Dee Anne Ramirez v. Drive Financial Services; and One Beacon Insurance Co.

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WORKERS’ COMPENSATION APPEALS BOARD 1 STATE OF CALIFORNIA 2 3 DEE ANNE RAMIREZ, Case No. ADJ4579659 (AHM 0089109) 4 5 Applicant, 6 vs. OPINION AND DECISION AFTER RECONSIDERATION (EN BANC) 7 8 DRIVE FINANCIAL SERVICES; and ONE BEACON INSURANCE CO., 9 Defendant(s). 10 11 The Appeals Board granted applicant’s petition for reconsideration to allow time to study 12 the record and applicable law. Because of the important legal issues regarding penalties under 13 Labor Code section 5814 1 and attorney’s fees under section 5814.5, and to secure uniformity of 14 decision in the future, the Chairman of the Appeals Board, upon a majority vote of its members, 15 assigned this case to the Appeals Board as a whole for an en banc decision. (Lab. Code, § 115.) 2 16 For the reasons discussed below, we hold: (1) that the amount of the penalty under section 17 5814(a) is discretionary and should be determined upon consideration of the factors enumerated in 18 this opinion; (2) that although, under new section 5814(a), a successive penalty may still be 19 awarded for an unreasonable delay in making a prior penalty payment, it should not be awarded 20 where the defendant had genuine doubt as to its liability or where there is no legally significant 21 intervening event; (3) that, if an unreasonable delay in payment of an award of compensation 22 occurred after January 1, 2003, section 5814.5 entitles an applicant’s attorney to receive fees for 23 enforcing the award, even against a private employer and even when the injury occurred prior to 24 25 26 27 1 2 All further statutory references are to the Labor Code, unless otherwise indicated. En banc decisions of the Appeals Board are binding precedent on all Appeals Board panels and workers’ compensation judges. (Cal. Code Regs., tit. 8, § 10341; City of Long Beach v. Workers’ Comp. Appeals Bd. (Garcia) (2005) 126 Cal.App.4th 298, 313, fn. 5 [70 Cal.Comp.Cases 109, 120, fn. 5]; Gee v. Workers’ Comp. Appeals Bd. (2002) 96 Cal.App.4th 1418, 1425, fn. 6 [67 Cal.Comp.Cases 236, 239, fn. 6]; see also Gov. Code, § 11425.60(b).) 1 January 1, 2003, the effective date of the amendment to section 5814.5; and (4) that such fees are 2 to be awarded “in addition to” applicant’s section 5814(a) penalty not as a percentage of the 3 penalty and are to be based on the reasonable number of hours expended and a reasonable 4 hourly rate. 5 BACKGROUND 6 Applicant was employed by Drive Financial Services as a collections specialist from 7 August 9, 2000 through February 15, 2001. Defendant, One Beacon Insurance Company (One 8 Beacon), had coverage for the employer during some of this period. Applicant filed a claim of 9 cumulative injury to various body parts, which was resolved by a December 7, 2004 order 10 approving compromise and release (OACR). Pursuant to the OACR, One Beacon was to pay 11 applicant $57,000. In addition, One Beacon agreed to pay $3,000 to applicant as settlement of 12 prospective vocational rehabilitation services (RU-122), and the agreement was approved by the 13 workers’ compensation administrative law judge (WCJ) in a separate order, also dated December 14 7, 2004. 15 The compromise and release agreement provided that all penalty issues were waived if 16 defendant made payment within 30 days of service of the OACR. Defendant concedes in its 17 Response to Petition for Reconsideration that it was five days late in making its payments of 18 $57,000 and $3,000 to applicant. 3 Applicant’s attorney notified defendant of the late payments by 19 multiple letters, and requested penalties. Applicant’s Exhibit 1 contains five letters to defendant, 20 requesting a 25 percent penalty on the late payments. They are dated January 12, 2005, January 21 17, 2005, February 2, 2005 (letter confirming a phone conversation), February 4, 2005 (faxed), and 22 March 7, 2005. Defendant, without any penalty award, paid applicant penalties of $5,700 and 23 $300 by checks dated February 8, 2005, and February 6, 2005, respectively. (Defendant’s Exhibit 24 A.) Defendant did not withhold any attorney’s fees from the penalty payments. 25 /// 26 27 3 In defendant’s Opposition to Applicant’s Penalty Petition, defendant stated that its payments were 15 and 17 days late. RAMIREZ, Dee Anne 2 1 Applicant then filed a penalty petition, essentially asserting that defendant should have 2 paid the maximum penalties available under section 5814(a) (i.e., the lesser of either 25 percent or 3 $10,000) for each of the delays, meaning that defendant should have paid $10,000 against the 4 delayed $57,000 payment and $750 against the delayed $3,000 payment. In addition, applicant 5 asserted that, because defendant underpaid the penalties by $4,300 and $450, respectively, 6 defendant now also owes additional 25 percent penalties, plus interest, against those amounts. 