Opinion
No. 344 C.D. 2014
10-16-2014
Weaber, Inc., Petitioner v. Workers' Compensation Appeal Board (Rios), Respondent
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE COHN JUBELIRER
Weaber, Inc. (Employer) petitions for review of the Order of the Workers' Compensation Appeal Board (Board) that affirmed the Workers' Compensation Judge's (WCJ) Order granting the Penalty Petition of Edwin Rios (Claimant). The WCJ found that Employer violated Section 406.1 of the Workers' Compensation Act (Act) by not filing a document either accepting or denying Claimant's injury with the Department of Labor and Industry (Department) within the time period set forth in that section. The WCJ directed Employer to pay Claimant penalties in the amount of fifty percent of the total amount of medical expenses Claimant incurred as a result of an August 6, 2007 work injury. On appeal, Employer argues that the Board erred in affirming the Penalty Petition and award of penalties where: it did not violate the Act because it did not have an obligation to file any document until Claimant suffered a loss of earnings or was harmed or prejudiced; and no penalty should have been awarded because there were no workers' compensation (WC) disability benefits awarded or due and owing to Claimant.
The WCJ also granted a "Reinstatement (in the nature of a Claim) Petition" that recognized Claimant sustained a work-related injury, described the injury as a lumbar sprain/strain, and concluded that Claimant had fully recovered from that injury. (WCJ Decision at 6; WCJ Decision, Conclusions of Law ¶ 1.) Employer does not appeal this determination.
Act of June 2, 1915, P.L. 736, added by Section 3 of the Act of February 8, 1972, P.L. 25, as amended, 77 P.S. § 717.1.
Employer's brief reverses the order of these issues; however, for ease of resolution, we first address whether Employer violated the Act before considering whether the WCJ abused his discretion in awarding Claimant a fifty percent penalty.
I. Background
The basic facts in this matter are uncontested. Claimant, who worked as a lumber handler in Employer's lumber yard, sustained a work-related lumbar sprain/strain on August 6, 2007, and notified Employer of the injury on that day. Claimant obtained treatment from Employer's panel physicians, which was paid by Employer. Claimant remained working for Employer at his pre-injury earnings; however, in accordance with Claimant's medical restrictions, Employer placed Claimant in a modified-duty position in Employer's security department. Employer's physicians released Claimant to his normal duties on January 9, 2008 and on March 14, 2008. For economic reasons, Claimant remained in Employer's security department at no loss of earnings rather than returning to his job in the lumber yard.
Claimant was released by Dr. Lance O. Yarus on January 9, 2008 and by Corporate Regain on March 14, 2008. (Physician's Visit Report, Employer's Ex. D-1, R.R. at 119a; Return to Work slip, Employer's Ex. D-2, R.R. at 120a.)
On June 30, 2008, Employer sent Claimant to Chad Rutter, D.O., for an Independent Medical Examination (IME), and, based on that examination, Dr. Rutter completed a Physician's Affidavit of Recovery on July 1, 2008. (Physician's Affidavit of Recovery, R.R. at 115a.) Dr. Rutter issued a report on July 16, 2008, opining that Claimant's lumbar sprain/strain had resolved, he did not need any further treatment, and he could return to his time-of-injury job as a lumber handler. (Letter from Dr. Chad Rutter to Employer's Insurer (July 16, 2008) at 3, R.R. at 113a.)
Employer placed Claimant, and others, on temporary layoff status on July 25, 2008 with the hope that business conditions would improve sufficiently to recall its workers. (Employer's Letter to Claimant (July 25, 2008), R.R. at 118a.) Three days after the layoff, on July 28, 2008, Employer sent Claimant a Notice of Ability to Return to Work indicating that, based on Dr. Rutter's IME, Claimant was fully recovered from the August 6, 2007 work injury and, inter alia, had an obligation to look for available employment. (Notice of Ability to Return to Work, R.R. at 110a.) Employer also issued a Notice of Compensation Denial (NCD) on July 28, 2008, checking the box stating that "[a]lthough an injury took place, the employee is not disabled as a result of this injury within the meaning of the [Act]." (Employer's NCD, R.R. at 116a.) Claimant's temporary layoff was made permanent on September 25, 2008. (Employer's Letter to Claimant (September 25, 2008), R.R. at 125a.)
