CLASSIFICATION VS. SCHEDULE LOSS OF USE
In New York workers' compensation matters, claimants who have demonstrated residual permanent physical and functional impairment as a result of their work-related accidents are entitled to compensation for the reduction in their overall ability to earn a wage in future employment. Because the workers’ compensation statutory framework was devised only to replace lost wages resulting from work-related accidents, the purpose of permanent impairment awards is to compensate workers only for their lost economic opportunities, not pain and suffering or other ancillary losses.
The legislature devised a two-tiered approach to compensate injured workers for their permanent impairments. Workers’ Compensation Law § 15(3) contains a schedule of awards for a permanent partial disability (PPD) resulting from a loss of specific body parts (i.e., extremities) or functions (such as vision and hearing). Workers’ Compensation Law § 15(3)(w) pertains to those cases of permanent partial disability that are not amenable to a schedule award.
Section 1.5 of both the 2012 and 2018 Permanency Guidelines states that “[n]o residual impairments must remain in the systemic area (i.e. head, neck, back, etc.) before the claim is considered suitable for schedule evaluation of an extremity or extremities involved in the same accident.” An exhaustive list of circumstances is also given for conditions that would otherwise be the subject of a schedule to be instead classified. Whether a claimant’s condition warrants a schedule loss of use (SLU) award or an award of continuing disability benefits is considered a question of fact for resolution by the Board.
Based on the foregoing, it had long been the law of the land in New York workers’ compensation matters that a claimant could not be found to have an SLU and classified with a PPD for injuries arising out of the same accident.
Thus, if a claimant’s injuries were found amenable to SLU evaluation, he or she would receive a lump sum award to compensate for the future residual permanent physical and functional impairments, regardless of current work status. SLU awards are based on the schedule set forth in Workers’ Compensation Law § 15(3) (see also Appendix A of the 2018 Permanency Guidelines) that assigns a value to each schedulable body part (e.g., 312 weeks for an arm, 288 weeks for a leg), and the claimant is then compensated based on the percentage loss of use of that body part.
If a claimant suffered a nonschedulable permanent impairment, he or she would be classified with a PPD and the Board would determine the claimant’s resulting loss of wage earning capacity (LWEC). The LWEC is set as a percentage between 0% and 99%, determined based on both the medical evidence and vocational factors. When a claimant is classified based on nonschedulable injuries, the claimant’s schedulable injuries are taken into account in determining his or her LWEC. The LWEC finding is meant to quantify how much earning power a claimant has lost in light of his or her medical impairment, functional limitations, prior work history, education, skills, and aptitudes. Classification results in a claimant becoming entitled to a capped number weekly benefits based on the LWEC finding, at the rate corresponding to the LWEC percentage. A claimant who is out of work or working at reduced wages as a result of his or her causally-related PPD at the time of classification continues to receive weekly indemnity benefits up to the capped number of weeks. A claimant who has returned to work at full wages at the time of classification receives no immediate monetary award, but retains the right to collect weekly indemnity benefits should he or she experience causally related wage loss in the future; the caps do not run while the claimant is working and not collecting indemnity benefits.
Accordingly, there was a monetary incentive for claimants with both schedulable and nonschedulable injuries (e.g., a neck and shoulder injury) who had returned to work at full wages by the time of permanency to demonstrate that their condition was amenable to an SLU award over classification. Conversely, insurance carriers and self-insured employers (SIE) had an incentive to argue that such claimants should be classified.
THIRD DEPARTMENT DECISION IN MATTER OF TAHER
In Matter of Taher v. Yiota Taxi, Inc., 162 A.D.3d 1288 (3d Dept. 2018), decided on June 14, 2018, the Third Department appeared to have altered the above landscape in a significant way. In Matter of Taher, the claimant sustained injuries to his neck, back, right knee, and right shoulder, and subsequently returned to work at his preinjury wages. Physicians found that there was permanent impairment of both the schedulable and nonschedulable sites of injury. The claimant argued that because he had returned to work at preinjury wages, he was entitled to both classification and SLU awards. The Board found that the claimant’s condition was amenable to classification due to the nonschedulable injuries, and, consistent with its longstanding position on the issue, that the claimant was not entitled to both an award for an SLU and a nonschedule PPD classification for injuries sustained in the same accident.
The Third Department disagreed and held that “in the unique circumstance where no initial award is made based on a nonschedule [PPD] classification, a claimant is entitled to an SLU award.” The Court explained that a claimant may receive an SLU award notwithstanding his nonschedule classification for the injuries that he sustained in the accident, but may not receive both an SLU award and nonschedule award for the impairments sustained in the same accident. Put more simply, the Court found – contrary to and without acknowledging the provision in Section 1.5 of the Permanency Guidelines – that a claimant can be found to have an SLU while simultaneously being classified with a PPD, and where the claimant is not entitled to weekly PPD benefits at the time of classification (in this case, due to his return to work at full wages), the claimant is entitled to an SLU award. If that claimant is entitled to weekly benefits at the time of classification, then he or she would not be entitled to an SLU award, since both are intended to compensate the claimant for loss of wage earning capacity sustained in the accident, such that concurrent payment of the SLU award and PPD benefits would amount to duplicative compensation. The Court explained that if the claimant subsequently becomes entitled to PPD benefits (because he, for example, stops working due to his PPD), the carrier or SIE will have a credit for the prior SLU award. As the Board had yet to make a finding regarding the claimant’s LWEC resulting from his PPD, the Third Department found that the Board did not err to the extent that it found that the claimant was not presently entitled to an SLU award and continued the case for development of the record on that issue, but noted that the claimant will be entitled to an SLU award if it is ultimately determine that he is not entitled to a nonschedule award.