7 Finally, applicant requested attorney’s fees pursuant to section 5814.5. The issues of applicant’s 8 section 5814 penalty and section 5814.5 attorney’s fee claims were tried on August 30, 2006. On October 20, 2006, the WCJ issued his Findings and Order, finding that no further 9 10 penalties were owed for the late payments, but that a ten-percent ($600) fee for applicant’s 11 attorney was warranted. 4 The WCJ found that, given the circumstances, a ten-percent penalty was 12 sufficient to accomplish a fair balance and substantial justice between the parties and that, while 13 section 5814(a) authorizes a penalty of up to 25 percent, it affords discretion to award a lesser 14 amount. The WCJ denied the claim for a fee pursuant to section 5814.5, reasoning that section 15 5814.5, as amended to apply to all employers except the State (see Lab. Code, §§ 5814.5, 3700), 16 applies only to dates of injury on or after January 1, 2003, the effective date of the amendment. He 17 cited Khan v. Workers’ Comp. Appeals Bd. (2006) 71 Cal.Comp.Cases 1168 (writ den.) (Khan). Applicant petitioned for reconsideration, essentially reiterating the contentions of her 18 19 penalty petition. Defendant filed a Response. We granted reconsideration on January 2, 2007. 20 On April 23, 2007, we received Applicant’s Supplemental Petition for Reconsideration. 21 We received defendant’s Response on May 14, 2007. Because we did not request or approve these 22 supplemental pleadings, we have not considered them. (See Cal. Code Regs., tit. 8, § 10848.) 23 /// 24 /// 25 26 27 4 The WCJ did not award the fee under section 5814.5. Therefore, because defendant did not withhold any attorney’s fees from the $5,700 and $300 penalty payments, it appears that the WCJ was ordering that this $600 fee was defendant’s direct liability. (Cf. Rocha v. Puccia Construction Co. (1982) 47 Cal.Comp.Cases 377, 380 (Appeals Board en banc).) RAMIREZ, Dee Anne 3 1 DISCUSSION 2 I. LABOR CODE SECTION 5814 ISSUES 3 A. Calculation of the Amount of a Section 5814(a) Penalty 4 Prior to Senate Bill 899, section 5814 provided, “When payment of compensation has been 5 unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the full 6 amount of the order, decision, or award shall be increased by 10 percent.” Because former section 7 5814 mandated a “10 percent” increase whenever an unreasonable delay occurred, the WCAB had 8 no discretion to impose a penalty that was greater or lesser than 10 percent. Therefore, there was 9 no basis to consider what factors might be balanced in determining the amount of the penalty. The 10 only balancing that occurred was in determining whether to award a section 5814 penalty at all. 11 (See generally County of San Luis Obispo v. Workers’ Comp. Appeals Bd. (Barnes) (2001) 92 12 Cal.App.4th 869, 874-879 [66 Cal.Comp.Cases 1261, 1264-1268] (Barnes).) 13 14 15 16 17 18 19 The current version of section 5814 was enacted on April 19, 2004, and became operative on June 1, 2004. (Lab. Code, § 5814(i).) Section 5814(a) now provides: “When payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the amount of the payment unreasonably delayed or refused shall be increased up to 25 percent or up to ten thousand dollars ($10,000), whichever is less. In any proceeding under this section, the appeals board shall use its discretion to accomplish a fair balance and substantial justice between the parties.” 20 In light of the language of current section 5814(a), the WCJ correctly concluded that 21 discretion is now required in setting the amount of a penalty and that an applicant is not 22 necessarily “entitled” to the maximum. Section 5814(a) provides that, when an unreasonable 23 delay is found, the penalty shall be “up to 25 percent or up to ten thousand dollars ($10,000), 24 whichever is less” and that the Appeals Board “shall use its discretion to accomplish a fair balance 25 and substantial justice between the parties.” However, the WCJ offered no explanation as to why 26 he thought the $5,700 and $300 penalties that defendant paid were the appropriate penalty amounts 27 under the “fair balance and substantial justice” test of section 5814(a). RAMIREZ, Dee Anne 4 1 2 In exercising discretion so as “to accomplish a fair balance and substantial justice between the parties,” there are a number of factors that a WCJ might consider. 