Workers’ Compensation Section of The State Bar of California

Vol. 25, No. 4
2013

Understanding Social Security Disability Offsets:
Aiding Your Clients and Avoiding Malpractice
ANTHONY J. DeLELLIS, ESQ.
San Diego, California
When a claimant is a recipient of social security disability
benefits and also receives workers’ compensation benefits
or state disability payments, the claimant’s social security
disability benefits may be reduced or offset (42 U.S.C.
§ 424(a), 20 C.F.R. § 404.408). This article discusses calculation of the offset and strategies that can be used to minimize
the offset, maximize the net recovery to the claimant, andavoid potential malpractice.
The determination of whether social security disability
benefits are reduced because of these payments depends on avariety of factors and calculations. The standard of care requires
you, as an attorney practicing in this field of law, to be familiar
with these factors and advise your clients who may be affected.
It is important to know, when settling a workers’ compensation
claim resulting in one or more lump-sum payments, that you
may add language to the Compromise and Release (C&R) thatcan modify and often eliminate the social security disability
offset. Failure to consider this issue is akin to playing Russianroulette with the claimant’s economic future. Of course, in the
majority of situations either your client will not be receivingsocial security disability benefits or the offset provisions will
not reduce their benefits. However, you may occasionally havea client for whom the offset issue arises, and you need to beprepared to identify and minimize that offset.
When a claimant receives both workers’ compensation
benefits and social security disability benefits, it is possible
for the combined benefits to exceed the amount of the wages
the claimant earned before becoming disabled. To avoid
this anomaly the Social Security Act places a ceiling on an
individual’s combined benefits. The statute provides thatwhen an individual is receiving both social security disability
insurance benefits and either workers’ compensation benefits
or other public disability benefits, the social security benefits“shall be reduced” by the amount necessary to ensure thatthe sum of the state and federal benefits does not exceed
80 percent of the individual’s pre-disability average current
earnings (42 U.S.C. § 424(a); 20 C.F.F. § 404.408). Doing so
prevents the duplication of benefits inherent in the programs,
thus eliminating the possibility that the claimant will receive
more benefits post disability than earnings received before
being disabled.

INSIDE:
Filing/Activation Fees, and a
Warning to Defendants ................4
Confessions of a Shopaholic: Hand
Over Those Manolo Blahnik Heels
and Nobody Gets Hurt—A WCJ’s
Rant on Proper Court Attire ........6
Caution: Increased MCLE Audits
Ahead! ..........................................8
15 Percent Adjustment of
Permanent Disability ....................9© 2013 by The State Bar of California. The statements and opinions contained in this publication are those of the contributors only and are not necessarily those of The
State Bar of California, the Workers’ Compensation Section, or any government body. This publication is designed to provide accurate and authoritative information andis made available with the express understanding that the publisher does NOT render legal services and that a wise practitioner never relies on the research of unknown
others. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Calculating the Offset•

The claimant’s highest annual earnings, also referred
to as the average current earnings

5. The monthly workers’ compensation benefit
subtracted from 80 percent of the highest annual
earnings is $1,011 ($2,000 – $989 = $1,011). The$1,011 represent the maximum social security
disability benefit SSA can pay, given the current
monthly workers’ compensation benefit.

•

The claimant’s monthly workers’ compensation
benefit

6. The social security offset is $489 ($1,500(PIA)– $1,011 = $489).

•

The claimant’s monthly social security disability
benefitSocial security calculates the offset by considering threefactors:

As mentioned earlier, the combined workers’ compensation
benefit and social security disability benefit cannot exceed
80 percent of the claimant’s highest annual earnings. To
determine the highest annual earnings, the Social Security
Administration (SSA) predominantly uses the higher dollar
figure of the following two calculations:•

The highest annual earnings during a period
including the calendar year in which thedisability occurred as well as the five years
immediately preceding the year of disability•

The average earnings of any five consecutive years
during the claimant’s work life prior to the disability

To illustrate the calculation of the offset, suppose aconstruction worker is injured on the job. His highest annual
earnings in 2006, three years before his disabling injury, was$30,000, calculated using the methods described above. He
was 53 when he was injured in July of 2009 and turned 55 in
January of 2011. In July of 2011 he exhausted his two years of
temporary disability payments. The worker’s average weekly
wage as calculated by California Labor Code section 4453
was $400. He was granted social security disability benefits
in December of 2011, retroactive to his 55th birthday. Hismonthly social security disability benefit, also known as thePrimary Insurance Amount (PIA), is $1,500 per month. In
February of 2012 he became permanent and stationary andreceived permanent disability advances of $230 per week
until his claim was settled. An Order approving the C&R wasentered in July of 2012.
The following list illustrates the process for calculating theworker’s offset.
1. The California partial permanent disability benefit is$230 per week, or $989 per month ($230 × 4.3 weeks/month = $989).
2. Prior highest annual earnings are $30,000.
3. 80 percent of the highest annual earnings is $24,000,
or $2,000 per month ($30,000 × 80% = $24,000 ÷ 12
= $2,000).
4. The monthly social security Primary Insurance
Amount is $1,500.

