Opinion
No. 365 C.D. 2013
09-04-2014
City of Pittsburgh, and UPMC Benefit Management Services, Inc., Petitioners v. Workers' Compensation Appeal Board (Hrapla), Respondent
BEFORE: HONORABLE DAN PELLEGRINI, President Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE LEAVITT
The City of Pittsburgh (Employer) and UPMC Benefit Management Services, Inc. petition for review of an adjudication of the Workers' Compensation Appeal Board (Board) setting aside Employer's recoupment of an overpayment of workers' compensation benefits. For a period of approximately seven months, Employer paid Gerard Hrapla (Claimant) total disability workers' compensation without an offset for the disability pension Employer also paid Claimant. Employer recouped the overpayment of workers' compensation until it was repaid. The Board set aside the recoupment because Employer did not give Claimant the official form for reporting his pension income, i.e., a Form LIBC-756, before effecting the recoupment. The Workers' Compensation Judge (WCJ) held that Claimant waived the issue of the reporting form and that, in any case, Employer did not need to have Claimant report his pension because Employer had full knowledge of the pension that it was paying Claimant. However, the WCJ set aside the recoupment for a different reason, namely, that Employer failed to prove that the recoupment did not prejudice Claimant. Concluding that both the Board and the WCJ erred, we reverse.
As set forth infra, Employer's recoupment was discovered to be excessive, and Employer has repaid the excessive amount of the recoupment with interest.
Claimant worked for the City of Pittsburgh for 18 years as a firefighter, most recently as Captain. In February 1997, he injured his right shoulder and right knee while fighting a fire. Also in February 1997, Claimant further injured his right shoulder and right knee while training at the fire academy. At the time of the injuries, Claimant earned approximately $75,000 annually. Employer, which is self-insured for workers' compensation, accepted liability and paid Claimant Heart and Lung benefits equal to his full salary for several months after the injuries.
Claimant and Employer agreed on an injury date of February 28, 1997, because Claimant could not recall on which specific days he was injured in February 1997.
Under what is commonly referred to as the Heart and Lung Act, Act of June 28, 1935, P.L. 477, as amended, 53 P.S. §§637-638, firemen who are temporarily unable to perform their duties because of a work injury are entitled to receive their full salary.
On June 30, 1997, Claimant elected to take a disability pension. This ended his Heart and Lung benefits and replaced them with workers' compensation benefits because his disability was of an indefinite duration. Employer agreed to pay workers' compensation wage loss benefits to Claimant in the amount of $542 per week beginning June 30, 1997, the maximum rate for any claimant injured in 1997. As of June 30, 1997, Claimant began receiving $2,934 per month in pension benefits and $542 per week in workers' compensation benefits.
On January 15, 1998, Employer issued Form LIBC-761, "Notice of Workers' Compensation Benefit Offset," to Claimant, stating that as of February 9, 1998, his compensation would be reduced to $72.59 weekly because Employer was taking an offset of $469.41. This offset represented the portion of Claimant's disability pension that was funded by Employer. Employer also informed Claimant that Employer had overpaid Claimant disability compensation for the period from June 30, 1997, through February 8, 1998, because the payments for those weeks did not include the offset. The overpayment totaled $16,898.76. Employer advised Claimant that $72.59 would be deducted from Claimant's weekly disability payment until the overpayment of $16,898.76 was paid back to Employer. Reproduced Record at 281a (R.R. ___). The offset and $72.59 deduction reduced Claimant's weekly disability payment to $0 from February 9, 1998, through July 21, 2002. As of July 22, 2002, Employer began paying Claimant $72.59 per week in workers' compensation.
The regulations require an employer to provide the Form LIBC-761 to the claimant "[a]t least 20 days prior to taking the offset." 34 Pa. Code §123.4(b). Thus, the offset could not begin until February.
On February 2, 1998, Claimant filed a petition alleging that Employer was not entitled to a pension offset because Claimant's work injury occurred prior to June 24, 1996, the date that the pension offset provision found in Section 204 of the Workers' Compensation Act (Act) became effective. Claimant alleged that his disability was caused by multiple, cumulative injuries he sustained to his right shoulder and knee over the years. Employer filed an answer denying the allegations. The matter was assigned to a WCJ and the parties stipulated that the sole issue in dispute was whether Claimant's disability was related to injuries that occurred before or after June 24, 1996. In July 2000, the WCJ denied Claimant's petition, finding that Claimant's benefits were offsetable because his disability resulted from work injuries that occurred in February 1997, after the effective date of the Section 204 pension offset provision. Claimant appealed and the Board affirmed. No further appeal was taken.
