McCLINTIC v. WORKERS COMPENSATION APPEALS BOARD (1983)

INTRODUCTION

Petitioner William McClintic seeks review and annulment of an opinion and decision of the Workers' Compensation Appeals Board after reconsideration of the workers' compensation judge's finding that Pacific Gas & Electric Company was entitled to credit funds payable pursuant to Labor Code section 132a against a third party settlement.

STATEMENT OF FACTS

On July 6, 1977, petitioner was injured in an automobile accident which occurred during the course of his employment as a result of the negligence of a third party;  petitioner does not allege that his employer was concurrently negligent.   Subsequent to the accident, petitioner filed a claim for workers' compensation benefits.

On May 16, 1978, petitioner's treating physician reported that he considered petitioner's existing medical condition permanent, but that petitioner could return to work.

A later medical report, dated August 9, 1978, revealed that the examining physician was unable to discern any evidence of medical disorder which would cause petitioner's symptoms of double vision, disturbance of equilibrium, and intermittent dizziness;  the physician was concerned, however, that petitioner's symptoms could adversely influence his ability to work as a troubleman.

Petitioner's attorney arranged for a subsequent medical examination which was held in January 1979;  at that time, Dr. Cox thought petitioner's medical symptoms should be considered slight.

Petitioner returned to work on April 15, 1979;  he was demoted to field clerk and paid a salary lower than that which he had previously received;  despite a judicial determination on August 31, 1979, that he was not a qualified injured worker and not entitled to rehabilitation benefits, he was not reinstated.

On January 18, 1980, petitioner filed a petition for benefits under the provisions of Labor Code section 132a (discrimination by employer or insurer against employee injured in employment or testifying before appeals board) alleging that his demotion was in retaliation for his workers' compensation claim.

Petitioner received $110,000 in settlement of his suit against the negligent third party.   During the course of the workers' compensation hearings, the parties stipulated that the third party settlement should be allowed as a credit toward the employer's liability for compensation benefits.

On its own motion, the court raised the question of whether the third party settlement should be applied as a credit against compensation awarded pursuant to Labor Code section 132a.   After the parties stipulated that the total permanent disability benefits and section 132a recovery would not exceed $110,000, the trial court refused to allow introduction of evidence on the issue of section 132a discrimination, added any potential recovery pursuant to section 132a to the permanent disability benefits recoverable, and credited the total amount of employer liability against the third party settlement.

A petition for reconsideration was timely filed and subsequently denied on December 2, 1982.   The workers' compensation judge noted:  “[I]t appears clear to this judge that the benefits already recovered by applicant in his third party action greatly exceed what he would have recovered under the most successful possibility existing in his proceedings for workers' compensation inclusive of future medical, permanent disability and benefits under Labor Code § 132a, and that a trial on the merits of applicant's § 132a would be a mere exercise in futility which would lead to no possible results, except, a take nothing award.”

A timely petition for writ of review was filed and subsequently granted by this court.

CONTENTIONS

I

Petitioner contends that the Workers' Compensation Appeals Board erroneously ruled that an employer may credit benefits to be paid pursuant to Labor Code section 132a against a third party settlement.

II

Petitioner further avers that the trial judge's refusal to take evidence on the issue of prohibited discriminatory conduct and the amount of potential compensation pursuant to Labor Code section 132a was erroneous.

DISCUSSION

I

Petitioner contends that compensation awarded pursuant to Labor Code section 132a is not properly credited against third party settlements or judgments, as to allow such credit would encourage discriminatory conduct wherever a third party recovery is likely.   As this is a case of first impression, we explain in detail our reasons for agreeing in part and disagreeing in part.

Initially, we direct respondent's attention to the fact that Labor Code section 132a ¹ provides two distinct remedies:  (1) additional compensation pursuant to the provisions of Labor Code section 4553 and (2) reinstatement and reimbursement for lost wages and work benefits caused by the employer's discriminatory conduct.   Together these awards serve to deter discriminatory conduct and to provide additional compensation for the aggrieved worker.  (Judson Steel Corp. v. Workers' Comp. Appeals Bd. (1978) 22 Cal.3d 658, 150 Cal.Rptr. 250, 586 P.2d 564.)   As we shall explain, the remedies provided by section 132a address different injuries;  while an employer may be entitled to a credit for additional compensation pursuant to Labor Code section 4553, he will not be entitled to credit the costs of reinstatement or reimbursement for lost wages and/or benefits if he has violated section 132a.

