Temporary disability is an important workers’ compensation benefit with some complex nuances. The purpose of temporary disability is to financially compensate an injured worker for lost wages due to their industrial injury, payable as either temporary total disability or temporary partial disability. Generally, temporary total disability is owed when an injured worker cannot work at all due to their industrial injury, or where their work restrictions cannot be accommodated by an employer. Temporary partial disability, also known as “wage loss,” is owed when an injured worker is able to work in some capacity but is earning less due to their industrial injury.
This article will explore some common issues defendants encounter with issuing temporary disability.
- Calculating the Temporary Disability Rate
Generally, temporary total disability is paid at two-thirds of the average weekly wage. Temporary partial disability is calculated as two-thirds of the difference in earnings caused by the injury. However, there are multiple exceptions and nuances when calculating the average weekly wage.
An adjuster must obtain the applicant’s earnings information from the employer to calculate the average weekly wage and temporary disability rate pursuant to California Code of Regulations Section 10101.1(j). The average weekly wage includes wages, earned bonuses, and the fair market value of board, lodging, and fuel if provided as remuneration to the applicant.
- Wage Statements
Labor Code Section 4453 details many different scenarios and ways to calculate the average weekly wage depending upon the type of work the applicant is doing, whether the applicant is working several jobs, or whether the applicant is working seasonally.
Regardless of the type of work, in order to determine the appropriate average weekly wage and temporary disability rate, it is vitally important to obtain proof of the applicant’s wages, usually in the form of a wage statement from the employer. While the wage statement is not the only way to determine an applicant’s average weekly wage, it is the primary method to calculate the appropriate rate. California Code of Regulations Section 10101.1(j) has been used by applicant’s attorneys to demand an applicant be paid the maximum temporary disability rate where the adjuster does not have proof of the applicant’s wages. While the case of Coca-Cola Enterprises Inc. v. WCAB (Espinoza) holds that this is an incorrect interpretation, it is still very important to have evidence to support a wage calculation.
- Seasonal Workers
Seasonal workers can be entitled to temporary disability at different rates for the “on” and “off” seasons. Please see the following article for a more comprehensive discussion. (California: the Golden State of Seasonal Workers).
- Multiple Employers
When an applicant has multiple employers, and different pay rates, calculating temporary disability can be complex. Labor Code Section 4453(c)(2) provides that if an applicant works for multiple employers simultaneously at the date of injury, then the average weekly earnings shall be calculated using the income from all of the jobs. If the defense is unaware of a secondary employer, this can create a temporary disability underpayment. Defendants should inquire via discovery tools such as depositions and subpoenas to check if there are multiple employers and procure wage statements from all of the employers.
Importantly, per Labor Code Section 4453(c)(2), if the defendant employer pays the lowest hourly wage between the employers, then the secondary employer’s higher hourly wage is adjusted down. For example, if the defendant pays $25 per hour for 20 hours per week, and the secondary employer pays $50 per hour for 20 hours per week, then the average weekly wage is calculated as $25 per hour for 40 hours. In other words, the applicant does not enjoy temporary disability windfall from the defendant if they have another higher paying job. This means the defendant is not penalized by the applicant’s other lucrative job.
An overpayment can occur if the applicant is receiving total temporary disability, while also receiving wages from a secondary employer. Therefore, if defendants discover that they have overpaid due to applicant’s secondary job income, then defendants should promptly issue a temporary disability delay letter and file a Petition for Credit for any temporary disability overpayment.
In contrast, an underpayment can occur if the temporary disability rate is calculated from the earnings of only one employer, rather than the earnings from all employers. If this occurs, the rate may need to be retroactively adjusted.
Thus, best practices require an early inquiry as to whether the applicant has multiple jobs, in order to ensure the temporary disability rate is correctly calculated.
II. Retroactive Temporary Disability and Reimbursing EDD
When a case is denied, applicants will often receive money from EDD. Per Labor Code Section 4903(f), EDD can claim a lien in cases where the defense disputes liability for benefits. Defendants are not always notified of EDD payments, as EDD sometimes fails to file a lien against the case.
If the case is later accepted, EDD must be reimbursed. California Unemployment Insurance Code Section 2629.1(f) states that employers must reimburse EDD within 60 days of (1) accepting liability or (2) after a final award, order or decision of the Workers’ Compensation Appeals Board. The benefit of reimbursing EDD is that defendants can take credit for EDD’s payments against any retroactive temporary disability that is due. When a defendant reimburses EDD, “it is as if EDD never paid,” and instead, defendant paid the applicant. Salazar v. WTS International, Inc., 2014 Cal. Wrk. Comp. P.D. LEXIS 160, 5 (panel decision). Reimbursing EDD “effectively converts SDI payments into workers’ compensation disability indemnity.” Id.
The risk is that an applicant will receive duplicate benefits from EDD and retroactive temporary disability. It is longstanding law that applicants are not entitled to duplicate EDD and workers’ compensation benefits. Garcia v. Industrial Acci. Com., (1953) 18 Cal. Comp. Cases 290, 291-292. Therefore, defendants must contact EDD to determine potential lien status before issuing retroactive temporary disability.