2

WORKERS’ COMPENSATIONIn the example, $2,000 is the 80 percent maximum theclaimant can receive, combining state workers’ compensationand federal social security benefits. The monthly permanent
disability payments are $989 per month, leaving only $1,011 insocial security benefits before payments reach the 80 percent
maximum of $2,000. This scenario requires social security to
reduce the monthly benefits, which would otherwise be $1,500
a month, to a significantly reduced $1,011 a month. This is aloss of $489 per month, with an annualized loss of $5,868.
Assume the injured worker in this scenario is your client.
Being a seasoned veteran in workers’ compensation law,
you expertly negotiate a very favorable C&R, resulting in apermanent disability lump-sum payment of $100,000 after
excludable expenses (which are discussed later in this article).
The SSA will use the permanent disability rate to amortize theclaimant’s lump-sum payment. At the permanent disability rateof $230 per week, it will take approximately 418 weeks, orabout eight years, to amortize your client’s lump-sum payment.
Two months after the ink dries on the C&R, your client
calls you to ask why his social security benefits were reduced
from $1,500 to $1,011. At this point it is too late to minimize
the impact of the workers’ compensation offset. Your client
is now losing $489 a month, or $5,868 a year. The offset willcontinue for eight years, until the C&R is fully amortized.
This results in a grand total of $46,944 in unnecessarily lost
social security benefits. For an injured worker earning $30,000
before his disability, the loss of $46,944 over eight years isdevastating. Who is responsible for that loss? This author
submits that attorneys who do not consider the effects of theoffset on their clients have failed to fulfill their professional
responsibilities to represent those clients and may be subject tolegal malpractice claims.
Minimizing the Offset
What can be done to avoid or minimize these reductions
in benefits? Before addressing that issue, we should look atwhat is not included in the calculation of the offset: third-party
settlements, unemployment compensation benefits, Veterans
Affairs benefits, Jones Act benefits, private pension benefits,
and long-term disability benefits. However, any workers’
compensation payments and state disability payments are
an offset even if the social security disability benefits wereawarded based on a non-work, completely unrelated disability.
If the claimant’s workers’ compensation case goes to trial,
there is obviously no opportunity for planning; the SSA will
simply determine the offset using the permanent disability

rate expressed in the award and as calculated earlier in thisarticle. However, if the matter is resolved by agreement, thesettlement documents can be used to reduce or eliminate
the offset by excluding certain fees and expenses from theworkers’ compensation payments and spreading the lump-sum
settlement over the life expectancy or work-life expectancy ofthe claimant.
The first step is to ascertain how much of the lump sum
social security will use in calculating the offset. From thegross amount of the C&R, the SSA will allow you to deduct“excludable expenses” to arrive at the lump-sum amount thatwill be amortized and used as an offset. The SSA’s Program
Operations Manual System (POMS) section DI 52120.030
defines “excludable expenses” and permits the reduction of thefollowing expenses from the gross amount of the C&R:•

Approved legal fees.

•

Allocated medical expenses identified in the C&R.

•

Penalties paid in the C&R.

•

Monies allocated for a Medicare Set Aside Trust.

•Amounts allocated to purchase annuities or
structured settlements. However, the SSA will
use any future annuity payments in the structure
to calculate any future offsets when actually
received. Any future lump-sum paymentsin the structure may be amortized over theclaimant’s life expectancy in the same manneras the original lump sum in the C&R.

•

Liens for legal or medical expenses paid from thelump sum and deducted from the claimant’s share.

•

Lump-sum catch-up payments for unpaid temporary
disability benefits when included in the gross award.

•

Supplemental Job Displacement Benefits (SJDBs)
are excludable since the payment is issued
directly to the educational retraining or skill
enhancement school. However, if all or part of theSJDB benefit is paid directly to the claimant, theamount the claimant receives is not excludable.

Note that permanent disability advances paid to the claimantprior to the date of the C&R are not excludable from the lumpsum.
Once excludable expenses have reduced the C&R, thenet amount to the claimant is amortized by a weekly rate.
The methods for establishing weekly rates, as set forth in the
Administration’s Program Operational Manual, in descendingorder of priority, are as follows:
1. The rate specified in the lump-sum award.
2. The periodic rate paid prior to the lump sum.
3. The maximum permanent partial rate in California
if no prior permanent disability payments have beenmade. Note that if the claimant received permanent
disability advances, the SSA will use the PDA rate
to amortize the lump sum absent any other direction(Social Security Ruling 87-21c).
The SSA looks first to the C&R for guidance on theamortization of the lump sum. The SSA is, in effect, inviting
the practitioner to create a more favorable offset provision
for the claimant. Failure to do so will simply result in the
Administration’s using the permanent disability rate in effectfor the claimant’s date of injury. The SSA will apply the offset
for any month in which the claimant was entitled to both social
security disability benefits and workers’ compensation benefits
and will continue applying the offset until the claimant reaches
age 65 or the lump sum is fully amortized using the permanent
disability rate.
As discussed earlier in this article, the result may be asignificant offset to the social security benefits, with lower
wage earners being hit the hardest. This occurs because thelower wage earner has a lower 80 percent maximum andtherefore a proportionately higher offset. Higher wage earners,
such as those earning $100,000, are usually not affectedby the offset since they can receive a combined 80 percent,or $80,000, in combined benefits. The SSA will allow theclaimant to amortize the lump sum favorably, but if thisissue is not addressed in the original settlement documents,
the Administration will not allow a subsequent stipulation oraward that attempts to reduce the offset (Social Security Ruling
87-21c; POMS § DI52150.065e). There is no “do-over,” which
is why it is so important to address the offset issue correctly inthe original C&R.
Obviously, the greater the number of years over which thelump sum can be spread, the lower the monthly amortization
number will be and the lower the social security offset will
be. At one point there was a split among social security
practitioners as to whether the settlement award may be spreadover the claimant’s life expectancy or over the claimant’s
work life expectancy. In Hodge v. Shalala 27 F.3rd 430 (9thCir.1994), the Court determined that under Oregon’s workers’
compensation law, a lump-sum payment is a substitute fora stream of payments for the remainder of an individual’s
working life, which the court presumed to end at age 65 (seealso Acquiescence Ruling 95-2(9)).
However, the SSA subsequently issued POMS section
52150.065, effective February 22, 2011, in which the SSA
specifically recognizes that a lump-sum award may specify
a payment amount based on the claimant’s life expectancy
determined by insurance life expectancy tables and provides
guidelines for doing so. (POMS section 52120.030, effective
September 19, 2011, addresses the offset provisions specificto California workers’ compensation claims.) POMS section
52121.030 indicates that the SSA is not bound by any specificformula, such as the Hartman formula identified in the C&R,
to amortize a lump sum. However, that POMS section refersback to POMS section 52150.065, which does allow a lifetime
amortization using the guidelines set out therein. In California,
therefore, the lump sum should be spread over the course of
the claimant’s life expectancy. Doing so greatly reduces any
WORKERS’ COMPENSATION

3social security offset and in most circumstances completely
eliminates the potential offset.