Additional compensation pursuant to the provisions of Labor Code section 4553

Section 4553 ² requires an employer who has engaged in serious and willful misconduct to pay an amount of compensation 50 percent greater than that which he would have been required to pay were his conduct less culpable.   (State Dept. of Corrections v. Workmen's Comp. App. Bd. (1971) 5 Cal.3d 885, 97 Cal.Rptr. 786, 489 P.2d 818.)

According to Labor Code section 3207,³ payments made pursuant to section 4553 are compensation within the meaning of Labor Code sections 3858 ⁴ and 3861 ⁵ (Adams v. Workers' Comp. Appeals Bd. (1976) 18 Cal.3d 226, 231, 133 Cal.Rptr. 517, 555 P.2d 303);  thus, after payment of litigation expenses, attorney's fees and the employer's lien, an employer is relieved from the obligation of paying compensation up to the entire amount of a third party judgment.

 Despite the seeming incongruity of this result, the statutory scheme clearly allows an employer who has participated in willful retaliatory misconduct to credit an award of additional compensation pursuant to Labor Code section 132a against a third party settlement.   An examination of the rationale and purpose of the workers' compensation system reveals that this result is neither incongruous nor erroneous.

The workers' compensation system was created in order to “enforce a liability on the part of any and all persons to compensate any or all of their workers for injury or disability, ․ incurred or sustained ․ in the course of their employment, irrespective of any fault.”  (Cal. Const., art. 14, § 4.)   Workers' compensation benefits do not fully cover costs incurred by an employee;  rather, the system allocates the burden between the employer and the employee.   Thus, workers' compensation benefits partially compensate the employee for medical-legal costs (State Compensation Ins. Fund v. Workers' Comp. Appeals Bd. (1977) 76 Cal.App.3d 136, 142 Cal.Rptr. 654), interest (Laucirica v. Workmen's Comp. Appeals Bd. (1971) 17 Cal.App.3d 681, 95 Cal.Rptr. 219), rehabilitation (Oldaker v. Industrial Indemnity (1981) 46 CCC 186), and future medical costs resulting from the initial injury.  (Herr v. Workers' Comp. Appeals Bd. (1979) 98 Cal.App.3d 321, 159 Cal.Rptr. 435.)

Additional compensation pursuant to section 4553, even when authorized by section 132a, does not penalize the employer, but serves merely to more fully compensate the employee for the medical-legal costs of his original injuries.  (Burton v. Workers' Comp. Appeals Bd. (1980) 112 Cal.App.3d 85, 169 Cal.Rptr. 72.)   A third party settlement which provides adequate funds for the injured employee's medical-legal costs, rehabilitation, and future medical expenses, compensates the employee for the same expenses as would the workers' compensation system, thus rendering the employer's contribution unnecessary.   We hold, therefore, that an employer is entitled to credit section 4553 compensation as authorized by section 132a against a third party settlement or judgment;  but for reasons we discuss below, we limit the applicability of our holding to employers who are free of either negligence or willful misconduct with respect to the employee's initial injury.

Reinstatement and reimbursement for lost wages and work benefits

Respondent directs our attention to the recent case of State Compensation Ins. Fund v. Workers' Comp. Appeals Bd. (1982) 130 Cal.App.3d 933, 182 Cal.Rptr. 171 for the proposition that all benefits awarded pursuant to Labor Code section 132a are compensation subject to the credit previously discussed.   We agree with respondent's assertion only with respect to those compensation benefits conferred by division 4 of the Labor Code, one of which was in issue in State Compensation Ins. Fund, (see Labor Code section 132a;  State Compensation Ins. Fund v. Workers' Comp. Appeals Bd., supra, 130 Cal.App.3d 933, 182 Cal.Rptr. 171);  however, we must direct respondent's attention to the fact that reinstatement and reimbursement for lost wages and work benefits pursuant to Labor Code section 132a, are conferred by division 1 of the Labor Code, not division 4.   Although the statutory scheme does entitle an employer to a credit against third party settlements and judgments for all compensation conferred by division 4, neither the statutes nor judicial construction thereof establish a similar entitlement for benefits conferred by division 1.

 Having reviewed the pertinent code sections, we conclude that an employer who has violated Labor Code section 132a is not entitled to credit the costs of reinstatement or reimbursement for lost wages and/or work benefits against a third party settlement or judgment.