II. Proceedings before the WCJ
Claimant filed Review and Reinstatement Petitions on February 2, 2011, averring an incorrect description of the August 6, 2007 work injury and a decrease in Claimant's earning capacity. Employer filed an answer denying the averments of these petitions. On August 13, 2011, Claimant filed a Penalty Petition alleging that Employer violated the Act by, inter alia, failing to acknowledge the work injury within twenty-one days, "[l]ulling the Claimant into a false sense of security by using the Act forcing a Statute of Limitation violation," requiring Claimant to attend a post hoc IME pursuant to the Act, and failing to reinstate compensation after Employer laid Claimant off from his modified-duty position. (Penalty Petition at 2, R.R. at 7a.) Employer filed an answer denying the Penalty Petition's allegations. The matter was assigned to the WCJ, who treated Claimant's Reinstatement Petition as a Claim Petition.
The WCJ granted the Reinstatement/Claim Petition "to the extent that it establishes a date of injury and description of injury, as the required Bureau [of Workers' Compensation (Bureau)] documentation - specifically, the Notice of Denial, did not issue until July 28, 2008, which was also the date of the Notice of Ability to Return to Work." (WCJ Decision at 6; WCJ Decision, Conclusions of Law (COL) ¶ 1.) Finding that Claimant had been released to his pre-injury position before the layoff and that he was fully recovered as of Dr. Rutter's June 30, 2008 IME, the WCJ concluded that Claimant was not entitled to any disability benefits and terminated Claimant's benefits as of June 30, 2008. (WCJ Decision at 6-7.) The WCJ found that the evidence established that Claimant's work-related injury was accurately described as a lumbar sprain/strain and, therefore, denied the Review Petition. (WCJ Decision at 6; COL ¶ 2.) Finally, although the WCJ indicated that "[w]hile the [E]mployer certainly appeared to have acted in good faith by issuing payment for medical expenses," the WCJ concluded that Employer had not complied with the Act's requirement that employers issue, on a timely basis, Bureau documentation "as developments occur." (WCJ Decision at 6.) The WCJ granted the Penalty Petition based on Employer not "issu[ing] the appropriate Bureau document within [twenty-one] days of notice of any alleged work injury." (WCJ Decision at 6.) The WCJ found that "the considerable delay in the issuance of Bureau documents, . . . support[ed] the imposition of a maximum penalty in the amount of 50% of applicable benefits payable pursuant to this adjudication." (WCJ Decision at 6.) The WCJ noted that, although no indemnity benefits were awarded upon which to grant a penalty, he was awarding a fifty percent penalty based on the medical expenses for the treatment Claimant received for the work-related injury. (WCJ Decision at 6-7.)
III. Employer's Appeal to the Board
Employer appealed to the Board, challenging only the WCJ's grant of the Penalty Petition and the imposition of the maximum penalty permitted under Section 435 of the Act. Employer argued that: its NCD was not untimely because it had no obligation to submit any documentation to the Bureau or Department until Claimant had a loss of earnings, and the WCJ abused his discretion in awarding penalties because there was no award of disability benefits and Claimant was not harmed or prejudiced by Employer's actions. The Board disagreed with Employer on both counts. The Board held that Employer had a duty under Section 406.1 of the Act, 77 P.S. § 717.1, to investigate and issue a Notice of Compensation Payable (NCP) or NCD within twenty-one days of receiving notice of the injury, the Act does not require a claimant to suffer a loss of earnings or economic harm before a penalty can be awarded, and the penalty could be based on Claimant's medical bills, even where no other compensation was awarded. Accordingly, the Board affirmed the WCJ's Order. Employer now petitions this Court for review.