Although styled a modification petition, in substance Claimant filed a petition to review compensation benefit offset.
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §71. The portion of Section 204(a) providing for an offset for pension payments was added by the Act of June 24, 1996, P.L. 350, No. 57. Section 204(a) states, in relevant part, as follows:
[T]he benefits from a pension plan to the extent funded by the employer directly liable for the payment of compensation which are received by an employe shall also be credited against the amount of the award [of workers' compensation benefits] made under sections 108 and 306, except for benefits payable under section 306(c).77 P.S. §71(a). An offset for pension benefits "only applies to individuals with claims for injuries suffered on or after June 24, 1996." 34 Pa. Code §123.4(a)(2).
On December 29, 2008, Claimant filed a petition to review compensation benefit offset, alleging that Employer's offset calculation was wrong. The petition also challenged Employer's entitlement to any recoupment, asserting that the $72.59 weekly deduction caused a financial hardship. Employer filed an answer denying Claimant's allegations.
The matter was assigned to a WCJ. Employer's evidence consisted of expert testimony establishing the amount of Claimant's pension contributed by Employer. In response, Claimant presented his own expert evidence in an effort to establish a lower offset amount. On August 10, 2009, the parties entered a stipulation that as a result of updated calculations, Employer was entitled to an offset of $207.58 per week, not $469.41 per week as previously asserted by Employer. R.R. 312a. Thus, rather than paying Claimant $72.59 in weekly workers' compensation, Employer agreed to pay Claimant $334.42 per week pending a final decision by the WCJ. Id. However, the parties agreed that the stipulation was not an admission by Claimant that the new offset calculation was correct and did not bar either party from continuing to litigate the petition to review compensation benefit offset.
Numerous other Pittsburgh firefighters filed petitions to review compensation benefit offset, which were assigned to two different WCJs who conducted joint hearings because the issues were similar. The WCJs then issued individual decisions for each firefighter.
Claimant testified about his personal finances and how they were affected by the offset. The record established that Claimant's disability pension totals $2,934 each month, or $35,208 per year. Claimant has received that amount continually since June 30, 1997. After Employer's offset and recoupment, Claimant's weekly workers' compensation of $72.59 totaled $3,774.68 per year. Claimant's yearly income from his disability pension and workers' compensation was $38,982.68. Following the parties' 2009 stipulation, Claimant began receiving weekly compensation of $334.42, which totals $17,389.84 per year. When added to Claimant's disability pension, his total yearly income is now $52,597.84.
Claimant testified that his household consists of himself, his wife, his son and his daughter. Claimant's wife has worked part-time for many years. When Employer began the offset and recoupment in February 1998, Claimant's household expenses included, inter alia, a mortgage, insurance, utility bills, and expenses for two cars. Claimant and his wife had set their household budget based on his pre-injury firefighter earnings. Claimant testified that the reduction of his workers' compensation benefits to $0 "caused a lot of hardship." Specifically, he had to eliminate one car and turn to family for help with mortgage payments. R.R. 260a, 262a-263a. Claimant stated that he was "always behind the eight ball" financially. R.R. 263a.
Claimant testified that he was represented by counsel when he received Employer's Form LIBC-761 offset notice in January 1998. Claimant filed a modification petition in February 1998, which resulted in the WCJ's decision that Claimant's work injury occurred in February of 1997. That litigation, which included an appeal to the Board, was not resolved until October 2001. During that time Claimant did not receive any workers' compensation because Employer was recouping the overpayment. Claimant could not explain why neither the amount of the offset nor recoupment was challenged in the modification proceeding initiated in 1998.
The WCJ credited Employer's actuarial evidence on its contribution to Claimant's pension. Accordingly, she upheld the amount of Employer's updated pension offset calculations set forth in its 2009 stipulation. In other words, the WCJ found that Employer was entitled to an offset of $207.58 per week. The WCJ then addressed the other issues raised by Claimant and Employer.
