Case Name: ASSOCIATED CONSTRUCTION & ENGINEERING COMPANY OF CALIFORNIA et al., Petitioners, v. WORKERS' COMPENSATION APPEALS BOARD and JEFFERY L. COLE, Respondents
Court: Supreme Court of California
Jurisdiction: California
Decision Date: 1978-12-19
Citations: 22 Cal. 3d 829
Docket Number: L.A. No. 30693
Parties: ASSOCIATED CONSTRUCTION & ENGINEERING COMPANY OF CALIFORNIA et al., Petitioners, v. WORKERS’ COMPENSATION APPEALS BOARD and JEFFERY L. COLE, Respondents.
Judges: 
Reporter: California Reports
Volume: 22
Pages: 829–864

Head Matter:
[L.A. No. 30693.
Dec. 19, 1978.]
ASSOCIATED CONSTRUCTION & ENGINEERING COMPANY OF CALIFORNIA et al., Petitioners, v. WORKERS’ COMPENSATION APPEALS BOARD and JEFFERY L. COLE, Respondents.
Counsel
Trout, Heggeness & Sweet, Clifford D. Sweet III and Perry Trout, Jr., for Petitioners.
Hanna, Brophy, MacLean, McAleer & Jensen, Warren L. Hanna, Michael G. Lowe, J. J. Vonk, G. S. Bjornsen, Arthur Hershenson, Louis L. Fayne, Michael J. Brodie, Mansell & Arthur, John L. Maier, Twohy & Brown and Kevin R. Twohy as Amici Curiae on behalf of Petitioners.
Charles L. Swezey, Philip M. Miyamoto, Thomas J. McBirnie, Joel A. Wallock, Ludecke & Andreos and Alan J. Ludecke for Respondents.
Lonergan, Jordan, Gresham, Varner & Savage, Allen B. Gresham, Barry J. Williams, Frank J. Reilly, Robert Goldstein, Robert Cartwright, Edward I. Pollock, Leroy Hersh, David G. Baum, Robert G. Beloud, Ned Good, Arne Werchick, Stephen Zetterberg, Roger H. Hedrick, Leonard Sacks and Robert B. Steinberg as Amici Curiae on behalf of Respondents.

Opinion:
Opinion
MOSK, J.
We must determine whether the principles of comparative negligence prescribed in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [119 Cal.Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393], are to be applied to the adjudication of employers' subrogation rights within the workers' compensation system. In particular, we consider whether Witt v. Jackson (1961) 57 Cal.2d 57 [17 Cal.Rptr. 369, 366 P.2d 641], and Roe v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 884 [117 Cal.Rptr. 683, 528 P.2d 771]—which prevent a negligent employer from obtaining any credit toward future workers' compensation liability when an injured employee recovers from a third party—should be modified to allow a partial credit to the employer.
We conclude that the principles of Li should indeed modify the Roe doctrine, but only to allow the concurrently negligent employer a credit against workers' compensation obligations which exceed the proportionate liability he would incur for indemnification of the third party under a comparative system of allocating tort responsibility among multiple wrongdoers. Only this result carries out the central objective of Witt to allocate responsibility equitably between a negligent employer and a third party tortfeasor, and thereby prevent the employer from taking "advantage of his own wrong." (Civ. Code, § 3517.)
I
Under section 3601 of the Labor Code, the recovery of workers' compensation benefits is, except in certain limited circumstances, the exclusive remedy of the injured employee against his employer. The claim of those benefits, however, does not affect the employee's right of recovery "for all damages proximately resulting from such injury or death against any person other than the employer." (§ 3852; see De Cruz v. Reid (1968) 69 Cal.2d 217, 222 [70 Cal.Rptr. 550, 444 P.2d 342].) In the event a third party is liable in whole or in part for the employee's injuries, the Labor Code provides the employer with three basic techniques for obtaining reimbursement from the third party for workers' compensation benefits the employer has paid or become obligated to pay: the employer "may bring an action directly against the third party (§ 3852), join as a party plaintiff or intervene in an action brought by the employee (§ 3853), or allow the employee to prosecute the action himself and subsequently apply for a first lien against the amount of the employee's judgment, less an allowance for litigation expenses and attorney's fees (§ 3856, subd. (b))." (Witt v. Jackson (1961) supra, 57 Cal.2d 57, 69.) The code also allows an employer to receive credit before the Workers' Compensation Appeals Board towards future workers' compensation liability for the amount of an employee's third party judgment "as has not theretofore been .applied to the payment of expenses or attorneys' fees, pursuant to the provisions of Sections 3856, 3858, and 3860 of this code, or has not been applied to reimburse the employer." (§ 3861; see also § 3858.)