Added by Section 3 of the Act of February 8, 1972, P.L. 25, as amended, 77 P.S. § 991.
Our "review is limited to determining whether the WCJ's findings of fact were supported by substantial evidence, whether an error of law was committed or whether constitutional rights were violated." Gumm v. Workers' Compensation Appeal Board (Steel), 942 A.2d 222, 227 n.5 (Pa. Cmwlth. 2008).
IV. Employer's Petition for Review to this Court
A. Violation of the Act.
The claimant bears the burden of proving that the employer violated the Act and the violation "must appear in the record for a penalty to be appropriate." Shuster v. Workers' Compensation Appeal Board (Pennsylvania Human Relations Commission), 745 A.2d 1282, 1288 (Pa. Cmwlth. 2000). "If the claimant meets his or her initial burden of proving a violation, the burden then shifts to the employer to prove it did not violate the Act." Gumm v. Workers' Compensation Appeal Board (Steel), 942 A.2d 222, 232 (Pa. Cmwlth. 2008).
In the Penalty Petition, Claimant averred, inter alia, that Employer violated the Act by "[f]ail[ing] to properly acknowledge [Claimant's] work injury under the Act within [twenty-one] days." (Penalty Petition at 2, R.R. at 7a.) Employer argues that it, technically, complied with the notice requirements of the Act, Claimant suffered no harm or prejudice and, consequently, there was no violation of the Act. Citing various provisions of the Act and the Department's regulations, Employer asserts that it had no obligation to report Claimant's work-related injury or to file any documents regarding that injury with the Department until Claimant became disabled, i.e., suffered a loss of earnings. Employer notes that Claimant did not begin missing time from work until July 25, 2008, when he was laid off for economic reasons and not due to his injury. At that time, Employer contends it properly filed a block 4/6 NCD acknowledging the work injury, but disputing that Claimant's disability, i.e., loss of earnings, was the result of the work injury.
We have held, pursuant to Section 406.1 of the Act, that an employer has "an affirmative obligation to accept or deny [an] injury as work-related within twenty-one days of notice" of the injury. Lemansky v. Workers' Compensation Appeal Board (Hagan Ice Cream Company), 738 A.2d 498, 502 (Pa. Cmwlth. 1999). We have not found persuasive arguments that the requirements set forth in Section 406.1 arise only when a claimant sustains a loss of earnings or has unpaid medical bills. In Lemansky, this Court held that an employer cannot "attempt[] to evade . . . recognizing [an] injury as required by [Section] 406.1 of the Act on the basis that the claimant did not suffer a loss of earnings." Id. at 503. Subsequently, in Waldameer Park, Inc. v. Workers' Compensation Appeal Board (Morrison), 819 A.2d 164 (Pa. Cmwlth. 2003), the employer argued "that it did not have to acknowledge [the c]laimant's injury through the issuance of a [NCP] because [the c]laimant did not suffer any loss of wages nor did she have any unpaid medical bills;" the Court found this "'ignored [Section] 406.1 of the Act.'" Id. at 169 (quoting Lemansky, 738 A.2d at 502) (emphasis omitted). "While the term disability is synonymous with a loss of earning power, our holdings in Waldameer Park and Lemansky have clearly held that [this] section includes injured employees as well." Brutico v. Workers' Compensation Appeal Board (US Airways, Inc.), 866 A.2d 1152, 1156 (Pa. Cmwlth. 2004) (emphasis in original).
Section 406.1 of the Act provides, in relevant part:
(a) The employer and insurer shall promptly investigate each injury reported or known to the employer and shall proceed promptly to commence the payment of compensation due either pursuant to an agreement upon the compensation payable or a notice of compensation payable as provided in section 407 or pursuant to a notice of temporary compensation payable as set forth in subsection (d), on forms prescribed by the department and furnished by the insurer. The first installment of compensation shall be paid not later than the twenty-first day after the employer has notice or knowledge of the employe's disability. Interest shall accrue on all due and unpaid compensation at the rate of ten per centum per annum. Any payment of compensation prior or subsequent to an agreement or notice of compensation payable or a notice of temporary compensation payable or greater in amount than provided therein shall, to the extent of the amount of such payment or payments, discharge the liability of the employer with respect to such case.77 P.S. § 717.1.
