DuBOIS v. WORKERS COMPENSATION APPEALS BOARD

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Court of Appeal, Second District, Division 6, California.

Scott Russell DuBOIS, Petitioner, v. WORKERS' COMPENSATION APPEALS BOARD, Robert A. Rohrer et al., Respondents.

No. B053655.

Decided: September 11, 1991

William A. Herreras, San Luis Obispo, for petitioner. John M. Rea, Chief Counsel, Leland D. Starkey and Vanessa L. Holton, S. Counsel, Raoul Thorbourne and Sue Tuskes, Counsel, for respondent Uninsured Employers Fund. No appearance, for respondent Robert A. Rohrer. No appearance, for respondent W.C.A.B.

The Uninsured Employers Fund (UEF) stipulates with an industrially injured employee to pay him certain benefits.   A workers' compensation judge orders the payments pursuant to the stipulation.   The UEF unreasonably delays in paying the benefits.   Does Labor Code section 3716.2 preclude imposition of a penalty against UEF?   We hold that it does not and conclude a penalty may be imposed against UEF under Labor Code section 5814 because of its unreasonable delay in paying the benefits.

FACTS

On June 24, 1988, applicant sustained industrial injury to his neck during employment as a truck driver by Robert A. Rohrer.   On the date of injury, the employer willfully had no workers' compensation insurance.

From applicant's medical report, the Rehabilitation Bureau (Bureau) determined he was medically eligible for vocational rehabilitation.   In an order dated April 20, 1989, the Bureau stated that, unless the employer filed an objection within 20 days, the Bureau would award applicant vocational rehabilitation temporary disability indemnity (VRTD) and require the employer to pay for a qualified rehabilitation representative, who would conduct a vocational evaluation.   The order provided VRTD would be payable until applicant returned to suitable gainful employment, unreasonably failed to cooperate in the rehabilitation process, or became unable to benefit from rehabilitation.   The employer did not file an objection to or appeal from the Bureau's order.

The workers' compensation judge (WCJ) determined the Bureau's order was binding because the employer did not appeal from the Bureau's decision.

On December 14, 1989, applicant, the employer, and UEF stipulated that the industrial injury caused temporary disability and the need for VRTD from June 25, 1988, through December 14, 1989.   They further stipulated the injury resulted in a need for medical treatment.   Applicant, the employer, and UEF also entered into the following stipulations:  “(1) U.E.F. agrees to pay applicant unpaid balance of VRTD through December 14, 1989 of [$]5643.77 less atty [sic ] fee for Rehab[ilitation] Services to date.  (2) It appearing that defendant employer is unable to continue VRTD payments, (3) U.E.F. agrees to continue VRTD payments to applicant per the [Bureau's decision and order] of 4/20/89 and withhold 12% of said payments for Rehab[ilitation] atty [sic ] fees in the future.  (4) U.E.F. agrees to satisfy the lien of Janet R. Larson (Voc [ational] Rehab[ilitation] Counselor) for Rehab[ilitation] services from 6/15/89—10/20/89 in the amount of $1177.50 and to continue to administer all Rehab[ilitation] benefits due applicant.  (5) UEF agrees to pay, adjust or litigate unpaid self-procured medical.”

On December 14, 1989, the WCJ ordered UEF to pay temporary disability indemnity, medical treatment costs, VRTD, and other rehabilitation benefits to applicant pursuant to the stipulations.

UEF failed to make the awarded payments.   Finding UEF unreasonably denied or delayed payment of the award, the WCJ imposed a 10 percent penalty against UEF under Labor Code section 5814.   The WCJ noted applicant had offered to prove he received no payments from UEF pursuant to the award and UEF's representative stated he “could not say one way or the other whether the Uninsured Employers Fund had made any payments.”   The WCJ stated:  “In the absence of any explanation by the Uninsured Employers Fund regarding why payment was not made, it must be found that the delay or denial is unreasonable.”

The WCJ concluded that Labor Code section 3716.2 protects UEF from a penalty for the uninsured employer's failure to make timely payments of compensation.   The section, however, does not bar a penalty for UEF's own unreasonable delay or failure to provide benefits payable by UEF under an award to which it stipulated.

