WCAB Clarifies Rebuttal of FEC Adjustment

Ogilvie v. City and County of San Francisco (2009) 74 Cal. Comp. Cases __: The WCAB has pulled a move reminiscent of Neo dodging bullets in The Matrix. Rather than alter its February 3, 2009 en banc decision as it did in Almaraz/Guzman, the WCAB has held firm – for the most part.

What Stayed the Same

The Commissioners affirmed most of the February 3, 2009 Opinion by holding:

1. Labor Code section 4660, subdivision (c) unambiguously means that a permanent disability rating established by the Schedule is rebuttable.

2. The party disputing that rating has the burden of proof to rebut the rating.

3. A party can rebut any element of the rating. This includes the diminished future earnings capacity (DFEC) adjustment. It also includes the whole person impairment (WPI) under the AMA Guides addressed under Almaraz/Guzman and the occupation group number and adjustment. It is unclear whether the age modification element can be rebutted.

What Changed:

The WCAB’s Opinion is in some ways less definitive than that issued in February. The WCAB clarified several points:

1. Rebuttal Procedure

The WCAB explained that the language of Labor Code section 4660, subdivision (c) makes the final disability rating rebuttable. A strict interpretation would require a judge to determine the correct rating applying the schedule. Only then would a party be given the right to present rebuttal evidence. Such evidence would be presented in a second trial to determine if the DFEC was rebutted. The WCAB concluded that such procedures would constitute a waste of time and unnecessary delay in violation of the California Constitution.

Instead, the WCAB ordered a more practical approach. The party wishing to rebut the DFEC adjustment factor should identify the issue as early as possible and be prepared to offer such evidence at the time of the first Mandatory Settlement Conference. The issue would then be tried with the remainder of the case. The judge and WCAB would be the ultimate trier of fact to determine the percentage of permanent disability.

2. Evidence to Rebut

To successfully challenge the DFEC adjustment factor a party must present “legally substantial” evidence. The WCAB did not define this term.

The WCAB cautioned that “even if the rebuttal evidence is legally substantial, the WCAB as the trier-of-fact may still determine that the evidence does not ‘overcome’ the DFEC adjustment factor component of the scheduled permanent disability rating.” In other words even if a party succeeds in rebutting the DEFC, the judge does not have to follow the rebuttal evidence and can still fall back on the standard adjustment factor.

3. “One” Acceptable Method

The workers’ compensation community almost entirely read the original Ogilvie Opinion to set forth the one and only acceptable method to rebut the DEFC adjustment factor. The WCAB, however, insists it did not. Instead, it explains “we were obliged to identify at least one valid method of successfully challenging a DFEC adjustment factor.” The WCAB further explained that a party can use “any valid method of challenging the DFEC adjustment factor competent of a scheduled permanent disability rating.” All that is required is that the method be consistent with the Constitutional mandate that it “accomplish substantial justice in all cases expeditiously, inexpensively and without incumbrance [sic].” It must also be “consistent” with Labor Code section 4660, subdivision (b)(2) [i.e. based on a numeric formula] and the RAND methodology.

The WCAB made no effort to offer alternative methodologies which would be acceptable. It did however, reject every other method offered.

For clarification of its earlier Opinion the WCAB also offered additional guidance. First, parties are not required to challenge the DFEC component of a rating. Second, the three year period of earnings is not required, but only a guideline.

4. Reopening of Cases

In responding to criticisms about the three year earnings doctrine the WCAB provided an unexpected solution. Specifically it indicated that “if within five years of the date of injury it later becomes clear that the employee’s individualized proportional earnings loss is significantly higher or lower than anticipated, a party may seek to reopen the issue of permanent disability by challenging the originally used DFEC adjustment factor.” For this theory the WCAB cited the notorious case of LeBoeuf v. Workers’ Comp. Appeals Bd. (1983) 34 Cal.3d 234 [48 Cal. Comp. Cases 587]. Unfortunately, the WCAB relies a misreading of LeBoeuf.

The LeBoeuf court held that if the Rehabilitation Bureau determined that an injured worker could not be returned to suitable gainful employment after an Award of Permanent disability, that determination would constitute could cause to reopen the prior Award. This was justified by the fact that then Labor Code section 4660 required disability be based on such a determination and, according to the California Supreme Court, a final determination on rehabilitation was supposed to take place before an Award of permanent disability. LeBoeuf looked to the total disability rating, not the “standard” rating because the Code was silent on what its terms meant.

New Labor Code section 4660 actually defines what DFEC means. The statute contemplates the adjustment factor be based on empirical data and aggregates, not individualized determinations. A mistaken estimate about the lost future earnings of an injured worker at the time of settlement falls in the category of a “mistake of fact.” The WCAB and Courts of Appeal have routinely held that such a mistake does not constitute “good cause” to reopen. Even if it were, the burden would be on the party seeking to reopen to establish what estimates/assumptions were used at the time of the original settlement. As a practical matter, such evidence will not exist in almost every case resolved within three years of the injury.

Other Interesting Issues

Several other interesting issues were raised in the Opinion which likely will reoccur in either the judicial review of Ogilvie or other cases. First, the question of whether the entire DFEC adjustment schedule is legally invalid was raised. The issue arises because the DFEC ranges were arrived at using pre-2005 (old system) permanent disability ratings in the computation of their values. The Ogilvie decision requires that an individualized DFEC computation use AMA Guides whole person impairment (WPI) values. Since both computations are based on entirely different methodology one or the other is invalid.

Second, the WCAB responded to a challenge that its Opinion constituted an unlawful “regulation.” The argument arises because regulations may only be enacted in California in accordance with the rule-making provisions of the Administrative Procedures Act. The applicant argued that the new computation methodology set forth in the original Ogilvie decision created a new procedure for computed permanent disability which constituted a regulation.

The WCAB responded in two parts. First it argued that its decision was a “case-specific adjudication” and thus not a regulation and thus within its authority. Second, the WCAB explained that it did not mandate that parties must challenge the DFEC adjustment factor. Third, it did not mandate that a challenge must be made in a particular manner. Fourth, the WCAB explained that it did not require a judge to admit or follow the rebuttal evidence presented.

In reality, the WCAB’s Opinion does create a new procedure which, so far as anyone has been able to determine is the only procedure under which the DFEC factor can be rebutted. This seems very much like a regulation. We have not heard the last of this argument.

The Dissent

Commissioner Caplan renewed her dissent from the majority Opinion. She again argued that the statutes allow rebuttal in the methods used at trial. She again argued that upon successful rebuttal, the permanent disability award should be the same as the percentage loss in future earnings capacity.

Ogilvie Computations

The mathematics involved are unchanged from the original en banc decision. Please click here for an explanation thereof.

Opinion filed September 3, 2009.

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

WCAB Clarifies Rebuttal of FEC Adjustment