1

Filed 8/11/11

IN THE SUPREME COURT OF CALIFORNIA

CHRISTINE BAKER, as Administrator, )

etc., )

)

Petitioner, )

) S179194

v. )

) Ct.App. 6 H034040

WORKERS‟ COMPENSATION )

APPEALS BOARD and X.S., ) WCAB Case No.

) ADJ1510738/SJO 0251902

Respondents. )

___________________________________ )

In this case we construe Labor Code1 section 4659, subdivision (c) 

(section 4659(c), or subdivision (c)), which provides for the annual indexing of 

two categories of workers‟ compensation benefits—total permanent disability and 

life pension payments—to yearly increases in the state‟s average weekly wage 

(SAWW), so that lifetime disability payments made to the most seriously injured 

workers will keep pace with inflation. The indexing procedure is sometimes 

referred to as an “escalator,” or one providing for “cost of living adjustments” 

(COLA‟s).

Permanent disability and life pension benefits are intended to compensate 

the injured worker for the long-term, residual effects of an industrial injury once 

the worker has attained maximum medical recovery. (Department of 

 

1 All further statutory references are to the Labor Code unless otherwise 

specified.
2

Rehabilitation v. Workers’ Compensation Appeals Board (2003) 30 Cal.4th 1281, 

1291 (Department of Rehabilitation).) Total permanent disability benefits are 

weekly payments made for life to injured workers who are 100 percent disabled. 

(§ 4659, subd. (b).) They commence on the date the injured worker reaches a 

medically stable condition (permanent and stationary) because, at that point, the 

full nature and extent of the worker‟s permanent disability, if any, can be 

determined. (Department of Rehabilitation, supra, 30 Cal.4th at p. 1292.) Life 

pensions are a form of supplemental partial permanent disability benefit, 

consisting of payments to a subclass of seriously injured workers, i.e., those whose 

“permanent disability is at least 70 percent, but less than 100 percent.” (§ 4659, 

subd. (a).) Life pension payments commence once the worker‟s partial permanent 

disability payments have been exhausted, and thereafter continue weekly for life. 

(Ibid.)

Section 4659(c) provides, in full, “For injuries occurring on or after January 

1, 2003, an employee who becomes entitled to receive a life pension or total 

permanent disability indemnity as set forth in subdivisions (a) and (b) shall have 

that payment increased annually commencing on January 1, 2004, and each 

January 1 thereafter, by an amount equal to the percentage increase in the „state 

average weekly wage‟ as compared to the prior year. For purposes of this 

subdivision, „state average weekly wage‟ means the average weekly wage paid by 

employers to employees covered by unemployment insurance as reported by the 

United States Department of Labor for California for the 12 months ending March 

31 of the calendar year preceding the year in which the injury occurred.” 

(§ 4659(c).)

We must determine whether the operative language of subdivision (c) 

requires the annual COLA‟s for total permanent disability and life pension 

payments to be calculated (1) prospectively from the January 1 following the year 
3

in which the worker first becomes “entitled to receive a life pension or total 

permanent disability indemnity” (§ 4659(c)), i.e., when the payments actually 

commence; (2) retroactively to January 1 following the year in which the worker 

sustains the industrial injury, the construction urged by real party in interest, or (3) 

retroactively to January 1, 2004, in every case involving a qualifying industrial 

injury, regardless of the date of injury or the date the first benefit payment 

becomes due, the interpretation given the statutory language by the Court of 

Appeal below.

Applying the “fundamental rule of statutory construction . . . that a court 

should ascertain the intent of the Legislature so as to effectuate the purpose of the 

law [citations]” (DuBois v. Workers’ Comp. Appeals Bd. (1993) 5 Cal.4th 382, 

387 (DuBois)), we conclude that, through the operative language of 

subdivision (c), the Legislature intended that COLA‟s be calculated and applied 

prospectively commencing on the January 1 following the date on which the 

injured worker first becomes entitled to receive, and actually begins receiving, 

such benefit payments, i.e., the permanent and stationary date in the case of total 

permanent disability benefits, and the date on which partial permanent disability 

benefits become exhausted in the case of life pension payments.

FACTS AND PROCEDURAL BACKGROUND

The injured worker in this matter, X.S.2 (applicant), sustained an industrial 

injury on January 20, 2004, while employed as an accountant/controller. He 

received temporary disability payments of $728 per week from the date of injury 

through October 19, 2006. On June 19, 2007, he and his employer settled his 

 

2 X.S. is a shortened version of a fictitious name assigned by the presiding 

workers compensation administrative law judge to protect applicant‟s medical 

privacy.
4

claim, stipulating that he had become permanent and stationary on October 20, 

2006, and that he suffered a 69.5 percent partial permanent disability, 

compensation for which was payable at the rate of $200 per week based on his 

earnings and date of injury (§ 4453, subd. (b)(6)(B)), for 422 weeks, commencing 

on the permanent and stationary date.