We believe that Matter of Taher was wrongly decided, and the carrier in Matter of Taher has filed a motion for leave to appeal to the New York Court of Appeals, which remains pending as of the date of this Update.
BOARD PANEL DECISION IN MATTER OF TREVI NAIL CORP.
In the meantime, while final resolution of this issue is pending the exhaustion of appeals, we have been monitoring the Board’s decisions to see how it has been applying Matter of Taher, and it appears that the Board disagrees with the Third Department as well. Specifically, in Matter of Trevi Nail Corp., a Memorandum of Board Panel Decision filed on November 15, 2018, the Board affirmed a WCLJ’s finding that the claimant’s injuries were subject to classification and not subject to SLU evaluation, despite the fact that the claimant had returned to work at full wages.
In Matter of Trevi Nail Corp., the claimant sustained injuries to her neck, back, shoulder, elbows, wrists/hands, and hips, and subsequently returned to work. Physicians rendered various opinions addressing SLU of the extremities only. The Workers’ Compensation Law Judge (WCLJ) found that the claimant’s injuries were classifiable and not subject to SLU evaluation, and directed the parties to produce new permanency reports. The claimant appealed, conceding that she has permanent injuries that are classifiable, but arguing that her injuries should also be found subject to SLU pursuant to Matter of Taher. The Board rejected this argument and affirmed the WCLJ.
The Board found that “the holding in Taher neither warrants nor necessitates a rescission of the finding that the injuries the claimant sustained are not subject to a SLU evaluation.” In doing so, the Board cited the Board’s Permanency Guidelines’ requirement that no residual impairments remain in the systemic area before the claimant is considered suitable for an SLU of an extremity involved in the same accident, and noted that the Third Department in Matter of Taher failed to address this provision. The Board also cited the Third Department’s decision in Matter of Tobin v Finger Lakes DDSO, 162 A.D.3d 1286 (3d Dept. 2018), issued the same day as Matter of Taher, which affirmed the Board’s determination that an award of a nonschedulable PPD rather than a SLU award was appropriate in that matter, and held that the claimant’s SLU awards were properly rescinded, since the claimant could not receive both a SLU award and a nonschedule PPD award for injuries arising out of the same accident. Finally, in apparent anticipation of a Third Department appeal of its Decision, the Board noted that a classified claimant who has returned to work at full wages loses nothing as a result of its position on this issue, since the caps do not run while the claimant is not collecting indemnity benefits, the claimant retains the right to collect benefits for the same overall amount of time should he or she experience causally related wage loss in the future, and the virtual banking of cap weeks is the benefit received under these circumstances and is the benefit permitted by Workers’ Compensation Law § 15(3) and the Permanency Guidelines.
STRATEGY MOVING FORWARD
In light of the pending motion for leave to the Court of Appeals in Matter of Taher and the Board’s apparent rejection of that decision, we recommend continued resistance of the implementation of SLU findings in cases in which the claimant’s injuries are found subject to classification. Thus, if the claimant has returned to work at full wages and a physician finds the claimant’s injuries amenable to classification, then carriers should argue for classification and no SLU award where doing so would be most beneficial in reducing future indemnity exposure.
However, in the event that the Third Department’s position in Matter of Taher is ultimately upheld, the bright side is that there is limited impact of that decision in practice, as it appears to only apply to the relatively small class of claimants with both schedulable and nonschedulable permanent impairments who have returned to work at full wages.
Further, although it remains to be seen whether this will materialize in the practice, Matter of Taher created a new incentive for claimants with nonschedule permanent impairments to return to work at full wages prior to litigation of permanency, in order to seek an SLU award in situations where doing so would result in greater monetary benefit to them. Claimants that return to work at reduced earnings are required to demonstrate ongoing reduced earnings in order to maintain entitlement to PPD benefits, while claimants that return to work at their pre-injury wages are relieved of this burden. Prior to Matter of Taher, if a claimant sought reduced earnings due to a nonschedule permanent impairment at the time of classification, the claimant would forego any future SLU award that could be made.
It is important to note that the carrier will still be able to take credit for any SLU award should the claimant subsequently be awarded PPD benefits. Thus, if a claimant who received an SLU award stops working and pursues PPD benefits, the carrier will have a holiday period until the total value of the SLU award is exhausted. Although possible in theory, it would be very rare for the SLU award to exceed the capped number weekly benefits that the claimant would be entitled to, based on the LWEC finding. In practice, this should disincentivize claimants from reopening their cases for PPD benefits after an SLU award, as they would likely have to wait some time before receiving any additional payments.
It is also important to note that if a claimant receives an SLU award, carriers will still be able to take credit for all prior indemnity benefits paid. Accordingly, if there were long periods of prior awards for lost time from work, the carrier would be able to offset these “new” SLU awards by prior payments, which may very well exceed the SLU awards in older claims.
We believe that the biggest impact if Matter of Taher is upheld will be on the litigation process limiting SLU awards. It will be more important than ever to aggressively litigate down SLU findings, and that approach should begin many months before permanency. By establishing a record of the claimant’s actual functional impairment over the course of the claim, as well as coordinating with carriers to periodically obtain high-quality and credible IME opinions, we can mitigate any potential negative impact of Matter of Taher on future claims. In addition, we believe that this decision opens up some avenues to reduce future liability on claims, if only we are willing to get a bit creative with the new incentives established by the Court.
We will continue to monitor appellate decisions on this issue and provide further updates as new developments arise. In the meantime, should you have any questions, please feel free to reach out to our New York workers’ compensation attorneys so that we can discuss how to properly address this changing legal landscape in the context of your claims.