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Kentucky Supreme Court Finds Setting ‘End-date’ for Workers’ Compensation Indemnity Benefits Unconstitutional

from the September/October 2017 issue of The Advocate

Article in the Advocate Magazine – download here – or read in its entirety below
 
Under Kentucky’s Workers’ Compensation Act1, the end-date for workers’ compensation indemnity benefits (i.e. monetary payments) is determined by KRS 342.730(4), which terminates all indemnity benefits when the claimant becomes eligible for normal retirement age Social Security Retirement or, if the claimant is within two years of Social Security Retirement Age, (or has already reached said age), limits the injured worker to two (2) years of indemnity benefits.2
 
The result of this statute was significantly larger awards of benefits for younger workers as opposed to older workers who suffer the same injuries.In past challenges to this statute, the Kentucky Supreme Court found it to be constitutional.3 Over the last several years, however, there has been a new wave of constitutional challenges to this statute.
 
In April of 2017, the Kentucky Supreme Court addressed the constitutionality argument in Parker v. Webster County Coal, LLC,4 and, by a vote of 4-3, found the limitation of benefits at Social Security Retirement Age under KRS 342.730(4) is unconstitutional.5
 
To provide some prospective for the effect of this Opinion, a quick overview of workers’ compensation benefits may be helpful. Employees injured at work in Kentucky are precluded fromfiling a civil lawsuit against their employer for damages arising from their injuries.6 Instead, injured workers are required to assert a claim for damages in an Administrative process through the Kentucky Department of Workers’ Claims.Injured workers are entitled to basically four types of benefits:
 
1. Medical Coverage – An injured worker is entitled to medical treatment for the work-related injury which, “shall continue for so long as the employee is disabled regardless of the duration of the employee’s income benefits,” (i.e. lifetime medical coverage for the injury).7
 
2. Temporary Total Disability benefits (TTD) – While completely restricted from work or under restrictions which preclude the employee from performing their customary work / work they were performing at the time of injury,8 an injured worker is entitled to TTD, paid at 2/3 of the employee’s pre-injury average weekly wage (AWW), capped at a State Maximum level, until the injured worker either returns to work or reaches a level of recovery called Maximum Medical Improvement (MMI).9
 
3. Vocational Rehabilitation – A claimant is entitled to an award of vocational rehabilitation, (up to 52 weeks at a trade school / educational center), when, “as a result of the injury he is unable to perform work for which he has previous training or experience.”10
 
4. Permanent Disability Benefits – Once at MMI, the injured worker is entitled to either Permanent Partial Disability (PPD) or Permanent Total Disability (PTD).

  • -PPD: If not totally disabled, an injured worker is entitled to benefits based on the impairment rating chosen by the Judge to most accurately reflect his / her condition. The impairment rating is inserted into a mathematical formula to determine the amount of PPD benefits.11 PPD benefits are paid on a weekly basis for either 425 weeks (if the occupational disability is less than 50%) or 520 weeks (if occupational disability is greater than 50%).12
  • -PTD: If found totally disabled, a claimant is entitled to weekly benefits, paid at two-thirds of the pre-injury AWW (capped at the State Maximum).13 In determining whether a claimant is totally disabled, a Judge can balance factors such as the claimant’s age, education, and work-history, in light of their post-injury physical, emotional, intellectual, and vocational status, to determine whether the worker, “will be able to earn an income by providing services on a regular and sustained basis in a competitive economy.”14

 
As an example of disparity of benefits between younger and older workers, take a 30-year-old, high wage earner, who suffers a double amputation injury in 2017 rendering him totally disabled. That 30-year-old would be entitled to Permeant Total Disability benefits (PTD) at a rate of $835.04 per week until he is eligible for normal old-age Social Security retirement benefits at the age of 67: a total pay-out of $1,606,616.90. However, a 67-year-old man who suffered the very same work-related injurywould be limited to only a two-year award of benefits with a total pay-out of only $86,844.16. The injury is just as damaging and the consequences equally detrimental; however, workers’ compensation arbitrarily sets a value on the now-impaired life of a fellow Kentuckian.
 