Approximately one month after settling his claim with his employer, 

applicant, who had a preexisting disability caused by hepatitis B and his HIVpositive status, filed an application for benefits from the Subsequent Injury Benefit 

Trust Fund (SIBTF) pursuant to section 4751.3 Petitioner in this matter, Christine 

Baker, is the Director of Industrial Relations serving as administrator of the 

SIBTF. SIBTF is funded and administered by the state for the purpose of 

compensating workers with prior disabilities who suffer subsequent industrial 

injuries.

On March 25, 2008, SIBTF and applicant stipulated that his January 20, 

2004 injury resulted in a 69.5 percent permanent disability; that he became 

permanent and stationary on October 20, 2006; that payments for permanent 

disability commenced on that date; and that his previous permanent disability 

combined with his industrial disability resulted in a combined total permanent 

 

3 Section 4751 provides, in relevant part: “If an employee who is 

permanently partially disabled receives a subsequent compensable injury resulting 

in additional permanent partial disability so that the degree of disability caused by 

the combination of both disabilities is greater than that which would have resulted 

from the subsequent injury alone, and the combined effect of the last injury and 

the previous disability or impairment is a permanent disability equal to 70 percent 

or more of total, he shall be paid in addition to the compensation due under this 

code for the permanent partial disability caused by the last injury compensation for 

the remainder of the combined permanent disability existing after the last injury 

. . . .” (§ 4751.) The payment for the combined disability is made by the SIBTF. 

(Subsequent Injuries Fund v. Workmen’s Comp. App. Bd. (1970) 2 Cal.3d 56, 59.)
5

disability of 100 percent. The parties agreed that applicant would receive weekly 

payments of $528 from the SIBTF ($728 less $200 paid by the employer‟s 

workers‟ compensation insurance carrier), which payments would continue for 

422 weeks, and thereafter $728 weekly for life.

Subsequently, a dispute arose when applicant claimed the initial $728 

weekly rate that started on October 20, 2006, had to be increased to reflect annual 

increases in the SAWW, through the calculation of retroactive COLA‟s for the 

period from January 1 following the date on which he had sustained his industrial 

injury (Jan. 20, 2004), to the date on which his total permanent disability payments 

commenced (the permanent and stationary date of Oct. 20, 2006). Petitioner, on 

behalf of the SIBTF, maintained that the weekly payment of $728 to applicant, 

commencing on the permanent and stationary date, properly reflected the total 

permanent disability rate calculated under sections 4659, subdivision (b) and 4453 

(a related section under which total permanent disability rate payments are 

calculated, referenced in § 4659, subd. (b)), and that the annual indexing of that 

payment with COLA‟s should not commence, per the language of section 4659(c), 

until January 1, 2007, which was the January 1 following the date applicant 

became permanent and stationary and actually began receiving his payments.4

On July 14, 2008, the worker‟s compensation administrative law judge 

(WCJ) issued a “Findings and Award” against the SIBTF, concluding that by 

failing to retroactively calculate and apply the annual COLA‟s for January 1, 2005 

(the first “January 1” following the date of injury) and January 1, 2006, COLA 

 

4 There was no dispute among the parties that payments made on and 

subsequent to January 1, 2007, going forward, should be indexed annually, on that 

and each successive January 1, based on the percentage increase of the SAWW as 

compared to the “prior” year. (§ 4659(c), 1st sentence.)
6

increases had been improperly withheld from applicant in the amount of 

$3,585.56.

The SIBTF appealed to the Workers‟ Compensation Appeals Board 

(WCAB), which, on February 13, 2009, issued its “Opinion and Decision After 

Reconsideration,” construing section 4659(c) as “provid[ing] that for injuries on or 

after January 1, 2003, where an employee becomes entitled to total permanent 

disability indemnity or a life pension, that payment shall be increased annually 

commencing on January 1, 2004. We construe this to mean that each payment of 

total permanent disability indemnity or life pension that is received on or after 

January 1 following the date of injury shall be increased, no matter when the first 

such payment is received. This ensures that severely injured workers are protected 

from inflation, no matter when they receive their first payment. In some cases 

there may be years of litigation before there is a determination that an employee is 

entitled to receive a life pension or total permanent disability indemnity award. In 

the case of a life pension, the first payment will ordinarily be made years after the 

date of injury. Nonetheless, the injured worker will have been protected against 

any inflation that may have ensued between the date of injury and the date of first 

payment of the life pension or total permanent disability indemnity.” (Italics 

added.)

