Opinion
W.C. No. 4-527-450.
November 4, 2004.
FINAL ORDER
The respondents seek review of a Supplemental Order of Administrative Law Judge Henk (ALJ) insofar as it determined the rate of recovery of an overpayment pursuant to § 8-42-113.5(1), C.R.S. 2004. The respondents also contest the ALJ's refusal to impose penalties under § 8-43-304(1), C.R.S. 2004, for the claimant's failure to provide timely notice of payments which are subject to offset under § 8-42-113.5. Finally, the respondents contend the ALJ erred in failing to enter an order for "repayment." We modify the order with respect to the rate of offset, and affirm the denial of penalties. We dismiss without prejudice the contention that the respondents are entitled to an order of repayment.
This case was tried on stipulated facts. While employed by respondent Lafarge Corporation the claimant sustained an injury to his knee in May 2001, and he became entitled to receive temporary total disability (TTD) benefits. On April 9, 2003, the claimant obtained employment with Castle Rock Construction Company (Castle Rock) and continued working until November 24, 2003, when he quit in anticipation of surgery. The claimant was not entitled to TTD or temporary partial disability (TPD) benefits from April 9, 2003, to August 5, 2003, and did not notify the respondents of the Castle Rock wages until August 11, 2003. As a result, the claimant has been overpaid $9,694.77 in benefits.
The respondents "restarted" the claimant's TTD benefits on December 9, 2003, but sought an order entitling them to suspend all of the claimant's disability benefits until the overpayment is recovered. The respondents also sought the imposition of penalties under § 8-43-304(1) based on the claimant's failure to give timely notice that he was receiving the Castle Rock wages. Finally, the respondents requested that the ALJ enter an order of "repayment" in the event they cannot recover all of the overpayment from the claimant's disability benefits.
The ALJ ordered that the respondents "recoup" the overpayment by reducing the claimant's TTD benefits by 50 percent until the overpayment is recovered. In the event the overpayment is not fully recovered by this method the ALJ ordered that the claimant's permanent partial disability and disfigurement benefits be reduced 100 percent.
Further, the ALJ denied the respondents' claim for penalties under § 8-43-304(1). The ALJ found the stipulated facts did not show the claimant's action in failing to give timely notice of the Castle Rock wages was "objectively unreasonable." Similarly, the ALJ found the claimant "cured" the violation before the hearing, and the respondents did not show by clear and convincing evidence that the claimant knew or reasonably should have known that he was in violation of the Act. Finally, the ALJ held that "section 8-43-113.5(a) provides a remedy for the respondents to recoup their overpayment." Therefore, the ALJ concluded that no penalty may be imposed under the general penalty provision of § 8-43-304(1) because the Act imposes a specific penalty for failure to give notice.
I.
On review, the respondents contend the ALJ erred in failing to order an immediate termination of all disability benefits until the overpayment is recovered. The respondents contend a total reduction of disability benefits is compelled by § 8-43-113.5(1)(b), C.R.S. 2004, and the ALJ had no discretion to order a mere 50 percent reduction. We agree.
It is not disputed that the claimant received an "overpayment" of benefits because the Castle Rock wages represented a "payment" from a "source" which required a reduction in the original award of TTD benefits. Section 8-42-113.5(1), C.R.S. 2004; Scruggs v. United Parcel Service, W.C. No. 4-490-474 (January 27, 2004) (wages received from a third-party employer are a "payment" from a "source" as contemplated by § 8-42-113.5). Therefore, the claimant was required to give notice of the receipt of the Castle Rock wages to the respondents within twenty days after "learning of the payment." Section 8-42-113.5(1)(a).
Section 8-42-113.5(1) establishes different consequences depending on whether the claimant provides the requisite notice. Subsection (1)(a) provides:
If the claimant or legal representative gives such notice, any overpayment that resulted from the failure to make the appropriate reduction in the original calculation of such disability benefits or death benefit shall be recovered by the employer or insurer in installments at the same rate as, or a lower rate than, the rate at which the overpayments were made. (Emphasis added).
Subsection (1)(b) provides as follows:
If the claimant or legal representative of a claimant who is a minor was receiving benefits in excess of the amounts that should have been paid under articles 40 to 47 of this title and failed to give the notice required by paragraph (a) of this subsection (1), the employer or insurer is authorized to cease all disability or death benefit payments immediately until the overpayments have been recovered in full. (Emphasis added).
Here, the parties stipulated that the claimant failed to give notice of the receipt of the Castle Rock wages for more than 20 days after they were first received. Thus, under the plain language of subsection (1)(b), the respondents were entitled to an order immediately terminating all of the claimant's disability benefits until the overpayment is recovered in full. Scruggs v. United Parcel Service, supra (holding that the respondents may unilaterally terminate benefits under this statute when the claimant fails to give notice). Conversely, the ALJ erroneously applied subsection (1)(a). Because the claimant failed to give the requisite notice the ALJ lacked the discretion afforded by subsection (1)(a) to order recovery at a rate less than that at which the overpayments were made. See Dee Enterprises v. Industrial Claim Appeals Office, 89 P.3d 430, 437 (Colo.App. 2003) (ALJ may not exercise powers or assume authority not expressly granted by statute). Consequently, the order must be modified to reflect that all disability benefits shall cease until such time as the overpayment is fully recovered.
The ALJ did not address the issue of "repayment," presumably because it is not yet possible to determine whether it is "practicable" to recover the entire overpayment under subsection (1)(b). Section 8-42-113.5(1)(c), C.R.S. 2004. Indeed, the ALJ reserved all issues not specifically addressed. Because the order contemplates the possibility of future litigation concerning repayment, it is not currently final and reviewable on this issue. See Bestway Concrete v. Industrial Claim Appeals Office, 984 P.2d 680 (Colo.App. 1999) (a final order is one which finally disposes of the issue presented).
