Opinion
No. 2927 C.D. 2000.
Submitted: April 27, 2001.
Filed: October 31, 2001.
Before: Honorable Dan Pellegrini, Judge; Honorable Bonnie Brigance Leadbetter, Judge; Honorable Charles P. Mirarchi, Jr., Senior Judge.
OPINION
Iroquois Tool System (Employer) appeals from the order of the Workers' Compensation Appeal Board (Board) reversing the Workers' Compensation Judge's (WCJ) decision that suspended benefits paid to Jose Rosales (Claimant) under the Workers' Compensation Act (Act).
Act of June 2, 1915, P.L. 736, as amended, 77 P. S. § 1-1041.4.
This case involves whether the "Walker Rule" — more generally known as the Legal Residuum Rule, that holds that unobjected uncorroborated hearsay is not substantial evidence — has been superseded by the Act 57 amendments (Act 57) to Section 422(c) of the Act insofar as it allows medical reports into evidence in excess of the proscribed number of weeks unless the party against whom the report is offered objects to its admission. Section 422(c) of the Act now reads, in relevant part:
In Walker v. Unemployment Compensation Board of Review, 367 A.2d 366 (Pa.Cmwlth. 1976), we held that, "hearsay evidence, admitted without objection, will be given its natural probative effect and may support a finding of the Board, if it is corroborated by any competent evidence in the record, but a finding of fact based solely on hearsay will not stand." Id. at 527, 367 A.2d at 370.
Act of June 24, 1996, P.L. 57.
Where any claim for compensation at issue before a workers' compensation judge involves fifty-two weeks or less of disability, either the employe or the employer may submit a certificate by any health care provider as to the history, examination, treatment, diagnosis, cause of the condition and extent of disability, if any, and sworn reports by other witnesses as to any other facts and such statements shall be admissible as evidence of medical and surgical or other matters therein stated and findings of fact may be based upon such certificates or reports. Where any claim for compensation at issue before a workers' compensation judge exceeds fifty-two weeks of disability, a medical report shall be admissible as evidence unless the party that the report is offered against objects to its admission. (Emphasis added).
In this case, Employer filed a suspension petition alleging that on October 9, 1996, it offered Claimant a full-time modified duty position at pre-injury wages within his medical restrictions. Although Claimant returned to work at the offered position on December 11, 1996, the suspension petition proceeded to a hearing because Claimant quit work on January 23, 1997. To support its showing under Kachinski v. Workmen's Compensation Appeal Board (Vepco Construction Company), 516 Pa. 240, 532 A.2d 374 (1987), that Claimant's condition changed such that he was medically capable of performing the full-time light-duty work, Employer offered into evidence the September 4, 1996 report of Richard P. Bonfiglio, M.D. (Dr. Bonfiglio). In his report, Dr. Bonfiglio opined that Claimant had continuing back problems making him incapable of performing his pre-injury job due to the repetitive nature of that work, but he could perform non-repetitive sedentary or light-duty work for 40 hours a week. To show job availability, Employer offered the testimony of its benefits administrator who testified that the full-time light-duty job offered to Claimant was removing burs from pieces of pipe that she described as modified for Claimant's medical restrictions.
Pursuant to a notice of compensation payable, Claimant received benefits for a work-related lumbar strain he sustained on May 26, 1994, and returned to work 30 hours a week as of June 28, 1996, per a supplemental agreement.
The WCJ accepted the testimony of Patrick Murphy, Employer's human resources manager, that at a meeting on January 23, 1997, where Claimant was to receive a three-day suspension for absenteeism, Claimant stated that he was late that day and walked out of the meeting saying he was fired. Mr. Murphy indicated, however, that Claimant could not have been fired at that meeting because he did not first serve his three-day suspension and believed Claimant voluntarily quit his employment. Furthermore, Mr. Murphy indicated that Claimant's records did not indicate he was absent because of his back injury, and Claimant testified that he left after the meeting because he felt sick. Based on the testimony of Mr. Murphy, the WCJ found that Claimant voluntarily quit his employment as of January 23, 1997.
In Kachinski, our Supreme Court set forth the following elements to support a modification of benefits: 1) when the employer seeks to modify the claimant's benefits based on the claimant recovering some or all ability must first produce medical evidence of a change in condition; 2) the employer must then produce evidence of referrals to then-open jobs which fit the occupational category to which the claimant has been medically cleared; 3) the claimant must then demonstrate that he has followed through on the referral in good faith; and 4) if the referral fails to result in a job, then benefits continue. Kachinski, 532 A.2d at 380.
Claimant presented no medical evidence in opposition to Employer's petition but testified that shortly after starting the job, he complained that he could not do the work. He indicated that despite the pain in his back, if offered to return, he would try the job again but was not sure he could do it because the bending involved with the job hurt his back.
