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Payment of Temporary Disability

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PAYMENT OF TEMPORARY DISABILITY

COVID-19 prompted an order for California workers to stay home unless their employer was considered an essential business. Nonessential businesses could continue to operate as long as their employees could telecommute.

Employers who couldn't enable their employees to work from home faced enormous financial pressure. Some were forced to shut down entirely. Some restructured and laid off workers.

Layoffs created problems in addition to the difficult financial decision for employers who were accommodating injured workers prior to the coronavirus outbreak. An employer generally is able to avoid paying temporary disability benefits by offering work to an employee who is injured at work. But if an employer is forced to close or lay off part of its workforce due to COVID-19, it has no work to offer.

Employers question whether they should be required to pay temporary disability benefits for a layoff necessitated by COVID-19. Although the answer is clear if an employee is temporarily totally disabled, it's not so clear if the employee is temporarily partially disabled. For further discussion on the differences between temporary total disability and temporary partial disability, see "Sullivan on Comp" Section 9.3 Temporary Disability –– Total and Partial.

BENEFITS FOR TEMPORARILY TOTALLY DISABLED EMPLOYEE

The purpose of temporary disability indemnity is to provide interim wage replacement assistance to an injured worker during the period he or she is healing. Temporary disability benefits are paid until an employee recovers or becomes permanently disabled.[1]

When temporary disability is total, an employee is incapable of performing any kind of work.[2] An employee is temporarily totally disabled if he or she is unable to earn any income during the period of recovery from the effects of the injury.[3]

So, a temporarily totally disabled employee still would be entitled to benefits even if an employer shuts down or lays off an injured employee due to the economic situation created by COVID-19. Without the layoff, the employee still would be incapable of earning income. The wage loss is entirely related to the industrial injury.

BENEFITS FOR TEMPORARILY PARTIALLY DISABLED EMPLOYEE

An employee who is temporarily partially disabled is capable of performing some work. If he or she is able to obtain some type of work despite the partial incapacity, he or she is entitled to compensation on a wage-loss basis.[4]

Labor Code § 4657 states, "In case of temporary partial disability the weekly loss in wages shall consist of the difference between the average weekly earnings of the injured employee and the weekly amount which the injured employee will probably be able to earn during the disability, to be determined in view of the nature and extent of the injury."

One of the most divisive issues is whether temporary disability benefits must be paid if an employer who was accommodating a temporarily partially disabled employee is required to close, either temporarily or permanently, as a result of COVID-19. Employers argue that they should not be responsible for forces beyond their control when they acted in good faith prior to the layoff. Employees argue that they should be compensated for their reduced ability to compete in the open labor market.

At this point, there is no definitive authority on the issue. Below, we present the arguments in support of both sides, but it's up to the courts to decide. It's likely that the courts will decide that no universal rule could apply, and will consider: (1) whether the employer shut down in full or in part; and (2) whether the employee was offered work prior to the layoff. For a detailed discussion on this law, see "Sullivan on Comp" Section 9.26 Temporary Disability for Terminated Employee.

Argument in Support of Benefits

Some argue that if an employer cannot offer work to a temporarily partially disabled employee, then temporary disability benefits should be paid in full. This argument is largely based on the "odd lot doctrine" (see Sullivan on Comp Section 9.4 Odd Lot Doctrine).

In Pacific Employers Ins. Co. v. Industrial Acc. Com. (Stroer),[5] the California Supreme Court held that an employee who could not do "rough" carpentering, but could have could have worked as a "finish" carpenter was entitled to temporary total disability benefits when he could not find the lighter work.[6] It found no evidence the employer had light work available to the worker. Therefore, although his disability was only partial, his wage loss was total, because the entire wage loss was caused by the industrial injury.[7]

Pacific Employers has been cited for the principle that "[u]nder the "odd lot" doctrine, a worker who is only partially disabled may receive temporary total disability payments if his partial disability results in a total loss of wages."[8] Moreover, "This doctrine places the burden on the employer to show that work within the capabilities of the partially disabled employee is available. If the employer does not make this showing, the employee is entitled to temporary total disability benefits."[9]

Accordingly, in one case, the appeals board held an employer was liable for temporary disability benefits when it failed to offer work after an employee was laid off. The employee was performing modified duty when she was laid off and could not find any jobs within her restrictions afterward. Because there was no evidence that the employer offer additional modified duty after the layoff, the appeals board awarded temporary disability benefits through the date she became permanent and stationary.[10]

Similarly, in another case, the appeals board awarded temporary disability benefits when an employer did not provide modified duty to an employee who was laid off following a plant closure. Citing the odd lot doctrine, the appeals board believed that an employee was entitled to temporary disability benefits "if the employee's inability to work for full wages is a function of the employer's decision to close a plant or otherwise layoff the employee."[11]

Therefore, there is case law holding that temporary disability benefits must be paid to an employee who is laid off, even if the employer was offering modified duty at the time of layoff. However, neither of these cases is binding. Therefore, although they are citable, they are not binding on judges or WCAB panels.