There are also circumstances where EDD issues benefits at a different rate than the temporary disability rate. Defendants must therefore be careful to reimburse EDD at the proper rate. If EDD was paid at a lower rate than the temporary disability rate, defendants will need to issue payment to the applicant for the differential.
III. Temporary Disability Overpayments
In issues where there is an allegation of an overpayment of benefits, defendants must file a Petition for Credit for Temporary Disability Overpayment with the Board in order to recoup this money. There are many statutes and case law supporting this. For example, Labor Code Section 4909 authorizes the Board to award a credit for overpayment of temporary disability benefits. Further, California Code of Regulation, Title 8 Section 10555(a) states that when a dispute arises as to a credit for any payments or overpayments of benefits pursuant to Labor Code Section 4909, any Petition for Credit shall include: (1) a description of the payments made by the employer; (2) a description of the benefits against which the employer seeks a credit; and (3) the amount of the claimed credit.
Defendants must notify an applicant that they intend to take credit for the overpayment. In Rogelio v. Connecticut Indemnity Co. (2006) 34 CWCR 188, 190, the Board determined that awarding credit against permanent disability was appropriate where the applicant was given timely notice of the overpayment. Therefore, it behooves defendants to timely send a Notice of Temporary Disability Overpayment as soon as they are aware of the overpayment.
The Board can award a credit for overpayment if the applicant has income, such as a second job or self-employment, while also receiving total temporary disability. This is sometimes known as “double dipping.” In Barajas v. Elite Med. Management (2013) Cal. Wrk. Comp. P.D. LEXIS 590, the Board held that awarding the defendant credit for the temporary disability overpayment was appropriate. In that case, the applicant earned income as a childcare worker while also receiving temporary disability and failed to notify the defendant that she was earning income. Id. at 4-5. The take-away from this case for defendants is to carefully complete the discovery process to determine other sources of income. If an applicant discloses another job, defendants should obtain wage statements and dates worked from the secondary employer to calculate the period of overpayment.
Finally, sometimes the overpayment amount is so large that it would subsume the entire permanent disability award. Judges are often reluctant to award the full overpayment credit to defendants when this occurs. It is therefore preferable to discover the overpayment early. Case law holds that defendants can take credit against future temporary disability and the future permanent disability award. Bowie v. WCAB (1999) 65 Cal. Comp. Cases 59 (writ denied). For example, if an overpayment is discovered while the applicant is still entitled to temporary partial disability (also known as “wage loss”), the defendants can issue a Delay Notice for any more payments of temporary disability. The wage loss can be credited against the temporary disability overpayment. While this does not obviate the need to file the Petition for Credit of the overpayment, it places the parties on notice and reduces the overpayment amount that needs to be credited against the Permanent Disability Award, making it more palatable to judges, defendants and applicants. It is always better to avoid or reduce the size of a potential overpayment than to be seeking a credit for it later.
IV. Retirement and Temporary Disability Benefits
When an applicant retires, are they entitled to temporary disability? The answer depends on the Gonzalez test.
Gonzalez v. WCAB (1998) 63 Cal. Comp. Cases 1477 holds that the applicant is not entitled to temporary disability after their retirement date when the evidence establishes that they intended to retire from all work. The test for whether the defense will be liable to pay temporary disability depends on the applicant’s “willingness to work.” Id. at 1479. If the applicant retires for all purposes, the defense is not liable to pay temporary disability. Id. However, if the applicant retires from that job only, or due to the industrial condition, the defense can be liable to pay temporary disability. Id. In Gonzalez , the Court of Appeal held the defense was not liable to pay total temporary disability after the applicant’s retirement because she had no plans to ever return to any work. Id. at 1478.
The determination as to whether an applicant is entitled to temporary disability benefits after retirement is therefore very fact specific and determined on a case-by-case basis.
V. Termination and Temporary Disability Benefits
Is an applicant entitled to temporary disability benefits after termination? This answer is also taken on a case-by-case basis and is fact-specific.
Pursuant to Butterball Turkey Company v. Workers’ Comp. Appeals Bd. (Esquivel) (2000) 65 Cal. Comp. Cases 61, an applicant is not entitled to temporary partial disability benefits if the defense can establish a two part test: (1) the applicant was terminated in good faith, and (2) the employer could have accommodated the modified duties but for the termination.
The employer has the burden to prove that the termination was lawful, justified and in good faith. Proving a good faith termination requires evidence from the employer regarding the circumstances of the termination. Typically, the evidence should come in the form of testimony from the employer, such as Human Resources or a manager, and written documentation pertaining to the termination, such as a termination letter, Codes of Conduct, evidence of violations, or evidence of prior warnings.
The employer also has the burden to prove that they could have accommodated the modified duty work, but for the applicant’s termination. The best practice is to have the employer provide a written offer to the applicant stating that, but for their termination, they could have accommodated the modified work, and be able to provide testimony at trial regarding the availability of that position to the applicant but for the termination.
Butterball cases are heavily litigated, and thus, it is recommended to consult with an attorney when this issue arises.
Conclusion
Temporary disability is of immense importance given that it is meant to replace an injured worker’s lost earnings. It is therefore crucial for defendants to issue benefits appropriately and expeditiously.
