Workers Comp Zone


There’s been a lot of speculation as to how the law of COLAS will develop.

I’m not talking potential taxes on sugary drinks as part of a national healthcare reform bill.

I’m talking about the cost of living increases under California Labor Code 4659(c). That COLA affects life pension cases (where the percentage of disability is 70% or more) and permanent total disability cases. The COLA statute was enacted in 2002 and was not repealed as part of the 2004 SB 899 comp reform. The COLA calculations apply only to injuries after January 1, 2003.

Under the terms of Labor Code 4659(c):
“an employee who becomes entitled to receive a life pension or total permanent disability indemnity…shall have that payment increased annually commencing on January 1, 2004, and each January 1 thereafter, by an amount equal to the percentage increase in the “state average weekly wage” as compared to the prior year”

The California Court of Appeal, 6th District has now rendered its opinion as to the start date for calculating cost of living increases under the COLA.

That decision, in a decision ordered published, John Duncan vs. Workers Compensation Appeals Board and X.S., can be found here: … 034040.PDF

The 6th District opinion (which is likely to be appealed to the California Supreme Court) holds that cost of living adjustments are to be added to payments starting January 1, 2004 and every January 1 thereafter.

This is a big win for Marc Marcus of Sacramento, who briefed the case on behalf of the California Applicants Attorneys Association in a friend of the court brief. Marcus contended that the COLA calculation should start as of January 1, 2004, the start date of the first COLA.

Also arguing on behalf of the claimant was Art Johnson of San Jose, one of the most creative applicant attorneys in California.

The 6th District adopted this argument on a “plain meaning” interpretation. The court noted that:
“We presume that the Legislature could have written the statute to include the date of injury, or the permanent and stationary date, or the date when the life pension starts to commence the COLAS, but the legislature did not. rather, the legislature chose January 1. 2004 as the start date of the first COLA.”

The court rejected two other approaches:
-a COLA increase start date as of the date life pension or permanent total payments were actually due
-a COLA increase start date as of the date of the injury

This decision is already coming under attack from some defense attorneys. Frequent commentator Richard Jacobsmeyer of Oakland’s Shaw, Jacobsmeyer, Crain and Claffey sent an eblast titled “Appellate Court Provides Potential Windfall in Life and PTD Cases”.

Jacobsmeyer (who, along with San Francisco’s Jeff Greenberg, sat on an educational panel on COLA issues with me at a 2008 CAAA conference and co- authored an article on COLAs for the publication of the State Bar Workers Compensation section) argues that a better interpretation would be to make the COLA calculations run from the date of the injury. Jacobsmeyer reasons that such a calculation would reflect the policy of preventing erosion of PTD and life pension benefits by inflation. But Jacobsmeyer argues that backdating COLA calculations to 1/1/04 will result in a double dip COLA in permanent total cases. In his view the result could be that payments in permanent total cases will outstrip the employee’s earnings, due to the interaction of the COLA and SAWW (state average weekly wage) increases.

That will undoubtedly be the focus of attack by opponents of this decision.

Proponents of the decision will note that the legislature did not tinker with the decision in 2004, and the 6th District’s plain meaning reading of the statute is elegantly simple. They also will want to note that the statute applies to seriously injured workers.

The argument could be made that the California comp system needs to be reformed to take better care of the most substantially disabled workers. This decision trends in that direction.

If the California Supreme Court elects not to review this case, the issue may crop up in other Court of Appeal districts.

Stay tuned.

Julius Young

Category: Political developments