. . . .
(c) If the insurer controverts the right to compensation it shall promptly notify the employe or his dependent, on a form prescribed by the department, stating the grounds upon which the right to compensation is controverted and shall forthwith furnish a copy or copies to the department.
Employer argues that its actions did not violate Section 438 of the Act, added by Section 3 of the Act of February 8, 1972, P.L. 25, as amended, 77 P.S. § 994, entitled "Employers' reports of injuries," because it was not required to issue a report for Claimant's work-related injury until he suffered a disability. Section 438 of the Act does use the term "disability" in relation to an employer's obligations to file a report of injury with the Department. Id. However, this Court addressed similar arguments that Section 406.1, which also refers to issuing notices in relation to a claimant's "disability," 77 P.S. § 717.1, did not require an employer to file a notice acknowledging or denying an injury where the employee suffered no loss of earnings, i.e., is not disabled, and concluded that the obligation to issue such documents arises with notice of the injury, not with notice of disability. Brutico, 866 A.2d at 1156; Waldameer Park, 819 A.2d at 169-70; Lemansky, 738 A.2d at 502. Moreover, Claimant did not assert that Employer violated Section 438, rather he averred a violation of Section 406.1, and as noted, our precedent is consistent that the employer's obligation under Section 406.1 arises when notified of the injury.
Employer argues that in this case it paid Claimant's medical bills and Claimant did not suffer any harm or prejudice from its actions. However, we have previously held that an employer is obligated to issue a notice within twenty-one days under Section 406.1 of the Act, even if there is no loss of earnings or unpaid medical bills. Waldameer Park, 819 A.2d at 169-70. There is no requirement that a claimant suffer harm in order to find a violation of the Act or to impose penalties because the imposition of penalties is to ensure compliance with the Act. Hough v. Workers' Compensation Appeal Board (AC&T Companies), 928 A.2d 1173, 1179 (Pa. Cmwlth. 2007); Palmer v. Workers' Compensation Appeal Board (City of Philadelphia), 850 A.2d 72, 78 (Pa. Cmwlth. 2004).
Accordingly, pursuant to Section 406.1, Lemansky, Waldameer Park, and Brutico, Employer had twenty-one days from receiving notice of Claimant's injury to investigate and issue a NCP acknowledging or a NCD denying that injury as work related. Claimant was injured on August 6, 2007 and gave Employer notice of the injury that same day. (Employer's NCD, R.R. at 116a.) Employer did not issue its NCD until July 28, 2008, more than eleven months after receiving notice of Claimant's August 6, 2007 injury. (Employer's NCD, R.R. at 116a.) Because Employer did not issue the NCD in accordance with Section 406.1, Employer violated the Act.
B. Award of Penalty.
Section 435(d)(i) of the Act authorizes the imposition of penalties for violations of the Act. That section states:
(d) The department, the board, or any court which may hear any proceedings brought under this act shall have the power to impose penalties as provided herein for violations of the provisions of this act or such rules and regulations or rules of procedure:77 P.S. § 991(d)(i). The WCJ has discretion over the assessment of penalties and the amount of the penalties imposed. Id. Thus, even if there is a violation of the Act on the record, the imposition of a penalty is not automatic but remains within the discretion of the WCJ. Brutico, 866 A.2d at 1156. Because the assessment of penalties is discretionary, this Court may reverse a penalty award "only when the WCJ abused his or her discretion." Allegis Group and Broadspire v. Workers' Compensation Appeal Board (Coughenaur), 7 A.3d 325, 327 n.3 (Pa. Cmwlth. 2010). "An abuse of discretion occurs where the WCJ's judgment is manifestly unreasonable, where the law is not applied or where the record shows that the action is a result of partiality, prejudice, bias or ill will." Id.