A less grand, but still significant, disparity is seen in cases of partial disability. For example, a 30-year-old, high wage earner, whose injury results in 15% impairment, but who can return to his job, would be entitled to PPD benefits paid at $93.94 per week for 425 weeks; total pay-out = $39,924.50. However, a 67-year-old worker with the same injury would only receive two-years of benefits with a total pay-out of only $9,769.76.
 
Turning back to Parker v. Webster County Coal, LLC, which involved a 69-year-old man who suffered injuries to his Right Knee, Hip and Back when he tripped over a conveyor belt in the course of his employment; sought a course of treatment which included Right Knee and Low Back surgeries; received TTD for two years while restricted from work recovering from his injury; and was, thereafter, found Permanently Partially Disabled by the Administratively Law Judge based on a 26% impairment rating.15 Because Mr. Parker had already received two (2) years of TTD benefits, the Judge found the Employer did not have liability for payment of any additional indemnity benefits.16 The Board and the Court of Appeals Affirmed.17
 
The Kentucky Supreme Court noted, “It is undisputed that because of KRS 342.730(4), injured older workers are treated differently from their younger counterparts.”18 The Court then turned to a “rational basis” analysis to determine if a “rational basis” or “substantial and justifiable reason,” supports treating these two classifications of workers disparately.19 The Court listed the “reasons” for treating younger and older workers differently, (e.g. prevention of duplication of benefits, and resultant savings for the workers’ compensation system), and held such were, indeed, substantial and justifiable reasons for treating older workers differently than younger ones.20
 
The Court then analyzed how KRS 342.730(4) treated older workers who qualify for old-age Social Security Retirement benefits differently from older workers who do not qualify for Social Security Retirement benefits, (e.g. public school teachers who did not have outside employment and never paid in to Social Security Retirement and, therefore, will not receive said benefits).21 The Court held, “There is no rational basis for treating all other workers in the Commonwealth differently than teachers. … This disparate treatment does not accomplish the goals posited as the rational bases for KRS 342.730(4).”22 Further,
 
The problem with KRS 342.730(4) is that it invidiously discriminates against those who qualify for one type of retirement benefit (social security) from those who do not qualify for that type of retirement benefit but do qualify for another type of retirement benefit (teacher retirement).23
 

The Court concluded:
 
[W]e discern no rational basis or substantial and justifiable reason for the disparate treatment of two groups of injured older workers. Thus, KRS 342.730(4) violates the right to equal protection and is constitutionally infirm. Our opinions to the contrary are hereby overruled.24
 
This Opinion, while a win for Plaintiffs, raises many questions, including:
 
1. Does this apply to Permanent Total Disability awards, or is it limited to Permanent Partial Disability awards (as was the subject of the Parker case)?

Answer: I believe having found the Statute unconstitutional, it applies to both PTD and PPD award.
 
2. When does a Permanent Total Disability award end?

Answer: This one is a little unclear. For PPD awards, it seems the benefit period for an older worker will be either 425 or 520 weeks. However, if someone is found Permanently Totally Disabled,are they entitled to benefits for as long as they live? Or, is there an end date / reduction of benefits — in previous versions of the workers’ compensation law, PTD benefits were subject to a tier-down system whereby benefits were reduced yearly over a number of years.
The consensus amongst plaintiffs’ attorneys seems to be that the result of this Opinion will be a lifetime award of benefits for permanently totally disabled individuals.
 
3. Is this retroactive to injured workers who are receiving awards presently? Or, does it only apply to awards which are made, or injuries which occur, after the Parker decision?