Prior to 1971, these credit and reimbursement remedies also gave to the employer the advantage of any recovery the employee obtained by way of settlement with the third party. Section 3860, subdivision (b), then provided that "the entire amount of such settlement, with or without suit, is subject to the employer's full claim for reimbursement for compensation he has paid or become obligated to pay . . . ." Section 3861 required the board to allow, as a credit to the employer, amounts from "any recovery by the employee for his injury, either by settlement or after judgment. . . ." (Italics added.)
In Witt we confronted the case of a negligent employer who attempted, at the trial of the employee's third party claim, to avail himself of the statutory reimbursement remedies. We noted that nothing in the Labor Code gave "any indication as to whether or not the employer's right to reimbursement is defeated when the employee's injuries are caused by the concurring negligence of the employer or another of his agents and a third party." (Witt, 57 Cal.2d at p. 69.) We discuss below the underlying rationale of the Witt decision; however, its conclusion may be succinctly related—to allow the negligent employer reimbursement would permit him to profit from his own wrong contrary to the mandate of Civil Code section 3517, and such reimbursement should be denied. We further declared, however, that because "the injured employee may not be allowed double recovery, his damages must be reduced by the amount of workmen's compensation he received." (Id., at p. 73.)
In Roe v. Workmen's Comp. Appeals Bd. (1974) supra, 12 Cal.3d 884, we encountered the negligent employer in a somewhat different setting—claiming a credit under section 3861 after the injured employee had settled his cause of action against the third party without determination of the issue of employer negligence. Two substantial arguments were advanced against extending Witt to bar recovery by a negligent employer in this situation: first, denial of the employer's credit would inure to the benefit of the employee rather than the third party, thereby giving the employee a "double recovery" of both workers' compensation benefits and third party settlement; and second, an adjudication of the employers' negligence by the board would be unconstitutional.
Roe held that neither of these problems justified allowing negligent employers to claim a credit. We expressed doubt as to whether the recovery of workers' compensation benefits by an employee following a settlement constituted a double recovery, given the likelihood that any settlement took into account the possibility of such a recovery (12 Cal.3d at p. 889), and pointed out that in any event "The policy against double recovery primarily protects the third party tortfeasor, not the employer"—the party seeking to assert that policy in Roe. Similarly, we found nothing in the Constitution to prevent the board from determining the employer's fault for the purpose of adjudicating his claim of credit. (Id., at p. 891.) We concluded "(1) that the concurrent negligence of the employer bars his right to a credit against his liability for compensation for the amount of any recovery for his injury obtained by the employee by settlement of his cause of action against third parties; and (2) that where the employer's negligence has not been adjudicated in such third party action, the applicant is entitled to have it adjudicated before the Board." (Gregory v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 899, 902 [117 Cal.Rptr. 694, 528 P.2d 782].)
II
In the course of his employment as a carpenter for Associated Construction & Engineering Company of California (hereinafter employer), Jeffery L. Cole (hereinafter employee) seriously injured his right ankle. At the time, employer was insured with California Compensation and Fire Company. Workers' compensation benefits for temporary disability amounting to $6,144.87 were paid to employee, and he was provided with all necessary medical treatment. Employee brought suit against a third party, Napp Systems, U.S.A., Inc. The record does not reveal the basis of the lawsuit, only that it was settled for $60,000, with the plaintiff-employee actually receiving $40,000. The record also fails to indicate the circumstances surrounding this settlement—in particular, whether employer sought a lien against the settlement in order to recoup his prior workers' compensation expenditures, whether employer joined or intervened in the lawsuit, or if the suit was settled without the employer's consent.
Subsequent to settlement of the third party suit, employee sought a permanent disability award. The workers' compensation judge found that the employee had sustained a permanent "disability of 29 percent, representing a total monetary award of $8,085, of which $2,270 had theretofore been advanced by employer.