On March 30, 2009, following the WCAB‟s final decision, the SIBTF 

petitioned the Court of Appeal for a writ of review (§ 5950), urging that the 

WCAB had misinterpreted section 4659(c) by finding that the statute‟s COLA 

increases begin accruing (and compounding) prior to the January 1 after the 

permanent and stationary date, the date on which the first benefit payment actually 

becomes due and payable, and asserting that “by holding that the payment increase 

is tied to the date of injury, the [WCAB] decided that the increase applies before

an employee is entitled to receive a benefit payment, contrary to the plain 
7

language of the statute which stated that the increase applies to „an employee who 

becomes entitled to receive‟ a life pension or total permanent disability 

indemnity.” (Italics in original.)

The Court of Appeal granted the writ of review and received full briefing,

as well as amicus curiae briefs from the California Applicants‟ Attorneys 

Association (CAAA) in support of applicant, and the County of Los Angeles on 

behalf of the SIBTF. In its amicus brief, the CAAA noted that, under applicant‟s 

reading of the statute, the COLA‟s began accruing on January 1 following the date 

of injury, whereas under the SIBTF‟s interpretation, the COLA‟s began accruing 

only with the first payment of indemnity after the injured worker becomes 

permanent and stationary, “which could be many years after the date of injury.” 

The CAAA asserted that both were wrong, as the “plain language of the statute 

mandates that the COLA in fact begins to accrue January 1, 2004, without regard 

to date of injury.” (Italics added.)

Agreeing with the position taken by the CAAA, the Court of Appeal 

concluded that “the [COLA‟s] pursuant to [§ 4659(c)], for life pensions and total 

permanent disability indemnity, are added to those payments, per the words of the 

statute, starting January 1, 2004, and every January 1 thereafter,” and annulled the 

decision of the WCAB. The court reasoned that “as to the worker whose injury 

leads to total permanent disability that does not become permanent and stable for a 

number of years, setting the COLA‟s from the permanent and stationary date 

causes that worker to see his or her payment exposed to the ravages of inflation 

over time, eroding the real value of the benefits.”

We granted the SIBTF‟s petition for review. We thereafter granted the 

requests of the State Compensation Insurance Fund and the California Chamber of 

Commerce to file amicus curiae briefs in support of petitioner, and the CAAA and 
8

the California Correctional Peace Officers Association to file amicus curiae briefs 

in support of applicant.

DISCUSSION

“As in any case involving statutory interpretation, our fundamental task is 

to determine the Legislature‟s intent so as to effectuate the law‟s purpose. (People 

v. Lewis (2008) 43 Cal.4th 415, 491.) „We begin with the text of the statute as the 

best indicator of legislative intent‟ (Tonya M. v. Superior Court (2007) 42 Cal.4th 

836, 844), but we may reject a literal construction that is contrary to the legislative 

intent apparent in the statute or that would lead to absurd results (Ornelas v. 

Randolph (1993) 4 Cal.4th 1095, 1105).” (Simpson Strong-Tie Co., Inc. v. Gore

(2010) 49 Cal.4th 12, 27; DuBois, supra, 5 Cal.4th at p. 387.) “[O]ur first task is 

to look to the language of the statute itself. [Citation.] When the language is clear 

and there is no uncertainty as to the legislative intent, we look no further and 

simply enforce the statute according to its terms. [Citations.]” (Dubois, at 

pp. 387-388.)

Section 4659(c) comprises two sentences, the first of which contains the 

indexing scheme‟s operative language, and the second of which defines the 

SAWW for purposes of the subdivision. The first sentence provides: “For injuries 

occurring on or after January 1, 2003, an employee who becomes entitled to 

receive a life pension or total permanent disability indemnity as set forth in 

subdivisions (a) and (b) shall have that payment increased annually commencing 

on January 1, 2004, and each January 1 thereafter, by an amount equal to the 

percentage increase in the „state average weekly wage‟ as compared to the prior 

year.” (§ 4659(c), italics added.)

Petitioner SIBTF argued below that under a straightforward reading of the 

first sentence of subdivision (c), there is no retroactive calculation of COLA‟s or 

additional sums to be added into the first total permanent disability or life pension 
9

payment for periods prior to the date on which the worker first becomes eligible to 

receive, and actually begins receiving, such payment. Instead, the first COLA 

would be computed and applied to the payment on the January 1 following the 

year in which the worker becomes permanent and stationary or, in the case of life 

pensions, on the January 1 following the year in which the worker‟s partial 

permanent disability benefits have become exhausted.

