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Phoenixville Hosp. v. Workers' Compensation Appeal Bd. (Shoap)

Supreme Court of Pennsylvania

November 21, 2013


Argued March 7, 2012.

Appeal from the Order and Opinion of the Commonwealth Court entered on June 30, 2010, at No. 2188 C.D. 2009 (reargument denied 08/18/2010), reversing the Order of the Workers' Compensation Appeal Board entered on October 14, 2009, by the Workers' Compensation Board at No. A08-1746. Intermediate Court Judges: Bernard L. McGinley, Kevin P. Brobson, Judges, Jim Flaherty, Senior Judge.2 A.3d 689 (Pa.Cmwlth. 2010).

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[Copyrighted Material Omitted]

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Jonathan Picker, Esq., Picker Law Offices, for Annette Shoap.

Fred Harold Hait, Esq., Smigel, Anderson & Sacks, L.L.P., Harrisburg, for Phoenixville Hospital.

Amber Marie Kenger, Esq., PA Department of Labor & Industry,

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Richard C. Lengler, Esq., Harrisburg, PA Department of Labor & Industry-WCOA, for Workers' Compensation Appeal Board.



McCAFFERY, Justice.

We accepted review of this case to determine whether the Commonwealth Court erred in its interpretation of Section 306(b) of the Workers' Compensation Act (" Act" ),[1]77 P.S. § 512. Appellant, Annette Shoap, asserts that the Commonwealth Court erred by concluding that " substantial gainful employment exists" for purposes of granting a modification of her compensation benefits pursuant to Section 306(b), despite the fact that her application for the specific jobs involved failed to result in any offers of employment. Secondarily, Appellant argues that the Commonwealth Court, even if correct in its interpretation of Section 306(b), erred by not remanding the case for further evidentiary development based on its interpretation of Section 306(b), which Appellant contends represented a change in the standard for evaluating cases under that statute. After careful review, we reverse and remand.

Appellant sustained a work-related injury in the nature of a left shoulder injury while working as an employee of Phoenixville Hospital (" Employer" ). She began receiving temporary total disability benefits pursuant to a Notice of Compensation Payable dated September 25, 2003. The treatment for Appellant's injury included three surgeries and physical therapy.

On August 9, 2007, Employer filed a modification petition alleging both that Appellant's physical condition had improved and that work was generally available to her within her physical restrictions in the relevant geographical area, as demonstrated by two labor market surveys. Appellant denied the material allegations of Employer's petition, and a hearing was held before a Workers' Compensation Judge (" WCJ" ).

At the hearing, Employer presented the testimony of Andrew Sattel, M.D., a board-certified orthopedic surgeon, who examined Appellant on May 9, 2007. Dr. Sattel opined that although Appellant has residual loss of function in her left shoulder, she was capable of performing sedentary work. Dr. Sattel also opined that Appellant was capable of performing the jobs described in the labor market surveys taken by Employer's vocational expert witness, Jeffrey Kimmich.

Mr. Kimmich, a certified rehabilitation counselor and vocational case manager, testified that he had met with Appellant and conducted a vocational interview. He also testified that, in two labor market surveys,[2] he had identified five jobs within Appellant's physical restrictions that were " open and available" in Appellant's usual employment area, and had forwarded this information to Appellant. These jobs were: (1) telephone sales representative, at $9.00 per hour, available on May 23, 2007; (2) telephone sales/appointment setter, at $8.00 to $10.00 per hour, available on June 18, 2007; (3) hotel night auditor, at $11.00 per hour, available on June 18,

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2007; (4) hotel front desk clerk, at $9.00 to $10.00 per hour, available on July 9, 2007; and (5) telephone customer representative, at $7.15 per hour, available on July 31, 2007. Mr. Kimmich then testified that he calculated Appellant's earning power as corresponding to an average weekly wage of $347.41, based on an average of the wages of the five identified positions.

Appellant testified that in July 2007, she received Mr. Kimmich's labor market survey as to the first three of the positions, and had applied for each of them on July 30, 2007, entering copies of her respective written applications into evidence.[3] She further testified that she had never been contacted by any of these prospective employers, but also admitted on cross-examination that she had never inquired further about the positions after submitting her employment applications. Appellant additionally testified that in August 2007, she received Mr. Kimmich's labor market survey as to the remaining two positions and had immediately applied for each of them. She testified that she had telephone interviews with both of these prospective employers, and testified, without objection, that she was informed by the latter employer that she was not qualified for the position.[4] Appellant was not offered a position with either employer. Appellant further testified that although she had searched for other jobs advertised in the newspaper, the only jobs that she had applied for were the five identified by Mr. Kimmich. Finally, Appellant presented her own expert medical and vocational witnesses who testified that she was incapable of working at the positions Mr. Kimmich had identified in his labor market survey.

The WCJ issued a decision in which he credited the testimony of Dr. Sattel that Appellant was physically capable of performing any of the five jobs identified by Mr. Kimmich, further finding that Mr. Kimmich had indeed identified five jobs that were both compatible with Appellant's working restrictions and in the relevant geographical area. The WCJ rejected as less credible Appellant's expert medical and vocational witnesses. However, the WCJ also found credible Appellant's testimony that she had made a genuine effort to secure any one of the five of the jobs identified in the labor market survey, but had not received any offers of employment. The WCJ specifically determined that Appellant " has established that in good-faith [sic], she followed through on all of the jobs referred to her by Employer and that none of the referrals resulted in an offer of employment." WCJ Decision, dated 8/27/08, at 5, Conclusion of Law No. 3. For this reason, the WCJ determined that Employer had failed to establish its right to a modification of benefits under Section 306(b) of the Act and, accordingly, denied its modification petition.