Employer claimed a credit against its workers' compensation liability under Labor Code section 3861 in the amount of employee's $40,000 net recovery in the third party action, which credit would have effectively eliminated employer's further workers' compensation obligations. Employee pleaded the employer's concurrent negligence as a bar to the credit, relying on Roe. Employer in response maintained that the "all-or-nothing" rule of Roe had been modified by Li, and requested that the judge reduce its credit only in accordance with its comparative fault. The judge, however, concluded that Roe remained applicable, and refused to apply comparative principles or make a determination of employer's relative negligence. He did determine that employer was negligent, and on this basis denied employer's claim of credit. The board affirmed this decision, adopting the opinion of the judge as its own. Faced with an award of permanent disability benefits, undiminished by the employee's substantial third party recovery, employer petitioned this court for a writ of review of the board's decision.
III
In 1971, the Legislature amended two sections of the Labor Code relating to settlements between injured employees and third party defendants. We must determine the effect of the amendments on the credit rights of employers.
The Legislature's action in 1971 followed a decade of judicial activity which had substantially altered the structure of third party litigation in workers' compensation cases. From at least the codification of workers' compensation laws in 1937 until 1971, the consent of both employer and employee was necessary for either to effect a settlement with a third party defendant. This consent requirement encouraged employers and employees to settle simultaneously their claims against the third party. It also served to "protect the rights and interests of employee and employer and to prevent or discourage either of them from obtaining a recovery from the third party at the expense or the disadvantage of the other." (Brown v. Superior Court (1970) 3 Cal.3d 427, 431-432 [90 Cal.Rptr. 737, 476 P.2d 105].) The employer and employee could efficiently be required to share each other's litigational burden in part because each had an interest in establishing the liability of the third party for the employee's injuries and in obtaining the maximum possible recovery. Moreover, there were no dramatic differences in the proof required for either to succeed in his claim.
After Witt a significant element was added to the burden of an employer who sought reimbursement from the third party. The employer now had to litigate the issue of his own negligence in order to succeed—whether he proceeded by way of lien, intervention, or independent action. He retained, however, his statutory right to veto any settlement. As a result, the contributorily negligent employer enjoyed a tactical advantage in settlement negotiations which did not necessarily reflect his likelihood of success at trial.
In Brown, supra, we attempted to reconcile these post- Witt realities of settlement practice with the prevailing statutory policy of protecting the reimbursement rights of the nonnegligent employer in litigation against the third party. We recognized that when "the issues of defendant's negligence and any alleged contributory negligence of the employee have once been determined favorably to the employee—and thus favorably to the employer as well—and only the issue of concurrent negligence of the employer remains in the case," it would impose no hardship on the employer to allow the employee to accept a sum from the third party "in settlement of the employee's share of the total claim free and clear from the reimbursement rights asserted by the employer." (3 Cal.3d at p. 432.) The employer would be left "to pursue the litigation as best he could," but he would be required to litigate no further issues in order to obtain reimbursement than he would otherwise have to litigate in order to claim his lien rights with regard to an employee's settlement recovery—i.e., the issue of his negligence. At the same time, by allowing independent employee-third party settlements once the common issues had been "determined or conceded against the third party," Brown removed the tactical advantage previously enjoyed by a negligent employer. (Id.) The employee could reach an independent settlement with a third party willing to agree on liability and the employee's recovery, but unwilling to compensate the negligent employer; the employer, if he sought reimbursement, would be required to litigate the issue of his negligence in an action against the third party.
The year following Brown the consent provision of the Labor Code was amended. The following subdivision was added to section 3859: "(b) Notwithstanding anything to the contrary contained in this chapter, an employee may settle and release any claim he may have against a third party without the consent of the employer. Such settlement or release shall be subject to the employer's right to proceed to recover compensation he has paid in accordance with section 3852." In addition, section 3860, subdivision (b), which subjects the employee's settlement to the "employer's full claim for reimbursement," was prefaced with the qualifying phrase "except as provided in Section 3859."
