June 11, 2009

The Real Diehl:
Repairing Impairment

By Kevin L. Connors

About a year ago, the Pennsylvania Workers’ Compensation community was turned on its head when the Commonwealth Court issued its initial opinion in Diehl v. WCAB (IA Construction Liberty Mutual Insurance). That opinion shocked compensation practitioners in the course of eviscerating the impairment rating provisions of Act 57, superimposing the requirement that employers seeking to modify injured employees’ compensation status from temporary total to temporary partial, in reliance upon an impairment rating, must present evidence of “earning power” as originally held by the workers’ compensation judge, with the Appeal Board’s reasoned analysis of that issue being overturned in the Commonwealth Court opinion that was issued on April 28, 2008.

As we had indicated in our newsletter reviewing the Diehl decision, the initial Diehl opinion made little sense in terms of Act 57’s impairment rating provisions, as the first Diehl opinion failed to distinguish between “modifications” based on “earning power,” as opposed to modifications based on “impairment ratings”. While both “modifications” result in an injured employee’s compensation status being “modified” from total disability to partial disability, the mechanism for achieving that result is necessarily predicated, as we had outlined, on very different burdens of proof.

Thankfully, the Commonwealth Court granted the employer/insurer’s re-argument request in Diehl, with the Commonwealth Court vacating the original opinion, in order to reconsider the nexus of fact and law raised under Diehl.

The Commonwealth Court reinstating common sense to its latest interpretation of the impairment rating provisions of Act 57.

No less thankfully, the Commonwealth Court has now issued its latest pronouncement in Diehl, with the Commonwealth Court reinstating common sense to its latest interpretation of the impairment rating provisions of Act 57.

The good news is that common sense has prevailed in the majority opinion in Diehl, although it is nevertheless troubling that the dissenting opinion, authored by Judge Smith-Ribner, infamous to all as the author of the Commonwealth Court’s majority opinion in Caso, a ruling ultimately overturned by the Pennsylvania Supreme Court in its landmark ruling, continues to confuse the disparate concepts of modification, in the course of suggesting the necessity of intersecting impairment with earning power.

So how did Diehl get to this point in the first place?

In Diehl, the employer/insurer secured an impairment rating of the injured employee beyond the 104 weeks plus 60 days permitted under Act 57, for automatic “modifications” from total to partial disability status.

Well, the Diehl facts seem straightforward enough, with the employer/insurer securing an impairment rating of the injured employee beyond the 104 weeks plus 60 days permitted under Act 57, for automatic “modifications” from total to partial disability status. In the wake of the Supreme Court’s Gardner ruling, wherein the Court had held that employers seeking to modify an injured employee’s compensation status with an impairment rating secured beyond the 104 weeks plus 60 days statutory timeframe for automatic “modifications,” would have to pursue the “traditional administrative process,” with the Supreme Court failing to offer any nibbling of a clue as to what that phrase actually might mean, presuming, we guess, that we should have known, with the compensation community generally interpreting a “traditional administrative process” to mean the litigation process, where the parties seeking a “modification,” herein an employer or insurer, would have to file a petition with the Bureau, and would then need to sustain its burden of proof for purposes of modifying compensation. Most compensation practitioners believed that the employer’s burden of proof under a Modification Petition predicated on an impairment rating would require proof that the impairment rating was conducted after the injured employee had received 104 weeks of total disability benefits, that the injured employee had reached maximum medical improvement from the work injury, and that the impairment rating was performed in conformity with the AMA Guides to Impairment Ratings, using whatever edition of that reference text was controlling as of the impairment rating.

In Diehl, the injured employee sustained a work-related injury to his right foot in 1999, with the employee receiving 104 weeks of total disability benefits by 2001. In 2002, the employer requested that the employee undergo an impairment rating, with the injured employee’s work injury evidencing an impairment rating of 28%, well below the 50% ceiling set forth in Act 57 for seeking an IRE-based “modification” from total to partial disability.

Since the impairment rating litigation landscape was in such a state of flux based on the Commonwealth Court’s Gardner opinion, the employer did not file its Modification Petition in Diehl until after the Supreme Court’s 2005 Gardner ruling, allowing for IREs to be conducted beyond the 104 weeks plus 60-day rule.

Although still unclear as to what the evidentiary record in Diehl actually consisted of, the Commonwealth Court notes in its April 22, 2009 opinion that the workers’ compensation judge concluded that the employer had proved that the Claimant’s work-related impairment was determined to be 28%, but the workers’ compensation judge did not grant the employer’s Modification Petition, as the WCJ concluded that the employer would have to present evidence of “earning power” in order to complete the evidentiary loop necessary for a modification to be granted.

Since the employer never presented any “earning power” evidence in Diehl, the WCJ denied the employer’s petition. The employer appealed the WCJ’s decision to the Appeal Board.

On appeal, the Board ruled in favor of the employer, holding that the employer simply sought a change in the employee’s disability status, not in the amount of compensation benefits paid to the employee. The Appeal Board ordered the employee’s compensation status changed from total to partial disability as of the date of the impairment rating evaluation in 2002.

The Appeal Board’s opinion was then appealed to the Commonwealth Court, with the Court issuing its April 28, 2008 opinion, which opinion was later vacated after re-argument in an Order issued on June 24, 2008.

The April 22, 2009 opinion correctly held that Section 306 actually has two separate subsections providing parallel paths to modifying disability status from total to partial disability.