II.
The respondents next contend the ALJ erred in denying the claim for penalties under § 8-43-304(1). Because we agree with the ALJ that § 8-42-113.5(1) provides a "specific penalty" for the claimant's failure to provide timely notice of the Castle Rock wages, we conclude that the general penalty provision of § 8-43-304(1) is inapplicable.
The following language from our recent decision in Gibson v. City of Colorado Springs/Utilities, W.C. No. 4-540-553 (September 15, 2004), is pertinent.
Section 8-43-304(1) provides for the imposition of penalties of up to five hundred dollars per day if an employer:
"Violates any provision of articles 40 to 47 of this title, or does any act prohibited thereby, or fails or refuses to perform any duty lawfully enjoined within the time prescribed by the director or panel, for which no penalty has specifically been provided, or fails, neglects, or refuses to obey any lawful order made by the director or panel . . ." (Emphasis added).
In Holliday v. Bestop, Inc., 23 P.3d 700 (Colo. 2001), the court held that the italicized language (limiting phrase) does not apply to violations of orders, but does apply to failure or refusal to perform a duty lawfully enjoined. Hence, where the employer's conduct is subject to a specific penalty under the Act, and also involves violation of an order, the conduct may be penalized under § 8-43-304(1). See Kennedy v. Industrial Claim Appeals Office, ___ P.3d ___ (Colo.App. No. 03CA1891, September 9, 2004). However, the Holliday court declined to address the question of whether the limiting phrase applies to violations of articles 40 to 47, or the performance of any act prohibited thereby. 23 P.3d at 707, n. 6.
In Pena v. Family Dollar Stores, Inc., W.C. No. 4-412-966 (February 11, 2003), we held that the limiting phrase does apply to cases where the alleged penalty is based on a violation of articles 40 to 47, or the performance of any act prohibited thereby. Thus, if the penalty is based on an alleged violation of the Act, no violation of an order is involved, and the Act imposes a specific penalty for the violation, penalties under § 8-43-304(1) are not available. We adhere to the reasoning in Pena and adopt it here as if fully set forth.
As in Gibson, we again adopt the reasoning of Pena. Hence, no penalties may be imposed under § 8-43-304(1) for the claimant's failure to give notice as required by § 8-42-113.5(1)(a) if the statute provides a "specific penalty" for that conduct. The respondents argue that § 8-42-113.5(1) is purely remedial because its purpose is to provide a mechanism or remedy for the recovery of overpayments.
However, the term "penalty" as it is used in the Act connotes a sanction for failure to adhere to the procedural requirements of the statute. BCW Enterprises. Ltd. v. Industrial Claim Appeals Office, 964 P.2d 533, 536 (Colo.App. 1997) (penalty includes fee award for applying for hearing on issue not ripe for hearing). For a sanction to constitute a penalty it must contemplate some type of monetary consequences for the violator. See Reed v. Industrial Claim Appeals Office, 13 P.3d 810 (Colo.App. 2000); American Express v. Industrial Commission, 712 P.2d 1132, 1134 (Colo.App. 1985).
Applying these principles here we agree with the ALJ that § 8-42-113.5(1) imposes a specific "penalty" for failure to give notice within 20 days of receiving the payment reducing compensation. Subsection (1)(a) grants an ALJ discretion to reduce the rate of recovery of the overpayment to a level less than the rate at which the overpayment was received. This provision permits the ALJ to consider various equitable factors including the effect on the claimant if all disability benefits are reduced to zero.
However, if the claimant does not give notice as required by subsection (1)(a), subsection (1)(b) grants the insurer "authority" to immediately terminate all indemnity benefits until the overpayment is recovered. Under subsection (1)(b) the claimant's failure to give notice is monetarily "sanctioned" by authorizing the cessation of all disability benefits and eliminating the ALJ's discretionary authority to lessen the impact of recovery by reducing the rate of offset. Subsection (1)(b) qualifies as a "specific penalty" for failing to give notice; therefore, the general penalty provision of § 8-43-304(1) does not apply.
We recognize that in Scruggs v. United Parcel Service, supra, a panel of the Industrial Claim Appeals Office remanded the matter for the ALJ to determine whether the claimant's failure to report seasonal wages under § 8-42-113.5 was "objectively reasonable" for purposes of imposing a penalty under § 8-43-304(1). However, Scruggs does not address the issue discussed here, and thus, we do not consider it to be dispositive.
IT IS THEREFORE ORDERED that the ALJ's Supplemental Order dated July 6, 2004, is modified to reflect that the respondents are entitled to cease the payment of all disability benefits until the overpayment is recovered.
IT IS FURTHER ORDERED that the respondents' petition to review is dismissed without prejudice insofar as it address the issue of an order of repayment.
IT IS FURTHER ORDERED that the ALJ's order is otherwise affirmed.
INDUSTRIAL CLAIM APPEALS PANEL
____________________ David Cain
____________________ Kathy E. Dean
Don Yates, Englewood, CO, Shelly Horn, LaFarge Corporation, Denver, CO, John Shelonko, LaFarge Corporation, Dr., Herndon, VA, Insurance Company of the State of Pennsylvania, c/o Alixe Virbick, Gallagher Bassett Services, Inc., Englewood, CO, Regina M. Walsh Adams, Esq., Greeley, CO, (For Claimant).
Matthew C. Hailey, Esq., Denver, CO, (For Respondents).