These amendments clearly deny the employer his former right to veto any settlement between the employee and third party; however, the breadth and imprecision of the amendatory language has generated some uncertainty as to an employer's remedies following such an independent settlement. Much of the controversy centers on the effect of the amendments on the employer's lien and the rule of Brown. (See Van Nuis v. Los Angeles Soap Co. (1973) 36 Cal.App.3d 222 [111 Cal.Rptr. 398]; but see Marrujo v. Hunt (1977) 71 Cal.App.3d 972 [138 Cal.Rptr. 220]; Harvey v. Boysen (1975) 50 Cal.App.3d 756, 760 [123 Cal.Rptr. 740]; Lasky, Subrogation Under the California Workmen's Compensation Laws—Rules, Remedies and Side Effects (1972) 12 Santa Clara Law. 1, 8-27; Cal. Workmen's Compensation Practice (Cont.Ed.Bar 1973) p. 648; id., (Cont.Ed.Bar Supp. 1976) pp. 149-150.) We restrict our discussion to the issue presented herein—the effect of the amendments on the employer's credit rights—and conclude that neither the language nor the purpose of the 1971 amendments reflect a legislative intent to abolish the employer's credit with respect to an independent employee-third party settlement.
It is significant that the Legislature modified the lien provisions of sections 3859 and 3860, but did not change the language of either section 3858 or section 3861, which together authorize the employer's credit remedy. This omission raises at least an inference that the Legislature did not have the employer's credit in mind when it amended section 3859. (See People v. Valentine (1946) 28 Cal.2d 121, 142 [169 P.2d 1].)
The Legislature's ambiguous expressions of intent in section 3859, subdivision (b), do not justify an abridgement of the policy, expressed forcefully elsewhere in the statute, that a nonnegligent employer should have the advantage of an employee's settlement with a third party so long as he can prove his liability for future workers' compensation payments and defeat an assertion of his culpability. Section 3861 still provides that "The appeals board is empowered to and shall allow, as a credit to the employer to be applied against his liability for compensation, such amount of any recovery by the employee for his injury, either by settlement or after judgment, as has not theretofore been applied to the payment of expenses or attorneys' fees, pursuant to the provisions of Sections 3856, 3858, and 3860 of this code, or has not been applied to reimburse the employer." (Italics added.) Yet, unless the Brown prerequisites happen to be met, denial of an employer's credit would restrict him to a cause of action against the third party in which he would be compelled to litigate the issue of the defendant's liability as well as his own lack of negligence.
Finally, even were we, in the manner of Brown, to condition the abolition of an employer's credit on the determination of the common issue against the third party, denial of the credit would in practice substantially deprive many nonnegligent employers of the possibility of recouping a substantial portion of their workers' compensation benefits. In a series of Court of Appeal decisions, it has been held that the employer, in an independent action against the third party, cannot recover for workers' compensation benefits not yet determined by the board. (Conner v. Utah Constr. & Mining Co. (1964) 231 Cal.App.2d 263, 275 [41 Cal.Rptr. 728]; Castro v. Fowler Equipment Co. (1965) 233 Cal.App.2d 416, 421-423 [43 Cal.Rptr. 589]; Slayton v. Wright (1969) 271 Cal.App.2d 219, 229-232 [76 Cal.Rptr. 494]; but see Comment, Roe v. Workman's Compensation Appeals Board: Something Fishy in California Workers' Compensation Law (1976) 27 Hastings L.J. 637, 643-646.) Thus, in order fully to recover his workers' compensation obligations, the employer would be required to postpone adjudication of his third party claim until permanent benefits were fixed by the board. Yet obvious legal and practical considerations might prevent the employer from so delaying trial of his claim. Section 3853 requires that employer and employee actions be consolidated, and nothing in the statute prevents an employee from postponing his independent settlement under section 3859 until the eve of trial, or even the middle of trial. We should not easily attribute to the Legislature an intent to make an employer's recovery fluctuate dramatically with his ability to prolong litigation.
In short, abolition of the employer's right to claim a credit on the basis of an independent employee-third party settlement would effectively deny nonnegligent employers the ability to recoup a substantial portion of the workers' compensation payments which would otherwise be received, indirectly, from third parties by way of a settlement credit. Nothing in the statute indicates an intent to abridge in this manner the policy expressed in section 3861. We therefore conclude that the Legislature did not intend to insulate from employers' credit claims independent settlements negotiated between employees and third parties. Accordingly, we consider the appropriate principles to apply to the adjudication of such claims.