The WCJ accepted the report of Dr. Bonfiglio and found that Claimant was able to return to light-duty work for 40 hours a week. The WCJ also accepted the testimony of Employers' witnesses that the offered modified duty position was within Claimant's restrictions and full-time at no loss of earnings. Based on these findings, the WCJ suspended benefits as of October 9, 1996. In his appeal to the Board, Claimant questioned whether the lone report of Dr. Bonfiglio could support the finding that he was physically capable of performing the full-time modified job because it was uncorroborated hearsay. The Board reversed, holding that because Dr. Bonfiglio's medical report was hearsay, it could not support a finding of a change in Claimant's condition because it was not corroborated by other competent evidence. This appeal followed.
Our scope of review of an order of the Board is limited to whether the WCJ's findings of fact were supported by substantial evidence, whether there was an error of law, or whether constitutional rights were violated. Kolenlkiewicz v. Workers' Compensation Appeal Board (SKF USA, Inc.), 730 A.2d 1054 (Pa.Cmwlth. 1999).
The sole issue then is whether, as the Employer contends, the Board erred in reversing the WCJ by holding that Section 422(c) of the Act has not superseded the Walker Rule. Because Section 422(c) of the Act now clearly allows medical reports that are admitted without objection in cases exceeding 52 weeks of disability to serve as evidence, the only reason that the unobjected hearsay report could not be considered substantial evidence is if there are constitutional considerations that foreclose an administrative agency from making a decision solely on uncorroborated hearsay testimony.
The Legal Residuum Rule provides that even though an agency rule or statutory provision allows the admission of incompetent evidence into the record of the administrative hearing, there still must be a residuum of legal evidence to support necessary findings before an award can be made. The Walker Rule has that effect because it does not allow the use of uncorroborated hearsay despite that Section 505 of the Administrative Agency Law, 2 Pa.C.S.A. § 505, provides that agencies shall not be bound by technical rules of evidence and establishes a higher standard for admissibility than the statutory requirement that the evidence be relevant and "of reasonably probative value." L.W.B. v. Sosnowski, 543 A.2d 1241, 1245 (Pa.Cmwlth. 1988). While the Rule has been formerly subject to much academic criticism, nonetheless, the courts in 29 states have formerly adopted such a Rule. Bernard Schwartz, Administrative Law § 7.4. (3d ed. 1991).
Section 505 of the Administrative Agency Law states:
Commonwealth agencies shall not be bound by technical rules of evidence at agency hearings, and all relevant evidence of reasonably probative value may be received. Reasonable examination and cross-examination shall be permitted.
Justice Kaufman in Ceja, infra, sets forth most of that criticism. Most of that criticism was levied at the zenith of the concept that administrative agencies were best able to solve problems, and they needed unfettered power to make decisions before the due process revolution. Schwartz, in his treatise, states that those criticisms "ignore the tendency of agencies to exercise little or no control over the admission of evidence, which contributed to the elephantine records in many administrative proceedings. Fear of the legal residuum rule leads agencies to insist on a more careful presentation and examination of evidence." Bernard Schwartz, Administrative Law § 7.4. See also 1 Cooper, State Administrative Law 411 (1965).
The Rule appears to be based mainly on due process principles but also on the concept that there needs to be some sort of substantial evidence in the interest of fairness for the agency to make the decision and for courts to conduct meaningful judicial review. In Section 7.4 of his Administrative Law treatise, Schwartz states:
The dissent contends that we are, sua sponte, raising the issue of whether the Act 57 amendments to Section 422(c) violates due process and fairness principles when all we are doing is addressing whether the Board correctly found that the Act was superseded by the Walker Rule, the issue raised by the parties. As our Supreme Court decisions have held, the Walker Rule is based on due process and fairness principles, and not to discuss those principles in a discussion of the Walker Rule would be like discussing the color "green" and not explaining that it was a combination of blue and yellow. As to the dissent's discussion of construction of Section 422 (c) of the Act, that the Walker Rule still applies to larger cases, none of the parties suggested that interpretation or that issue.
Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Kocher's IGA v. Workers' Compensation Appeal Board (Deitrich), 729 A.2d 145 (Pa.Cmwlth. 1999), petition for allowance of appeal denied, 561 Pa. 680, 749 A.2d 473 (2000).
The rules of evidence cannot be so relaxed in administrative proceedings as to disregard due process and fundamental rights. There is a fundamental distinction between the admission of incompetent evidence and reliance upon it in reaching a decision. . . . Though an agency may admit incompetent evidence, a challenged finding may not rest solely upon such evidence. Under the `legal residuum' rule it is generally considered that a finding is not substantially supported absent the presence of at least a residuum of evidence competent under the exclusionary rules.
