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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. The WCAB, however, has held that temporary disability benefits must be paid if an employer is shut down due to a COVID-19 stay-at-home order. 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.

Below, we present the arguments in support of both sides. Nevertheless, the WCAB has issued a nonbinding decision that temporary disability benefits must be paid if modified work cannot be accommodated due to a shutdown related to COVID-19. 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 people argue that if an employer cannot offer work to a temporarily partially disabled employee, temporary disability benefits should be paid in full. The argument is based largely 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 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 that the employer had light work available, so although the applicant's 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 Workers' Compensation Appeals Board held that 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 subsequently could not find any jobs within her restrictions. Because there was no evidence that the employer offered 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 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]

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 3rd District Court of Appeal found that 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 "[T]here 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 that 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]

So, under Hargrove, it seems that if the evidence establishes that a cause other than the disability, such as COVID-19, accounts for part of the wage loss, each separate cause must be separately evaluated, and only the proportion chargeable to the industrial injury is 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, the employee is not entitled to any temporary partial disability benefits.

It doesn't appear as if the appellate courts have revisited this issue since Hargrove. The courts, however, 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 5th 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 "[I]t 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 when a seasonal employee has no off-season earnings and does not compete in the open labor market during a portion of the year, he or she 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 that 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 that 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, she was not entitled to temporary disability indemnity for that time off or wage loss.[23]

Accordingly, although neither Ochoa nor Skelton directly relates 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, if the loss of earnings is attributable to a cause other than the industrial injury (that is, 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.

WCAB Holds That Temporary Disability Benefits Must Be Paid

On Sept. 25, 2020, in Corona v. California Walls, Inc dba Crown Industrial Operators,[24] the WCAB held that temporary disability benefits must be paid if an employer is unable to offer modified work due to state or local stay-at-home orders. In that case, the applicant sustained an accepted injury to his knees Feb. 19, 2020. He was placed on modified duty, and the employer accommodated his work restrictions. A month later, the employer sent all employees home due to state and local emergency orders related to COVID-19. The parties disputed whether the applicant was entitled to temporary disability benefits for the two-month period the employer was forced to close.

The WCAB held that the applicant was entitled to temporary disability indemnity. It found that to avoid liability for temporary disability benefits, the employer must meet the burden of proving that a temporarily partially disabled employee was terminated for good cause. It found that "applicant's termination from employment was not for cause, or due to his own misconduct, but was due to COVID-[19] shelter-in-place orders."

The fact that it was impossible for the employer to offer modified duties to the applicant because of the COVID-19 orders, the WCAB added, was inconsequential. Citing its en banc decision of Dennis v. State of California –– Department of Corrections and Rehabilitation Inmate Claims,[25] it stated that "an employer's inability to accommodate a temporarily disabled employee's work restrictions does not release it from its obligation to pay temporary disability benefits." So, the WCAB concluded, "applicant is entitled to temporary disability benefits regardless of whether defendant is able to provide modified work."

Although workers' compensation is generally a no-fault system, the WCAB believes that there must be an element of fault on the applicant's part before temporary disability benefits may be denied during a period of temporary partial disability. When the inability to accommodate work restrictions is the fault of neither the applicant nor the employer, the WCAB believes that the employer must bear the risk. So, although COVID-19 affects both employers and employees, the WCAB believes that employers must provide temporary disability benefits to injured workers, even if they cannot operate due to a stay-at-home order.[26]

Similarly, in Ceballos v. TriMark Chefs' Toys,[27] the WCAB held that an applicant's temporary disability award should not be reduced by income he would have earned with a subsequent employer after he left that job due to the COVID-19 pandemic. The applicant was terminated after his injury, then found employment with Starbucks. The defendant asserted that his TD should be reduced by the anticipated income he would have received from Starbucks if he had not left that job.

The WCAB explained that the defendant could have avoided liability for TD by showing that work would have been available but for the applicant's termination due to his or her own misconduct. It added that the defendant could not meet this burden simply by showing that the modified work is no longer available for other reasons, such as layoffs due to changing economic circumstances, unproven misconduct allegations or other such circumstances. The WCAB accepted the applicant's testimony that he was concerned about working at Starbucks during the COVID-19 pandemic. It noted that a food service job, such as at Starbucks, posed a greater risk of COVID-19 spread. The board did not believe that declining such a position due to an unexpected pandemic constituted an unreasonable refusal of modified work. It concluded that the defendant did not meet its burden of proving that the applicant unreasonably left his Starbucks job due to his own misconduct.

Neither decision is binding, but they are probably indicative of how this issue will be decided at the WCAB level moving forward. So, unless an appellate level court holds otherwise, the WCAB will find that employers may not avoid liability temporary disability benefits based on COVID-19 related layoffs or terminations.

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. 2020 Cal. Wrk. Comp. P.D. LEXIS 256.
  25. (2020) 85 CCC 389.
  26. See also Mota Perez v. Spr Op Co., Inc., 2021 Cal. Wrk. Comp. P.D. LEXIS 193; Escobar v. Wood Ranch BBQ & Grill, Inc., 2021 Cal. Wrk. Comp. P.D. LEXIS 218..
  27. (2020) 85 CCC 955 (panel decision).



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