WCAB Allows Customized FEC Adjustment

Ogilvie v. City and County of San Francisco (2009) [en banc]:In a nearly 50 page decision, the WCAB en banc has determined that the Future Earnings Capacity/Diminished Future Earnings Capacity (FEC/DFEH) adjustment in the 2005 Permanent Disability Rating Schedule (PDRS) is rebuttable.

The FEC adjustment is rebuttable:

The WCAB first determined that the Future Earning Capacity (FEC) portion of the 2005 PDRS is rebuttable. In reaching this conclusion the WCAB used only 3 pages of its opinion. It explained that Labor Code section 4660 still allows the PDRS to be rebutted. (See Costa II). Since the language was unchanged by SB 899, the FEC as part of the PDRS is rebuttable too.

How to Rebut the FEC:

The WCAB rejected several approaches to rebuttal of the FEC including a straight award of PD based on a percentage equal to the loss in future earnings. The WCAB also rejected an approach which awarded the dollar value of the 2/3 the lost future earnings.

Instead the WCAB focused on the RAND Study and the section of Labor Code section 4660, subdivision (b)(2) which required the FEC to based on a “numeric formula based on empirical data and findings that aggregate the average percentage of long-term loss of income resulting from each type of injury for similarly situated employees.” It then set forth a 4 step approach:

1. Estimated “Individualized” proportional earnings loss:

The parting seeking to rebut the FEC must establish the employee’s “individualized” proportional earnings loss.

First, like the RAND Study, the party must establish the employee’s actual earnings in the three years following the injury. To get the information the WCAB suggests contacting EDD or the Social Security Administration. It also suggested tax records might be discoverable.

Second, the party must establish what “similarly situated employees” earned during the same three year period. Again the WCAB suggested using EDD wage data. However, since such data is protected by privacy rights, the earnings will have to be “estimated.” Such estimation can be done via information from EDD’s Labor Market Information Division (LMID) website. It also suggested the US Department of Labor, Bureau of Labor Statistics. Earnings can also be established “directly” via evidence from public employment cases, union contracts, or coworker testimony.

The third step is simply to subtract the post-injury earnings of the injured worker from those of similarly situated employees to get the estimated earnings loss.

The forth step is to take the estimated earnings loss and divide it by the earnings of similarly situated employees.

2. Individualized Ratio

The second step is to divide the injured employee’s WPI using the AMA Guides by the estimated proportional earnings loss. This yields the individualized ration.

3. Rebut?

The FEC was based on the RAND Study. The empirical data was sorted by body part to obtain ratios of “rating over lost earnings” as set forth in Table B on page 1-7 of the PDRS. The ratios were then ranked and grouped together in ranges. The ranks became the FEC “Ranks.” The ranges associated with each “rank” were set forth in Table A on page 1-7 of the PDRS. It is these ratios, ranks and tables that the rebuttal analysis hinges on.

The FEC is not rebutted if the individualized ratio is either the same ratio contained in Table B for that body part OR falls within the range for that Rank.

The FEC is rebutted if the individualized ratio is less than or greater than the ratio contained in Table B for that body part OR falls outside the range for that Rank.

If the individualized ratio still falls within the range for another FEC Rank, then that rank is used for the DFEC Adjustment factor portion of the rating process. In other words, a back could end up with a FEC Rank other than 5 if it falls within another Rank’s range set forth in Table A.

If the individualized ratio falls outside all the ranges in Table A (less than .450 or greater than 1.810), then the adjustment factor is arrived at by the following formula: ([1.81/a] x .1) + 1. In this equation “a” is the individual ratio. The resulting number is simply multiplied by the WPI. The resulting number is adjusted for occupation and age to produce the final rating.

4. Exceptions

The WCAB then explained that in some circumstances this formulaic approach would yield injustice and another method should be employed. For example when an employee’s post-injury earnings far exceed those of coworkers.

Dissent:

Commissioner Caplane issued a six page Dissent. Favoring simplicity over complexity, the Dissent favors the rebutted PD to equal the loss of the future earning capacity established by expert testimony without any consideration of the schedule.

Commentary:

The above is intended as an objective analysis of this opinion. The following is not:

The Ogilvie opinion is incredible lengthy and complex. Its effect is to take a compromise disability assessment system and make it optional. Instead, either side may arbitrarily disregard the FEC analysis. Worse yet, the most important variable (loss of earnings) is completely under the injured worker’s control. Any injured worker can exponentially increase his or her permanent disability rating simply by taking three years off – collecting temporary disability for 2 and EDD for one. This creates a disincentive to get back to work.

In such a scenario a 20% WPI on spine would adjust as follows: 100% proportional earning loss. 20/100 = .2 individualized ratio (outside Tables A and B). ([1.81/.2] x .1]) + 1 = 1.905. FEC adjusted WPI would now be 1.905 x 20 = 38%. A nearly doubling of the WPI.

A 5% WPI however would yield a new FEC of 4.62 and a new WPI of 23% - more than a quadrupling. In other words, in the cases where an injured worker has the least real disability, he or she can maximize the FEC adjustment to approach the disability suffered by more impaired workers.

Filed February 3, 2009.

Heggeness,Sweet, Simington & Patrico, A.P.C

WCAB Allows Customized FEC Adjustment