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Protz v. Workers Compensation Appeal Board (Derry Area School District)

Supreme Court of Pennsylvania

June 20, 2017


          ARGUED: November 1, 2016

         Appeal from the Order of the Commonwealth Court entered September 18, 2015 at No. 1024 CD 2014, vacating the Order of the Workers' Compensation Appeal Board entered May 22, 2014 at No. A13-0096 and remanding with instructions.



          WECHT, JUSTICE

         Section 306(a.2) of the Workers' Compensation Act allows employers to demand that a claimant undergo an impairment-rating evaluation (IRE), during which a physician must determine the "degree of impairment" that is due to the claimant's compensable injury. See 77 P.S. § 511.2(1). In order to make this assessment, the Act requires physicians to apply the methodology set forth in "the most recent edition" of the American Medical Association (AMA) Guides to the Evaluation of Permanent Impairment. Id. In these consolidated appeals, we consider whether this mandate violates the constitutional requirement that all legislative power "be vested in a General Assembly, which shall consist of a Senate and a House of Representatives." Pa. Const, art. II, § 1. We hold that it does.

         In 2007, Mary Ann Protz sustained a work-related knee injury. Shortly thereafter, her employer, Derry Area School District (Derry), voluntarily began paying temporary total disability benefits. In October 2011, Protz underwent an IRE at Derry's request. The IRE physician evaluated Protz and assigned to her a 10% impairment rating based upon the Sixth Edition of the American Medical Association Guides to the Evaluation of Permanent Impairment (the Guides)[1] Because Protz's impairment rating was less than 50%, Derry filed a modification petition seeking to convert Protz's disability status from total to partial-the effect of which would be to limit the duration that Protz could receive workers' compensation benefits.[2] See 77 P.S. § 511.2(2) (providing that a claimant with "a threshold impairment rating that is equal to or greater than fifty per centum" is presumed to be totally disabled); 77 P.S. § 511.2(7) (limiting partial disability payments to five hundred weeks). After holding a hearing on Derry's modification petition, a Workers' Compensation Judge (WCJ) ruled that Protz's whole-body impairment was less than 50%, and accordingly granted the petition.

         Protz appealed to the Workers' Compensation Appeal Board, arguing that the General Assembly unconstitutionally delegated to the AMA the authority to establish criteria for evaluating permanent impairment. See Pa. Const, art. II, § 1 ("[T]he legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives."). The Board rejected Protz's constitutional argument and affirmed the WCJ's decision.

         Protz appealed to the Commonwealth Court, where she again argued that Section 306(a.2) of the Act violates Article II, Section 1 of the Pennsylvania Constitution. The Commonwealth Court, sitting en banc, reversed the Board's decision. The en banc panel agreed with Protz that Section 306(a.2)'s requirement that physicians use "the most recent edition" of the Guides violates Article II, Section 1. Writing for the four-judge majority, Senior Judge Dan Pellegrini recited the basic principle that the General Assembly alone has the power to make laws, and it cannot constitutionally delegate that power to any other branch of government or to any other body. Protz v. W.C.A.B. (Deny Area Sch. Dist), 124 A.3d 406, 412 (Pa. Cmwlth. 2015).

         The court acknowledged that, despite this seemingly broad prohibition, "the General Assembly may delegate authority and discretion in connection with the execution and administration of a law to an independent agency or an executive branch agency where the General Assembly first establishes primary standards and imposes upon others the duty to carry out the declared legislative policy in accordance with the general provisions of the enabling legislation." Id. at 413 (citing Blackwell v. Commonwealth, State Ethics Commission, 567 A.2d 630, 637 (Pa. 1989)). The court explained that, when the legislature chooses to so delegate, two critical limitations apply: first, "the basic policy choices must be made by the [legislature;" and second, "the legislation must contain adequate standards which will guide and restrain the exercise of the delegated administrative functions." Id. (citing Gilligan v. Pa. Horse Racing Commission, 422 A.2d 487, 489 (Pa. 1980)).

         Applying this test, the Commonwealth Court concluded that "the Act is wholly devoid of any articulations of public policy governing the AMA, " and that the Act lacks "adequate standards to guide and restrain the AMA's exercise" of its delegated power to create a methodology for grading impairment. Id. at 415. Instead, the court remarked, the General Assembly bestowed upon the AMA "carte blanche authority to implement [the AMA's] own policies and standards, " which are then automatically adopted, sight unseen. Id. at 416.

         The court went on to explain that, even if the General Assembly had included "adequate standards" to "guide and restrain" the AMA's exercise of delegated authority, Section 306(a.2) still would be unconstitutional because the AMA is a private organization. Along these lines, the court noted that:

Unlike governmental agencies which are supposed to act disinterestedly and only for the public good, that presumption cannot be made with regard to private entities. There is no accountability to the public, either directly through the rulemaking process providing for public input and comment or indirectly through the appointment and confirmation power and the power of the purse. More simply, the keystone behind the prohibition against unlawful delegation is that the General Assembly, not private bodies, enacts laws which the government agencies implement in accordance with the standard given to them in the enactment.


