990 that injured Kenneth Welcher's right arm and leg. He and his employer stipulated that the injuries resulted in a permanent disability of 62.5%. Welcher received $32,193 in permanent disability benefits. He stayed in the workforce as a laborer for a construction firm until his leg below the knee had to be amputated after a cumulative leg injury in March 2001. His level of disability rose to 71%, the sides agreed. A Redding workers' comp judge found that Welcher's overall disability was 71%. The monetary value of a 71% rating is $100,165 plus a weekly life pension of $42.52 per week. Attorney Skip Tescher, on behalf of Welcher, argued that the proper compensation formula was to start with $100,165 (the dollar amount for a 71% total disability) and to deduct the $32,193 the applicant received for his 1990 injury. Welcher's award for his permanent disability because of the amputation would have been approximately $68,000 using that method. Welcher instead is due to receive $3,360 for his amputation injury, based on Thursday's decision. The ruling to keep Fuentes intact also will make it impossible for anyone with a prior disability to get a total permanent disability award of 100%, Gearhart said. Qualifying for a life pension for a 70% or higher disability becomes much more difficult under the percentage from percentage formula, he added. The justices said the facts of the five permanent disability claims bundled in the Brodie-Welcher case demonstrated there were "dramatic fiscal" consequences if the court accepted an old dollars from new dollars formula, or a variation of it. Court found 'only silence' The method adopted in Fuentes subtracts the percentage of old disability from an employee's percentage of total disability to arrive at a dollar award. The Legislature likely would have said it wanted to do away with that formula during the lawmaking process, the justices reasoned. "Instead, one hears only silence," Werdegar wrote. The justices also said they relied on the WCAB's expertise in making the Nabors decision. The board ruled en banc that SB 899 did not overrule use of formula A and that that formula should continue to be applied. The 1st District Court of Appeal saw it differently twice last year, first in reversing the WCAB's Nabors decision not to change the apportionment formula for calculating dollar awards. The court then tweaked formula C in Brodie, prompting a challenge by the Contra Costa County Fire District. The Brodie court modified the formula C method and valued the previous award at present-day dollars and subtracted from the dollar value of the total disability, a method that applicants' attorneys -- including Gearhart -- said they thought was fairer for the employers. The 5th District Court of Appeal also decided on the dollars-from-dollars method in a December 2005 case, E.J. Gallo v. WCAB (Dykes). In Welcher the 3rd District Court of Appeal last year rejected the Dykes methodology for apportioning for prior injury. The court said that apportionment under SB 899 should have remained the same as it had been for 28 years since the Supreme Court decided Fuentes. The Supreme Court opinion can be viewed by clicking on the case title in the side bar at right.
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