UEF petitioned for reconsideration.

The Workers' Compensation Appeals Board (Board) granted reconsideration.   In its decision after reconsideration, the Board rescinded the WCJ's penalty decision and concluded Labor Code section 3716.2 exempts UEF from any penalty for its own failure to pay benefits in a timely manner.

On December 13, 1990, we summarily denied applicant's petition for writ of review.   The Supreme Court subsequently granted review and transferred the matter to this court with directions to vacate our prior order and issue a writ of review.   We have issued a writ of review in compliance with the Supreme Court's order.

DISCUSSION

 We consider the issues in accordance with the principle that the Supreme Court's transfer order does not establish the petitioner is entitled to the relief requested.   It does, however, require us to decide this case after the parties have had an opportunity to argue the issues.  (See Dickey v. Workers' Comp. Appeals Bd. (1990) 224 Cal.App.3d 1460, 1463, 274 Cal.Rptr. 620.)

 The issue of whether Labor Code section 3716.2 bars imposition of a penalty against UEF under Labor Code section 5814 is a matter of first impression.

Labor Code section 5814 provides in pertinent part:  “When payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the full amount of the order, decision or award shall be increased by 10 percent․”   In Gallamore v. Workers' Comp. Appeals Bd. (1979) 23 Cal.3d 815, 153 Cal.Rptr. 590, 591 P.2d 1242, the court held the penalty must be assessed against the entire amount ultimately awarded for the class of benefit unreasonably delayed or withheld.   (Id. at pp. 826–827, 153 Cal.Rptr. 590, 591 P.2d 1242.)

“Section 5814 is the goad for securing timely payment of compensation to injured working men and women without delay.  [Citation.]   One of its principal purposes is to encourage employers or their workers' compensation insurance carriers to make payments of compensation in a reasonable and timely fashion to speed the recovery and return to work of injured employees as rapidly as possible.  [Citation.]   An equally important purpose of section 5814 is to encourage timely payments of compensation to injured working people to promptly ameliorate economic hardship because of the interruption of their employment and concomitant loss of income.”  (Consani v. Workers' Comp. Appeals Bd. (1991) 227 Cal.App.3d 12, 23, 277 Cal.Rptr. 619.)

The Legislature established UEF to serve as an immediate source of funds for injured workers whose employers failed or refused to obtain workers' compensation insurance or to qualify as self-insurers.  (Flores v. Workmen's Comp. Appeals Bd. (1974) 11 Cal.3d 171, 173, 113 Cal.Rptr. 217, 520 P.2d 1033.)   UEF was created “to ensure that workers who happen to be employed by illegally uninsured employers are not deprived of workers' compensation benefits.”  (Lab.Code, § 3716, subd. (b).)

In Jenkins v. Workmen's Comp. Appeals Bd. (1973) 31 Cal.App.3d 259, 107 Cal.Rptr. 130, the court stated the purpose of UEF is to provide immediate benefits to an industrially injured employee whose illegally uninsured employer failed to promptly pay an award of workers' compensation benefits.  (Id. at p. 263, 107 Cal.Rptr. 130.)   The court explained that prompt payment of benefits by UEF would fulfill the constitutionally declared public policy that in workers' compensation cases substantial justice be accomplished expeditiously, inexpensively, and without encumbrance.  (Jenkins, supra, at p. 263, 107 Cal.Rptr. 130, citing former Cal.Const., art. XX, § 21 [now Cal.Const., art. XIV, § 4].)

In Flores v. Workmen's Comp. Appeals Bd., supra, 11 Cal.3d 171, 113 Cal.Rptr. 217, 520 P.2d 1033, a referee ordered an employer to pay a 10 percent penalty under Labor Code section 4554 and attorney fees under section 4555 because the employer was willfully uninsured.1  When the employer failed to pay the penalty and attorney fee award, the referee ordered UEF to make the payments.   The Board granted reconsideration and concluded UEF was not liable for the penalty or attorney fee.   The Supreme Court held nothing in the legislation creating UEF exempted UEF from liability for the penalty and attorney fee.  (Flores, supra, at p. 178, 113 Cal.Rptr. 217, 520 P.2d 1033.)