Argument for Denial of Benefits

The most analogous appellate level decision on the issue is Hardware Mut. Casualty Co. v. Workers' Comp. Appeals Bd. (Hargrove).[12] In that case, an employee performed light work following an industrial back injury until he was discharged for reasons unrelated to his physical condition. The parties proceeded to trial, and the judge awarded temporary partial disability payment at the maximum rate.[13]

The Third District Court of Appeal found the appeals board erred in fixing the rate of compensation, but not the period of compensation, and that Pacific Employers could not support the board's decision.[14] The court explained that "there are circumstances in which a temporary partial disability may account for a total wage loss" and there are others "when a cause other than the disability accounts for some part of the wage loss."[15] The court believed the present situation evoked the second alternative.

The court found the evidence undisputed that the employee "was discharged for some reason unrelated to his physical condition and that his ensuing unemployment overlapped the claimed period of disability."[16] It stated, "Where, as here, a separate cause contributed to the employee's inability to earn wages, the rule enunciated in Pacific Employers requires specific findings and a separate evaluation."[17] The court rejected the appeals board's contention that the "odd lot" doctrine supported an award of temporary total disability. It did not believe that doctrine was applicable stating, "Here the problem is one of evaluating a cause of unemployment unrelated to physical capacity."[18]

Therefore, to the extent that the cases discussed above held that the odd lot doctrine could support an award of temporary total disability for a temporarily partially disabled employee who was laid off or terminated for reasons unrelated to his or her injury, they are inconsistent with Hargrove. And since Hargrove is a Court of Appeals case, it is clearly controlling. If the evidence establishes that a cause other than the disability, such as COVID-19, accounts for part of the wage loss, then each separate cause must be separately evaluated, and only the proportion chargeable to the industrial injury allowed as compensation. Arguably, if an employee was earning full pay while performing the modified duty, and the wage loss was attributable entirely to the layoff caused by COVID-19, and the employee is not entitled to any temporary partial disability benefits.

It doesn't appear the appellate courts have revisited this issue since Hargrove. However, the courts have been clear that a temporarily disabled employee is not always entitled to temporary disability benefits.

In Signature Fruit Co. v. Workers' Comp. Appeals Bd. (Ochoa),[19] the Fifth District Court of Appeal explained, "Temporary disability payments end when the employee returns to work, is deemed able to return to work, or achieves permanent and stationary status and therefore becomes eligible for permanent disability." It stated that "it would be illogical to award an employee temporary disability as a wage replacement where it is undisputed that there otherwise would not be a wage to replace."[20] In Ochoa, the court held that where a seasonal employee does not have any off-season earnings and does not compete in the open labor market during a portion of the year, the employee is not entitled to temporary disability payments during that season.  

More recently, in Skelton v. Workers' Comp. Appeals Bd.[21] the 6th District Court of Appeal held an employee was not entitled to temporary disability benefits for lost time from work to attend medical treatment appointments. The court found that temporary disability benefits were tied to "actual incapacity" to work and should be paid to an employee "while unable to work."[22] In that case, the court found the employee returned to work full time after her injuries, and she suffered wage loss after using all her sick and vacation time. It concluded that because the employee's injuries did not render her incapable of working during the time she took off from work and suffered wage loss, she was not entitled to temporary disability indemnity for that time off or wage loss.[23]

Accordingly, while neither Ochoa nor Skelton directly relate to the issue at hand, both courts recognize that an employee is entitled to temporary disability benefits when the injury causes the wage loss. Consistent with Hargrove, where the loss of earnings is attributable to a cause other than the industrial injury (i.e., lack of work during the off-season in Ochoa and use of all sick and vacation time in Skelton), the employer is not liable for temporary disability benefits.

Likewise, employers could argue that if they were accommodating an employee's work restrictions prior to a plant closure or layoff necessitated by COVID-19, then it is not the industrial injury causing the wage loss but the COVID-19 outbreak. Such employees are not without a remedy, as the EDD website states, "If your employer has reduced your hours or shut down operations due to COVID-19, you can file an Unemployment Insurance (UI) claim."[24] If injured workers were entitled to workers' compensation benefits following a layoff while other employees were not, it would elevate the rights of injured workers beyond those of other workers.