The express language of the operative first sentence of subdivision (c) 

plainly supports this construction. To receive the benefit of a COLA on any given 

January 1, a worker who has sustained an industrial injury must meet two 

conditions. First, he or she must have been injured “on or after January 1, 2003 

. . .” (§ 4659(c).) Second, he or she must “become[] entitled to receive a life 

pension or total permanent disability indemnity . . . .” (Ibid., italics added.) This 

court‟s past decisions explain that the entitlement to total permanent disability 

indemnity payments arises when the injured worker‟s condition becomes 

permanent and stationary or, to put it in other terms, when the statutory obligation 

to pay temporary disability indemnity has ceased. (LeBoeuf v. Workers’ Comp. 

Appeals Bd. (1983) 34 Cal.3d 234, 238, fn. 2; Department of Rehabilitation, 

supra, 30 Cal.4th at p. 1292.) In the case of life pension benefits, the entitlement 

to receive such payments arises, by statute, when the worker‟s partial permanent 

disability benefits have been exhausted. (§ 4659, subd. (a).) Hence, under 

subdivision (c)‟s express language, it is not until the injured employee “becomes 

entitled to receive a life pension or total permanent disability indemnity” 

(§ 4659(c), italics added), and actually begins receiving such payments, that he or 

she “shall have that payment increased annually . . . by an amount equal to the 

percentage increase in the „state average weekly wage‟ as compared to the prior 

year.” (Ibid., italics added.)
10

The reference to the fixed date of January 1, 2004, in the first sentence of 

section 4659(c) (“commencing on January 1, 2004, and each January 1 

thereafter”) is not inconsistent with this construction of its operative provisions. 

Since the subdivision applies only to injuries occurring “on or after January 1, 

2003” (§4659(c)), the date of January 1, 2004, is the first “January 1” on which a 

COLA may be calculated and applied under the subdivision‟s statutory scheme, 

i.e., for those workers who were injured on or after January 1, 2003, and who, 

during that calendar year, became permanent and stationary and thus became 

“entitled” (ibid.) to receive total permanent disability payments as of January 1, 

2004.5 The phrase “shall have that payment increased annually commencing on 

January 1, 2004, and each January 1 thereafter” (§ 4659(c), italics added) is thus 

most reasonably understood as a reference to the overall period to which the new 

statutory scheme will apply, or put another way, the indexing provision‟s effective 

date, with January 1, 2004, being the first “January 1” on which a COLA could be 

calculated and applied for qualifying injuries sustained after January 1, 2003.

This straightforward and sensible reading of the operative language of 

subdivision (c) then applies uniformly to all successive years postdating the 

statute‟s effective date. Each January 1, “commencing on January 1, 2004, and 

each January 1 thereafter” (§ 4659(c)), an employee who has sustained a 

qualifying industrial injury “on or after January 1, 2003” and who has “become 

entitled to receive a life pension or total permanent disability indemnity” “shall 

 

5 It is not likely that a worker who sustains a partial permanent disability 

from an injury occurring on or after January 1, 2003, would have his or her partial 

permanent disability benefits awarded and exhausted within the ensuing year, thus 

entitling him or her to receive life pension benefits by January 1, 2004. But a 

close reading of the syntax of the first sentence reflects that this circumstance does 

not undermine our construction of the provision.
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have that payment increased annually . . . by an amount equal to the percentage 

increase in the „state average weekly wage‟ as compared to the prior year.” (Ibid.)

The Court of Appeal, in contrast, construed the phrase “shall have that 

payment increased annually commencing on January 1, 2004, and each January 1 

thereafter . . .” (§ 4659(c)), as meaning that every worker who sustains an 

industrial injury on or after January 1, 2003, regardless of the date he or she is 

injured, and who thereafter becomes eligible to receive total permanent disability 

or lifetime pension payments, even if that be decades into the future, must receive 

annual COLA‟s calculated and applied to any such future payments retroactive to 

January 1, 2004. The court believed it was thereby giving effect to the literal 

language of the statute (“shall have that payment increased annually commencing 

on January 1, 2004 . . .” (§ 4659(c)). The court reasoned that “as to the worker 

whose injury leads to total permanent disability that does not become permanent 

and stable for a number of years, setting the COLA‟s from the permanent and 

stationary date causes that worker to see his or her payment exposed to the ravages 

of inflation over time, eroding the real value of the benefits.” It concluded the 

Legislature must have intended to remedy such inequity by authorizing COLA‟s 

retroactive to January 1, 2004, in every case qualifying for indexing treatment 

under the statutory scheme.

“[W]e may reject a literal construction that is contrary to the legislative 

intent apparent in the statute or that would lead to absurd results (Ornelas v. 