3. Life expectancy is 24.7 years, or 296.4 months (24.7
× 12 = 296.4).

Amortization of the Lump Sum

4. The monthly payment amortized over the life
expectancy is $337.38 ($100,000 ÷ 296.4 = $337.38).

Three factors determine the correct amortization of thelump sum:•

The lump sum amount after deduction for allowable
excludable expenses•

The beginning of the amortization period•

The claimant’s life expectancy

The beginning of the amortization period is the day
after the last payment of temporary disability payments
was made. If no temporary disability payments were made,the amortization period begins on the date of the injury or
the last date the claimant worked in the industry (POMS§ DI52120.030). The life expectancy can be determined byreferring to life expectancy tables. The Centers for Disease
Control has published these tables, which can be referenced
as the National Vital Statistics Report, Vol. 58, No. 21, June
28, 2010.
The claimant in the example at the beginning of this article
turned 55 prior to the date of his last temporary disability
payment of $400 in July of 2011. His life expectancy is 24.7
years. His last temporary disability payment of $400 occurredin July of 2011, when he was 55. His lump-sum payment,
received in July of 2012, was $100,000.
Following is an analysis of the calculations for thisclaimant in determining amortization of the lump sum:

We know that 80 percent of the average current earning is$2,000. Instead of using the permanent disability rate of $230
per week, or $989 per month, as an offset, we are able to use
the much more favorable weekly amount of $337.38. Instead of
our initial calculation of $2,000 – $989 = $1,011, we are now
permitted to use the favorable calculation of $2,000 – 337.38= $1,662. The latter amount is what the claimant would bepermitted to receive in social security benefits and still remain
under the 80 percent cap. Since the claimant’s social security
benefit rate is $1,500 per month, he is under the 80 percent
cap and there is no offset. By including language in the C&R
amortizing the lump sum over his life expectancy, we havelegally eliminated the social security offset and increased theclaimant’s combined state and federal benefits by $5,868 per
year, for a total of $46,944 over the life of the C&R.
Anthony J. DeLellis is the principal owner of DeLellisand Associates, a San Diego law firm with offices in
San Diego, Riverside, and Imperial counties. The firm
practices social security disability, workers’ compensation,and county disability retirement law. He can be reached atwww.delellis.com.

1. The amortization period begins at age 55.
2. The lump sum after excludable expenses is $100,000.

Filing/Activation Fees, and a Warning
to Defendants
JON C. BRISSMAN, ESQ.
Colton, California
Legislation effective January 1, 2013, requires medical
treatment providers to pay a $150 lien filing fee for a newlien. It also requires medical and certain other providers who
filed liens prior to 2013 to pay a $100 lien activation fee atthe earliest of (1) filing a Declaration of Readiness to Proceed(DOR), (2) before attending a lien conference, or (3) December
31, 2013. Labor Code sections 4903.05 and 4903.06; 8 CCR
section 10208. The consequence of failure to submit proof of
payment when filing a DOR is that the DOR will be rejected
and not processed, and the consequence of failure to pay the
4