In Pennsylvania, the only case that squarely addressed the basis behind the Walker Rule was our Supreme Courts problematic decision in Unemployment Compensation Board of Review v. Ceja, 493 Pa. 588, 427 A.2d 631 (1981). In that case, Justice Kauffman issued an opinion that proposed the rejection of the Walker Rule in favor of a Pennsylvania administrative law adaptation of Federal Rule of Evidence 803(24), the residual hearsay exception, which makes hearsay competent when, pursuant to stated criteria, it possesses "circumstantial guarantees of trustworthiness" determined to be "equivalent" to the logical assurances associated with the hearsay exceptions specifically described in those Rules. He also found that trustworthiness and necessity for the use of hearsay in support of administrative findings satisfied the more flexible due process requirements of the informal administrative setting. However, no other Justice of the Supreme Court of the-then six-member court joined in that opinion. All of the other five Justices concurred only in the result, with three of the six joining in one concurring opinion and Justice Flaherty, who joined in the other concurring opinion, filing a separate concurring opinion. Both of the concurring opinions, after explicitly rejecting Justice Kauffman's opinion, went on to find that due process and fairness required that a decision not be based solely on hearsay. In his concurring opinion, Justice Flaherty stated:
Fundamental due process requires that no adjudication be based solely upon hearsay evidence. This tenet of our law is not a "technicality", but rather lies at the root of the truth determining process. . . . The majority opinion, however, in my view, goes too far and could lead to a determination of rights based upon rank hearsay. This result is repugnant to centuries of tradition. I must, therefore, concur only in the result.
Id. at 618, 427 A.2d at 647.
While only three of the Justices in concurring opinions in Ceja held that constitutional considerations were at the foundation of the Walker Rule, in Commonwealth ex rel. M. Russell Buchanan v. Verbonitz, 525 Pa. 413, 417, 581 A.2d 172, 174, our Supreme Court quoted with approval Justice Flaherty's concurring opinion that "[f]undamental due process requires that no adjudication be based solely on hearsay evidence." Again, in A.Y. v. Commonwealth, Department of Public Welfare, Allegheny County Children Youth Services, 537 Pa. 116, 641 A.2d 1148 (1994), our Supreme Court based the Rule on due process principles, stating that due to the informal nature of the proceeding, nothing but hearsay could determine some very important rights implicating the fairness of the hearing.
A.Y. involved a case of purported child abuse where the court did allow the testimony of the purportedly abused child who did not testify "live." While denominating the testimony as "hearsay," technically, it was not hearsay because the child's statements were going to be presented directly. What that case appears to hold is that due process did not require that the purported child abuser be able to cross-examine if the statement was accurately recorded by audio or video equipment; the audio-visual record disclosed the identity and at all times included the images and/or voices of all individuals present during the interview of the minor; the statement was not made in response to questioning calculated to lead the child to make a particular statement; and the statement was not the product of improper suggestion. A.Y., 641 A.2d at 1153.
Although not going into the basis of the Rule, in Joyce v. Workmen's Compensation Appeal Board (Ogden/Allied Maintenance), 680 A.2d 855, 859 (Pa. 1996), different outcome on rehearing, 550 Pa. 244, 705 A.2d 417 (1997), albeit decided before Section 422 was amended, our Supreme Court stated that "[w]hile we recognize that Ceja has no precedential value, we specifically reject any notion that a claimant must challenge the reliability of hearsay evidence when the Employer must prove job availability . . ." More recently, our Supreme Court again held that uncorroborated hearsay would not be permitted to determine whether a claimant applied for suitable alternative employment in Pertile v. Workers' Compensation Appeal Board (Construction Engineering Consultants, Inc.), 546 Pa. 569, 687 A.2d 367 (1997).
In finding the testimony hearsay as to whether Pertile applied for the jobs he was referred to, our Supreme Court noted:
In fact, it is difficult to imagine a case more illustrative of the evils of hearsay testimony. Without the employer being present, Pertile was helpless to inquire as to whether there may not have been an error in the employer's report that he did not apply. Pertile could not inquire as to who searches the files for applications, their qualifications, who creates the files, the security and reliability of the files, the cost to the employer of responding to the vocational counselor's inquiries, or the importance to the employer or lack of importance in making sure that its responses are accurate. It is conceivable that the files at Tri-State were created and maintained by poorly trained temporary personnel who had no interest or ability to insure their accuracy. Pertile was entitled to mount a meaningful challenge to the accuracy of information concerning his application, and such a challenge was impossible in the absence of the employer.
Pertile, 687 A.2d at 369-370.