Randolph [, supra,] 4 Cal.4th 1095, 1105).” (Simpson Strong-Tie Co., Inc. v. 

Gore, supra, 49 Cal.4th at p. 27; Younger v. Superior Court (1978) 21 Cal.3d 102, 

113.) We find that the Court of Appeal‟s purported literal construction of the 

reference to the date “January 1, 2004” in section 4659(c) is implausible for 

several reasons.
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First and foremost, the Court of Appeal‟s construction is patently at odds 

with the operative language of section 4659(c), as described above. Calculating 

and applying COLA‟s retroactively to the arbitrary fixed date of January 1, 2004 

in every case reads right out of the statute the requirement that the disabled worker 

must first “become[] entitled to receive a life pension or total permanent disability 

indemnity” (§ 4659(c)) before COLA‟s may be applied to such payments. 

Similarly, before an injured worker becomes entitled to receive disability 

payments, there simply is no “payment” (“shall have that payment increased 

annually . . .”) (§ 4659(c), italics added) to be increased.

Next, to ascribe such a literal meaning to the drafters‟ inclusion of the fixed 

date of January 1, 2004, in the statutory language would expand the scope of the 

statute‟s indexing provisions in a manner the Legislature could not within reason 

have intended. Under the Court of Appeal‟s interpretation of section 4659(c), a 

worker who did not sustain his or her industrial injury until the year 2008, or 2011, 

and indeed workers who will not suffer such injuries qualifying them for total 

permanent disability or life pension benefits until well into the future, would still 

receive annual COLA‟s for every calendar year commencing on the arbitrary date 

of January 1, 2004, through to the date on which they become entitled to and 

actually begin receiving their benefit payments, which COLA‟s would further then 

be compounded from January 1, 2004, going forward. Even persons who have not 

yet joined the work force, and for whom workers‟ compensation insurance 

premiums have yet to be paid, but who, in years to come, may become employed, 

sustain industrial injuries, and qualify for the two categories of disability benefits 

covered under subdivision (c), would likewise have their future benefit payments 

enhanced by compounded annual COLA‟s retroactive to the arbitrary fixed date of 

January 1, 2004, under the Court of Appeal‟s construction of the statute. The 
13

Legislature could not possibly have envisioned or intended such an expansive 

application of the statute‟s anti-inflationary protections.

Furthermore, as petitioner observed below, under the Court of Appeal‟s 

construction of the statute, many workers with industrial injuries qualifying them 

for total permanent disability benefits could actually receive a windfall “double 

escalator” as a result of applying retroactive COLA‟s for the period from January 

1, 2004, until the date they sustain their injury. This is so because of the 

provisions of section 4453, subdivision (a)(10), which operate in conjunction with 

section 4659, subdivision (b), to set the total permanent disability payment rates 

based on the worker‟s earnings on the date of injury. Briefly, section 4453, 

subdivision (a)(10), sets forth brackets (floors and ceilings) for determining 

temporary disability payments based on the injured worker‟s earnings on such 

date. For injuries occurring after January 1, 2007, the upper brackets are 

themselves indexed to the SAWW (i.e., increased) to account for the effects of 

inflation over time.6 Section 4659, subdivision (b), in turn, extends those 

increases in the ceiling brackets for temporary disability payments to the 

calculation of total permanent disability payment rates. As a result of the interplay 

of these two statutes, under the Court of Appeal‟s interpretation of section 

4659(c)‟s indexing provision, a maximum earnings worker sustaining an industrial 

injury in 2011 that leads to total permanent disability would receive the benefit of 

both section 4453, subdivision (a)(10)‟s increase in the ceiling brackets used to 

calculate temporary disability payment rates (i.e., adjusted for inflation), which are 

then utilized to calculate the total permanent disability payment rate by virtue of 

 

6 Applicant here sustained his industrial injury on January 20, 2004. 

Accordingly, the SAWW indexing provision found in section 4453, 

subdivision (10), has no direct application to his case.
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section 4659, subdivision (b), and the benefit of the annual (and compounded) 

COLA‟s calculated and applied retroactive to January 1, 2004, for the period from 

that date until the date of injury in 2011 — the “double escalator” complained of 

by petitioner below.

“The words of the statute must be construed in context, keeping in mind the 

statutory purpose, and statutes or statutory sections relating to the same subject 

must be harmonized, both internally and with each other, to the extent possible. 

[Citations.]” (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 

Cal.3d 1379, 1387.) It is unreasonable to infer that the Legislature intended two

distinct anti-inflation measures to overlap and apply to the calculation of the same 

total permanent disability payment rate. Moreover, workers who sustain industrial 

injuries qualifying them for total permanent disability payments receive temporary 

disability payments for the period between the date of injury and the date they 

become permanent and stationary and begin receiving their permanent payments. 

