An employer’s obligation for paying temporary disability (TD)and advancing permanent disability (PD) indemnity is mandated by Labor Code §4650. Historically, the obligation to commence PD was outlined in 4560(b) which still requires the employer to advance a “reasonable estimate” of PD due commencing “within 14 days after the date of last payment of temporary disability indemnity.” Failure to comply with this time line for benefits subjects the employer to a 10% self-imposed penalty on the amount of benefits delayed.

However, in January 2013, LC §4650 was amended to add subsection (b)(2). This subsection allows that PD advance payments are not required if:

  1. The employer offers the employee a position that pays at least 85% of the wages and compensation paid to the employee at the time of injury; or,
  2. The employee is employed at a position that pays at least 100% of the wages and compensation paid to the employee at the time of injury.

If either of these provisions are satisfied, the employer only becomes obligated to make a PD payment upon issuance of a PD award. At that time, accrued PD is paid back to the last date that TD was paid.

The benefits of complying with LC §4650(b)(2), are that it reduces or eliminates potential penalties for delayed PD advances. It reduces the potential for under-advancing and over-advancing PD. It also fosters settlements as it avoids a situation where all PD is previously advanced leaving the employee without incentive to execute settlement documents.

However, that language of Labor Code §4650(b)(2) leaves many questions about what does and does not constitute compliance with its terms. As of the date of this writing (July 2019), there are no cases to provide us guidance on issues likely to arise. Such issues include:

  • Is there a deadline for the employer to offer the employee a position that pays 85% of the wages and compensation. Presumably, it would be 60 days from MMI similar to LC §4658(d). But the statute is silent on this issue.
  • How long is the position required to last? There is no requirement on how long the job with the original employer at 85% wages or the new employer at 100% wages is supposed to last. Other sections requiring a valid offer to return to work require the job last at least 12 months. While these statutes may provide guidance, section §4650(b)(2) is silent on the issue.
  • Is the offer required to be in writing or on a particular form? While LC §4658(d)(2) requires the work offer to be conveyed “in the form and manner prescribe by the administrative director,” there is no such requirement in LC §4650(b)(2). Presumably, compliance with §4650(b)(2), is achieved where the offer issues by way of verbal or any written communication. Regardless, best practice is to issue the offer in writing and ideally on Form 10133.35 to eliminate any potential controversies.
  • Employers will undoubtedly confront situations where the work terminates. Are PD advances then due to start up when the employment ends? What ifthe employee voluntarily resigns or retires?
  • Does LC §4650(b)(2) apply to all injury claims or only those after January 1, 2013? This question is easy: Since this amendment was part of SB 863, we know that the section will apply to claims for all dates of injuries.

The Amendment to §4650 to add subsection(b)(2) is now 61/2 years old and there are very few, if any, cases to interpret the statute. This means that the section is not very controversial or the cases are still litigation short of appeal. Time will tell how the WCAB and appellate courts will interpret the terms of the statute as drafted. Wait and see.