IV
In Li v. Yellow Cab Co. (1975) supra, 13 Cal.3d 804, 828-829, we held that "the 'all-or-nothing' rule of contributory negligence . . . should be and is herewith superseded by a system of 'pure' comparative negligence, the fundamental purpose of which shall be to assign responsibility and liability for damage in direct proportion to the amount of negligence of each of the parties." We also noted, however, that our decision in Li should "be viewed as a first step in what we deem to be a proper and just direction, not as a compendium containing the answers to all questions that may be expected to arise." (Id., at p. 826.) This caveat mandates that we proceed with caution when considering the application of comparative negligence principles to a system of workers' compensation which has as its central feature a principle of employer liability without fault. Nevertheless, to the extent Witt and Roe depend on the vitality of contributory negligence, the same considerations of "logic, practical experience, and fundamental justice" that motivated our decision in Li (id., at p. 808) require an accommodation of the Witt-Roe doctrines to a comparative system.
The employer herein contends that the "all-or-nothing" rule of Roe must fall to the logic of Li, and urges that we replace Roe with a system in which the board determines the employer's comparative negligence, and denies only that percentage of employer's credit which corresponds to his degree of negligence. Both employee and the board argue that modification of Witt and Roe in light of Li would violate the purposes of all three cases, and unnecessarily—even unconstitutionally—inject questions of fault into proceedings before the board.
Analysis of the underlying theory of Witt reveals that application of comparative negligence principles to that case would not violate its purpose, or the intent of Li\ but such analysis also points up serious difficulties with the particular application of Li urged by employer.
The central animus of our decision in Witt was to obtain an equitable distribution of liability between the negligent employer and the third party tortfeasor. (See Larson, Law of Workmen's Compensation (1976) § 75.22, p. 14-267; Comment, Roe v. Workman's Compensation Appeals Board: Something Fishy in California Workers' Compensation Law (1976) 27 Hastings L.J. 637, 640.) Under the rule of Witt, the negligent employer pays workers' compensation benefits to the employee and is denied reimbursement; the third party obtains a reduction in his tort liability which corresponds to those benefits; and the employee's net recovery remains unchanged. The effect of Witt is thus to allow the third party defendant to "shift part of the responsibility for the judgment rendered against it to the employer's carrier." (Witt, supra, 57 Cal.2d at p. 70.)
The most significant aspect of Witt, for purposes of analyzing the applicability of comparative negligence principles to the credit and reimbursement rights of employers, is its reference to the then-existing law of contribution between joint tortfeasors. Prior to our decision in that case an employer could be reimbursed out of a third party recovery whether or not he was negligent. We pointed out in Witt that this rule corresponded to the pre-1957 common law doctrine denying contribution between concurrent tortfeasors, in that the third party paid in full the employee's damages without any contribution from the negligent employer. (Id.) We held, however, that passage in 1957 of Code of Civil Procedure sections 875 through 880 mandated judicial provision for some contribution by the negligent employer, noting that "today, in the absence of the Workmen's Compensation Act, a negligent third party would be allowed contribution against a concurrently negligent employer . . . ." (Id.) An approximation of that contribution, within the statutorily limited liability of the employer, was effected by denying the contributorily negligent employer reimbursement and granting the third party a corresponding reduction in his tort liability.
Witt thus established the principle that, to the extent allowed by the employer's statutory liability, the employer and third party should share liability as would ordinary concurrent tortfeasors. To the extent the reimbursement provisions of the Labor Code allowed an employer to avoid this duty of contribution, we reasoned, they allowed him to "profit from his own wrong." We applied the same logic in Roe with respect to the credit provisions of the Labor Code.
The development and application of comparative negligence principles, however, has undermined the conceptual basis for the rule of Witt and Roe by altering the liability of ordinary joint tortfeasors. To achieve Lis objective of a "system under which liability for damage will be borne . in direct proportion to . . . respective fault" (Li, 13 Cal.3d at p. 813), in American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 591-599 [146 Cal.Rptr. 182, 578 P.2d 899], we modified California's common law equitable indemnity doctrine to permit "comparative indemnity" between multiple tortfeasors. As Witt and Roe interpreted the reimbursement and credit provisions of the Labor Code in light of the advent of contribution, so we must now interpret them to reflect the advent of comparative responsibility among joint tortfeasors. Applying the principle that the employer and third party should, to the extent consistent with the employer's statutory immunity from tort liability, share the burden of the employee's recovery as joint tortfeasors, we conclude that the concurrently negligent employer should receive either credit or reimbursement for the amount by which his compensation liability exceeds his proportional share of the injured employee's recovery. (See Arbaugh v. Procter & Gamble Mfg. Co. (1978) 80 Cal.App.3d 500, 508-509 [145 Cal.Rptr. 608].)