Depending on the date of injury, the Legislature has provided that those temporary 

disability payments may themselves be indexed to the SAWW, thereby protecting 

the payments received by the worker during that waiting period from the effects of 

inflation. (See §§ 4453, subd. (a)(10), 4653, 4661.5.)

Next, to the extent the phrase “shall have that payment increased annually 

commencing on January 1, 2004, and each January 1 thereafter . . .” (§ 4659(c), 

italics added) can be viewed as creating some ambiguity in the operative language, 

we may “look to a variety of extrinsic aids, including the ostensible objects to be 

achieved, the evils to be remedied, the legislative history, public policy, 

contemporaneous administrative construction, and the statutory scheme of which 

the statute is a part. [Citations.]” (People v. Woodhead (1987) 43 Cal.3d 1002, 

1008.) We find an examination of the legislative history of section 4659(c), 

enacted by Assembly Bill No. 749 (2001-2002 Reg. Sess.) (Stats. 2002, ch. 6, 
15

§ 67), lends no support to the argument that the Legislature intended to expand the 

inflation protection of subdivision (c), through the language utilized in its 

operative sentence, by authorizing COLA‟s to be calculated retroactive to either 

the fixed date of January 1, 2004, in every case, or to the January 1 following the 

date on which the worker sustains his or her qualifying industrial injury.

First, the Workers‟ Compensation Insurance Rating Bureau of California 

(WCIRB) prepared a cost analysis report for the Legislature, which is part of the 

official legislative history of Assembly Bill No. 749 (2001-2002 Reg. Sess.), in 

which the indexing of disability benefits proposed in the new legislation was 

summarized and analyzed. (WCIRB, Preliminary Evaluation of Assembly Bill 

No. 749 as Amended January 31, 2002 (Feb. 1, 2001) pp. 1-2.) In that report, the 

WCIRB stated, “AB 749 provides that weekly permanent total benefits [sic] paid 

during each calendar year be increased annually by the change in the state average 

weekly wage. We have assumed these annual increases would commence the year 

following the year in which permanent total benefit payments began.” (Id., 

appen., Summary of Benefits Proposed, § 2, fn. 1, italics added.) At the very least, 

this legislative history reflects that when enacting section 4659(c), the Legislature 

had before it for consideration the solicited opinion of a workers‟ compensation 

insurance rating service, which analyzed the legislation‟s provisions and fiscal 

impact, and concluded the annual COLA‟s authorized thereunder would, per the 

bill‟s language, be applied prospectively once the injured worker‟s total permanent 

disability payments commenced.

Second, in the Assembly debates over the proposed workers‟ compensation 

reform measures in the 2001-2002 legislative session, the question arose whether 

COLA‟s for total permanent disability and life pension payments should be 

retroactively extended to workers who had sustained their industrial injuries prior 

to January 1, 2003, and who were receiving lifetime disability payments without 
16

any adjustments for inflation. Then Governor Davis vetoed two earlier attempts at 

reform (Sen. Bill No. 71 (2001-2002 Reg. Sess.) and Assem. Bill No. 1176 (2001-

2002 Reg. Sess.)) because, inter alia, he viewed the total costs of those packages, 

which included COLA‟s for pre-2003 injured workers, as exorbitant. (See Assem. 

Com. on Insurance, Analysis of Assem. Bill No. 749 (2001-2002 Reg. Sess.) as 

amended Jan. 31, 2002, pp. 17-18; Sen. Rules Com., Off. of Sen. Floor Analyses, 

3d reading analysis of Assem. Bill No. 749 (2001-2002 Reg. Sess.) as amended 

Jan. 31, 2002, p. 2.) It would be unreasonable to conclude that the Legislature, 

having agreed in the final enacted version of subdivision (c) to forego retroactive 

COLA‟s for workers with pre-2003 injuries as a cost-saving compromise, would 

then extend COLA‟s to all current workers who will sustain qualifying industrial 

injuries in future years, and to those persons who will sustain such future injuries 

but have yet to even enter the workforce, retroactive to the fixed arbitrary date of 

January 1, 2004, as a component of the compromise legislation.