Thereafter, in 1976, the Legislature enacted Labor Code section 3716.2.2  The section provided among other things that UEF shall pay to a claimant benefits that would have accrued against an employer properly insured for workers' compensation liability.

In 1981 the Legislature amended section 3716.2 by adding the following sentence:  “The Uninsured Employers Fund shall not be liable for any penalties or for the payment of interest on any awards.”  (Stats.1981, ch. 894, § 4, pp. 3409–3410.) 3

The 1981 amendment was the result of passage of Assembly Bill No. 1529, 1981–1982 Regular Session.   In a report on Assembly Bill No. 1529, the Assembly Committee on Finance, Insurance, and Commerce explained the purpose of the amendment to section 3716.2 as follows:  “Section 4. is amended to preclude the Fund from being liable for any penalties or for the payment of interest on awards.   Because of the nature of the Uninsured Employers Fund, it has no liability for benefits until after a formal proceeding and the employer has failed to act.   Sanctions should not be applied against the Fund for the employer's wrong, according to the proponents.”  (Emphasis added.)

A bill analysis was provided to the Legislature by the Department of Industrial Relations.   In its analysis of Assembly Bill No. 1529, the Department of Industrial Relations noted that in most cases in which UEF was a party, a penalty was imposed against the uninsured employer under Labor Code section 5814 because of the employer's delay in payment of benefits.   The department asserted that UEF's liability for penalties imposed against employers under section 5814 was a substantial fiscal drain.   The department stated:  “The justification for imposing the penalty does not apply to the U.E.F.   The penalty is designed to deter carriers and employers from delaying benefits.   Since the U.E.F. has no liability for benefits until after they are demanded after a formal award, imposing the penalty on the U.E.F. for the employer's delay will not hasten the U.E.F.'s payment.   The State should not be penalized for the employer's delay.”  (Emphasis added.)

Other cases have touched on the issue of whether Labor Code section 3716.2 bars imposition of a penalty against UEF under Labor Code section 5814.   In Carver v. Workers' Comp. Appeals Bd. (1990) 217 Cal.App.3d 1539, 1548, 266 Cal.Rptr. 718, the Court of Appeal had to decide an issue involving construction of Insurance Code sections 1063.1 and 1063.2.   By way of dictum in a footnote, the court gave Labor Code section 3716.2 as amended in 1981 as an example of legislative clarity.   The court stated:  “We note that when the Legislature has intended to exclude statutory penalties from coverage by insurance funds, it has expressly done so.  (See, e.g., Lab.Code, § 3716.2 [Uninsured Employers Fund ‘shall not be liable for any penalties․']  ․)”  (Carver, supra, at p. 1548, fn. 8, 266 Cal.Rptr. 718.)

In Bishop v. Wilson (1982) 80 MON 33896, 11 Cal. Workers' Comp.Rptr. 23, the WCJ approved a compromise and release in which UEF agreed to pay benefits to the applicant.   UEF did not pay its share for almost four months, and the applicant requested that a penalty be imposed against UEF under Labor Code section 5814.   The WCJ denied the penalty request, and the Board denied reconsideration.   The Board concluded Labor Code section 3716.2 precluded imposition of any penalties against UEF.

The editor of the California Workers' Compensation Reporter criticized the Board's decision in Bishop, stating:  “When the UEF voluntarily agrees to settle a matter, why should its subsequent payment delay be treated differently from a delay by a carrier or a self-insured?  Labor Code § 3716.2 was clearly aimed at relieving the UEF from liability for penalties imposed in awards against the uninsured employer.   To interpret the section as insulating the UEF against liability for its own unreasonable delays is not compelled by the statutory language when the prohibition is read in the light of the entire section.   The Board's interpretation will further delay payments to injured workers who have already experienced long delays by the employer's failure to secure compensation.”  (11 Cal. Workers' Comp.Rptr. 23.)

The language in section 3716.2 that UEF “shall not be liable for any penalties” is susceptible to different meanings.   On the one hand, the language can be construed to forbid imposition of any penalties whatsoever against UEF.   This is what the Board held in Bishop.   On the other hand, it can be construed to absolve the Board only of liability for penalties imposed against the uninsured employer.