WORKERS’ COMPENSATION

activation fee by the time of a lien conference or January 1,
2014, whichever is earlier, is dismissal of the lien withprejudice.
While judges have information available to them, via
EAMS and the EAMS public access website, documenting
whether or not the lien filing fee or lien activation fee has been
paid, Labor Code section 4903.06(a)(4) specifically states thatlien claimants that did not file the DOR must submit at thelien conference proof of payment of the activation fees. Do
not assume that a judge will take the time to look in EAMSto see whether the activation fee has been paid. It would be
prudent, to avoid any confusion or misunderstanding, for all
lien claimants, including the one that filed the DOR, to haveproof of payment of the fee at the time of the lien conference.
The WCAB has proposed regulations that are currently
pending in the regular rulemaking process and not yet in effectthat will expand the types of appearances at which a legacy(pre-2013) lien claimant must pay the activation fee. For now,
an activation or filing fee is not required for appearances atstatus conferences, mandatory settlement conferences, pretrial
conferences, expedited hearings, rating MSCs, trials on casein-chief issues, or at lien trials when the lien conference
occurred prior to 2013. Practitioners need to be aware that if alien claimant is a party as defined by 8 CCR section 10301(x)(3), pursuant to 8 CCR section 10770.1(a) and (c), any type ofhearing that is set is to be construed as a lien conference, before
which payment of the activation fee will be required.
Labor Code section 4903.07 specifies a procedure fora lien claimant to recover the activation or filing fee fromdefendant. Prior to payment of the fee, the lien claimant must
make a dollar-specific written demand, and defendant has 20days to respond in writing. If settlement does not result andthe lien claimant still wishes to pursue its lien balance, the lien
claimant must pay the activation or filing fee. Certainly thismust be done on legacy liens before filing a DOR to have thelien adjudicated before the WCAB or before December 31,
2013. If the final determination of the WCAB is that defendant
owes an amount equal to or greater than the demanded amount,defendant is liable for reimbursement of the amount plus thefee.
Unfortunately, the drafters of the legislation did not specify
any mechanism for lien claimants to recover the fee when theyreceive a notice of hearing for a lien conference when they did
not file the DOR. It is likely that regulations will be proposed
to fill the gaps. Until then, lien claimants should make written
settlement demands as soon as they receive a notice of hearing
for a lien conference (or any type of hearing) and specificallyrequest the WCAB to award reimbursement of the fee underLabor Code section 5811 if the demanded amount is foundreasonable.
The rationale of the legislation is to encourage parties toresolve outstanding liens before the jurisdiction of the WCAB
needs to be invoked. However, several claims adjusters anddefense attorneys are demanding that lien claimants produce
proof of payment of the filing or activation fee as a precondition
to lien negotiation. The tactic is contrary to the spirit of the law,which mandates that lien claimants attempt negotiation of theliens prior to filing DORs or appearing at lien conferences. On
legacy liens, payment of the activation fee is not required untila lien claimant files the DOR or, if the lien claimant did not
file the DOR, prior to appearance at a lien conference. Labor
Code section 4903.06(a)(4). For services provided in 2013
and beyond, lien filing is not required to initiate settlement
discussions.
Both defendants and lien claimants are required to engage
in good-faith negotiations. Filing a DOR requires a statement
under penalty of perjury of the “specific, genuine, good faithefforts to resolve the dispute(s).” Failure to comply results in
taxing the time and resources of the WCAB to resolve liendisputes and circumvents the assumed purpose of the law,which is to encourage lien resolution prior to setting hearingson the WCAB calendars.
Workers’ compensation judges will have ample justification
to grant a petition filed by a lien claimant requesting sanctions,
attorney fees, and costs for bad-faith actions or tactics when
defendant insists on proof of activation- or filing-fee payment
before negotiating.
Observe that non-attorney lien claimants may request andbe awarded attorney fees: under Labor Code sections 4907 and
5813 and 8 CCR section 10561, anyone who appears at the
WCAB is subject to an assessment or award of attorney fees
(although someone who is not a member of the State Bar likely
will be awarded a lesser hourly fee). Note that 8 CCR section
10561(e) specifically states:
Notwithstanding any other provision of these rules,
for purposes of this rule and Labor Code section
5813: (1) a lien claimant may be deemed a party at
any stage of the proceedings before the Workers’
Compensation Appeals Board; and (2) an attorney
includes a lay representative of a party or lien
claimant.
Prudent lien claimants that find themselves in the positionin which claims adjusters or defense attorneys are refusing tonegotiate liens prior to proof of payment of a lien activation or
filing fee will be collecting or documenting proof of defendants’refusal to negotiate and may soon be filing petitions on theissue. Since lien claimants are considered a party at any stage ofthe proceedings for purposes of Labor Code section 5813 and8 CCR section 10561, there is nothing to prevent them fromfiling such a petition before paying an activation or filing fee.
To capture the attention of the judges, lien claimants should
clearly reference 8 CCR section 10561(e) in their pleadings.
It may take a few well-publicized cases where sanctions,costs, and attorney fees were assessed, or maybe a DWC
Newsline press release by the Administrative Director, toextinguish the tactic of using the activation or filing fee as aprecondition to lien negotiation. Defendants would be welladvised to abandon the tactic now.
Jon C. Brissman is an attorney based in Colton,
California, whose practice represents lien claimants
exclusively.

WORKERS’ COMPENSATION

5

Confessions of a Shopaholic: Hand Over Those
Manolo Blahnik Heels and Nobody Gets
Hurt–A WCJ’s Rant on Proper Court Attire
THE HON. ALLYSON C. HALL
Stockton, California
Writer’s comment: These satirical musings are the opinion of
the writer alone and do not represent the opinion or policyof the Department of Industrial Relations, the Division ofWorkers’ Compensation, the Workers’ Compensation Appeals
Board, other judges, or staff.
It’s hard to be a Californian. The fashion mecca of New
York beckons, and sample sales elude us California girls andguys. Oh, the “Sample Sale.” Sigh. I signed up years ago fore-mail blasts of all the New York sample sales, and in thedays when you could get a fare on Jet Blue for $129 to JFK…
okay, but I digress. For those of us who have lived south of theTehachapis, in the promised land of beautiful weather, tanned
bodies, and botox for days, the fashion police are also out infull force. The “fashionista creep,” as I call it, doesn’t spare us
in the north, even for this NorCal transplant/returnee.
I know that a lot of judges, attorneys, and hearing and lien
reps who appear at the “Board” (yay! It’s a “Board” again;
I was beginning to wonder just what we were, for a while,
there) forget that where we do our work is, in fact, a court. Our
looks range from the “just rolled out of bed” to “as soon as I’mdone here, I’m hitting the nightclub.” Just what am I getting
at? Aside from having an actual written policy on appropriate
dress at the “Board” (you can say it…“Board”; you know you
want to), we judges are reluctant to point out, shall I say, thefashion faux pas or outright travesties in the interpretation of
appropriate dress for court.
My personal debate ranges from, “We are dealing withadults who are capable of deciding what is appropriate to wear
for court” to, “What do they think this is, Hollywood Boulevardon Saturday night?”
I’m not just talking about the ladies. Some of you men out
there consider your fashion idol to be Rico Suave. The goldchain, medallion, and open-shirt look is better shared after
5:00 p.m. at your favorite club. Why do you wear cologne as
if you’re an elk calling your mate? Also, anything produced by
Faberge went out with Joe Namath. That should tell you how
long it’s been out of style. And no need to bathe in the stuff.
Tone it down a little, would you? We shouldn’t have to smell
it even after the elevator door closes on you, or worse, before
the door even opens.
That also goes for you smokers. Yikes, why do we haveto breathe that stuff too? Air yourselves out before entering thebuilding. Another gripe: BrylCreem, or any of the various ways
6