(i) Employers and insurers may be penalized a sum not exceeding ten per centum of the amount awarded and interest accrued and payable: Provided, however, That such penalty may be increased to fifty per centum in cases of unreasonable or excessive delays. Such penalty shall be payable to the same persons to whom the compensation is payable.
Employer asserts that the WCJ abused his discretion in awarding a penalty because the Act specifies that a penalty must be based on "the amount awarded" and there was no amount awarded in the WCJ's Order upon which the penalty could be based. Relying on Krushauskas v. Workers' Compensation Appeal Board (General Motors), 56 A.3d 64 (Pa. Cmwlth. 2012), and Jaskiewicz v. Workmen's Compensation Appeal Board (James D. Morrisey, Inc.), 651 A.2d 623 (Pa. Cmwlth. 1994), Employer argues that the WCJ abused his discretion in directing it to pay Claimant a fifty percent penalty based on Claimant's already-paid medical expenses since those expenses were not awarded or due and owing. Employer further asserts that Orenich v. Workers' Compensation Appeal Board (Geisinger Wyoming Valley Medical Center), 863 A.2d 165, 169-70 (Pa. Cmwlth. 2004), which the Board cited to support calculating Claimant's penalty on his medical expenses, is distinguishable.
In Jaskiewicz, the claimant sought a penalty based on the employer's unilateral decision to stop paying the claimant disability benefits, which were being paid pursuant to a NCP. Jaskiewicz, 651 A.2d at 624. The employer filed, inter alia, a termination petition, alleging that the claimant's work-related injury had ceased. Id. The WCJ granted the employer's termination petition and denied the penalty petition, finding that it was moot because the claimant was not awarded any compensation under the Act. Id. at 624, 626. The Board affirmed, as did this Court on appeal. This Court held that the WCJ did not abuse his discretion in holding, based on the phrase "of the amount awarded" in Section 435(d)(i), 77 P.S. § 991(d)(i), that a claimant who was not eligible for compensation was not entitled to a penalty. Id. at 626. We stated that "any other interpretation of this section of the Act would lead to arbitrary results, as [WCJs] would be left to award penalties based upon unknown numbers." Id.
In Wyche v. Workers' Compensation Appeal Board (Pimco), 706 A.2d 1297 (Pa. Cmwlth. 1998), the WCJ denied the claimant's claim petition but, nonetheless, awarded the claimant $5,000 in penalties for the employer's violation of the Act. Id. at 1298. The Board reversed the penalty award and, on appeal, this Court affirmed based on Jaskiewicz. Wyche, 706 A.2d at 1298, 1300-01. We stated that to award penalties to claimants who have "no entitlement to any benefits whatsoever under the Act" was evidence of the arbitrary result warned of in Jaskiewicz. Wyche, 706 A.2d at 1301 (emphasis in original).
Finally, in Krushauskas, the claimant, who was receiving compensation pursuant to an NCP, filed a penalty petition based on the employer's alleged unilateral suspension of that compensation after the claimant accepted a disability retirement pension. Krushauskas, 56 A.3d at 66. The WCJ denied the penalty petition finding that, although the employer had violated the Act, there was no award of benefits or past due benefits against which a penalty could be assessed because the employer had established that the claimant had voluntarily removed himself from the workforce by retiring and the employer was entitled to a suspension of benefits as of the claimant's retirement date. Id. at 67-68. We affirmed the denial of penalties based on the fact that the claimant was not due any compensation because the claimant had voluntarily retired from the workforce as of the day the employer suspended his benefits. Id. at 67-68, 73.
In these cases, a claimant who was not awarded any benefits was not entitled to a penalty because the Act specified that the calculation of the penalty was based on ten percent (or up to fifty percent) "of the amount awarded." Section 435(d)(i), 77 P.S. § 991(d)(i). The same is true in the present matter. Although the WCJ granted the Reinstatement/Claim Petition, the WCJ found that Claimant was fully recovered and, therefore, not entitled to any wage loss benefits under the Act following his layoff from Employer for economic reasons. (WCJ Decision at 6-7; COL ¶¶ 1-2.) The WCJ further found that any liability Employer may have had for medical benefits ended on June 30, 2008, the date Dr. Rutter opined that Claimant was fully recovered from his work-related injury. (WCJ Decision at 7.) Employer had paid all of Claimant's medical expenses and, therefore, there was no "amount awarded."
