What happens if an employer has properly taken the Labor Code section 4658 15% reduction but is forced to lay off the injured worker prior to the 12 months but after the Permanent Disability has been paid in full? Is the 15% reimbursed and then does the 15% increase apply? Is there a penalty for not completely complying with the one year requirement?

I personally read Labor Code section 4658 exactly as written given the WCAB panel decision of Monica Mansfield v. County of Los Angeles/Tristar Risk Management (ADJ3640151/MON0347448 issued January 27, 2010).

The WCAB applies statutes as written whenever they are not vague, ambiguous, or unintelligible. I think this is the right approach. I encourage my colleagues and clients to do the same. If the letter of the procedure is not met, an employer does not benefit from the reduction.

Should the employer fail strict compliance as well as subsequently fail to increase permanent disability payments when statutorily mandated there are two obvious potential penalty exposures: Labor Code section 4650 (self-assessed penalty for untimely issuance of permanent disability payments) as well as Labor Code section 5814 (based on unreasonable delay of benefits without genuine medical or legal doubt). Further there might be additional arguments of administrative or other applicable penalties for failure to pay benefits under these circumstances.

In the instance of a position that is offered in anticipation of but subsequently not lasting 12 months, I find the answer in Labor Code section 4658(d)(3)(B) which reads as follows:

“…(B) If the regular work, modified work or alternative work is terminated by the employer before the end of the period for which disability payments are due the injured employee, the amount of each of the remaining disability payments shall be paid in accordance with paragraph (1) and increased by 15 percent. An employee who voluntarily terminates employment shall not be eligible for payment under the subparagraph…”

My reading of the statute suggests that the employer would still be entitled to the full reduction under a strict reading of this subsection. The employer may assert the reduction up until the payments run out or the position is terminated short of 12 months, whichever is earlier.

It appears the statute allows a reduction whenever the employer “offers…” but does not guarantee “…the injured worker…work…in the form and manner prescribed…for a period of at least 12 months…” in accordance with Labor Code section 4658(d)(3(A). I read the statute as decrease applying even if the position does not actually last 12 months. This makes some sense for instance where an employer must cease all operations due to economic conditions wholly unrelated to a work-related injury but before the 12 month requirement has been met.

Here is my caveat: I am of the opinion that if the employer is found to have made the initial offer in bad faith, for instance knowing the position would not last 12 months at the time the offer is tendered, there might be a judicial exception to a black and white application of the law carved-out. There might be remedies beyond the obvious penalty statutes such as Labor Code sections 132(a) and 5812 where a known misrepresentation is made when the offer is tendered. However, generally it appears that an employer offering a 12 month position in good-faith and in accordance with mandated procedure does benefit from the reduction even on occasions where the position offered does not actually last 12 months.

I always offer a caveat: this is my position only, so I expect “reasonable minds may differ.” I think this is a fair analysis of these situations given the WCAB’s confirmation that it will read these statutes as written whenever possible.