WORKERS’ COMPENSATION

some of you guys plaster your hair Sopranos-style. Really? My
dad wore that in the ’70s, and even then it was passé. Ulta has
great hair products for men that don’t involve shellac. See Rico
Suave, supra. Check it out.
As for the rumpled, 5:00 o’clock shadow look? Only after
5:00. Be nicely groomed at 8:30 a.m., please. An iron is an
inexpensive way to keep your clothes pressed, or take yoursuits to the dry cleaners. Something. Rumpled only works forJohnny Depp, and that’s only when he’s in Jack Sparrow mode.
I do have to give props to you stylish men who don’t
try to hide the fact that Mother Nature is playing with yourhairline. What a cruel hand of fate! But some of you gentlemen
understand the rule of Telly Savalas: bald is sexy, comb-overs
are for wimps, and “Who loves you, Baby.” Kudos for you!
As much as I like The Donald, I don’t like the pompadour,
and the rest of us feel real pity, or the mean ones just snicker.
Be brave and proud, and embrace the real you. Join the Hair
Club for Men, or see a plastic surgeon who specializes in hair
restoration, if that matters so much to you. I hear there are a few
plastic surgeons in California open for business.
The gripes don’t extend just to the men. Oh, no, ladies.
We are the worst offenders in the appropriately dressed andgroomed department. Ladies love guidelines (stop guffawing,boys, it’s really true—it’s just the applicability of rules to a
woman’s behavior you don’t understand). So, here are a few ofmine that I like to live by, and maybe some of you ladies will
choose to follow them (and class up the joint a bit):
1. Fishnet stockings are for after 5:00 p.m. and are never
to be worn at court. Enough said.
2. “Fire engine” red lipstick is fine, as long as you’re
wearing red. (Not just a red bag or cell phone case.
Your dress or suit also has to be red.) You cannot
wear a color on your lips that is less than 50 percentof what you’re wearing on your body, except for
black. Never wear black lipstick. Goth doesn’t workfor court. (That goes for the fingernails, too).
3. Bare shoulders go with beach blankets, umbrelladrinks, and cabanas. Wear a suit jacket over yoursleeveless blouse or bustier, or you will be asked tofetch your jacket out of your car to cover up. Who
dresses you, Fredericks of Hollywood, or Lady
Gaga? Not appropriate for court!

4. Clothes retailers sell more than one size because(this is shocking, I know) we all are different sizes.
Don’t try to squeeze into a size that you wore injunior high school, especially if you are, shall I say,a “little” bigger than a junior size. It’s not flattering,dear. If you’re big, be big, beautiful, and proud. And
tastefully dressed. This is also true for those of us
constantly fighting the scale, and our weight goes up
and down like an elevator or hot air balloon: wear
clothes that fit. I am guilty of this too. I’ve recently
lost a bit of weight, and my clothes were starting tohang. One of our sweetheart senior legal technicians(SLTs) gently reminded me that “comfy clothes” arefor working out or sleeping. If your clothes are big
enough to do calisthenics in, it’s time to go shopping.
American Express is a good thing, and the spending
helps the economy. We all have to do our share, right?
5. Ladies, unclad bosoms may get you more in yoursettlement discussions, but those of you who show
them off in court send a vastly different message tothe judge and staff. Showing off your cleavage is fora beach, night club, or…enough said. And for thoseof you who are not happy with this rule, too bad. Not
appropriate for court.
6. It’s not enough to rant about what happens “topside”;
don’t forget your hemlines either, ladies. One
should be able to sit, cross one’s legs, and still havethe thighs covered completely. Again, court is not
a nightclub. You don’t want to be mistaken for a
cocktail waitress at the Bellagio. The short-shorthems of Ally McBeal are long gone. I think I’ve
made my point. Sorry to disappoint the fellas.
7. Perfume is like another item of clothing, and you
shouldn’t share it with others. The rule: if someone
standing three feet away from you can smell it (that’s
nearly a meter, ladies), you’re wearing too much.
If someone is standing closer to you than that, callsecurity, or save the interlude until after 5 p.m. Watch
the judge. If the judge opens a window or turns on a
fan when you walk into his or her office or hearing
room, take a cue and tone it down.
I’m not saying any of this because I’m in some sort of elite
Michael Kors fan club or because I worship Anna Wintour, theeditor of Vogue (but I admit, she is impeccably dressed). But
since I’m a member of the shopaholic club, there has been morethan one occasion when a dear friend has barricaded herself
outside a designer store to keep me from adding to my purse
collection. I think it’s called an intervention. Or so I’ve heard.
I may have experience here to impart some tips.

Some last rants: If you need to be late because you’ve been
on a bender (or wild weekend in Vegas), call in and advise
you’re going to be late. Put yourself together. We don’t have toknow what you’ve been imbibing, do we? That raises all sortsof other issues that aren’t the subject of this article.
For you ladies, your footwear has become a topic ofdiscussion of late. You wouldn’t wear a new evening gown towork, so why wear the stilettos? For you guys, we know teetime is just around the corner, but don’t even think of wearing
your golf shoes to court. The spikes ruin the carpet, such as
it is. I respect the wild and wacky golf attire that quite a few
pros like John Daly are wearing these days, but don’t wear
clothes that make me want to turn down the volume. Or put onsunglasses.
The court attire problem is statewide, as I understand it. It
may be a symptom of our ultra-casual California lifestyle weboast about, or we’re slaves to the industry that likes to playon our sense of insecurity. No matter the reason, we need to
be aware that how we present ourselves professionally makesa difference.
Dress as if you’re going to a job interview in the profession
you’re in rather than an interview at Starbucks or Barnes &Noble. That means ties for men, at a minimum, and preferablya jacket (definitely for trials, anyway). For ladies, you should
be wearing a tasteful and professional dress or skirt and blouse,
and if the blouse is sleeveless, with a jacket. Suits are neverout of style or inappropriate, and they portray you as theprofessional you are. Impressing the judge goes beyond yourlegal skill. It involves your entire presentation, and even how
you interact with opposing parties (but that is also the subjectof another article).
Impress us. Look your best in your efforts to do your best.
But you can show off your new Dooney Bourke purse or yourbutter leather Cole Haan messenger bag or Armani briefcase,and I promise to ooh and ahh appropriately. I do respect a
professionally appointed accessory, whether it’s a purse orbriefcase, after all. Who loves you, Baby?
Tell ’em, Telly.
Judge Hall serves in the Stockton WCAB. She is afrequent contributor to workers’ compensation programs
and is currently a member of the Executive Committee of
this Section.