Claimant argued that Employer was not entitled to any offset because it did not provide him with a Form LIBC-756, entitled "Employee's Report of Benefits for Offsets," before notifying him of its intention to take an offset. The WCJ found that Claimant waived that issue by not raising it while the record was open. In any case, the WCJ determined that Employer was not required to issue a Form LIBC-756 to Claimant before taking an offset for Claimant's pension because Employer knew about the pension and, thus, did not need Claimant's report. The WCJ reasoned:
Even if the issue had not been waived, the undersigned cannot perceive that the employer's tender of a Form 756 to a worker is a condition precedent to its later assertion of a credit. The right to a set-off is established by statute (via an Act 57 of 1996 amendment), and no condition upon taking the credit is established via that amendment. Nor do the Act 57 regulations state that tender of the form is a condition precedent.WCJ Decision, July 30, 2010, at 7; Conclusion of Law No. 4.
Claimant also argued that Employer's recoupment was invalid because it imposed a financial hardship on him. The WCJ agreed. Citing Maxim Crane Works v. Workers' Compensation Appeal Board (Solano), 931 A.2d 816 (Pa. Cmwlth. 2007), the WCJ concluded that a recoupment raises a "presumption of prejudice" to the claimant that the employer must rebut before it can recover its overpayment of workers' compensation. WCJ Decision, July 30, 2010, at 6; Finding of Fact No. D.1. The WCJ found that Claimant was prejudiced by Employer's recoupment because "the unexpected delay of [his] increased loss of income" caused him "some degree of financial difficulty" because he is not wealthy. Id. at 6; Findings of Fact Nos. D.2-3.
Claimant also argued that Employer was collaterally estopped from presenting evidence on whether it had correctly calculated Claimant's offset for his disability. The WCJ held that Employer was not collaterally estopped because the prior litigation cited by Claimant had involved different firefighters and, therefore, different factual issues. The Board, likewise, rejected Claimant's collateral estoppel argument, and Claimant did not appeal it. Accordingly, this issue is not before us.
For its part, Employer argued that because Claimant failed to challenge the recoupment before Employer had completed it, Claimant was barred by the doctrine of laches from asserting a financial hardship. The WCJ rejected this argument and held that Employer did not make out a case for application of the doctrine of laches.
Employer also argued that Claimant was barred by the doctrines of technical res judicata or collateral estoppel from challenging the retrospective offset because he could have, and should have, raised that issue during the proceeding initiated in 1998, but he failed to do so. The WCJ did not address this argument and made no findings with respect to the prior litigation.
The WCJ granted, in part, Claimant's petition to review compensation benefit offset. The WCJ allowed Employer the ongoing pension offset but disallowed Employer's recoupment of its overpayment. Accordingly, she ordered Employer to reimburse Claimant the full amount of the recoupment.
Thereafter, the WCJ issued an amended order for all her firefighter cases, including this one, where Employer's updated pension offset calculations had reduced the offset amount. Specifically, the WCJ ordered Employer to reimburse all firefighters, including Claimant, the amount they had been underpaid, with interest. The WCJ reaffirmed the prior decision and order in all other material respects. Employer has not appealed the amended order, except to the extent it preserved the WCJ's prior order denying Employer any recoupment of the overpayment made from June 30, 1997, to February 9, 1998, i.e., the payment of $542 per week without any offset for the pension.
Claimant and Employer appealed to the Board. Claimant argued that the WCJ erred in holding (1) that Claimant waived the issue of Employer's failure to issue a Form LIBC-756 and (2) that Employer did not have to issue this reporting form before taking an offset. Employer argued that the WCJ erred in (1) interpreting Maxim Crane as disallowing a retrospective offset to recoup an overpayment of workers' compensation benefits and (2) failing to address the res judicata/collateral estoppel issue regarding the 1998 modification petition.
Claimant did not appeal the issue of Employer's calculation of the offset amount. Employer did not appeal the issue of whether Claimant's review petition was barred by the doctrine of laches.
The Board affirmed the WCJ. The Board agreed that Claimant had waived the issue of whether Employer had to issue Claimant a Form LIBC-756 before taking an offset. Nevertheless, the Board went on to hold that Employer's tender of a Form LIBC-756 was a condition precedent to recoupment of an overpayment of benefits in every case. Because Employer did not satisfy that condition, the Board held that "the appropriate course of action in this case is to allow [Employer] an ongoing offset based on Claimant's receipt of pension benefits after the issuance of the [Form LIBC-761] Offset Notice while disallowing any retrospective credit." Board Adjudication at 8. The Board did not address Employer's res judicata argument. Employer then petitioned for this Court's review.