In construing Labor Code section 3716.2, “[w]e begin with the fundamental rule that a court ‘should ascertain the intent of the Legislature so as to effectuate the purpose of the law.’  [Citation.]”  (Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230, 110 Cal.Rptr. 144, 514 P.2d 1224.)   The words of the statute must be construed in context, and the various parts of the statutory enactment must be harmonized.  (Id. at pp. 230–231, 110 Cal.Rptr. 144, 514 P.2d 1224.)   If the language of the statute does not shed light on the Legislature's intent, that intent may be determined from other factors.   (Nunn v. State of California (1984) 35 Cal.3d 616, 624, 200 Cal.Rptr. 440, 677 P.2d 846.)  Labor Code section 3202 provides the following rule of construction in workers' compensation:  “This division and Division 5 (commencing with Section 6300) shall be liberally construed by the courts with the purpose of extending their benefits for the protection of persons injured in the course of their employment.”  Sections 3202 and 3716.2 are both in division 4 of the Labor Code.

In light of these principles of statutory construction, we conclude Labor Code section 3716.2 prevents the Board from holding UEF liable for those penalties imposed against the uninsured employer for being willfully uninsured or unreasonably delaying payment of benefits.   The section, however, does not preclude a penalty for UEF's own unreasonable delay in payment of an award.

Our construction of section 3716.2 is supported by the context in which the pertinent sentence appears, the statutory scheme of which that section is a part, the legislative history of the 1981 amendment to section 3716.2, and the statutory rule of liberal construction.

The sentence stating UEF shall not be liable for any penalties is the second sentence in section 3716.2.   The first sentence provides that UEF shall pay only those benefits “that would have accrued against an employer properly insured for workers' compensation liability.”  (Lab.Code, § 3716.2.)   That language means the Legislature intended to exempt UEF from liability for penalties and attorney fees under Labor Code sections 4554 and 4555, thus abrogating the Supreme Court's holding in Flores.

The reports of the Assembly Committee on Finance, Insurance, and Commerce and the Department of Industrial Relations quoted ante, at page 407, further support the conclusion that section 3716.2 does not preclude imposition of penalties against UEF for its own unreasonable delay in payment of benefits.  (See Hutnick v. United States Fidelity & Guaranty Co. (1988) 47 Cal.3d 456, 465, fn. 7, 253 Cal.Rptr. 236, 763 P.2d 1326 [reports of legislative committees may be considered when meaning of statute is uncertain];  Judson Steel Corp. v. Workers' Comp. Appeals Bd. (1978) 22 Cal.3d 658, 668–669, 150 Cal.Rptr. 250, 586 P.2d 564 [great weight should be given to interpretation of statute by administrative agency charged with enforcement of the statute].)

UEF was created “to ensure that workers who happen to be employed by illegally uninsured employers are not deprived of workers' compensation benefits.”  (Lab.Code, § 3716, subd. (b).)  A holding that section 3716.2 precludes imposition of any penalties against UEF for UEF's own unreasonable delay in payment of benefits would defeat the stated purpose for which UEF was created.   Such a holding would also contravene the statutory rule of liberal construction (Lab.Code, § 3202) and its constitutional foundation (Cal.Const., art. XIV, § 4 [public policy declared that workers' compensation legislation shall “accomplish substantial justice in all cases expeditiously, inexpensively, and without incumbrance of any character”];  Webb v. Workers' Comp. Appeals Bd. (1980) 28 Cal.3d 621, 626, 170 Cal.Rptr. 32, 620 P.2d 618 [rule of liberal construction applies to all aspects of workers' compensation law;  underlying policy of workers' compensation statutes, their constitutional foundation, and recurrent theme of countless appellate decisions have been “ ‘pervasive and abiding solicitude for the [worker]’ ”].)

The Board may hold UEF liable for a penalty because of UEF's own unreasonable delay in payment of an award.   Therefore the Board's previous decision must be annulled.

The September 4, 1990, decision of respondent Workers' Compensation Appeals Board after reconsideration is annulled, and the matter is remanded to the Board for proceedings consistent with the views expressed in this opinion.   Petitioner shall recover his appellate costs.