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7

Caution: Increased MCLE Audits Ahead!
THE HON. W. KEARSE McGILL
Stockton, California
All attorneys whose licenses are in active status mustsatisfy the California State Bar’s Minimum Continuing
Legal Education (MCLE) program requirements every three
years. Unless an attorney has a specific exemption from the
MCLE program requirements (such as state employment), an
attorney must complete twenty-five (25) hours of participatoryclasswork with a California State Bar approved–provider, of
which up to half of those hours (12.5) can be earned throughself-study within the attorney’s three-year cycle. Within the
total hours required, an attorney must complete four (4) hoursof ethics and one (1) hour each in the detection and preventionof substance abuse or mental illness and in the elimination ofbias in the legal profession.
The three-year cycle for each attorney is established byusing the first letter of the attorney’s last name. For example,
an attorney whose last name begins with one of the letters A
through G must complete the MCLE requirements no later thanJanuary 1, 2013. At the time of reporting one’s completion of
the requirements, an attorney is required to certify under penalty
of perjury that the attorney has completed the requirements.
The California State Bar audits attorneys for MCLE
program compliance. Last year it discovered that an audit of
635 attorneys (representing one percent of those who were inlast year’s reporting group) revealed 98 attorneys who were
not in compliance. Of those who were not in compliance, theState Bar is investigating 27 attorneys for falsely reporting
compliance. Recently, the State Bar announced that three of
those attorneys will be referred for prosecution. Because of
those findings, the State Bar announced that it was increasing
its audit rates from the usual one percent to five percent of
those who are in the reporting group this year and then willaudit ten percent of the reporting group next year.
Dina DiLoreto, who is the State Bar’s managing directorof member records and information, said that attorneys should
consider a few points in making sure an audit request they may
receive from the State Bar goes smoothly. First, she said, is tokeep all certificates of attendance and other program materials
for at least one year after the February 1 reporting deadline.
She also recommends keeping a separate log of courses taken
in case that documentation is lost, because State Bar–approved
MCLE providers are required to keep their own attendance
records for four years and can provide proof of attendance if
an attorney loses attendance information.
Another point DiLoreto stresses is that an attorney needs tomake sure that a program is in fact approved by the California
State Bar for MCLE. While some programs publicly state thatapproval is pending, only programs that are approved willcount towards an attorney’s MCLE requirements.
8

WORKERS’ COMPENSATION

A third point DiLoreto mentions is that all active attorneys
are required to report MCLE compliance, and that includes
those attorneys who are exempt from taking MCLE classes,
such as state employees. “In short,” DiLoreto says, “everyone
has to send in a compliance statement when it is due.
Therefore, if an active member is randomly selected for audit,
the State Bar can see if an attorney is claiming compliancethrough credit or exemption and can ask for the appropriate
documentation in the audit notice.”
If an attorney realizes that at the time reporting complianceis required, the attorney will not be in compliance, DiLoretosuggests some “do’s and don’ts” to mitigate the problem.
Under no circumstances should an attorney sign the compliancestatement without actually satisfying the requirements. “If you
are going to miss the deadline for compliance, be honestwith us,” says DiLoreto. The financial penalty for missing
the deadline is $75, and the State Bar gives those who
miss the February 1 deadline sixty (60) days’ notice to get
into compliance before an administrative suspension of an
attorney’s license can occur. That is a small price to pay incomparison to the penalty that can occur if one falsely reports
compliance.
When the State Bar discovers in an audit that an attorney
has not in fact satisfied the requirements for MCLE compliance,
it does look at the circumstances to determine if the lackof compliance was due to an honest mistake or a deliberate
deception. The State Bar recognizes that some people domake honest mistakes in complying with MCLE requirements,
and it will work with those attorneys who did try to comply.
However, DiLoreto states that those who deliberately mislead
the State Bar will face a serious investigation and probablereferral to the Trial Counsel’s office for discipline, and she
points to the recent three referrals from last year’s audit asevidence of just how seriously the State Bar takes the issue.
DiLoreto stresses that the point the State Bar would likemembers to understand is that audits are to help attorneys
understand the importance of MCLE in their professional
development. The purpose of the MCLE program is to help
attorneys represent their clients better, because attorneys who
regularly receive education are better prepared to meet theneeds of their clients.
Kearse McGill is a workers’ compensation judge
at the Stockton Workers’ Compensation Appeals Boardand an advisor to the Workers’ Compensation Section
Executive Committee, with a particular interest in ethics
issues.

15 Percent Adjustment of Permanent Disability
R.I.P.
(1/1/05–12/31/12)
JUSTIN SONNICKSEN, ESQ.
Antioch, California
The road to hell is paved with good intentions.
—St. Bernard of Clarivaux
Actually, Saint Bernard’s quote was, “L’enfer est plein debonnes volontés et désirs.” It sounds much lovelier in French,doesn’t it?
As we all know, when SB 899 passed in 2004, it led toa massive overhaul of the workers’ compensation system in
California, and many of the changes had devastating effects
on injured workers. However, there was one set of provisionsof the new law that appeared to encapsulate the spirit of theworkers’ compensation bargain: Labor Code sections 4658(d)(2) and (3). These sections created an incentive for employers
with 50 or more employees to make an offer of return toregular, modified, or alternative work to employees withpermanent disabilities. These employers would be permitted
to reduce by 15 percent the rate of permanent disability (PD)payments made after such an offer, if timely. Likewise, if,following a permanent and stationary (P&S) determination on
an injury resulting in PD, the employer did not offer an injured
worker the job the worker had before the injury, the remaining PD payments were to be increased by 15 percent. This
provision allowed for some additional monetary consideration
to be given to those workers who were unable to return to work
because of the injury. Sounds simple enough.
Of course, as the opening lines of this article suggest,
however well intentioned the statute was, it has led to a great
deal of litigation over the interpretation of its terms. The
drafters of the statute perhaps did not fully contemplate several
scenarios that might surround an injured worker’s return towork. To the best of this author’s knowledge, there has notbeen a WCAB en banc decision interpreting the provisionsof Labor Code sections 4658(d)(2) and (3), although a coupleof Court of Appeal decisions regarding the statute have been
published.
Furthermore, several Board panel decisions have interpreted the statute, and not surprisingly, the Commissioners
often reach conflicting results. At times, frankly, to accomplish
an equitable result, the Board has read into the statute languagethat does not exist. (As we know from the Supreme Court
decision in Baker v. W.C.A.B. (2011) 76 Cal.Comp.Cases 701,
the Court “may reject a literal construction that is contrary to
the legislative intent apparent in the statute or that would lead
to absurd results.”)