This Court's review of an order of the Board is limited to determining whether the necessary findings of fact are supported by substantial evidence, whether Board procedures were violated, whether constitutional rights were violated or an error of law was committed. Cytemp Specialty Steel v. Workers' Compensation Appeal Board (Crisman), 39 A.3d 1028, 1033 n.6 (Pa. Cmwlth. 2012). When reviewing questions of law, our scope of review is plenary. Land O' Lakes, Inc. v. Workers' Compensation Appeal Board (Todd), 942 A.2d 933, 936 n.3 (Pa. Cmwlth. 2008).
On appeal, Employer argues that the Board and the WCJ erred in concluding that Employer was not entitled to recoup its overpayment of benefits to Claimant, i.e., the payment of $542 per week, without any offset from June 30, 1997, to February 9, 1998. First, Employer argues that it was not required to issue Claimant a Form LIBC-756 in order to implement a retrospective credit to recover overpaid disability benefits and that, in any case, Claimant waived that issue. Second, Employer asserts that the WCJ erred in holding that Employer's recoupment was presumed to be prejudicial and, thus, not allowed. Third, Employer argues that Claimant was barred by res judicata from challenging Employer's retrospective credit because he should have raised the issue in the 1998 petition.
This Court addressed Employer's first two issues in the related case of City of Pittsburgh and UPMC Benefit Management Services, Inc. v. Workers' Compensation Appeal Board (Wright), 90 A.3d 801 (Pa. Cmwlth. 2014) (City of Pittsburgh I), which involved the same employer and similar facts. There, we held that the Board erred in holding that Employer's failure to provide the claimant with a Form LIBC-756 barred its recoupment of the overpayment when the Board itself found that the claimant had waived the issue of the Form LIBC-756.
Because we find the issue waived, we need not address the WCJ's holding that Employer did not have to issue Claimant a Form LIBC-756 before it did its offset because Employer did not need Claimant to report an event of which Employer had full knowledge, i.e., the amount of Claimant's disability pension.
We also held that the WCJ erred in construing Maxim Crane to mean there is always a "presumption of prejudice" that an employer must overcome in order to recoup an overpayment of compensation, no matter how implemented. Section 204 of the Act and regulations promulgated thereunder expressly authorize recoupment of compensation that was overpaid because it did not include an offset. Because the employer in Maxim Crane failed to follow those regulations, the recoupment was set aside. In obiter dicta, Maxim Crane also found that the recoupment was unacceptable because the employer sought to recover two years of overpayments by reducing the claimant's weekly compensation to $0 for six months.
Maxim Crane was decided on legal grounds, i.e., that the employer had failed to comply with the regulation at 34 Pa. Code §123.501 which squarely places the burden on the employer to notify the claimant of his duty to report offsetable benefits to the employer. Maxim Crane went on to explain that where an employer waits two years to satisfy this notice obligation, there will be a presumption that recoupment will cause a hardship. This was obiter dicta because the case was decided on the employer's failure to follow 34 Pa. Code §123.501. --------
Finally, in City of Pittsburgh I, we addressed Muir v. Workers' Compensation Appeal Board (Visteon Systems LLC), 5 A.3d 847 (Pa. Cmwlth. 2010). Muir established that the regulations require the employer to give a claimant notice at least once every six months of his duty to report offsetable benefits to the employer. The employer does this by issuing the claimant a Form LIBC-756. In this way, a recoupment should not need to cover an overpayment made over a period of time longer than six months. City of Pittsburgh I also confirmed that in keeping with the Act's humanitarian purposes, a WCJ may structure a recoupment in a way that minimizes its impact on the claimant.
Here, Claimant was overpaid for approximately seven months. Employer fully recouped the overpayment, and it has paid back, with interest, the amount of its excessive recoupment. The only question is whether Employer must also pay Claimant the difference between $542 and $334.42, as ordered by the WCJ. Claimant testified that the recoupment caused a hardship, i.e., he had to sell one car and seek help with mortgage payments. Claimant filed his review offset petition challenging the recoupment in December 2008, nearly six-and-a-half years after the recoupment had ended. Under the circumstances, the issue of whether the recoupment resulted in any financial hardship or could have been structured differently is moot.
Our holding in City of Pittsburgh I is dispositive. Accordingly, we reverse the Board's adjudication to the extent it disallowed recoupment of the overpayment and affirm it in all other respects.
/s/_________
MARY HANNAH LEAVITT, Judge ORDER
AND NOW, this 4th day of September, 2014, the order of the Workers' Compensation Appeal Board dated February 13, 2013, in the above captioned matter is hereby REVERSED inasmuch as it disallowed recoupment of overpaid benefits and AFFIRMED in all other respects.
/s/_________
MARY HANNAH LEAVITT, Judge