Addressing Act 57's amendment to Section 422(c) of the Act allowing hearsay testimony just because someone fails to object, important fundamental due process rights are implicated because it attempts to make incompetent evidence alone sufficient to support an agency decision. Claimants have an important interest in their worker's compensation benefits, and employers have an important interest in having benefits cease once the injury has resolved itself or if suitable alternative employment has been offered. However, a provision that affects an employer's or a claimant's rights, but more likely a claimant's, because he or she is more likely to be unrepresented based on uncorroborated hearsay that is dependent on a failure to properly object, violates fundamental due process because there is no competent evidence on which the WCJ can make a decision. To correct this, all that either party has to do is offer some direct evidence to support the finding, which appears to be better than the procedure suggested here and does not constitute, even though it may involve some expense, an unreasonable burden. See Matthews v. Eldridge, 424 U.S. 319 (1976).
While allowing reports up to 52 weeks to go into evidence with no objection possible, because the opposing party receives the medical report in advance, if the party against whom the report is offered believes that it is sufficiently damaging and the amount at issue warrants the expense, if they desire to challenge the report, they can schedule the deposition of that medical expert. In effect, the allowance of reports merely shifts burdens and costs.
Taking into consideration that the Walker Rule itself vitiated evidentiary procedures contained in the Administrative Agency law and our Supreme Court holdings that the Walker Rule is based on due process and fairness considerations, we agree that uncorroborated medical reports whose admissibility is dependent on the claimant's or counsel's failure to properly object violates fundamental due process upon which the Walker Rule is based. The last sentence of Section 422(c) added by Act 57 allowing an administrative decision to be founded solely on unobjected uncorroborated hearsay violates our constitutional notions of fundamental due process.
Accordingly, because Dr. Bonfiglio's medical report was uncorroborated hearsay not constituting substantial evidence, the Board properly held that the WCJ's finding of a change in Claimant's condition was unsupported by evidence in the record and its order is affirmed.
ORDER
AND NOW, this 31st day of October, 2001, the order of the Workers' Compensation Appeal Board entered November 30, 2000, at Appeal No. A98-1355, is affirmed.
DAN PELLEGRINI, JUDGE
This is a case submitted on briefs without oral argument. The only issue raised and briefed by the parties was a question of statutory construction — whether Section 422(c) of the Workers' Compensation Act, as amended, 77 P. S. § 835, has superceded the Walker Rule. Finding that it has, the majority sua sponte proceeds to hold that Section 422(c) is unconstitutional. While I strongly disagree with the majority's constitutional analysis, I have an even greater jurisprudential objection to our holding an act of the General Assembly unconstitutional when that issue has not been raised, briefed or argued by the parties. Nonetheless, I concur in the result reached by the majority because I do not believe that Section 422(c) abrogates the Walker Rule in proceedings like the one before the court, involving more than 52 weeks' compensation.
Act of June 2, 1915, P.L. 736, as amended, 77 P. S. § 1-1041.4; 2501-2626. Section 422 was added by Section 6 of the Act of June 26, 1919, P.L. 642.
As the majority notes, Section 422(c) provides, inter alia:
Where any claim for compensation at issue before a workers' compensation judge involves fifty-two weeks or less of disability, either the employe or the employer may submit a certificate by any health care provider as to the history, examination, treatment, diagnosis, cause of the condition and extent of disability, if any, and sworn reports by other witnesses as to any other facts and such statements shall be admissible as evidence of medical and surgical or other matters therein stated and findings of fact may be based upon such certificates or such reports. Where any claim for compensation at issue before a workers' compensation judge exceeds fifty-two weeks of disability, a medical report shall be admissible as evidence unless the party that the report is offered against objects to its admission.
77 P. S. § 835 (emphasis added). The Walker Rule provides that:
[H]earsay evidence, admitted without objection, will be given its natural probative effect and may support a finding of the Board, if it is corroborated by any competent evidence in the record, but a finding of fact based solely on hearsay will not stand.
Walker v. Unemployment Compensation Bd. of Review, 367 A.2d 366, 369 (Pa.Cmwlth. 1976).
It seems apparent to me that, by its very terms, Section 422(c) preserves the Walker Rule for the second category it addresses, that of larger claims. The majority seems to interpret the phrase "a medical report shall be admissible as evidence" to mean "shall amount to substantial evidence," i.e., shall be sufficient to support a finding. I cannot agree with this construction, since the General Assembly explicitly provided that "findings of fact may be based upon such certificates and reports" in proceedings where 52 weeks or less of compensation is in issue, but specifically omitted that language as to the larger claims.
Accordingly, while I believe the majority's interpretation of Section 422(c) is correct with respect to smaller claims, I do not believe it applies to the claim at issue, which exceeded fifty-two weeks. Applying the Walker Rule, the Board found employer's uncorroborated hearsay evidence insufficient to support the WCJ's findings, and I would affirm on that basis.