City of Pittsburgh, and UPMC Benefit Management Services, Inc., Petitioners
Workers' Compensation Appeal Board (Wright), Respondent
Submitted January 31, 2014
Appealed from No. A10-1466. State Agency: Workers' Compensation Appeal Board.
Michael B. Dodd, Pittsburgh, for petitioners.
Herbert B. Cohen, Pittsburgh, for respondent.
BEFORE: HONORABLE DAN PELLEGRINI, President Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JAMES GARDNER COLINS,
MARY HANNAH LEAVITT, Judge
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 two months, Employer paid John Wright (Claimant) total disability workers' compensation without an offset for the disability pension Employer also paid Claimant. Employer recouped the overpayment of workers' compensation by reducing Claimant's weekly disability payment by $100 until it was repaid. The Board set aside the recoupment because Employer did not give Claimant the official form for reporting his pension income 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 wait for Claimant to report his pension before effecting an offset. Employer was fully aware of Claimant's pension from the City. 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.
Claimant worked for the City of Pittsburgh for many years as a firefighter, most recently as Captain. On February 4, 2004, he slipped on ice while fighting a fire and injured his right knee. At the time he was injured, Claimant annually earned between $70,000 and $80,000. Employer, which is self-insured for workers' compensation, accepted liability for the injury and paid Claimant Heart and Lung benefits equal to his full salary for over a year after the injury.
On May 30, 2005, 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. On June 13, 2005, Employer issued a notice of compensation payable providing for payment of workers' compensation wage loss benefits in the amount of $690 per week beginning May 30, 2005, the maximum rate for any claimant injured in 2004. As of May 30, 2005, Claimant began receiving $3,568 per month in pension benefits
and $690 per week in workers' compensation benefits. Claimant received his first pension check from Employer at the end of June. Employer mailed the first workers' compensation check on June 24th.
On August 5, 2005, Employer issued Form LIBC-761, " Notice of Workers' Compensation Benefit Offset," to Claimant, stating that as of August 8, 2005, his compensation would be reduced to $555.76 weekly because Employer was taking an offset of $134.24. This offset represented the portion of Claimant's disability pension that was funded by Employer. Reproduced Record at 224a-225a (R.R. ). Employer also informed Claimant that Employer had overpaid Claimant disability compensation for the period from May 30, 2005, to August 8, 2005, because the payments for those weeks did not include the offset. The overpayment totaled $1,783.48. Employer advised Claimant that $100 would be deducted from Claimant's weekly disability payment until the overpayment of $1,783.48 was paid back to Employer. The offset and $100 deduction reduced Claimant's weekly disability payment to $455.76 from August 8, 2005, through January 8, 2006. At that point, Employer then began paying Claimant $555.76 per week in workers' compensation, and has continued to do so.
On December 29, 2008, Claimant filed a petition to review compensation offset, alleging that Employer's offset calculation was wrong. The petition also challenged Employer's entitlement to any recoupment, asserting that the $100 deduction would cause a financial hardship. Employer filed an answer denying that its offset calculation was incorrect or that its recoupment was in any way improper.
The matter was assigned to a WCJ. Employer's evidence consisted of expert testimony establishing the amount of Claimant's pension contributed by Employer. Claimant rebutted this evidence with his own expert and testimony about how the offset affected his personal finances. The record established that Claimant's disability pension totals $3,568 each month, or $42,816 per year. Since January 2006, after Employer's offset and recoupment, Claimant has collected $555.76 in weekly workers' compensation disability, or $28,899.52 per year. Claimant's yearly income from his disability pension and workers' compensation is $71,715.52.
Claimant testified that he is the family's sole breadwinner, and he and his wife based their household budget on Claimant's pre-injury earnings. Even full Heart and Lung benefits, i.e., his full salary, required an adjustment to that budget because Claimant lost the opportunity for the overtime he used to earn before his injury. Their household budget was further constrained by the change to his disability pension supplemented by workers' compensation. Employer's recoupment of the overpayment of compensation required Claimant to remove his son from a private high school, which he attended for one semester, and place him in public school. The recoupment came at a difficult time because Claimant was also helping his two daughters who were in college. The family did not want to eat " beans every day," which would have been necessary in order to pay for his son's private school tuition. R.R. 212a. When the recoupment was completed, things became " easier." R.R. 213a. However, Claimant did not return his son to private school. Claimant acknowledged
that he did not contact Employer to challenge or complain about the $100 weekly recoupment after receiving Employer's notice in August 2005.
The WCJ credited Employer's actuarial evidence and expert and found Employer's offset calculations to be accurate. The WCJ then addressed the other issues raised by Employer and Claimant.
Claimant first 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.
Claimant next argued that Employer was not entitled to any offset because it did not provide him with 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 by not raising that issue while the record was open, Claimant waived it. In any case, the WCJ determined that Employer was not required to issue the 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 12; Conclusion of Law No. 5.
Claimant argued, lastly, that Employer was barred from recouping the overpayment of workers' compensation disability because it caused a financial hardship. The WCJ agreed. Citing Maxim Crane Works v. Workers' Compensation Appeal Board (Solano), 931 A.2d 816 (Pa. Cmwlth. 2007), the WCJ concluded that whenever an employer wishes to take a retrospective pension offset, there is a " presumption of prejudice" to the claimant that the employer must rebut in order to recoup an overpayment. Accepting Claimant's testimony as credible, the WCJ concluded that Claimant was prejudiced by Employer's retrospective offset.
For its part, Employer argued that because Claimant failed to challenge the retrospective offset before Employer had actually completed the recoupment, 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.
The WCJ granted, in part, Claimant's petition for review offset. The WCJ allowed Employer the ongoing pension offset based upon its calculations of the amount it contributed to the pension. However, the WCJ disallowed Employer's recoupment of its overpayment and ordered Employer to reimburse Claimant the full amount of the recoupment.
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 the Form LIBC-756 and (2) that issuing the form was not a condition precedent to Employer's offset. Employer argued that the WCJ erred in interpreting Maxim Crane as disallowing a retrospective offset to recoup an overpayment of workers' compensation benefits.
The Board affirmed the WCJ. The Board agreed that Claimant had waived the issue of Employer's entitlement to an offset or whether Employer had to issue Claimant Form LIBC-756 before taking an offset. Nevertheless, the Board went on to hold that the 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. Employer then petitioned for this Court's review.
Issues on Appeal
On appeal, Employer argues that the Board and the WCJ erred in concluding that Employer was not entitled to recoup the overpayment of benefits to Claimant. 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 ...