Claimant relies on this Court's decision in Orenich, in which we approved the use of unpaid medical benefits as a basis for calculating penalties for an employer's violation of the Act. Orenich, 863 A.2d at 171. The medical bills in that case had been improperly denied by the employer and, accordingly, remained due and owing to the claimant. Id. at 168. The WCJ in Orenich specifically directed the employer to pay those outstanding bills as part of his award, and this Court specifically indicated that any penalty imposed would be "based on the medical bills awarded." Id. at 168, 171 (emphasis added). Orenich is, therefore, consistent with the requirement in Section 435(d)(i) of the Act and our decisions in Jaskiewicz, Wyche, and Krushauskas because the penalty in Orenich was calculated on the "amount awarded" and due to the claimant. In contrast, the medical expenses in the present matter were paid, and are not due and owing, and were not part of an "amount awarded" by the WCJ. We agree with Employer that Orenich is distinguishable and does not support the penalty awarded by the WCJ. Pursuant to Jaskiewicz, Wyche, and Krushauskas, the WCJ abused his discretion in awarding Claimant penalties in this matter where there was no award of wage loss benefits or medical expenses.
Our holding does not mean that we condone Employer's actions in not timely preparing and filing the forms required by Section 406.1 of the Act, and we expect "both employers and claimants [to] strive to abide by the provisions of the Act to the utmost extent." Wyche, 706 A.2d at 1301.
C. Attorneys' Fees.
Claimant requested attorneys' fees in this matter. (Penalty Petition at 2, R.R. at 7a.) Section 440(a) of the Act authorizes the award of attorneys' fees if the claimant prevails in whole or in part unless an employer establishes that its contest was reasonable. Lemansky, 738 A.2d at 501. In his Order, the WCJ directed Employer to reimburse Claimant's litigation costs and awarded attorneys' fees based on the penalty award, stating "20% [of the penalty is] payable to claimant's counsel, representing counsel fees." (WCJ Order.) Unfortunately, because we have reversed the penalty award, a new determination regarding the amount of attorneys' fees is necessary. Accordingly, we must vacate the WCJ's Order with respect to the amount of attorneys' fees and remand this matter for a new determination.
Added by Section 3 of the Act of February 8, 1972, P.L. 25, as amended, 77 P.S. § 996(a). Section 440(a) states, in pertinent part:
In any contested case where the insurer has contested liability in whole or in part . . . the employe or his dependent, as the case may be, in whose favor the matter at issue has been finally determined in whole or in part shall be awarded, in addition to the award of compensation, a reasonable sum for costs incurred for attorney's fees, witnesses, necessary medical examination, and the value of unreimbursed lost time to attend the proceedings: Provided, That cost for attorney's fees may be excluded when a reasonable basis for the contest has been established by the employer or the insurer.
V. Conclusion
For the forgoing reasons, we reverse the WCJ's award of penalties to Claimant. We vacate the WCJ's award of attorneys' fees because they were calculated on the penalties and remand this matter for a new calculation by the WCJ. The Board's Order is affirmed in all other aspects.
/s/ _________
RENÉE COHN JUBELIRER, Judge ORDER
NOW, October 16, 2014, the Order of the Workers' Compensation Appeal Board (Board), affirming the Workers' Compensation Judge's (WCJ) award of penalties to Edwin Rios, is hereby REVERSED. The Board's Order affirming the WCJ's award of attorneys' fees is VACATED and this matter is REMANDED for a new calculation of attorneys' fees by the WCJ. The Board's Order is AFFIRMED in all other aspects.
Jurisdiction relinquished.
/s/ _________
RENÉE COHN JUBELIRER, Judge