3 The overriding consideration in determining what penalty amount to assess should be 4 whether the penalty imposed would serve “the purposes sought to be accomplished” by section 5 5814. (Barnes, supra, 92 Cal.App.4th at pp. 878-879 [66 Cal.Comp.Cases at p. 1266].) The 6 purposes of section 5814 are both remedial and penal. (State Comp. Ins. Fund v. Workers’ Comp. 7 Appeals Bd. (Stuart) (1998) 18 Cal.4th 1209, 1214 [63 Cal.Comp.Cases 916, 919] (Stuart); 8 DuBois v. Workers’ Comp. Appeals Bd. (1993) 5 Cal.4th 382, 396 [58 Cal.Comp.Cases 286, 297] 9 (DuBois).) Each of these purposes is “equally important.” (Stuart, supra, 18 Cal.4th at p. 1214 [63 10 Cal.Comp.Cases at p. 919]; DuBois, supra, 5 Cal.4th at p. 396 [58 Cal.Comp.Cases at p. 297].) 11 The penal aspect of section 5814 provides an incentive to employers and insurance carriers 12 to pay benefits promptly by making delays costly. (Stuart, supra, 18 Cal.4th at p. 1214 [63 13 Cal.Comp.Cases at p. 919]; Barnes, supra, 92 Cal.App.4th at p. 874 [66 Cal.Comp.Cases at p. 14 1264].) In discussing former section 5814, the Supreme Court has stated that “section 5814 was 15 enacted as an inducement to prompt payment on the part of private employers and their insurers, 16 which otherwise would have an economic incentive to delay or deny the payment of workers’ 17 compensation benefits.” (DuBois, supra, 5 Cal.4th at p. 396 [58 Cal.Comp.Cases at p. 297].) The 18 Court also stated that a section 5814 penalty was intended to “have an in terrorem effect on 19 employers and their insurance carriers.” (Avalon Bay Foods v. Workers’ Comp. Appeals Bd. 20 (Moore) (1998) 18 Cal.4th 1165, 1178 [63 Cal.Comp.Cases 902, 911]; see also Consani v. 21 Workers’ Comp. Appeals Bd. (1991) 227 Cal.App.3d 12, 23 [56 Cal.Comp.Cases 45, 53] [“Section 22 5814 is the goad for securing timely payment of compensation to injured working men and women 23 without delay.”].) 24 The remedial aspect of section 5814 is to ameliorate the economic hardship on the injured 25 employee that results from the delay in the provision of benefits and, when the employee is unable 26 to work, that results from the interruption of their employment and concomitant loss of income. 27 (Stuart, supra, 18 Cal.4th at p. 1214 [63 Cal.Comp.Cases at p. 919]; DuBois, supra, 5 Cal.4th at p. RAMIREZ, Dee Anne 5 1 396 [58 Cal.Comp.Cases at p. 297].) As stated by the Supreme Court, a section 5814 penalty “is 2 designed to help an employee obtain promptly the cure or relief he is entitled to under the law, and 3 to compel his employer to provide this cure or relief in timely fashion.” (Adams v. Workers’ Comp. 4 Appeals Bd. (1976) 18 Cal.3d 226, 229 [41 Cal.Comp.Cases 680, 682]; see also, DuBois, supra, 5 5 Cal.4th at p. 396 [58 Cal.Comp.Cases at p. 297] [“the remedial aspect [of section 5814] is to 6 facilitate return to work of the injured employee as quickly as possible”].) 7 Although these are the overriding factors in determining the appropriate amount of a 8 section 5814(a) penalty, there are additional factors that also might be considered in determining 9 an appropriate penalty. We recognize that most of these factors are derived from case law 10 regarding whether a delay is or is not unreasonable; and, of course, when a WCJ has reached the 11 point of determining what penalty amount to award, a determination that the delay was 12 unreasonable already has been made. Nevertheless, some factors relevant to the assessment of 13 reasonableness also are relevant to the assessment of the amount of the penalty to be awarded, i.e., 14 up to 25 percent of the amount delayed or $10,000, whichever is less. These factors include, but 15 are not necessarily limited to: 16 17 (1) evidence of the amount of the payment delayed; (2) evidence of the length of the delay; 18 19 20 21 (3) evidence of whether the delay was inadvertent and promptly corrected; (4) evidence of whether there was a history of delayed payments or, instead, whether the delay was a solitary instance of human error; 22 23 24 (5) evidence of whether there was any statutory, regulatory, or other requirement (e.g., an order or a stipulation of the parties) providing that payment was to be made within a specified number of days; 25 26 27 (6) evidence of whether the delay was due to the realities of the business of processing claims for benefits or the legitimate needs of administering workers’ compensation insurance; RAMIREZ, Dee Anne 6 (7) evidence of whether there was institutional neglect by the defendant, such as whether the defendant provided a sufficient number of adjusters to handle the workload, provided sufficient training to its staff, or otherwise configured its office or business practices in a way that made errors unlikely or improbable; 1 2 3 4 5 (8) evidence of whether the employee contributed to the delay by failing to promptly notify the defendant of it; and 6 (9) evidence of the effect of the delay on the injured employee. 