The COLA‟s provided for in subdivision (c) apply to only two categories of 

disability benefits: total permanent disability and life pension payments, and only 

then for injuries sustained after January 1, 2003. It can further be observed that 

partial permanent disability payments for industrial injuries rated at less than 70 

per cent, and temporary disability payments for workers in all such categories 

whose injuries predate 2007, are not indexed to the SAWW to protect such 

payments against inflation. Indeed, adjustment for inflation seems to be more the 

exception than the rule. (See § 4453, subd. (d) [“Except as provided in section 

4661.5 [for the calculation of temporary disability payments more than two years 

after the date of injury], disability indemnity benefits shall be calculated according 

to the limits in this section in effect on the date of injury and shall remain in effect 

for the duration of any disability resulting from the injury.”].) In short, we find no 

compelling reason to conclude the Legislature intended the COLA‟s authorized 
17

under section 4659(c) to broadly redress all the potentially erosive effects of 

inflation—past, present and future—for every case falling within the two 

categories of disability benefits covered under subdivision (c).

Last, applicant‟s argument that section 4659(c) calls for the calculation of 

COLA‟s retroactive to the January 1 following the date of injury must be rejected 

for the same reasons we have found the Court of Appeal‟s construction of the 

statutory language untenable. Applicant‟s construction would likewise conflict 

with the straightforward operative language of the subdivision‟s first sentence, 

because workers who suffer total permanent disability, or partial permanent 

disability sufficiently serious to give rise to the right to life pensions, do not 

“become[] eligible” (§ 4659(c)) to receive such benefit payments as of the date of 

injury or the January 1 immediately following that date. (Indeed, life pension 

payments usually commence many years if not decades after the date of injury.) 

Hence there is no “payment” (§ 4659(c)) to which COLA‟s can be applied as of 

the date of injury under the statute‟s operative language. Moreover, for the same 

policy and legislative history reasons given for rejecting the Court of Appeal‟s 

expansive reading of the statute, we find no basis to conclude that the Legislature, 

through the language utilized in subdivision (c), actually intended to extend the 

COLA‟s authorized thereunder retroactive to the January 1 following the date of 

injury.

The WCAB below agreed with the interpretation of the statutory language 

urged by applicant, suggesting that, “[t]his holding is also consistent with the 

second sentence of section 4659(c). The state average weekly wage which is the 

basis of the increased payments is determined initially by data in the „calendar 

year preceding the year in which the injury occurred,‟ not the year in which the 

first payment is made. This is further evidence of legislative intent that the 
18

increased payments be calculated from the January 1 following the date of injury, 

not from the date of first payment.”

The second sentence of section 4659(c) reads, “For purposes of this 

subdivision, „state average weekly wage‟ means the average weekly wage paid by 

employers to employees covered by unemployment insurance as reported by the 

United States Department of Labor for California for the 12 months ending March 

31 of the calendar year preceding the year in which the injury occurred.” 

(§4659(c).)

The WCAB‟s Opinion and Decision After Reconsideration offered no 

further guidance as to how the language in the second sentence, which specifically 

references SAWW data for “the calendar year preceding the year in which the 

injury occurred” (§ 4659(c)), might be read consistently with the operative 

language of the first sentence to support applicant‟s position that the COLA‟s must 

be calculated and applied from the January 1 following the date of injury. We 

make the following brief observations regarding the matter.

First, the question directly before us in this case is when the COLA‟s 

authorized under subdivision (c) must be applied under the operative language, 

i.e., prospectively, from the January 1 following the date on which the worker first 

becomes eligible to receive the benefit payments and actually begins receiving 

them, as was argued by petitioner below, or retroactively, i.e., from either the 

fixed date of January 1, 2004 (the Court of Appeal‟s construction of the 

subdivision), or from the January 1 following the date of injury (applicant‟s 

position). Consideration of the language of the second sentence of subdivision (c) 

sheds little light on that inquiry, and, as noted, the WCAB‟s decision neither 

analyzed the relevant statutory language nor explained how the special definition 

of the SAWW found in the second sentence could be squared with the operative 
19

language of the first sentence and thereby support its conclusory determination 

that the date of injury controls.

Second, the parties below agreed, as apparently did the WCAB and the 

Court of Appeal, that, looking forward from the January 1 following the date on 

which the worker‟s benefit payments in question first become due and payable, the 

COLA‟s must then be calculated and applied “each January 1 thereafter” 

(§ 4659(c)), to reflect each successive year‟s percentage change in the SAWW “as 

compared to the prior year” (id., italics added) for the duration of the worker‟s 

lifetime payments. As petitioner states in the opening brief, “No one disputes that 

once payments begin, the raise in payments each year is based on the increase in 

the state average weekly wage from the prior calendar year.” (Italics added.)

