Labor Code section 4658 (“LC § 4658”) applies to injuries that occur on or after January 1, 2005, but before January 1, 2013 at work place where there are 50 or more employees. LC § 4658 specifies that if an employer offers an injured employee regular, modified, or alternative work within 60 days of the applicant becoming permanent and stationary, each disability payment remaining to be paid can be decreased by 15 percent. Alternatively, if the employer does not offer regular, modified, or alternative work within 60 days of the applicant becoming permanent and stationary the remaining disability payments to be paid can be increased by 15 percent.

It is clear from LC § 4658(B) that once regular, modified, or alternative work has been offered and commenced that the employee who voluntarily terminates employment does not receive a 15 percent increase in the remaining permanent disability payments. The difficult area of this law has developed from the confusion on whether an employer has to offer regular, modified, or alternative work in situations where the employee has arguably voluntarily terminated their employment, or did not have any lost time prior to becoming permanent and stationary.

Case Law on LC § 4658 Increase/Decrease When an Employee Has No Lost Time:

Case law has begun to address the question of whether or not the 15 percent “swing” in LC § 4658 applies in situations where the employee has not lost any time.

In the case of Audiss v. City of Rohnrt Park (2007) Cal.Wrk.Comp. P.D. Lexis 399 (“Audiss“) the employee lost no time from work but was nevertheless provided a Notice of Offer of Regular Work. The defendants asserted the LC § 4658 15 percent decrease. The applicant argued that the offer to return to work was not made in a timely fashion, but the court found that the employer had offered the return to work in a timely matter because, “[t]he timing of [an employer's] offer [of work] is not dispositive… where [the employee] has been [continuously] employed full time in [his or] her regular work.” (Ibid.) The court in Audiss ultimately awarded the defendants the 15 percent decrease in permanent disability pursuant to LC § 4658.

In a contradictory panel decision, Tsuchiya v. County of Los Angeles Sheriff’s Dept. (2009) Cal Wrk.Comp. P.D. Lexis 399 (“Tsuchiya“) the employee had lost no time from work, and the employer failed to offer regular, modified, or alternative work. The court found that the employer was not entitled to the 15 percent decrease due to the failure to offer regular, modified, or alternative work. The court in Tsuchiya also found that the employee was not entitled to the 15 percent increase because the employee had no lost time. (Ibid.)

The question of whether the LC §4658 15 percent “swing” applies when the injured worker has lost no time from work and continues in his or her regular work was a question of first impression in the appellate courts with the case of City of Sebastopol v. Workers; Compensation Appeals Bd. (2012) 208 Cal.App.4th 1197 (“Sebastopol“). This case involved an employee who sustained a hearing loss due to an industrial injury, but lost no time from work as a result of the injury. The employee was found permanent and stationary in February of 2011, and in March of 2011 his employer offered the injured worker a Notice of Offer of Regular Work, and commenced payments of permanent disability utilizing the 15 percent decrease pursuant to LC § 4658.

The WCJ determined that the 15 percent decrease did not apply as the employee had lost no time from work, while the defendant filed a petition for reconsideration arguing that the sole condition president of offering regular, modified, or alternative work was met and the 15 percent decrease should apply. (City of Sebastopol, supra, 208 Cal.App. 4th 1197, 1202-1203.) The WCAB issued an opinion denying the petition for reconsideration concluding that the incentive to return the employee back to work was not present as the employee was never off of work. The WCAB found that applying either the 15 percent decrease or increase in a situation where the employee has not lost any time would be a windfall (Ibid.)

Ultimately the appellate court in Sebastopol determined that an employee who has not lost any time from work provides no incentive for the employer to return the employee to work, thus the LC §4658 15 percent decrease does not apply because it would provide a windfall to the employer. (City of Sebastopol, supra, 208 Cal.App. 4th 1197, 1211.)

What the Sebastopol Court did not Address:

It is unclear from the Sebastopol decision whether the “windfall” only applies to the employer or if using the same logic the employee cannot receive a 15% increase in permanent disability when the employer fails to offer a Notice of Offer of Regular Work to an employee who was found permanent and stationary, but has not lost any time. It certainly seems that the if the 15 percent decrease does not apply then the 15 percent increase should also not apply, but it unclear from the Sebastopol decision, and panel decisions subsequently evidence the uncertainty of this decision.

Does the 15 Percent Increase/Decrease Apply When an Employee Voluntarily Resigns, Retires, or Quits Prior to Becoming Permanent and Stationary?

The Sebastopol decision raises a few questions as to how the LC § 4658 15 percent increase/decrease applies to an employee who has resigned, retired, or quit prior to becoming permanent and stationary.

There are panel decisions that are contradictory as to whether the 15 percent increase applies when an employer fails to offer regular, modified, or alternative work to an employee who has retired. While these panel decisions are not labeled “significant panel decisions” they are still citable at the WCAB, although not binding precedent. Nevertheless, the following panel decisions that are discussed offer some insight into the logic and reasoning that may later be adopted by an appellate court in this area.

In the panel decision of Eugenia Fuentes v. Bakersfield School District (2014) Cal. Wrk.Comp. P.D. Lexis 565 the employee retired due to disciplinary write ups, not her injury, and was found permanent and stationary after she retired. The WCJ found that the 15 percent increase of LC §4658 applied to the employee’s award of permanent disability due to the employer’s failure to offer regular, modified, or alternative work within the 60 days required in LC § 4658. The court reasoned that absent evidence that the applicant would not have accepted the offer of regular, modified, or alternative work the fact that the applicant had retired was irrelevant. (Id. at 9-11.)

The opposite outcome occurred in the panel decision of Lana King v. Anaheim Police Department, City of Anaheim (2014) Cal. Work.Comp. P.D. Lexis 153 (“Lana King“). In Lana King the employee retired from her job where she got injured, receiving a permanent disability impairment. The applicant argued that she was constructively forced to retire because she was humiliated by how she had hardly any work to do and was “sitting around doing nothing.” However, the court found that she was not constructively forced to retire or made to retire due to her injury, thus, the applicant was not entitled to the 15 percent increase in LC § 4658 when her employer failed to offer her regular, modified, or alternative work.

The court reasoned that since the applicant was no longer an employee the employer was not required to offer regular, modified, or alternative work. (Id. at 3-5.) The court essentially found that offering regular, modified, or alternative work to an applicant who was not an employee was an idle act, and the law does not require idle acts. (Cal. Civ. Code 3532; Lana King v. Anaheim Police Department, City of Anaheim, supra, Cal. Work.Comp. P.D. Lexis 153., at 5.)

The Take Away:

The take away from the above-referenced case law is that when in doubt offer regular, modified, or alternative work, if it is available, within 60 days after the injured worker is declared permanent and stationary. Although it could be argued that according to Lana King offering work to an injured worker who is no longer an employee because they resigned or retired is an idle act, it may be enough to sway some judges to find that the 15 percent decrease applies, or at least that the increase does not apply since there was a timely offer to return to work. It is easier to show that the offer of regular, modified, or alternative work was made, and that the employee did not accept it, rather than face attempting to prove that had the return to work been offered the injured worker would not have accepted it.

If an employee has not lost any time a Notice of Offer of Regular Work will likely not result in a 15 percent decrease pursuant to LC § 4658 and the Sebastopol decision, however, there is a strong implication that the 15 percent increase should not apply for the employee either, although not explicitly stated in the Sebastopol decision.

Using the strategy of offering regular, modified, or alternative work in cases even where it may seem like an idle act, as well as utilizing the arguments in the above cases may result in either a 15 decrease in permanent disability payments or at the very least avoiding the 15 percent increase pursuant to LC § 4658.