Temporary Disability, EDD Liens, and the 2 Year Cap

104 Weeks Revisited – Temporary Disability, EDD /State Disability Liens, and the 2 year cut-off for TTD Benefits, Regardless of Whether or not You’re Able to Return to Work.

For injuries occurring between April 19, 2004 and Jan. 1, 2008, California Labor Code Section 4656 (c)(1) states that temporary disability payments “shall not extend for more than 104 compensable weeks within a period of two years from the date of commencement of temporary disability payment.”
Labor Code Section 4656 (c)(2) states, “Aggregate disability payments for a single injury occurring on or after Jan. 1, 2008, causing temporary disability shall not extend for more than 104 compensable weeks within a period of five years from the date of injury.”
What does this mean for you? It means that even if the insurance company denies temporary disability (wage loss) for months, you could be stuck getting only State Disability payments while the dispute over wage loss is litigated at the Worker’s Compensation Appeals Board (WCAB).  Then, if you get temporary disability benefits, you will only get at most, 104 weeks (two years) of payments at a rate of 2/3rds of your regular salary.  Most people cannot survive a sudden 33% pay cut, so for most injured workers, this will be an extremely  difficult time for you and your family, financially.  Regardless of your job, you will always make more money working than being on worker’s compensation.
The difference in wording between these two statutes is significant, and has given rise to some interesting cases regarding the application of the newer version of the limitation and its effect on continuing temporary total disability awards issued more than three years after the date of injury, and its effect on Employment Development Department (EDD) reimbursements.
EDD is also known as State Disability, a program through the State of California.  This program requires employees to pay a portion of their wages into a fund to be used if they are unable to work.  State Disability requires a doctor’s certification of inability to work and a description of the condition and its physical limitations, along with an expected recovery date.

In the case of Valerie Hawkins v. Amberwood Products (2007), 72 CCC 807, the Workers’ Compensation Appeals Board issued a published en banc decision applying LC 4656 (c)(1) holding that the 104 weeks begins on the date the first TTD check is issued, not the date for which it is first owed. In Hawkins, the EDD paid benefits from 7/26/04 to 3/31/05. The State Fund on behalf of the employer reimbursed EDD, and then made its first payment of temporary disability on 5/03/05.The Fund argued that its liability for temporary disability ended 7/25/06, while the applicant argued the 104 weeks did not run until 5/2/07. The WCAB noted that: “Because section 4656(c)(1)’s limitation of 104 weeks within two years does not begin to run until ”the date of commencement of temporary disability payment,” there is a strong inducement to promptly start paying temporary disability indemnity. Prompt payment helps ensure that the injured employee and his or her dependents receive some replacement of the employee’s lost wages and a means of subsistence during the period of temporary disability.”

Implied in this reasoning is the additional incentive that, if not promptly provided when due, the ultimate liability for TTD will be much more than 104 weeks. The result of Hawkins and its progeny has been that, for dates of injury between 4/19/04 and 1/1/08 the defendant cannot apply retroactive TTD payments to the 104 week “cap,” nor can payments in satisfaction of an EDD lien be counted against the 104 week limit.

LC 4656(c)(1) was found to be somewhat draconian, however, in those instances where there was an employee injured on the job, who may have undertaken treatment and a brief period of temporary disability, but who returned to work for an extended period before going off on disability again. Often this scenario occurred where the treatment for an extended period was conservative but, ultimately, surgery became the only option. More than once, the employee was prematurely left without the right to obtain TTD benefits because the limitations clock was running from the date the original TTD check issued. Thus, LC 4656(c)(2) came into being for dates of injury on or after January 1, 2008.

The language of section 4656(c)(2) is plain, clear and unambiguous. It limits a defendant’s obligation to pay temporary disability indemnity to “104 compensable weeks within a period of five years from the date of injury,” without any reference to the date of the commencement of temporary disability payment as is contained in section 4656(c)(1).

This being the case, we take the position that retroactive TTD payments would count against the TTD cap because now we are counting “compensable weeks” within five years, not compensable weeks following the issuance of the first TTD check. Thus, for those dates of injury where LC 4656(c))(2) applies, it would appear that a WCAB judge may not issue a retroactive award of temporary disability that would require more than 104 weeks of such payments.

In addition to the above limitation regarding retroactive awards, it would appear a WCAB judge is not permitted to issue an award of continuing TTD benefits that would extend beyond a date which is more than 5 years from the date of injury, or to deny a petition to terminate such an award based on the 5 year limitation within LC 4656(c))(2).

This brings us squarely to the question of the effect of EDD liens under LC4656(c)(2). Temporary disability benefits are intended to replace lost wages during a period of disability Western Growers Ins. Co. V. WCAB, (1993) 16 Cal. App. 4th 227; 58 CCC 323, Labor Code Sections §4650 and §4652). The EDD pays out benefits when an applicant is disabled and unable to perform his regular or customary work Unemployment Insurance Code §§2626, 2655, 2608, 2610. In order to be paid benefits by the EDD “the claimant shall establish medical eligibility for each uninterrupted period of disability by filing a first claim for disability benefits supported by the certificate of a treating physician or practitioner that establishes the sickness, injury… A certificate filed to establish medical eligibility for the employees’ own sickness, injury.., shall contain a diagnosis and diagnostic code …” Unemployment Insurance Code §2708.

In the case of Jesus Rebolar v. Specialty Restaurants, WCAB No ADJ1539297 (2011) (WCAB Panel Decision after Reconsideration), the WCAB Panel stated: “Because an employer is liable to EDD for benefits it paid due to disability later determined to be caused by an industrial injury, there is no good reason why those reimbursed payments not be credited to defendant as part of the 104 compensable weeks described in Section §4656(e)(2)… However, defendant is only entitled to this credit to the extent that it establishes that it reimbursed EDD for the benefits paid [to] applicant. …” [fn.1. “Absent such reimbursement, the payments made by EDD will not be characterized as temporary disability benefits.”] In accord is the decision after reconsideration by a WCAB panel in the case of Yousef v. Millenium Rugs, Inc., (2011) ADJ6821283.

All of this suggests the possibility, if not the probability, of a litigation “can of worms” where entitlement to TTD is being litigated and there is, or may be, an EDD lien because EDD has paid benefits during the disputed period. We recommend that EDD be placed on notice of any such litigation.. EDD should also be served with any subsequent award of TTD. We envision those instances where EDD may lose its right to recover reimbursement from the defendant because, pursuant to an award, the defendant may exhaust its statutory liability by payments to the injured worker by payment of an additional 104 weeks of benefits.

EDD should be placed on notice that the TTD litigation may affect its lien rights so that EDD may not later be heard to claim reimbursement for failure of notice and opportunity to be heard.

Originally published in WorkCompCentral.com: Author Howard J. Stevens is a attorney in the Orange Office of McDermott & Clawson, a workers’ compensation defense firm. This column was reprinted with his permission from the firm’s newsletter.