2008-EB-3 (2008). In re Pellicer.

CourtCalifornia
California Workers Compensation Decisions 2008. 2008-EB-3 (2008). In re Pellicer WORKERS' COMPENSATION APPEALS BOARD STATE OF CALIFORNIA DEE ANNE RAMIREZ, Applicant, vs. DRIVE FINANCIAL SERVICES; and ONEBEACON INSURANCE CO., Defendant(s).Case No. ADJ4579659 (AHM 0089109)OPINION AND DECISION AFTER RECONSIDERATION (EN BANC) The Appeals Board granted applicant's petition for reconsideration to allow time to study the record and applicable law. Because of the important legal issues regarding penalties under Labor Code section 5814[1] and attorney's fees under section 5814.5, and to secure uniformity of decision in the future, the Chairman of the Appeals Board, upon a majority vote of its members, assigned this case to the Appeals Board as a whole for an en banc decision. (Lab. Code, § 115.)[2] For the reasons discussed below, we hold: (1) that the amount of the penalty under section 5814(a) is discretionary and should be determined upon consideration of the factors enumerated in this opinion; (2) that although, under new section 5814(a), a successive penalty may still be awarded for an unreasonable delay in making a prior penalty payment, it should not be awarded where the defendant had genuine doubt as to its liability or where there is no legally significant intervening event; (3) that, if an unreasonable delay in payment of an award of compensation occurred after January 1, 2003, section 5814.5 entitles an applicant's attorney to receive fees for enforcing the award, even against a private employer and even when the injury occurred prior to January 1, 2003, the effective date of the amendment to section 5814.5; and (4) that such fees are to be awarded "in addition to" applicant's section 5814(a) penalty - not as a percentage of the penalty - and are to be based on the reasonable number of hours expended and a reasonable hourly rate. BACKGROUND Applicant was employed by Drive Financial Services as a collections specialist from August 9, 2000 through February 15, 2001. Defendant, One Beacon Insurance Company (One Beacon), had coverage for the employer during some of this period. Applicant filed a claim of cumulative injury to various body parts, which was resolved by a December 7, 2004 order approving compromise and release (OACR). Pursuant to the OACR, One Beacon was to pay applicant $57,000. In addition, One Beacon agreed to pay $3,000 to applicant as settlement of prospective vocational rehabilitation services (RU-122), and the agreement was approved by the workers' compensation administrative law judge (WCJ) in a separate order, also dated December 7, 2004. The compromise and release agreement provided that all penalty issues were waived if defendant made payment within 30 days of service of the OACR. Defendant concedes in its Response to Petition for Reconsideration that it was five days late in making its payments of $57,000 and $3,000 to applicant.[3]Applicant's attorney notified defendant of the late payments by multiple letters, and requested penalties. Applicant's Exhibit 1 contains five letters to defendant, requesting a 25 percent penalty on the late payments. They are dated January 12, 2005, January 17, 2005, February 2, 2005 (letter confirming a phone conversation), February 4, 2005 (faxed), and March 7, 2005. Defendant, without any penalty award, paid applicant penalties of $5,700 and $300 by checks dated February 8, 2005, and February 6, 2005, respectively. (Defendant's Exhibit A.) Defendant did not withhold any attorney's fees from the penalty payments. Applicant then filed a penalty petition, essentially asserting that defendant should have paid the maximum penalties available under section 5814(a) (i.e., the lesser of either 25 percent or $10,000) for each of the delays, meaning that defendant should have paid $10,000 against the delayed $57,000 payment and $750 against the delayed $3,000 payment. In addition, applicant asserted that, because defendant underpaid the penalties by $4,300 and $450, respectively, defendant now also owes additional 25 percent penalties, plus interest, against those amounts. Finally, applicant requested attorney's fees pursuant to section 5814.5. The issues of applicant's 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 penalties were owed for the late payments, but that a ten-percent ($600) fee for applicant's attorney was warranted.[4]The WCJ found that, given the circumstances, a ten-percent penalty was sufficient to accomplish a fair balance and substantial justice between the parties and that, while section 5814(a) authorizes a penalty of up to 25 percent, it affords discretion to award a lesser amount. The WCJ denied the claim for a fee pursuant to section 5814.5, reasoning that section 5814.5, as amended to apply to all employers except the State (see Lab. Code, §§ 5814.5, 3700), applies only to dates of injury on or after January 1, 2003, the effective date of the amendment. He 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 penalty petition. Defendant filed a Response. We granted reconsideration on January 2, 2007. On April 23, 2007, we received Applicant's Supplemental Petition for Reconsideration. We received defendant's Response on May 14, 2007. Because we did not request or approve these supplemental pleadings, we have not considered them. (See Cal. Code Regs., tit. 8, § 10848.) DISCUSSION I. LABOR CODE SECTION 5814 ISSUESA. Calculation of the Amount of a Section 5814(a) Penalty Prior to Senate Bill 899, section 5814 provided, "When payment of compensation has been unreasonably delayed or refused, either prior to or subsequent to the issuance of an award, the full amount of the order, decision, or award shall be increased by 10 percent." Because former section 5814 mandated a "10 percent" increase whenever an unreasonable delay occurred, the WCAB had no discretion to impose a penalty that was greater or lesser than 10 percent. Therefore, there was no basis to consider what factors might be balanced in determining the amount of the penalty. The only balancing that occurred was in determining whether to award a section 5814 penalty at all. (See generally County of San Luis Obispo v. Workers' Comp. Appeals Bd. (Barnes) (2001) 92 Cal.App.4th 869, 874-879 [66 Cal.Comp.Cases 1261, 1264-1268] (Barnes).) 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."
In light of the language of current section 5814(a), the WCJ correctly concluded that discretion is now required in setting the amount of a penalty and that an applicant is not necessarily "entitled" to the maximum. Section 5814(a) provides that, when an unreasonable delay is found, the penalty shall be "up to 25 percent or up to ten thousand dollars ($10,000), whichever is less" and that the Appeals Board "shall use its discretion to accomplish a fair balance and substantial justice...

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