Here are some examples of potentially troublesome
situations that may arise that are not easily resolved by areading of Labor Code sections 4658(d)(2) and (3):
1. The statute says the offer of work should be sent
within 60 days of an injury becoming P&S. What
if the AME or QME assigns a retroactive P&S dateor takes more than 60 days from the date of theexamination to issue the report?
2. If the injured worker retires before the P&S date, isthe employer obligated to make an offer of work?
3. If the employee is fired for cause, can the employer
escape its liability for the 15 percent increase in PD
benefits?
4. What if the injured worker returns to work after
being on temporary disability (TD) but before the
P&S date? A year later, the AME says the condition
is P&S with ratable PD, and within 14 days of receiptof the AME report, the employer makes a valid offer
of work. PD benefits have accrued retroactive to thedate of termination of TD, but are these benefits now
owed at the “standard” rate or at the reduced rate?
5. What if the AME issues a P&S report but does notoutline permanent work restrictions, so the employer
does not know if it can accommodate the injured
worker? Does this situation extend the 60-day
deadline for the employer to send the offer of work to
the injured worker?
6. Does the injured worker have to miss time fromwork due to the industrial injury for the 15 percent
adjustment of PD payments to apply?
7. If there are multiple periods off work with multiple
P&S dates on a single injury, is the employer
obligated to send an offer of work after every P&S
determination? If the employer simply sends anoffer within 60 days of the final P&S finding, is thiscompliance with the statute?
This is by no means an exhaustive list of the perplexing
situations that can arise in interpreting Labor Code section
4658(d). However, these examples illustrate the challenges theBoard is faced with when trying to implement this statute in a
WORKERS’ COMPENSATION

9

way that is fair to the employer and the injured worker. Manyof the questions that have arisen have not yet been definitively
answered.
Perhaps because of the challenges present in interpreting
Labor Code section 4658(d), when the Legislature recently
overhauled workers’ compensation again, through SB 863,
it eliminated the 15 percent adjustment of PD payments forinjuries occurring on or after January 1, 2013. The new Labor
Code section 4658(e) sets forth the payment schedule for PD
benefits without regard to whether the employer has made anoffer of work. The unfortunate consequence of this change isthe loss of the provisions in Labor Code sections 4658(d)(2)and (3), which really did provide injured workers who lost theirjobs due to injury with a small financial cushion—a cushionthat became even more necessary several years ago, after theelimination of vocational rehabilitation.
Nevertheless, since there will be litigation involving
pre–January 1, 2013, injuries for several years to come, it may
be helpful to briefly summarize some of the cases that haveinterpreted this sincere yet flawed statute.
Note: Unless otherwise stated, these are three-member Board
panel decisions and are meant to be illustrative. They are notbinding precedent on other cases.
Audiss v. City of Rohnert Park (2007) Cal Wrk Comp PD
LEXIS 9The WCAB found that the injured worker’s continuationof her regular work following the injury and at the time of the
P&S date was “sufficiently equivalent” to a notice of regular
work and permitted defendant to reduce her entire monetary
PD award by 15 percent. The WCAB did point out that theemployer offered applicant her regular work but not on thecorrect AD Form 10003 because the form was not in existenceat the time of the offer.
Reyes v. City of Los Angeles (2007) Cal Wrk Comp PD
LEXIS 113
The WCAB held that the 15 percent adjustment of PD
applied only to applicant’s PD award payments, not to life
pension payments. Applicant was also awarded a section 5814
penalty based on defendant’s reducing the PD payments by 15
percent without making a valid offer of return to work.
Brown v. County of San Mateo (2008) Cal Wrk Comp PD
LEXIS 425
The Board upheld the WCJ in refusing to allow a 15
percent reduction of PD benefits despite applicant’s continued
employment by the employer. The Board stated that thelogic behind Audiss, supra, was no longer valid since theAdministrative Director offer of work form had since beencreated.
Jauregui v. Mercy Southwest (2008) Cal Wrk Comp PD
LEXIS 582
The Board held that the employer’s duty to offer regular,
modified, or alternative work is not triggered until all of
10