When the issue of an employer's concurrent negligence arises in a judicial forum, application of comparative negligence principles is relatively straightforward. The third party tortfeasor should be allowed to plead the employer's negligence as a partial defense, in the manner of Witt. Once this issue is injected into the trial, the trier of fact should determine the employer's degree of fault according to the principles of American Motorcycle. The court should then deduct the employer's percentage share of the employee's total recovery from the third party's liability—up to the amount of the workers' compensation benefits assessed against the employer. Correspondingly, the employer should be denied any claim of reimbursement—or any lien under section 3856, subdivision (b)—to the extent that his contribution would then fall short of his percentage share of responsibility for the employee's total recovery.
When the issue of an employer's concurrent negligence arises in the context of his credit claim based on a third party settlement, the board must determine the appropriate contribution of the employer since the employee's recovery does not represent a judicial determination of tort damages. Specifically, the board must determine (1) the degree of fault of the employer, and (2) the total damages to which the employee is entitled. The board must then deny the employer credit until the ratio of his contribution to the employee's damages corresponds to his proportional share of fault. Once the employer's workers' compensation contribution reaches this level, he should be granted a credit for the full amount available under section 3861. Only when such level of contribution has been reached, however, will grant of the statutory credit adequately accommodate the principle that a negligent employer should not profit from his own wrong.
A system so structured will eifect an allocation of responsibility between negligent employers and third party tortfeasors far more equitably than the rule urged by employer. Employer proposes that the board determine the employer's relative fault and reduce the amount of its credit by the percentage of negligence so determined. The employer could then take this reduced credit immediately, without regard to the magnitude of its prior contribution to the employee's recovery. Under this mechanistic application of Li, a negligent employer that had made an insignificant contribution would have its already deficient contribution further reduced—a result clearly at odds with the premise that an employer should not be able to profit from its own wrong.
In opposition to the application of comparative negligence principles to employers' subrogation rights within the workers' compensation system, it is argued that the board cannot constitutionally be authorized to make the necessary factual determinations. In Roe, we rejected the contention that an inquiry by the board into whether the employer was negligent injects "fault" into the board's compensatory function, contrary to the constitutional requirement that the workers' compensation system compensate workers "irrespective of the fault of any party." (See Cal. Const., art. XIV, § 4.) We reasoned: "To classify the employee's damage recovery as a workmen's compensation benefit at the outset of the hearings begs a question yet to be determined. At that point the employee stands before the board with an achieved recovery of damages. If the employer has been negligent, the recovery is unalloyed tort damages; none of it belongs to the employer, none of it is available to offset the employer's compensation liability. If the employer is freed of fault, he is entitled to the offset; to that extent the employee's recovery is the equivalent of workmen's compensation benefits (received from the third party in lieu of the latter's liability to the fault-free employer)." (Roe, 12 Cal.3d at p. 891.)
The theory thus advanced in Roe concerning the board's determination of whether the employer was negligent is equally applicable to determination of the degree the employer was negligent: in either case, the board does not condition benefits upon "the fault of any party," but rather seeks only to characterize the employee's prior recovery from the third party. As we explained in Roe, the Constitution does not prevent adjudications of fault to resolve such ancillary issues as credit as long as workers' compensation benefits are not thereby diminished; and under the rule announced herein such benefits are not diminished whether or not the employer's negligence is determined. The rule has been structured in such a manner that the employee fully recovers his tort damages—but from the proper parties. Apportionment of liability between the concurrently negligent employer and third party may depend on the relative fault of the two, but workers' compensation benefits are not so dependent. Compensation thus remains irrespective of fault.
It is further argued that application of comparative negligence principles in the context presented by the case at bar—i.e., when the employer claims credit on the basis of a settlement and no determination has been made of either the employer's degree of negligence or the employee's total damages—will require the board to make difficult factual determinations and will thus contravene the constitutional purpose underlying the workers' compensation system of accomplishing "substantial justice in all cases expeditiously, inexpensively, and without incumbrance of any character . . . ." (Cal. Const., art. XIV, § 4.) We disposed of such a contention in Roe, holding that board determination of such tangential issues as negligence would not encumber board proceedings unnecessarily. We noted that "Sections 4551 and 4553 require the board to alter the amount of the award when either employee or employer has been guilty of serious and wilful misconduct," and concluded that "The board may decide a claim of employer negligence with no more and probably less difficulty than the issue of serious and wilful misconduct." (Roe, 12 Cal.3d at p. 892.)