Answer: It would seem if a case is pending, (no settlement reached or Opinion issued), then the award of benefits will not be subject to termination upon the claimant reaching the age for Social Security Retirement. It is a little less clear for:
 
(a) Claimants whoare currently receiving PTD / PPD benefits per an award that expressly states the benefits will end per KRS 342.730(4). It seems if “Constitutionality of KRS 342.730(4)” was not raised during the pendency of the original claim, the claimant could not now make a claim for additional benefits.
(b) Claimants who received PTD or PPD benefits per an award previously, but said benefits have long since been terminated pursuant to the age limitation. As set forth above, even if the Opinion & Award did not specifically set an end date per KRS 342.730(4), if the constitutionality issue was not raised during the case in chief, it does not seem the claimant could now make a claim for additional benefits.
And,
(c) Claimants who were awarded PTD benefits with the age limitation but the case is currently on appeal without KRS 342.730(4) having been preserved as an issue. This is the scenario putting fear in workers’ compensation practitioners.25
 
4. Can claims under scenarios (a) or (b) directly above be Reopened to argue for additional benefits?

Answer: Pursuant to the Reopening Statute, it does not appear, “Change in Constitutionality of the Act” fits one of the four (4) scenarios for which a Reopening is allowed under KRS 342.125(1).
 
As noted above, there are still a lot of unanswered questions the courts need to sort out. In closing, some tips for those practicing workers’ compensation law:
 
1. In the past, I was hesitant to take on older clients, especially if dealing with only partially disabling injuries. If a person suffered a shoulder injury, was off work and had surgery; and received TTD for 18 months, and now has a 5% impairment, it did not make financial sense to represent that client, when you could be looking at a very small award of weekly benefits for only six months. Now, and until either the legislature makes changes to the Act, or if the Court changes its finding on Rehearing, I am signing up older workers, and if the injury has taken them out of the workforce, arguing for total disability.
 
2. Also, procedurally, I advise listing“Duration of Benefits / constitutionality of KRS 342.730(4)” as a contested issue at the Benefit Review Conference in any pending case where it may be applicable (i.e. all claims for PTD and any case for PPD where the claimant is within 10 years of Social Security old-age retirement).


1. KRS 342
2. KRS 342.730(4)
3. See McDowell v. Jackson Energy RECC, 84 S.W. 3d 71 (KY 2002) and Keith v. Hopple Plastics, 178, S.W. 3d 463 (Ky. 2005), as corrected (Dec. 13, 2005).
4. 2014-SC-000526-WC, (Rendered 4/27/17), Designated To Be Published. Petition for Rehearing filed 5/17/17.
5. Id. at pp. 10,17
6. KRS 342.690(1)
7. KRS 342.020(1)
8. Central Kentucky Steel v. Wise, 19 S.W.3d 657 (Ky. 2000)
9. KRS 342.730(1)(a). The maximum TTD rate is set at 100% of the State’s average weekly wage, which for injuries occurring in 2017 places the “cap” at $835.04.
10. KRS 342.710(3)
11. KRS 342.730(1)(b) and (c)
12. KRS 342.730(1)(d). Occupational disability is determined by multiplying the impairment rating by a “grid” factor found in KRS 342.730(1)(b) which corresponds to the impairment rating. For all practical purposes, an impairment rating less than 34% results in a 425-week award, while an impairment rating of 34% or greater results in a 520-week award.
13. KRS 342.730(1)(a)
14. Osborne v. Johnson, 432 S.W.2d 800 (Ky. 1968) and Ira A. Watson Department Store v. Hamilton, 34 S.W.3d 48, 51 (Ky. 2000).
15. 2014-SC-000526-WC, (Rendered 4/27/17), Designated To Be Published ,pp. 2-5.
16. Id. at pp. 5-6
17. Id. at p. 6
18. Id. at p. 11
19. Id. at pp. 12-13
20. Id.
21. Id. at pp.13-15
22. Id. at p. 13
23. Id. at p. 16
24. Id. at 17
25. H/t to Charlie Gorham for identifying these scenarios