So now we have the real Diehl, with the April 22, 2009 opinion authored by Judge Leavitt correctly holding that Section 306, the definitive section of the Act for purposes of defining an injured employee’s compensation status and entitlement to compensation benefits for disability, specific loss, and medical benefits, actually has two separate subsections providing parallel, but not necessarily overlapping paths, to modifying an injured employee’s disability status from total to partial disability.

True enough, one avenue, lined with the heady lexicon of legendary rulings that all of us can cite to in our sleep, like Kachinski, employs a model of restoration of sufficient functional capacity to be able to perform some level of occupational work, with the employer’s burden supposedly simplified to evidence of a “change in physical condition” coupled with evidence of either a specific job opening and/or labor market evidence presuming available work, with the employer then entitled to modify an injured employee’s compensation benefits from total to partial disability, with the actual amount of compensation paid to the Claimant reduced to a partial disability benefit rate predicated on the wages that the injured employee either would, or could, have earned in reliance upon the employer’s “earning power” evidence.

The second, and less traveled, route to modify an injured employee’s compensation status from total to partial disability is one predicated on an Act 57 impairment rating that finds that the injured employee has a whole person impairment rating of less than 50%. Of course, if the impairment rating is secured within the statutory timeframe of 104 weeks plus 60 days, the employer’s entitlement to the IRE “modification” is automatic, with the employer only required to file a Notice of Conversion with the Bureau, resulting in the injured employee’s compensation status being “modified” from total to partial disability; with that modification, the injured employee is only entitled to receive another 500 weeks of partial disability benefits, although there is no change in the amount of weekly compensation benefits paid to the Claimant.

Although the parties in Diehl were in agreement that the Gardner-imposed requirement of a “traditional administrative process” requires a legal adjudication of the employer’s right to an IRE-based modification, the parties were in complete disagreement as to the evidence necessary to sustain the employer’s burden of proof for an IRE modification. The Claimant in Diehl contended that Section 306(a.2)(5), governing IRE determinations, necessarily required reference to Section 306(b), under which earning power is the predicate for changing a Claimant’s disability rating.

In contrast, the employer in Diehl persuasively argued that the statutory reference in Section 306(a.2)(5) to Section 306(b) was simply just that, a reference, and “not an instruction” with the Commonwealth Court holding that “earning power” evidence need not be presented by an employer seeking to change a Claimant’s compensation status through a Modification Petition relying upon an IRE.

In this ruling, the Commonwealth Court seems to finally recognize that there is a legally important distinction between the concepts of disability and impairment, with Pennsylvania compensation practitioners at whatever level, still not fully grasping that distinction, as Pennsylvania has always employed a compensation scheme predicated on a disability concept, and 13 years after Act 57 spliced the impairment concept into our statutory scheme, few of us are able to understand that the two concepts are not synonymous, that each employ a unique conceptual framework.

Consequently, the Commonwealth Court specifically ruled in Diehl, that IRE-based Modification Petitions need not be supplemented with “earning power” evidence, for the following reasons, to include:

• That the change in disability status following an IRE does not affect the Claimant’s compensation benefit rate;
• That the Claimant whose compensation status has been changed from total to partial in reliance upon an IRE is not necessarily guaranteed to receive 500 weeks of partial disability benefits, as the employer is still free to prove “earning power” during the 500 weeks of partial disability; and/or to prove albeit with some difficulty, a full recovery for the work injury;
• That the Legislature had specifically required a determination of “earning power” in a Section 306(b)(2) proceeding, but never imposed that requirement on a Section 306(a.2)(5) proceeding; and,
• That requiring proof of both impairment and earning power in an IRE proceeding would otherwise render the IRE provisions of Act 57 meaningless, as there would never be a reason for an employer to seek an IRE, as the employer would always then still have to prove “earning power,” effectively nullifying the IRE provisions of Act 57.

Simply stated, “proof of earning power and job availability is not required” when an employer seeks “to change a Claimant’s benefit status using the results of an IRE requested outside the 60 day window” under Section 306(a.2)(5). With this ruling, the Commonwealth Court affirmed the Appeal Board opinion changing the Claimant’s compensation status from total to partial disability.

The dissent argues that Gardner’s reference to the “traditional administrative process” necessarily means that a “non-self-executing procedure for modifying” from total to partial disability should not be as “simple and automatic as those for the self-executing provisions,” for a timely IRE.

The Judge Smith-Ribner-authored dissent takes issue with the meaning of a “traditional administrative process” under Gardner. The dissent ineffectively argues, neither convincing the majority nor the undersigned, that Gardner’s reference to the “traditional administrative process” necessarily means that a “non-self-executing procedure for modifying” from total to partial disability should not be as “simple and automatic as those for the self-executing provisions,” for a timely IRE, but should require, as the dissent believes is implicit in Gardner, that the “traditional administrative process” requires proof of the impairment to be coupled with proof of “earning power."

It is our view that the dissent’s analysis on this issue highlights the cognitive disconnect between the concepts of disability and impairment under Act 57, and in our statewide statutory compensation scheme.

Since the Gardner idiom of “traditional administrative process” appears to be at the very heart of any current IRE-based litigation, Diehl will presumably find its way to the Supreme Court, to allow the Supreme Court to tell us what we all think we know, that is what a “traditional administrative process” actually is, with clarification as to what evidence must be presented to sustain the moving party’s burden of proof.

Questions concerning this decision, its impact, or any other issues with regard to workers’ compensation matters, can be directed to the undersigned.

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