7 (See generally, e.g., Stuart, supra, 18 Cal.4th at pp. 1216-1220 [63 Cal.Comp.Cases at pp. 921- 8 924]; Barnes, supra, 92 Cal.App.4th at pp. 874-878 [66 Cal.Comp.Cases at pp. 1264-1268]; 9 County of Sacramento v. Workers’ Comp. Appeals Bd. (Souza) (1999) 69 Cal.App.4th 726, 732- 10 733 [64 Cal.Comp.Cases 30, 34-35]; Kampner v. Workers’ Comp. Appeals Bd. (1978) 86 11 Cal.App.3d 376, 384 [43 Cal.Comp.Cases 1198, 1204].) 12 Defendant argued in its Opposition to Applicant’s Penalty Petition that its delay in this case 13 was not “so unreasonable” as to warrant the maximum penalty. It argued that its “self-imposed” 14 ten-percent penalty was “sufficient to have accomplished a fair balance and substantial justice 15 between the parties.” 16 suggested looking to section 5814(b), which allows an employer, who discovers a potential 17 violation of section 5814 prior to the employee claiming a penalty, to pay a self-imposed penalty 18 of ten percent within 90 days of the discovery, in lieu of a section 5814(a) penalty. 5 For guidance in determining a reasonable penalty amount, defendant 19 Because the WCJ in this case offered no explanation as to why he thought the $5,700 and 20 $300 penalties paid by defendant were the appropriate penalty amounts, we will rescind the 21 October 20, 2006 decision and return the matter to the WCJ so that he may consider this question 22 23 24 25 26 27 5 Defendant has not argued that its voluntary penalty satisfies section 5814(b) and is in lieu of a section 5814(a) penalty. Such an argument would be difficult to make in this case, given applicant’s five letters requesting a 25 percent penalty, four of which pre-date defendant’s penalty checks. Unlike the applicant in New United Motors Manufacturing, Inc. v. Workers’ Comp. Appeals Bd. (Gallegos) (2006) 141 Cal.App.4th 1533 [71 Cal.Comp.Cases 1037], who merely requested a benefit printout and an explanation of why the entire award had not been paid, applicant in this case expressly and repeatedly requested, i.e. “claimed,” a penalty. We do not believe the filing of a petition for penalty is required to “claim” a penalty. A petition is a request for action by the WCAB. (Cal. Code Regs., tit. 8, § 10450.) It would be inefficient and inconsistent with the constitutional mandate to “accomplish substantial justice in all cases expeditiously, inexpensively, and without incumbrance” (Cal. Const., art. XIV, § 4) to interpret section 5814(b), which does not mention the filing of a petition, as requiring a formal request for adjudication by the WCAB when the parties, in many instances, will be able to resolve the penalty issue informally. RAMIREZ, Dee Anne 7 1 in light of our discussion above. When he issues a new decision, his Opinion on Decision should 2 explain the reasons for his penalty determination. (Lab. Code, § 5313.) 3 B. Multiple Penalties Under Section 5814 4 Applicant contends that, under new section 5814(a), he should have been awarded multiple 5 penalties: (1) the statutory maximum of $10,000 for defendant’s delay in paying the $57,000 due 6 under the OACR, plus the statutory maximum of $750 (i.e., 25 percent of the delayed amount) for 7 defendant’s delay in paying the $3,000 due under the RU-122; and (2) additional section 5814(a) 8 penalties for defendant’s failures to pay the foregoing penalties at their statutory maximums. 9 (Once again, defendant paid ten-percent penalties of $5,700 for the $57,000 delay and $300 for the 10 $3,000 delay.) 11 We agree that, in principle, a separate section 5814(a) penalty may be awarded for an 12 unreasonable refusal or delay in making a section 5814 penalty payment. New section 5814(a) 13 continues to state that a penalty is payable “[w]hen payment of compensation has been 14 unreasonably delayed or refused.” (Emphasis added.) Payment of a section 5814 penalty is 15 “compensation.” (See Lab. Code, § 3207; DuBois, supra, 5 Cal.4th at p. 396 [58 Cal.Comp.Cases 16 at p. 297]; State of California v. Workers’ Comp. Appeals Bd. (Ellison) (1996) 44 Cal.App.4th 17 128, 140 [61 Cal.Comp.Cases 325, 334] (Ellison).) 18 Nevertheless, without actually deciding the issue, we observe that, on the facts of this case, 19 we have serious questions about the appropriateness of awarding new and separate section 5814(a) 20 penalties against defendant’s penalty payments of $5,700 and $300, based on defendant’s failure to 21 voluntarily pay a larger penalty amount. 