It is forcefully argued on behalf of the board, however, that applying comparative principles to the rule of Roe will require a set of determinations qualitatively more complicated than merely inquiring into the presence or absence of employer negligence. Although the application of comparative principles to employers' credit rights may indeed burden board proceedings to some extent by requiring more extensive evidentiary presentations, we do not agree that the problems posed thereby are so severe or so impervious to amelioration as to render the methodology either unconstitutional or misguided.
The rule announced herein contemplates two factual determinations: (1) the degree of fault attributable to the employer, and (2) the total damages suffered by the employee. When a settlement between the employee and a third party tortfeasor fails to resolve these issues, the task devolves upon the board. The burden thus imposed, however, may often be discharged without being appreciably more difficult than under the current requirements of Roe. For instance, the employer, as the party asserting a claim of credit after a determination of workers' compensation liability, must defeat any claim that its percentage share of total damages equals or exceeds its workers' compensation liability. Because the board need only decide to deny credit that the damages for which the employer is responsible equal the employer's actual workers' compensation contribution, a precise determination of damages will not always be necessary. Elaborate evidentiary presentations may be avoided when the benefits assessed against the employer are clearly insufficient to merit a credit.
Thus, in the large number of cases involving a single third party tortfeasor and a tort recovery by the employee substantially in excess of his workers' compensation entitlement, board proceedings will not be unduly complicated. Even in the few cases in which the assessment of total damages poses special difficulties or the existence of multiple tortfeasors renders an assessment of the employer's degree of negligence relatively burdensome, we do not perceive the obstacles posed to be insurmountable.
The other policy arguments asserted against extending comparative principles to the adjudication of employers' credit rights are similarly unpersuasive. It is contended that such an extension would permit a negligent employer to profit from its own wrong and thus violate the important policy effectuated through the Witt-Roe doctrine. Under the rule we announce, however, the employer does not so profit; no credit is available until the employer has fully satisfied its share of tort damages. Allowing the concurrently negligent employer a credit limited in this fashion is rational if nonnegligent employers are to be permitted credit; each profits, if at all, only to the extent it committed no wrong. The resultant system effects a fair and equitable balance between the interest of the employee in receiving his full damages and the interest of the employer in recovering its subrogation interest. The employer does not profit from its wrong, nor does the employee enjoy a double recovery.
Finally, permitting a partial credit will not encourage employers to maintain "half-safe" workplaces, in violation of the overriding purpose of workers' compensation law. (See Cal. Const., art. XIV, § 4.) An employer will obtain a reduction of its workers' compensation liability only if its degree of negligence is so small that its statutory liability exceeds its percentage share of the tort measure of.damages. In any event, there is no safety disincentive in a system that holds the employer responsible for its full share of tort damages before any credit against workers' compensation benefits is allowed.
V
We conclude that the . doctrines of Roe and Witt must be modified to reflect the principles of comparative negligence developed in Li and American Motorcycle. Thus, an employer may be allowed credit or reimbursement under the Labor Code, based on an employee's recovery from a third party, but only to the extent the employer's liability in workers' compensation exceeds its share of responsibility for the employee's full tort damages. When an employer claims a credit before the board after an employee's independent third party settlement, section 3861 operates as a delegation of authority to the board to make the necessary determinations to apply this rule. Any complication of board proceedings that may unavoidably result is justified by the same considerations of logic and justice that led us to apply comparative negligence in the first instance.
The award is annulled and the matter remanded to the Workers' Compensation Appeals Board for further proceedings consistent with this opinion.
Clark, J., Richardson, J., and Manuel, J., concurred.
CLARK, J.
Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [119 Cal.Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393], American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578 [146 Cal.Rptr. 182, 578 P.2d 899], Daly v. General Motors Corp. (1978) 20 Cal.3d 725 [144 Cal.Rptr. 380, 575 P.2d 1162], and Safeway Stores, Inc. v. Nest-Kart (1978) 21 Cal.3d 322 [146 Cal.Rptr. 550, 579 P.2d 441], compel concurrence in the judgment and in the majority opinion.