Of course, there are various scenarios under which temporarily partially disabled employees could be laid off. It is possible for an employer to layoff some employees, but not others. If a disabled employee was laid off, but other workers were not, it invariably raises the question of whether the employer should have laid off the disabled worker. Any time an employer lays off some workers, but not other, it must make sure there are legitimately nondiscriminatory reasons for doing so.

Moreover, it is possible an employee was released to modified duty after the employer decided to lay off its workers. In that situation, it may be difficult for the employer to establish modified work was available since such work was never actually offered prior to the layoff.

These factual scenarios don't necessarily preclude an employer from claiming that wage loss was caused entirely by the layoff rather than the injury. However, they will require employers to make additional showings if they want to dispute liability for temporary disability indemnity.

As noted at the outset, whether an employer is liable for temporary total disability benefits to a temporarily partially disabled employee who restrictions could have been accommodated but for a COVID-19 related layoff or plant closure will be a legal issue for the courts. Rather than announcing a decision that would apply to all scenarios, the issue could very well be decided based on the evidence presented in the case. Nevertheless, provided the employers actions were conducted in good faith, they have a legitimate legal basis for asserting that temporary disability is not owed.

SEE ALSO


REFERENCES

  1. ↑ Gamble v. Workers' Comp. Appeals Bd. (2006) 143 Cal. App. 4th 71, 79-80.
  2. ↑ Huston v. Workers' Comp. Appeals Bd. (1979) 95 Cal. App. 3d 856, 868.
  3. ↑ Herrera v. Workers' Comp. Appeals Bd. (1969) 71 Cal. 2d 254, 257.
  4. ↑ Huston v. Workers' Comp. Appeals Bd. (1979) 95 Cal. App. 3d 856, 868.
  5. ↑ (1959) 52 Cal.2d 417.
  6. ↑ Pacific Employers Ins. Co. v. Industrial Acc. Com. (Stroer) (1959) 52 Cal.2d 417, 419.
  7. ↑ Pacific Employers Ins. Co. v. Industrial Acc. Com. (Stroer) (1959) 52 Cal.2d 417, 420-421.
  8. ↑ General Foundry Serv. v. Workers' Comp. Appeals Bd. (Jackson) (1986) 42 Cal.3d 331, 339, fn. 5.
  9. ↑ General Foundry Serv. v. Workers' Comp. Appeals Bd. (Jackson) (1986) 42 Cal.3d 331, 339, fn. 5.
  10. ↑ Owens Illinois v. Workers' Comp. Appeals Bd. (Stuart) (2009) 74 Cal.Comp.Cases 975 (writ denied).
  11. ↑ Bedoya v. Ashley Furniture Industries, Inc. (2018) 2018 Cal. Wrk. Comp. P.D. LEXIS 396.
  12. ↑ (1967) 253 Cal.App.2d 62.
  13. ↑ Hardware Mut. Casualty Co. v. Workers' Comp. Appeals Bd. (Hargrove) (1967) 253 Cal.App.2d 62, 63-65.
  14. ↑ Hardware Mut. Casualty Co. v. Workers' Comp. Appeals Bd. (Hargrove) (1967) 253 Cal.App.2d 62, 65.
  15. ↑ Hardware Mut. Casualty Co. v. Workers' Comp. Appeals Bd. (Hargrove) (1967) 253 Cal.App.2d 62, 66.
  16. ↑ Hardware Mut. Casualty Co. v. Workers' Comp. Appeals Bd.(Hargrove) (1967) 253 Cal.App.2d 62, 66.
  17. ↑ Hardware Mut. Casualty Co. v. Workers' Comp. Appeals Bd. (Hargrove) (1967) 253 Cal.App.2d 62, 66.
  18. ↑ Hardware Mut. Casualty Co. v. Workers' Comp. Appeals Bd. (Hargrove) (1967) 253 Cal.App.2d 62, 66.
  19. ↑ (2006) 142 Cal.App.4th 790, 802.
  20. ↑ Signature Fruit Co. v. Workers' Comp. Appeals Bd. (Ochoa) (2006) 142 Cal.App.4th 790, 802.
  21. ↑ (2019) 39 Cal.App.5th 1098, 1110.
  22. ↑ Skelton v. Workers' Comp. Appeals Bd. (2019) 39 Cal.App.5th 1098, 1107.
  23. ↑ Skelton v. Workers' Comp. Appeals Bd. (2019) 39 Cal.App.5th 1098, 1110.
  24. ↑ See https://www.edd.ca.gov/about_edd/coronavirus-2019/workers.htm.


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