22 Preliminarily, new section 5814(a) still provides that a penalty is payable only “[w]hen 23 payment of compensation has been unreasonably delayed or refused.” (Emphasis added.) A delay 24 or a refusal to pay is not “unreasonable” if the defendant had “genuine doubt from a medical or 25 legal standpoint as to [its] liability.” (Kerley v. Workers’ Comp. Appeals Bd. (1971) 4 Cal.3d 223, 26 230 [36 Cal.Comp.Cases 152, 157].) Here, there is a significant possibility that, when defendant 27 made its penalty payments of $5,700 and $300 (i.e., ten percent of $57,000 and $3,000, RAMIREZ, Dee Anne 8 1 respectively), it could have had genuine doubt from a legal standpoint regarding its liability for 2 more than it paid. As of the time defendant voluntarily paid these amounts, there had been no 3 order or award directing it to pay more than ten percent. Therefore, given that section 5814(a) 4 gives the WCAB discretion to award a penalty within a broad range, i.e., up to 25 percent or 5 $10,000, whichever is less, it appears, without actually deciding, that defendant may well have had 6 genuine doubt as to whether it should have paid more than ten percent. 7 Moreover, in Christian v. Workers’ Comp. Appeals Bd. (1997) 15 Cal.4th 505, 507 [62 8 Cal.Comp.Cases 576, 577] (Christian), the Supreme Court held that former section 5814 permitted 9 multiple penalties to be assessed against a defendant “when the unreasonable delay or refusal of 10 [the] benefits [due] is attributable to separate and distinct acts by an employer or insurance 11 carrier.” A separate and distinct act of misconduct occurs where there is an unreasonable delay or 12 refusal to pay after “the same conduct had already been found … to be unreasonable and a prior 13 penalty imposed, or some analogous, legally significant event such as stipulation of liability by the 14 carrier had intervened between the first act for which a penalty was imposed and the second.” (Id., 15 15 Cal.4th at p. 511 [62 Cal.Comp.Cases at p. 580].) 16 The Christian rationale is applicable to new section 5814. (Green v. Workers’ Comp. 17 Appeals Bd. (2005) 127 Cal.App.4th 1426, 1443-1445 [70 Cal.Comp.Cases 294, 309-310] 18 (Green).) 19 penalties on its delayed payments, in the absence of a WCAB order, would constitute a legally 20 significant intervening event. Indeed, to so conclude could lead to the anomalous result that a 21 defendant would be in a worse position if, without an order from the WCAB, it pays some penalty 22 than if it pays no penalty. (See Moulton v. Workers’ Comp. Appeals Bd. (2000) 84 Cal.App.4th 23 837, 844 [65 Cal.Comp.Cases 1259, 1262] (noting that, absent a legally significant intervening 24 event, the imposition of multiple penalties against an employer who pays some benefits, but does 25 not pay them all, would mean that “we would treat the employer who makes a partial payment 26 more harshly than the employer who makes no payment at all.”).) 27 Nevertheless, there is a question as to whether defendant’s voluntary ten-percent However, we will remand this issue to the WCJ to decide in the first instance. RAMIREZ, Dee Anne 9 1 2 3 4 II. LABOR CODE SECTION 5814.5 ISSUES A. Application of Current Section 5814.5 to Injuries Occurring Before Its January 1, 2003 Effective Date Labor Code section 5814.5 currently provides: 5 “When the payment of compensation has been unreasonably delayed or refused subsequent to the issuance of an award by an employer that has secured the payment of compensation pursuant to Section 3700, the appeals board shall, in addition to increasing the order, decision, or award pursuant to Section 5814, award reasonable attorneys’ fees incurred in enforcing the payment of compensation awarded.” 6 7 8 9 10 Section 5814.5 was amended to its present form by Assembly Bill (AB) 749, effective 11 January 1, 2003. Prior to its amendment by AB 749, section 5814.5 applied only to delays “by an 12 employer which has secured the payment of compensation pursuant to subdivision (c) of Section 13 3700.” Section 3700(c) concerns securing the payment of compensation for “any county, city, city 14 and county, municipal corporation, public district, public agency, or any political subdivision of 15 the state….” 