Neither the parties nor the Court of Appeal focused on the special definition 

of the SAWW contained in the second sentence of section 4659(c). Nor did they 

seek to explain how the phrase “average weekly wage paid by employers to 

employees covered by unemployment insurance as reported by the United States 

Department of Labor for California for the 12 months ending March 31 of the 

calendar year preceding the year in which the injury occurred,” utilized in that 

definition, could be given effect together with the operative language of the first 

sentence, “shall have that payment increased annually . . . by an amount equal to 

the percentage increase in the „state average weekly wage‟ as compared to the 

prior year.” (§ 4659(c), italics added.) Accordingly, we have no clear occasion in 

this case to construe the language or import of the special definition of the SAWW 

contained in section 4659(c). That having been said, we briefly observe that the 

special definition, which purports to tie any year-to-year change in the SAWW to 

the figures for the year preceding the date of injury, appears in conflict with the 

otherwise clear language of the first sentence, which defines the COLA‟s in the 
20

traditional sense, as “an amount equal to the percentage increase in the „state 

average weekly wage‟ as compared to the prior year.” (Ibid., italics added.)

Although the parties have not briefed or argued the point, our research 

reveals that the Legislature‟s two earlier attempts at drafting the inflationoffsetting measures of subdivision (c), Senate Bill No. 71 (2001-2002 Reg. Sess.) 

and Assembly Bill No. 1176 (2001-2002 Reg. Sess.), both of which were vetoed 

by then Governor Davis, contained the following language as the proposed 

subdivision‟s second sentence: “For the purpose of this subdivision, „state average 

weekly wage‟ means the average weekly wage paid by employers to employees 

covered by unemployment insurance, as reported to the Employment Development 

Department for the four calendar quarters ending June 30 of the calendar year 

preceding the year in which the adjustment is made.” (Italics added.)

The current text of section 4659(c)‟s second sentence is no model of clarity. 

Perhaps the Legislature may wish to revisit the suitability of the current language 

of the second sentence of subdivision (c) in light of the operative language of the 

first sentence.
21

CONCLUSION

The judgment of the Court of Appeal is reversed and the matter remanded 

to that court for further proceedings consistent with the views expressed herein.

BAXTER, J.

WE CONCUR:

CANTIL-SAKAUYE, C. J.

KENNARD, J.

WERDEGAR, J.

CHIN, J.

CORRIGAN, J.

LAMBDEN, J.P.T.*

_______________________

* Associate Justice, Court of Appeal, First Appellate District, Division Two, 

assigned by the Chief Justice pursuant to article VI, section 6 of the California 

Constitution.
22

See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Baker v. Workers‟ Compensation Appeals Board and X.S.

__________________________________________________________________________________

Unpublished Opinion

Original Appeal

Original Proceeding

Review Granted XXX 179 Cal.App.4th 1009

Rehearing Granted

__________________________________________________________________________________

Opinion No. S179194

Date Filed: August 11, 2011

__________________________________________________________________________________

Court:

County:

Judge:

__________________________________________________________________________________

Counsel:

Vanessa L. Holton, Steven A. McGinty, Carol Belcher, Anthony Mischel and Jesse N. Rosen for Petitioner.

Robert E. Kalunian, Acting County Counsel (Los Angeles), Leah D. Davis, Assistant County Counsel, 

Jeffrey L. Scott and Jason E. Waller, Deputy County Counsel, for County of Los Angeles as Amicus Curiae 

on behalf of Petitioner.

Suzanne Ah-Tye, Patricia A. Brown and David M. Goi for State Compensation Insurance Fund as Amicus 

Curiae on behalf of Petitioner.

Law Offices of Saul Allweiss and Michael A. Marks for California Workers‟ Compensation Institute as 

Amicus Curiae on behalf of Petitioner.

Finnegan, Marks, Theofel & Desmond and Ellen Sims Langille for the California Chamber of Commerce 

as Amicus Curiae on behalf of Petitioner.

No appearance for Respondent Workers Compensation Appeals Board.

Butts & Johnson, Arthur L. Johnson and Heather A. Harper for Respondent X.S.

Marcus & Regalado, Marc G. Marcus and Jason M. Marcus for California Applicants‟ Attorneys 

Association as Amicus Curiae on behalf of Respondent X.S.

Frank Rankin for California Correctional Peace Officers Association as Amicus Curiae on behalf of 

Respondent X.S.
23

Counsel who argued in Supreme Court (not intended for publication with opinion):

Anthony Mischel

Department of Industrial Relations

Office of the Director-Legal Unit

320 W. 4th Street, Suite 600

Los Angeles, CA 90013

(213) 576-7725

Ellen Sims Langille

Finnegan, Marks, Theofel & Desmond

1990 Lombard Street, Suite 300

San Francisco, Ca 94123

(415) 931-9284

Arthur L. Johnson

Butts & Johnson

481 N. First St.

San Jose, CA 95112

(408) 293-4818

Marc G. Marcus

Marcus & Regalado

3031 F Street, Suite 100

Sacramento, CA 95816

(916) 441-1611