However, as we become more familiar with the practical workings of the comparative fault system, justices will recognize, as many trial judges have, that the system involves great expense and that inquiry into relative fault requires determinations our triers of fact—whether juries, judges, or administrative boards—are ill-equipped to make. It is encouraging to see some of my colleagues now recognize the shortcomings of the system. (Infra, p. 861.) Hopefully, a majority of our court—if not our Legislature —will soon adopt a simpler system of apportioning damage in cases where more than one party is at fault.
Except where noted, all statutory references are to the Labor Code.
The Workers' Compensation Appeals Board will hereafter be referred to as the board.
This constitutional argument was based on provisions in article XIV, section 4. requiring compensation "irrespective of the fault of any party." and contemplating such legislation as "shall accomplish substantial justice in all cases expeditiously, inexpensively. and without incumbrance of any character. . . ." (See discussion infra.)
In keeping with the statutory usage (§ 3850, subd. (b)), all references to "employer" hereafter include employer's workers' compensation carrier, unless otherwise indicated.
Prior to its amendment in 1971, section 3859 provided: "No release or settlement of any claim under this chapter as to either the employee or the employer is valid without the written consent of both. The consent of both the employer and employee filed in court in writing together with the approval of the court, is sufficient in any action or proceeding where such approval is required by law."
Subdivision (b) of section 3860 now reads in full: "(b) Except as provided in Section 3859, the entire amount of such settlement, with or without suit, is subject to the employer's full claim for reimbursement for compensation he has paid or become obligated to pay and any special damages to which he may be entitled under Section 3852, together with expenses and attorney fees, if any, subject to the limitations in this section set forth."
The survival of both a credit and reimbursement remedy under the holding of this case gives the employer the choice of two courses of action, one against the third party and one which penalizes the employee. Most employers can be expected to choose the forum presenting the least onerous proof requirements. The risk that an employer will seek recovery from the third party may be effectively allocated by an agreement under which the employee agrees to assume the defense of such an action and pay any resulting judgment. This type of agreement has been successfully consummated. (See Levels v. Growers Ammonia Supply Co. (1975) 48 Cal.App.3d 443 [121 Cal.Rptr. 779].) Similar arrangements might shift the risk of a successful credit claim to the third party.
The Los Angeles Superior Court has proposed jury instructions for reimbursement cases which substantially embody employer's proposed system. (BAJI Nos. 15.14-15.19 (6th ed. 1977) pp. 668-691.)
Under the rule of American Motorcycle, the joint and several liability of joint tortfeasors is retained. (20 Cal.3d at pp. 586-591.) Thus, except for his Witt-type deduction, the third party remains liable for all of employee's damages, including the portion which represents the extent to which section 3864 insulates the negligent employer from the comparative responsibility he would otherwise incur.
As no allegations of employee negligence appear on the face of this record, we do not decide here how such negligence, if established, would affect the proportional contribution of the employer.
Application of this rule is simple and may be illustrated by the following example. Assume an employee receives $20,000 in workers' compensation benefits. He later sues a third party to recover for the same injury, which suit is settled without the consent of the employer. Out of the settlement, the employee actually receives, after the payment of "expenses or attorneys' fees" within the meaning of section 3861, the sum of $25,000. The employee then seeks further benefits from the board, and his employer claims a credit in the amount of the $25,000 settlement recovery. Under the principles announced herein, the board would then determine the employer's degree of fault and the employee's total damages. Should the board find the employer free of negligence, of course, the employer would receive the benefit of the entire $25,000 settlement as a credit against future payments. Were the board, however, to determine that the employer was 50 percent negligent, and that the employee is entitled to $100,000 in damages, then the employer could not claim a credit until he contributed an additional $30,000 in benefits. The employer would then have contributed a total of $50,000 to the employee's recovery, or 50 percent of the employee's total damages of $100,000, and the ratio of his contribution to the employee's damages would correspond to his degree of fault.
Thus, under its proposed rule the employer herein would be relieved of all further contribution even if it is determined that employer was 85 percent at fault; credit for only 15 percent of the employee's $40,000 net settlement would effectively wipe out employer's further workers' compensation liability of approximately $5,800.
BAJI Nos. 15.14-15.19 (6th ed. 1977) pages 668-691, to the extent they are inconsistent with this opinion, should not be used by trial courts.