16 subdivisions of the State, although not to the State itself. (Ellison, supra, 44 Cal.App.4th at p. 138, 17 fn. 12 [61 Cal.Comp.Cases at p. 332, fn. 12].) As amended, however, section 5814.5 applies to 18 any “employer that has secured the payment of compensation pursuant to section 3700.” Because 19 section 3700 applies to “[e]very employer except the state,” private employers were included in 20 section 5814.5 effective January 1, 2003. Therefore, when section 5814.5 was first enacted, it applied only to political 21 The WCJ, relying on Khan, supra, 71 Cal.Comp.Cases 1168 (writ den.), concluded that, 22 since applicant’s injury occurred before the effective date of the amendment to section 5814.5, 23 section 5814.5 cannot be applied to her case. “Writ denied” cases are citable authority as to the 24 holding of the Appeals Board panel in its underlying decision. (E.g., Farmers Ins. Group of 25 Companies v. Workers’ Comp. Appeals Bd. (Sanchez) (2002) 104 Cal.App.4th 684, 689, fn. 4 [67 26 Cal.Comp.Cases 1545]; Bowen v. Workers’ Comp. Appeals Bd. (1999) 73 Cal.App.4th 15, 21, fn. 27 10 [64 Cal.Comp.Cases 745].) However, unlike Appeals Board en banc decisions (see Cal. Code RAMIREZ, Dee Anne 10 1 Regs., tit. 8, § 10341), Appeals Board panel decisions, even if appellate review is denied, are not 2 binding precedent and have no stare decisis effect. (Gee v. Workers’ Comp. Appeals Bd. (2002) 96 3 Cal.App.4th 1418, 1425, fn. 6 [67 Cal.Comp.Cases 236]; MacDonald v. Western Asbestos Co. 4 (1982) 47 Cal.Comp.Cases 365, 366 (Appeals Board en banc).) In Khan, the section 5814.5 issue 5 was not the primary issue being addressed by the Appeals Board’s panel decision. Moreover, the 6 issue of whether section 5814.5 could be applied to injuries before January 1, 2003, was not even 7 raised by the parties. Therefore, that issue was not analyzed in depth in Khan. Now, upon more 8 comprehensive analysis, we conclude that section 5814.5 does apply to unreasonable delays in the 9 payment of an award occurring after its effective date, regardless of the date of injury. 10 The amendment to section 5814.5 was “substantive,” in that it potentially imposes a new or 11 additional liability against private employers. (See In re Marriage of Buol (1985) 39 Cal.3d 751, 12 758; Aetna Cas. & Surety Co. v. Industrial Acc. Com. (Charlesworth) (1947) 30 Cal.2d 388, 395 13 [12 Cal.Comp.Cases 123, 126] (Charlesworth).) 14 substantive statutory rights, the legislation is applied prospectively unless it is clear that the 15 Legislature intended retrospective application. (McClung v. Employment Development Dept. 16 (2004) 34 Cal.4th 467; Myers v. Philip Morris Companies, Inc. (2002) 28 Cal.4th 828, 840-841 17 (Myers); Green, supra, 127 Cal.App.4th 1426, 1436 [70 Cal.Comp.Cases 294, 301].) 18 retrospective law “is one which affects rights, obligations, acts, transactions and conditions which 19 are performed or exist prior to the adoption of the statute” (Charlesworth, supra, 30 Cal.2d at p. 20 391 [12 Cal.Comp.Cases at p. 124]; accord, Myers, supra, 28 Cal.4th 828, 839; Evangelatos v. 21 Superior Court (1988) 44 Cal.3d 1188, 1206) or which “substantially changes the legal effect of 22 past events.” (Kizer v. Hanna (1989) 48 Cal.3d 1, 7.) When new legislation amends or adds A 23 We conclude that an award of fees, pursuant to section 5814.5, in the circumstances present 24 here, would not constitute retrospective application of the amended statute. While applicant’s date 25 of injury predated the amendment of section 5814.5, the liability created by amended section 26 5814.5 did not arise by virtue of the injury. It arose because defendant unreasonably delayed 27 payment of an award of compensation an event that occurred in early 2005. The right to seek RAMIREZ, Dee Anne 11 1 attorney’s fees under section 5814.5 comes into existence only after applicant has been awarded 2 compensation and defendant has unreasonably delayed payment. The award of compensation in 3 this case occurred on December 7, 2004. The delay occurred in January 2005. Thus, the event 4 that triggered the obligation (and the right) established by section 5814.5, as amended 5 defendant’s unreasonable delay in paying an award of compensation occurred long after the 6 section was amended. 7 The amendment to section 5814.5 did not affect rights, obligations, acts, transactions, and 8 conditions that were performed or existed prior to the adoption of the statute, and the amendment 9 did not substantially change the legal effect of past events. Instead, the amendment affected only 10 rights and obligations pertaining to acts or events that occurred, or failed to occur, after the 11 January 1, 2003 effective date. Private employers have been on notice, since adoption of AB 749, 12 that any future unreasonable delay in paying compensation would expose them to liability for 13 attorney’s fees. Because the amendment applies only to conduct (i.e., unreasonable delays in 14 paying an existing award) occurring after the January 1, 2003 effective date of amended section 15 5814.5, the amendment is being applied prospectively, not retrospectively. The amendments do 16 not retroactively increase the cost of benefits due from the employer to the employee. (See 17 Pebworth v. Workers’ Comp. Appeals Bd. (2004) 116 Cal.App.4th 913, 919 [69 Cal.Comp.Cases 18 199].) 