WORKERS’ COMPENSATION

applicant’s disabilities are P&S. It awarded a 15 percent
increase in PD benefits even though an offer of modified work
was timely made since applicant was actually still working in
her regular capacity at the employer at the time of the offer.
City of Los Angeles v. WCAB (Nguyen) (2008) 73 Cal.
Comp.Cases 1348
In this writ-denied case, the Court of Appeal upheld the
WCAB award of a 15 percent increase in PD benefits because
the employer offered applicant regular work when he shouldhave been offered modified work.
Ornelaz v. Albertsons (2008) Cal Wrk Comp PD LEXIS
724
This case represents a situation where the Board readlanguage into the statute in order to achieve an equitable result.
The Board held that an employer has 60 days from the serviceof the AME or QME P&S report (plus five days for mail) to
make a timely offer of work and then reduce the remaining PD
payments by 15 percent. Of course, the statute says nothing
about the date of a report (or the service thereof) as the trigger
date of the start of the 60 days; it merely indicates a timeframe “within 60 days of a disability becoming permanent andstationary.”
Pena v. City of Santa Rosa (2009) Cal Wrk Comp PD
LEXIS 239
The Board did not allow defendant a 15 percent reduction
on the entire PD award despite defendant’s timely offer ofreturn to work. Applicant returned to work prior to the P&S
date, but defendant failed to advance PD in accordancewith Labor Code section 4650 upon the termination of TD
benefits. The accrued PD benefits should have been paid at theunadjusted rate.
Bontempo v. WCAB (2009) 74 Cal.Comp.Cases 419
In a rare published Court of Appeal decision on thisissue, the Court held that applicant’s failure to specificallylist a 15 percent adjustment of PD as an issue in the PreTrial Conference Statement did not constitute a waiver of his
entitlement to that increase when the box labeled “permanent
disability” was checked and the evidence at trial otherwise
supported a 15 percent increase in PD benefits. The Court
noted that defendant was already paying applicant PD at theincreased rate at the time of the MSC.
Boatman v. Town of Windsor (2009) Cal Wrk Comp PD
LEXIS 615
The Board did not allow a 15 percent reduction in PD
benefits where the injured worker missed two weeks of workand then returned to his pre-injury job. Furthermore, it pointed
out that the offer of work was made more than 60 days after the
P&S date (albeit it was made four days after defendant received
the P&S report).

Marincik v. City of Santa Rosa (2012) Cal Wrk Comp PD
LEXIS 199
The Board granted defendant’s request to reduce the entire
PD award by 15 percent even though it had failed to advance
PD benefits immediately upon the termination of TD benefits(which occurred several months before the eventual P&S date).
The Board found that at the time of applicant’s return to work,
the medical evidence did not support a finding of permanent
impairment, and therefore defendant was not obligated toadvance PD benefits before the P&S date.
Parker v. The Georgia Force (2012) Cal Wrk Comp PD
LEXIS 250
The Board held that the provisions of Labor Code section
4658(d) allowing for the 15 percent increase in PD benefits
apply even if the employer is no longer in business and even if
it conducts its primary business outside of California.
City of Sebastopol v. WCAB (Braga) 77 Cal.Comp.Cases
783
The 1st District Court of Appeal issued a publisheddecision on August 28, 2012, in this case. In Braga, the injured
worker remained in his regular job after the injury and suffered
no lost time from work due to the injury. The employer madea timely offer of regular work to applicant and accordingly
reduced the rate of the PD payments by 15 percent. The Courtof Appeal held that the provisions of Labor code sections
4658(d)(2) and (3) do not apply where there is no lost timefrom work. In doing so, the Court reasoned that the justification
behind Labor Code section 4658(d) is to create an incentive for
employers to return disabled employees to work following theirinjuries. However, this return-to-work incentive is absent for
employees who are currently working at their regular job andhave lost no time from work due to the injury.
The problem with the Court’s decision in Braga is that
Labor Code sections 4658(d)(2) and (3) make no distinction,
when determining whether the 15 percent adjustment of PD
benefits applies, between employees who have lost time fromwork and those who have not. This is another example of the
Court’s reading language into the statute that does not exist.
When statutory language is clear, courts are to adopt theliteral meaning of the language unless a strict interpretation
would lead to absurd results. The flawed assumption behind
the Court’s decision in Braga is that the statute was meant
to provide employers whose workers suffer TD and wage
loss due to work injuries with an incentive to return them towork. However, it is the employer’s ability and willingness
to accommodate PDs and permanent work restrictions that is
the subject of Labor Code section 4658(d) and the justification
behind the corresponding 15 percent increase or decrease inthat benefit. Frankly, this decision will lead to inequitable
results for those employers who do retain the services of theirdisabled employees. A plain-language interpretation of thestatute would not have led to an absurd result in this instance;quite the opposite is true.

Perhaps the Court’s decision in Braga underscores thereason the Legislature, with SB 863, decided to scrap the 15
percent adjustment of PD benefits. As one can see, the statutehas led to a great deal of litigation and confusion. In someinstances the statute has caused judges to “rewrite” provisionsof the statute in order to effectuate what they feel is a proper
result. However, it is this author’s opinion that rather than an
entire repeal of the adjustment provision, a more carefully
drafted statute regarding the obligation to offer a return towork could have resulted in a distribution of PD benefits thatwould be fair to both employee and employers. If anything,
this author was hopeful that with the pending legislation, there
would perhaps be an increase in the percentage number of the
PD benefit adjustment in order to give the law more “teeth.”
How many times, as attorneys, have we seen employers
use a workers’ compensation P&S report to get rid of an
employee who has filed a claim? How many times have weseen long-term employees working on modified duty at large
employers following an injury get terminated immediately onreceipt of the P&S report with restrictions from the AME or
QME? Perhaps if the PD adjustment percentage were closer to25 percent, or even 50 percent, large employers would search atiny bit harder for that elusive modified position for the injured
worker that often escapes them now.
Nevertheless, despite the noble motives behind a law
designed to reward employers who make the effort to retain
the services of their disabled employees while also giving
some monetary solace to those unfortunate employees who
cannot continue working at the employer because of the injury,
it is time to bid farewell to the 15 percent adjustment of PD
payments for injuries occurring after January 1, 2013. May
Labor Code sections 4658(d)(2) and (3) rest in peace; au revoir.
Justin Sonnicksen is an applicant attorney with
Pegnim & Ivancich, LLP, which represents clients inpersonal injury, social security disability, and workers’
compensation cases. Mr. Sonnicksen is a current memberof the Executive Committee of the Workers’ Compensation
Section of the State Bar of California.

WORKERS’ COMPENSATION

11

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Documation

VOL. 25, No. 4
2013

Save the Dates! 2013 Section Education Programs
Spring Education Conference
March 16
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Boot Camp for Specialization Exam Preparation
July 13–14
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Northern California (Concord Hilton)
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September 7Southern California

Annual Meeting
October 10–13

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November 2

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