I respectfully dissent.   My compassion for this injured worker and the unreasonable way in which his case was handled by the Uninsured Employers Fund (UEF) tells me the result reached by the majority does justice between the parties.   The majority's holding will also deter the UEF from treating other similarly situated applicants with such a cavalier attitude.

I am disappointed that the State of California neglected petitioner at a crucial time of need.   The state officials responsible for this injustice should be more than embarrassed.   However, a 10 percent penalty against the UEF is precluded by statute.   In pertinent part, Labor Code section 3716.2 provides:  “The Uninsured Employers Fund shall not be liable for any penalties or for the payment of interest on any awards.”  (Emphasis added.)

As flagrant as this case may be, the result reached by the majority is inconsistent with the statutory command.   Only through statutory construction does the majority justify its holding.

“[T]he objective of statutory interpretation is to ascertain and effectuate legislative intent.  [Citations.]   In determining intent, we look first to the words themselves.  [Citation.]   When the language is clear and unambiguous, there is no need for construction.  [Citation.]”  (People v. Woodhead (1987) 43 Cal.3d 1002, 1007–1008, 239 Cal.Rptr. 656, 741 P.2d 154).   In my view, the language of Labor Code section 3716.2 is clear and unambiguous.

Labor Code section 3716.2 was amended to preclude “any penalties” subsequent to Flores v. Workmen's Comp. Appeals Bd. (1974) 11 Cal.3d 171, 113 Cal.Rptr. 217, 520 P.2d 1033, which allowed such a penalty against the UEF.   The Legislature has spoken.   The UEF may not be penalized for an unreasonable delay in paying a stipulated judgment.   One court has recently so indicated:  “We note that when the Legislature has intended to exclude statutory penalties from coverage by insurance funds, it has expressly done so.  (See e.g. Lab.Code, § 3716.2 [Uninsured Employers Fund ‘shall not be liable for any penalties․']”  (Carver v. Workers' Comp. Appeals Bd. (1990) 217 Cal.App.3d 1539, 1548, fn. 8, 266 Cal.Rptr. 718.)

The September 4, 1990 decision by respondent Workers' Compensation Appeals Board after reconsideration should be affirmed.

FOOTNOTES

1.   Labor Code section 4554 provides:  “In case of the willful failure by an employer to secure the payment of compensation, the amount of compensation otherwise recoverable for injury or death as provided in this division shall be increased 10 percent.   Failure of the employer to secure the payment of compensation as provided in Article 1 (commencing at Section 3700) of Chapter 4 of Part 1 of this division is prima facie evidence of willfulness on his part.”Labor Code section 4555 provides:  “In case of failure by an employer to secure the payment of compensation, the appeals board may award a reasonable attorney's fee in addition to the amount of compensation recoverable.   When a fee is awarded under this section no further fee shall be allowed under Section 4903 but the provisions of Section 4903 shall be applicable to secure the payment of any fee awarded under this section.”

2.   Section 3716.2, as originally enacted, provided in part:  “Notwithstanding the precise elements of an award of compensation benefits, and notwithstanding the claim and demand for payment being made therefor to the Director of Industrial Relations, the director, as administrator of the Uninsured Employers Fund, shall pay the claimant only such benefits allowed, recognizing proper liens thereon, that would have accrued against an employer properly insured for workers' compensation liability.”  (Stats.1976, ch. 1036, § 7, p. 4642.)

3.   Labor Code section 3716.2 currently provides:  “Notwithstanding the precise elements of an award of compensation benefits, and notwithstanding the claim and demand for payment being made therefor to the director, the director, as administrator of the Uninsured Employers Fund, shall pay the claimant only such benefits allowed, recognizing proper liens thereon, that would have accrued against an employer properly insured for workers' compensation liability.   The Uninsured Employers Fund shall not be liable for any penalties or for the payment of interest on any awards.   However, in civil suits by the director to enforce payment of an award, including procedures pursuant to Section 3717, the total amount of the award, including interest, other penalties and attorney fees granted by the award, shall be sought.   Recovery, by the director, in a civil suit, or other means, of awarded benefits in excess of amounts paid the claimant by the Uninsured Employers Fund, shall be paid over to the injured employee, or his representative as the case may be.”

GILBERT, Associate Justice.

STONE, P.J., concurs.