19 Therefore, the general principle that substantive changes in the law that impose a new or 20 additional liability may be applied only prospectively is not violated by awarding section 5814.5 21 fees to applicant’s attorney for enforcing applicant’s award, following defendant’s unreasonable 22 delay in payment that occurred after the effective date of the amendment of section 5814.5. 23 B. Calculation of the Amount of a Section 5814.5 Attorney’s Fee 24 Having determined that applicant’s attorney is entitled to a fee pursuant to section 5814.5, 25 we now turn to how that fee shall be computed. In Sparagna, Sparagna, Ferrone & Ferrone v. 26 Workers’ Comp. Appeals Bd. (Jaramillo) (1999) 64 Cal.Comp.Cases 706 (writ den.) (Jaramillo), 27 we considered the issue of how to determine section 5814.5 attorney’s fees. The WCJ in Jaramillo RAMIREZ, Dee Anne 12 1 2 3 4 5 stated in her report, adopted and incorporated by the Appeals Board: “Attorneys’ fees paid pursuant to Labor Code Section 5814.5 by defendant are to be ‘reasonable’ and ‘incurred in enforcing the payment of compensation awarded.’ There is no reference to percentage of recovery and the reasonable inference is that fees are to be paid for time reasonably incurred, at a reasonable hourly rate, as is done with attorneys’ fees for service provided for vocational rehabilitation.” (Id., at p. 707.) 6 The method for calculating attorney’s fees for obtaining vocational rehabilitation benefits 7 was set forth in Rocha v. Puccia Construction Co. (1982) 47 Cal.Comp.Cases 377, 381 (Appeals 8 Board en banc): 9 10 11 12 13 14 15 “The Board agrees that the best method of evaluating the worth of these services is based on the time and effort expended by the attorney as reflected in the hours of work devoted to securing rehabilitation services for the client. The fee, however, may not be entirely disproportionate to the amount of benefits obtained. If, for instance, counsel spends long hours to obtain benefits of small value, the fee should not be strictly based on the number of hours without regard to the benefits obtained. Where there are sufficient benefits involved, however, the fee based on time and effort is appropriate.” 16 In Town of Hillsborough v. Workers’ Comp. Appeals Bd. (Sommer) (2003) 68 17 Cal.Comp.Cases 304 (writ den.), as in Jaramillo, we affirmed the WCJ’s award of section 5814.5 18 attorney’s fees on an hourly basis. 19 Section 5814.5 states that the award of attorney’s fees shall be “in addition to” the increase 20 in the applicant’s award under section 5814. This language is in contrast to the allowance of an 21 attorney’s fee as a lien against applicant’s recovery, as provided in section 4903. 22 “percentage” fee guidelines in section 1.140 of the DWC/WCAB Policy and Procedural Manual 23 apply to those attorney’s fees intended as a lien against the employee’s compensation (Lab. Code, 24 § 4903(a)), i.e., the fees that come out of funds that otherwise would have been payable to the 25 injured employee. Fees under section 5814.5, however, are akin to fees under section 5801 for 26 responding to an employer’s frivolous petition for writ of review. 27 The In Johnson v. Marin Tennis Club (1982) 47 Cal.Comp.Cases 527, 529 (Appeals Board RAMIREZ, Dee Anne 13 1 Panel Decision) (Johnson), we said, “The award of a reasonable fee under § 5801 should be based 2 upon the reasonable amount of time expended and the hourly value thereof.” Furthermore, in Lee 3 v. Workers’ Comp. Appeals Bd. (1998) 63 Cal.Comp.Cases 1082 (writ den.), we considered “‘the 4 attorney’s time, effort, care, experience and results,’” for the purpose of determining a “reasonable 5 and appropriate hourly rate” for an award of attorney’s fees under section 5801. In Johnson, we 6 cited Employers Mutual Liability Ins. Co. v. Workmen’s Comp. Appeals Bd. (Rodriguez) (1975) 46 7 Cal.App.3d 104 [40 Cal.Comp.Cases 820] (Rodriguez), in which the Court stated, 8 9 10 11 12 13 14 15 16 “Section 5801 provides that attorney’s fees may be awarded in addition to the amount of compensation otherwise recoverable and shall be paid as part of the award by the party liable