         Rather than striking all of Section 306(a.2), or undertaking a severability analysis, the Commonwealth Court declared the law unconstitutional only "insofar as it proactively approved versions of the AMA Guides beyond the Fourth Edition without review." Id. Consistent with that narrow remedy, the court remanded the instant matter to the WCJ with instructions to apply the Fourth Edition of the Guides, the version in existence when the General Assembly enacted Section 306(a.2) in 1996.

         Judges Anne Covey and Robert Simpson each authored dissenting opinions. In Judge Simpson's view, Section 306(a.2) withstands constitutional scrutiny in light of the fact that "the General Assembly delegated initial impairment ratings to an independent, Pennsylvania-licensed, board-certified, clinically-active physician, " not to the AMA itself. Id. at 417 (Simpson, J., dissenting). Judge Simpson also maintained that, because it would be impractical to expect the legislature to establish and constantly revise a set of standards for evaluating physical impairment, "the General Assembly may rely on the medical expertise of the AMA, a well-recognized independent authority, in expressing current, best-practice medical knowledge." Id. at 420. Finally, Judge Simpson observed that "other states have adopted and judicially upheld similar workers' compensation provisions requiring the use of the most recent edition of the AMA Guides in evaluating impairment in workers' compensation cases." Id. at 419 (citing Madrid v. St. Joseph Hosp., 928 P.2d 250 (N.M. 1996) (rejecting a non-delegation challenge involving the New Mexico legislature's adoption of "the most recent edition" of the Guides)). Judge Covey joined Judge Simpson's dissent and authored a separate dissent addressing the majority's alternative holding that all delegations to private entities are unconstitutional.

         Both parties filed petitions for allowance of appeal with this Court, which we granted. Derry takes issue with the Commonwealth Court's conclusion that the General Assembly's prospective adoption of "the most recent edition" of the Guides violates Article II, Section 1, whereas Protz argues that the Commonwealth Court, after finding Section 306(a.2) to be unconstitutional, erred in remanding her case to the WCJ for application of the Fourth Edition of the Guides.

         We begin with the non-delegation issue, as to which our standard of review is de novo and our scope of review plenary. City of Phila. v. Fraternal Order of Police Lodge No. 5 (Breary), 985 A.2d 1259, 1269 n.13 (Pa. 2009). Because the parties' arguments largely reflect the views expressed in the majority and dissenting opinions below, we need not recite them at length. In short, Derry argues that the General Assembly is free to adopt current and future standards that are published by "a well-recognized independent authority." Brief for Derry at 28 (quoting Protz, 124 A.3d at 420 (Simpson, J., dissenting)). Protz, on the other hand, maintains that Section 306(a.2) violates the non-delegation doctrine embodied in our Constitution because it gives the AMA unfettered discretion over Pennsylvania's impairment-rating methodology. See Brief for Protz at 16.

         Article II, Section 1 of the Pennsylvania Constitution states that "[t]he legislative power of this Commonwealth shall be vested in a General Assembly, which shall consist of a Senate and a House of Representatives." Pa. Const, art. II, § 1. That is why, when the General Assembly empowers some other branch or body to act, our jurisprudence requires "that the basic policy choices involved in 'legislative power' actually be made by the [legislature as constitutionally mandated." Tosto v. Pa. Nursing Home Loan Agency, 331 A.2d 198, 202 (Pa. 1975). This constraint serves two purposes. First, it ensures that duly authorized and politically responsible officials make all of the necessary policy decisions, as is their mandate per the electorate. Wm. Penn Parking Garage, Inc. v. City of Pittsburgh, 346 A.2d 269, 291 (Pa. 1975) (plurality opinion). And second, it seeks to protect against the arbitrary exercise of unnecessary and uncontrolled discretionary power. Id.

          At the heart of the non-delegation doctrine, which we have described as a "natural corollary" to the text of Article II, Section 1, is the tenet that the General Assembly cannot delegate "to any other branch of government or to any other body or authority" the power to make law. Blackwell, 567 A.2d at 636; State Bd. of Chiropractic Exam'rs v. Life Fellowship of Pa., 272 A.2d 478, 480 (Pa. 1971). Or, as John Locke put it, legislative power consists of the power "to make laws, and not to make legislators." John Locke, Second Treatise of Government 87 (R. Cox ed.1982). Indeed, the rule is essential to the American tripartite system of representative government. The framers of the Constitution believed that the integrity of the legislative function was vital to the preservation of liberty. See Dep't of Transp. v. Ass'n of Am. Railroads, __U.S.__, 135 S.Ct. 1225, 1237 (2015) (Alito, J., concurring) ("The principle that Congress cannot delegate away its vested power exists to protect liberty."); see also The Federalist No. 47, at 301 (J. Cooke ed. 1961) (J. Madison) ("The accumulation of all powers, legislative, executive, and judiciary, in the same hands . . . may justly be pronounced the very definition of tyranny.").