On appeal to the Workers' Compensation Appeals Board (" WCAB" ), Employer argued that, by concluding that Appellant had made a " good faith" but unsuccessful effort to secure any one of the five jobs listed in Employer's labor market survey, the WCJ had improperly incorporated into his legal analysis one of the requirements of Kachinski v. Workmen's Compensation Appeal Board (Vepco Const. Co.), 516 Pa. 240, 532 A.2d 374 (1987). Employer asserted that the Kachinski requirements

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were no longer relevant in light of the subsequently enacted provisions of Section 306(b), which provide an approach toward a modification of benefits for claimants with partial disability differing from the approach laid out in Kachinski. In order to place Employer's argument, and the WCAB's and Commonwealth Court's respective dispositions of it, in proper perspective, some background is required.

Prior to 1996, the Act was relatively silent regarding the manner of approaching an employer's claim that it is entitled to a modification of disability benefits where the claimant has regained some functional abilities and is capable of returning to some measure of gainful employment. In our 1987 Kachinski decision, this Court established guidelines for evaluating such cases as follows:

1. The employer who seeks to modify a claimant's benefits on the basis that he has recovered some or all of his ability must first produce medical evidence of a change in condition.
2. The employer must then produce evidence of a referral (or referrals) to a then open job (or jobs), which fits in the occupational category for which the claimant has been given medical clearance, e.g., light work, sedentary work, etc.
3. The claimant must then demonstrate that he has in good faith followed through on the job referral(s).
4. If the referral fails to result in a job[,] then claimant's benefits should continue.

Id. at 380 (emphasis added).

Further, we observed that the above guidelines could create a viable system only when all parties, including employers by referring a serious, productive employment possibility, acted in " good faith," and, by so doing, created an environment where an injured employee could return to " productive employment." Id.

In 1996, the Act of June 24, 1996, P.L. 350 (" Act 57" ) substantially amended Section 306(b) of the Act, renumbering it Section 306(b)(1) and adding Section 306(b)(2) and (3). Amended Section 306(b)(1) establishes that partial disability compensation benefits shall be based on the difference between the claimant's pre-injury wage and her or his " earning power." 77 P.S. § 512(1). Section 306(b)(2) defines " earning power" as " the work the employe is capable of performing and shall be based upon expert opinion evidence which includes job listings with agencies of the department, private job placement agencies, and advertisements in the usual employment area." 77 P.S. § 512(2). Section 306(b)(2) also provides that partial disability " shall apply" if the claimant " is able to perform his previous work or can, considering [her or his] residual productive skill, education, age and work experience, engage in any other kind of substantial gainful employment which exists in the usual employment area" where the claimant lives in Pennsylvania. Id.

Because Section 306(b)(2) did not include the Kachinski requirement that an employer must prove that the claimant was referred to an appropriate " then open job" (except, as noted infra, when the employer itself has an appropriate open position), Employer argued before the WCAB that it was irrelevant that Appellant had shown " good faith" in applying for the five jobs listed in Mr. Kimmich's labor market surveys. The WCAB, however, rejected this argument, opining that the WCJ's decision did not, as Employer asserted, incorporate the Kachinski standards into the analysis, even though " good faith" pursuit of specific employment is one of the elements of Kachinski. Rather, the WCAB determined that " a fair reading" of

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the WCJ's decision " shows that the WCJ used the words [‘ ]good faith[’ ] to show that [Appellant had] made a genuine effort to secure the positions located by [Employer's] vocational expert." WCAB Decision, dated 10/14/09, at 7 n.1.

Regarding the question of whether the WCJ's decision should otherwise be upheld pursuant to Section 306(b), the WCAB noted that the WCJ's decision was in conformity with South Hills Health System v. Workers' Compensation Appeal Board (Kiefer), 806 A.2d 962 (Pa.Cmwlth.2002), from which the WCAB quoted at length. More specifically, the WCAB observed that South Hills determined that the reference in Section 306(b) to jobs that " exist" must be interpreted to mean jobs that do not just " ‘ exist’ but ‘ exist’ in reality and are open and available to a claimant." WCAB Decision at 5 (quoting South Hills, supra at 969). Thus, the WCAB concluded that modification of benefits could not be based simply on whether Employer had identified job listings within Appellant's physical requirements and geographic location, as Employer advocated, when Appellant had produced credible evidence that the jobs were in actuality not available to her, and thus did not " exist in reality." The WCAB held:

By taking the initiative and applying in good faith for the positions, [Appellant here] put the findings of the labor market survey to the test and demonstrated that the jobs listed therein were not, in reality, available to her. Hence, we conclude that the positions did not exist for [Appellant] and that the WCJ correctly denied [Employer's] Modification Petition.

Id. at 7.

On further appeal, the Commonwealth Court reversed. Phoenixville Hospital v. Workers' Compensation Appeal Board (Shoap), 2 A.3d 689 (Pa.Cmwlth.2010). The court noted that South Hills, among other things, opined that an employer could not satisfy its burden under Section 306(b) by simply providing proof of a working environment in the relevant geographic area involving positions that someone with the claimant's physical limitations could perform, but which were currently filled by other individuals. That is, an employer must do more than show that there are people in the relevant geographic area who are working at jobs within the claimant's physical and vocational restrictions. Rather, the employer must show the existence of " available" positions at the time its expert conducted the labor market survey in question. [5] The court further observed, however, that South Hills did not address the issue raised by the present case: whether jobs are " available" to a claimant for purposes of Section 306(b) when the jobs are advertised, the claimant applies for all of the jobs identified in the employer's labor ...

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