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decided: November 8, 1982.


Appeals from the Order of the Workmen's Compensation Appeal Board in case of Armelia Henderson v. Rockwell International, Axle Division, No. A-79102.


Richard E. Flannery, Mansell, McKee, Mitsos & Flannery, for Rockwell International -- Axle Division.

William G. Cohen, Cohen & Cusick, for Armelia Henderson.

Michael L. Harvey, Deputy Attorney General, with him, Allen C. Warshaw, Deputy Attorney General, and LeRoy S. Zimmerman, Attorney General, for intervenor, Commonwealth of Pennsylvania.

Thomas Gerety, for Amicus Curiae, Pittsburgh Chapter, Pennsylvania American Civil Liberties Union.

President Judge Crumlish, Jr. and Judges Rogers, Williams, Jr. and Doyle. Opinion by President Judge Crumlish, Jr. Judge Rogers concurs in the result only. Judge Mencer did not participate in the decision in this case.

Author: Crumlish, Jr.

[ 69 Pa. Commw. Page 615]

The Workmen's Compensation Appeal Board awarded benefits to Armelia Henderson and denied her request for attorney's fees and penalties. Cross-appeals were filed by her and her employer, Rockwell International, Inc.

In October of 1977, Henderson, a Rockwell employee, sustained a work-related injury. In May of 1978, she signed a final receipt and her benefits were terminated. She suffered a recurrence in January of 1979, and entered into a supplemental compensation agreement. In April, Rockwell petitioned to terminate compensation and proffered an affidavit by Dr. Medlock in support of its allegation that her injury had ceased, and her benefits were automatically suspended under Section 413(a) of The Pennsylvania Workmen's Compensation Act.*fn1

The referee, concluding that Henderson's disability continued, reinstated her benefits but denied her request for attorney's fees and penalties. The Board affirmed and these cross-appeals followed.

[ 69 Pa. Commw. Page 616]

Rockwell must prove that Henderson no longer had a work-related disability. Children's Aid & Family Page 616} Service v. Workmen's Compensation Appeal Board, 53 Pa. Commonwealth Ct. 379, 417 A.2d 1297 (1980). Rockwell maintains that the referee capriciously disregarded the testimony of Rockwell's medical witness, Dr. Medlock.*fn2 Henderson's attending physician, Dr. Rogers, testified that she was totally disabled and that her disability was related to her 1977 injury and to its January 1979 recurrence. In light of this conflicting testimony, we cannot say that the referee capriciously disregarded the testimony of Rockwell's medical witness, Aversa. We affirm the denial of the termination petition.

We must also affirm the referee's refusal to award attorney's fees and penalties. Section 443*fn3 provides that no attorney's fees may be awarded where there is a reasonable basis for the contest. Here, Dr. Medlock's deposition reveals that Rockwell had a reasonable basis for seeking termination of Henderson's benefits. Additionally, Section 435(d)*fn4 provides for the imposition of penalites only where the employer is guilty of unreasonable or excessive delays.

The Board's deletion of litigation costs and medical expenses from the computation of counsel fees must be reversed. We have held that the determination of counsel fees under Section 442 of the Act,*fn5 may take into account the full amount of the award made by the referee, Workmen's Compensation Appeal Board v. General Machine Products Co., 24 Pa. Commonwealth

[ 69 Pa. Commw. Page 617]

Ct. 95, 353 A.2d 911 (1976), and we conclude that the Board erred in modifying the referee's order.

Henderson has also challenged the constitutionality of Section 413 of the Act,*fn6 which provides that the filing of a termination petition, accompanied by a physician's affidavit, will act as an automatic supersedeas, suspending the claimant's benefits. She contends that this provision acts as a denial of her due process rights because the suspension of benefits is made without the proper procedural safeguards under the color of state law. She asserts that the state, in enacting this section, has significantly involved itself with Rockwell's actions or that, in the alternative, Rockwell is performing a traditional, governmental function. We disagree.

An earlier version of Section 413 was found to be constitutionally valid in Silas v. Smith, 361 F. Supp. 1187 (E.D. Pa. 1973).*fn7 We agree with that court's holding that the suspension of an employee's workmen's compensation benefits by a private insurer prior to a hearing does not violate the employee's rights to due process. See also Department of Labor and Industry v. Workmen's Compensation Appeal Board, 58 Pa. Commonwealth Ct. 413, 427 A.2d 1277 (1981).

Section 413 of the Act, although encompassed in a comprehensive system of regulation of workmen's compensation, does not significantly involve the state in the actions of the employer. The fact that a certain area is highly regulated is not sufficient by itself to

[ 69 Pa. Commw. Page 618]

    establish that a private party covered by such regulation acts under color of state law. See Jackson v. Metropolitan Edison, 419 U.S. 345 (1974). In order to demonstrate state action, there must also be a showing of active participation by state officials or a showing that the state ordered the private party to act in a specific manner. Flagg Bros., Inc. v. Brooks, 436 U.S. 149 (1978); Jackson. Employers and employees are permitted to enter into voluntary agreements to provide compensation without the supervision or intervention of any state official and these benefits may be terminated by mutual consent either through the signing of a final receipt, Section 434 of the Act, 77 P.S. § 1001, or through agreement of the parties, Section 408 of the Act, 77 P.S. § 732. An employer may force the discontinuance of benefits by filing a termination petition, and it may then suspend benefits without approval from state officials if it produces a physician's affidavit stating that the employee had recovered. It is true that the Act sets forth the exclusive means for terminating benefits, Workmen's Compensation Appeal Board v. Leuschen, 21 Pa. Commonwealth Ct. 39, 342 A.2d 810 (1975), but it does not require the employer to suspend benefits. The automatic supersedeas provision of the Act is merely an option available to the employer to be used at its own discretion.

Further, the state has not encouraged the suspension of benefits through the enactment of Section 413 because the compensation agreement between the parties constitutes a private contractual relationship and, if the Act did not exist, the employer would be free to stop payments if it determined that the employee's disability had ended. ...

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