         Although our Constitution generally forbids the delegation of "legislative power, " it nonetheless permits the General Assembly, in some instances, to assign the authority and discretion to execute or administer a law. Blackwell, 567 A.2d at 637. When the General Assembly does so, the Constitution imposes two fundamental limitations. First, as mentioned, the General Assembly must make "the basic policy choices, " and second, the legislation must include "adequate standards which will guide and restrain the exercise of the delegated administrative functions." Pennsylvanians Against Gambling Expansion Fund, Inc. v. Commonwealth, 877 A.2d 383, 418 (Pa. 2005); State Bd. of Chiropractic Exam'rs, 272 A.2d at 481 (quoting Chartiers Valley Joint Sch. v. Cty. Bd. of Sch. Dirs. of Allegheny Cty., 211 A.2d 487, 492-93 (Pa. 1965)). This means, to borrow Chief Justice Taft's oft-quoted expression, that the law must contain some "intelligible principle to which the person or body authorized to [act] is directed to conform." J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928).

         In many non-delegation cases, this Court also has stressed the importance of procedural mechanisms that serve to limit or prevent the arbitrary and capricious exercise of delegated power. Tosto, 331 A.2d at 203; see W. Phila. Achievement Charter Elementary Sch. v. Sch. Dist. of Phila., 132 A.3d 957, 966 (Pa. 2016). In Tosto, for example, the statute at issue required that the administrative agency establish neutral operating procedures, develop standardized documents, and give the public notice of proposed agency rules and regulations before promulgating them. In upholding the law, we described these elements as "important safeguard[s] against the arbitrariness of ad hoc decision making." Tosto, 331 A.2d at 204.

         Similarly, in William Penn, we upheld a tax enabling statute that delegated to the judiciary the power to assess whether certain local taxes were "excessive or unreasonable." Wm. Penn Parking Garage, Inc., 346 A.2d at 291. There, a plurality of this Court found it significant that the General Assembly had assigned this task to the courts, rather than to an administrative body, because the very structure of the judiciary serves to protect against the arbitrariness of ad hoc decision making. In this regard, we emphasized that a trial court operating under the statute "must explain the grounds of its decision in a reasoned opinion which will serve as a precedent to guide decisions in future cases, " and that "trial courts are subject to careful review by appellate courts to [e]nsure the general consistency of their actions with one another and to confine them within their proper sphere." Id. at 291 -92.

         This Court's most recent non-delegation decision involved a provision in the Public School Code, see 24 P.S. §§ 1-101 - 27-2702, that gave a five-member School Reform Commission (comprised mostly of individuals appointed by the Governor) sweeping powers to improve the finances of distressed school districts. Among other things, the law delegated to the School Reform Commission the authority to suspend regulations of the State Board of Education and to suspend provisions of the Public School Code. W. Phila. Achievement Charter Elementary Sch., 132 A.3d at 959. The General Assembly placed only minor restrictions upon the Commission's authority. First, the General Assembly put a few provisions of the Public School Code beyond the reach of the Commission's suspension power, most of which related to local school-board elections. Second, the General Assembly required that the Commission submit annually a report to the Governor and the Education Committees of both the House and the Senate detailing the progress made in fiscal and academic performance. Finally, individual members of the Commission, as public employees, could be removed by the Governor for "malfeasance or misfeasance." Id. at 971 (Baer, J., dissenting). This Court held that the law violated the non-delegation doctrine because it did not include concrete measures to channel the Commission's discretion to wield its suspension power, nor did it include safeguards to protect against arbitrary, ad hoc decision making, such as a requirement that the Commission hold hearings, allow for public notice and comment, or explain the grounds for its suspensions in a reasoned opinion subject to judicial review.

         By any objective measure, the authority delegated to the AMA in Section 306(a.2) of the Workers' Compensation Act is even more broad and unbridled than that of the School Reform Commission in West Philadelphia Achievement Charter Elementary School. The General Assembly did not favor any particular policies relative to the Guides' methodology for grading impairments, nor did it prescribe any standards to guide and restrain the AMA's discretion to create such a methodology.[3] Without any parameters cabining its authority, the AMA would be free to: (1) concoct a formula that yields impairment ratings which are so inflated that virtually every claimant would be deemed to be at least 50% impaired; or (2) draft a version of the Guides guaranteed to yield impartment ratings so miniscule that almost no one who undergoes an IRE clears the 50% threshold; or (3) do anything in between those two extremes. The AMA could add new chapters to the Guides, or it could remove existing ones. It could even create distinct criteria to be applied only to claimants of a particular race, gender, or nationality.[4]

         Consider also that the AMA could revise the Guides once every ten years or once every ten weeks. If the AMA chooses to publish new editions infrequently, Pennsylvania law may fail to account for recent medical advances. By contrast, excessive revisions would likely pose severe administrative headaches, inasmuch as the Guides automatically have the force and effect of law once published. As these hypotheticals illustrate, the General Assembly gave the AMA de facto, unfettered ...

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