 Although the workers' compensation system was created to enforce liability “irrespective of any fault,” (Cal. Const., art. 14, § 4) the phrase “irrespective of any fault” simply means that an award need not be predicated upon a finding of fault;  the phrase does not preclude the Legislature or the courts from considering fault where an employer has engaged in willful wrongdoing.  (Matthews v. Workmen's Comp. Appeals Bd. (1972) 6 Cal.3d 719, 100 Cal.Rptr. 301, 493 P.2d 1165.)   Thus, it is well settled that an employer's concurrent negligence will bar the availability of a credit against third party settlements or judgments.  (Witt v. Jackson (1961) 57 Cal.2d 57, 17 Cal.Rptr. 369, 366 P.2d 641;  Roe v. Workmen's Comp. Appeals Bd. (1974) 12 Cal.3d 884, 117 Cal.Rptr. 683, 528 P.2d 771.)   If a credit is unavailable for damages caused by the concurrent negligence of an employer, how much the more so must a credit be unavailable where the employee has suffered the loss of wages and benefits as a direct result of the willful prohibited misconduct of his employer!

 Furthermore, we direct respondent's attention to Civil Code section 3517 which provides that “No one may take advantage of his own wrong,” and suggest that its application to the workers' compensation system explains and reconciles our two conclusions:  where the benefit in question provides payment for damages caused by the employer's negligence or willful misconduct, the employer will not be entitled to a credit.   Thus, where the employee is seeking compensation for medical expenses, the availability of the credit depends upon a finding that the employer is free of fault with respect to the cause of the employee's injuries;  where the employee is seeking reinstatement and reimbursement for lost wages and benefits due to a violation of Labor Code section 132a, the unavailability of the credit depends upon a finding that the employee's loss resulted from the employer's prohibited misconduct.

II

Inasmuch as we have concluded that an employer who has violated Labor Code section 132a is not entitled to credit the costs of reinstatement and/or reimbursement for lost wages and benefits against a third party settlement or judgment, we are obliged to hold that the trial judge erroneously refused to take evidence on the issue of prohibited discriminatory conduct and the amount of potential benefits pursuant to Labor Code section 132a.

That portion of the order of November 4, 1981, allowing defendant to credit a potential award of costs of reinstatement and reimbursement for lost wages and benefits pursuant to Labor Code section 132a is reversed and the matter is remanded for further proceedings consistent with the views expressed in this opinion.   In all other respects, the order is affirmed.   Costs are awarded to petitioner.

FOOTNOTES

1.   Section 132a provides in pertinent part:“Discrimination by employer or insurer against employee injured in employment or testifying before appeals board ․“It is the declared policy of this state that there should not be discrimination against workers who are injured in the course and scope of their employment.“(1) Any employer who discharges, or threatens to discharge, or in any manner discriminates against any employee because the latter has filed or made known his intention to file an application with the appeals board, or because the employee has received a rating, award or settlement * * *, is guilty of a misdemeanor and subject to the provisions of Section 4553.   Any such employee shall be entitled to reinstatement and reimbursement for lost wages and work benefits caused by such acts of the employer.”   (Original emphasis.)

2.   Labor Code section 4553, provides:“SERIOUS AND WILLFUL MISCONDUCT OF EMPLOYER.“The amount of compensation otherwise recoverable shall be increased one-half where the employee is injured by reason of the serious and willful misconduct of any of the following:“(a) The employer, or his managing representative.“(b) If the employer is a partnership, on the part of one of the partners or a managing representative or general superintendent thereof.“(c) If the employer is a corporation, on the part of an executive, managing officer, or general superintendent thereof.“But such increase of award shall in no event exceed * * * ten thousand dollars ($10,000);  together with costs and expenses incident to procurement of such award, not to exceed two hundred fifty dollars ($250).”

3.   Labor Code section 3207 defines “compensation” as “every benefit or payment conferred by Division 4 upon an injured employee, including vocational rehabilitation, or in the event of his death, upon his dependents, without regard to negligence.”

4.   Section 3858 of the Labor Code provides:“After payment of litigation expenses and attorneys' fees fixed by the court pursuant to Section 3856 and payment of the employer's lien, the employer shall be relieved from the obligation to pay further compensation to or on behalf of the employee under this division up to the entire amount of the balance of the judgment, if satisfied, without any deduction.   No satisfaction of such judgment in whole or in part, shall be valid without giving the employer notice and a reasonable opportunity to perfect and satisfy his lien.”

5.   Labor Code section 3861 provides:“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.”

SPENCER, Presiding Justice.

LILLIE and L. THAXTON HANSON, JJ., concur.