to pay such award when the employee prevails upon a petition for writ of review initiated by the employer. This provision appears to be in the nature of a penalty assessed against the employer if the reviewing court finds that the petition has no reasonable basis. [Citation.] The provisions of section 5801 differ materially, therefore, from those of section 4903, subdivision (a), which permit the board to determine and allow as liens against any sum to be paid as compensation a ‘reasonable attorney’s fee for legal services pertaining to any claim for compensation either before the appeals board or before any of the appellate courts, and the reasonable disbursements in connection therewith.’ ” (46 Cal.App.3d at p. 108 (emphasis in original).) 17 18 The reasoning of the Court in Rodriguez with regard to section 5801 applies to an even 19 greater extent to section 5814.5, which also states that the fees shall be “in addition to” applicant’s 20 recovery, and which not only “appears to be in the nature of a penalty,” but directly involves a 21 penalty. The attorney for an applicant seeking increased compensation under section 5814 is 22 entitled to a reasonable fee under section 5814.5, based on a reasonable number of hours expended 23 in enforcing the prior award of benefits and a reasonable hourly rate. 24 We emphasize, however, that a section 5814.5 fee is payable only where there has been a 25 prior award of benefits, the defendant has unreasonably delayed payment of some or all of that 26 award, and the applicant has incurred attorney’s fees in enforcing the prior award. If there is no 27 prior award, or no unreasonable delay, section 5814.5 fees shall not be awarded. Moreover, RAMIREZ, Dee Anne 14 1 section 5814.5 fees should be allowed only for legal services rendered in “enforcing” the 2 unreasonably delayed prior award, and not for any other purpose. The WCJ should determine in the first instance the amount of section 5814.5 attorney’s 3 4 fees payable under the facts presented here. 5 III. CONCLUSION 6 In sum, we hold that the amount of the penalty under section 5814(a) is discretionary and 7 should be determined upon consideration of the factors enumerated above, and that a successive 8 section 5814(a) penalty may be awarded for an unreasonable delay in making a prior penalty 9 payment, if the circumstances warrant it. We further hold that, if the unreasonable delay in 10 payment of the award of compensation occurred after January 1, 2003, section 5814.5 entitles an 11 applicant’s attorney to receive fees for enforcement of the award, even against a private employer 12 and even when the injury occurred prior to January 1, 2003, the effective date of the amendment to 13 section 5814.5. Such fees are to be based on a reasonable hourly rate and are to be awarded “in 14 addition to” the increase awarded the applicant under section 5814(a), not as a percentage of 15 applicant’s increase. 16 Accordingly, and without expressing any opinion as to the appropriateness of the amount 17 of the penalty or the attorney’s fee found by the WCJ, we will rescind the Findings and Order and 18 return the matter to the trial level for further proceedings and a new decision on all the issues, 19 consistent with this opinion. 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// RAMIREZ, Dee Anne 15 1 /// 2 For the foregoing reasons, 3 IT IS ORDERED, as the Decision After Reconsideration of the Workers’ Compensation 4 Appeals Board (En Banc), that the October 20, 2006 Findings and Order is RESCINDED and the 5 matter is RETURNED to the trial level for further proceedings and a new decision by the WCJ, 6 consistent with this opinion. 7 WORKERS’ COMPENSATION APPEALS BOARD 8 /s/ Joseph M.Miller____________________________ JOSEPH M. MILLER, Chairman 9 10 /s/ James C. Cuneo____________________________ JAMES C. CUNEO, Commissioner 11 12 13 /s/ Frank M. Brass_____________________________ FRANK M. BRASS, Commissioner 14 15 /s/ Ronnie G. Caplane__________________________ RONNIE G. CAPLANE, Commissioner 16 17 /s/ Alfonso J. Moresi___________________________ ALFONSO J. MORESI, Commissioner 18 19 /s/ Deidra E. Lowe____________________________ DEIDRA E. LOWE, Commissioner 20 21 22 DATED AND FILED AT SAN FRANCISCO, CALIFORNIA 23 24 9/9/2008 SERVICE MADE BY MAIL ON ABOVE DATE ON THE PERSONS LISTED BELOW AT THEIR ADDRESSES AS SHOWN ON THE CURRENT OFFICIAL ADDRESS RECORD: 25 26 Stephan Gary Stockwell, Harris, Widom & Woolverton 27 RAMIREZ, Dee Anne 16 1 CB/bea 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 RAMIREZ, Dee Anne 17
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