The Demise of Vocational Rehabilitation Reports Post 01-01-2013

By Nicholas J. Perry 

Often times as defense attorneys and claims examiners, we find ourselves in a situation where applicant’s counsel attempts to increase their client’s permanent disability percentage by obtaining a Vocational Rehabilitation Expert to show that their client is unable to compete in the open labor market or has a diminished future earning capacity. However, the strict reading of the current California Labor Code no longer allows for such consideration when calculating permanent disability.

As a brief history, the Supreme Court reviewed the LeBoeuf v. Workers’ Comp. Appeals Board (1983) and agreed that permanent disability ratings should reflect as accurately as possible an injured employee’s diminished ability to compete in the open labor market. This decision was based on the then current reading of Labor Code § 4660(a), which noted that in determining the percentage of permanent disability, account should be taken, inter alia, the diminished ability of the injured employee to compete in the open labor marker. Therefore, the Vocational Rehabilitation reports could be used to increase applicant’s permanent disability impairment, at that time.

Then came along the next revision of Labor Code § 4660, by Senate Bill 899, in 2004. SB 899 amended the language of Labor Code § 4660 and specified that in determining the percentage of permanent disability, consideration should be given to the employee’s diminished future earning capacity. Notice the slight difference? The prior Labor Code addressed the employee’s “diminished ability to compete in the open labor market”, and the SB 899 revision addressed the employee’s “diminished future earning capacity”. Each of these variances still permitted Vocation Consultant’s to prepare reports, which were often times admitted into evidence, in order to rebut a lower finding of permanent disability that did not take into account the applicant’s vocational impairment.

After the SB 899 revision of Labor Code § 4660, the ability to make such considerations for permanent disability was affirmed in Contra Costa County v. Workers’ Compensation Appeals Board (Dahl). The Dahl case confirmed that a Vocation Rehabilitation Expert’s report and findings of diminished earnings capacity, could only be used to increase an applicant’s permanent disability award to 100%. This was a slight variance from the LeBoeuf case, but still allowed the reports to be used.

Now we come to the present and Senate Bill 863, for dates of injury on or after January 1, 2013. With SB 863, the Legislature added Labor Code §4660.1, which stated that in “determining the percentages of permanent disability, account shall be taken of the physical injury or disfigurement, the occupation of the injured employee, and his or her age at the time of the injury.” Did you notice the change? Based on the strict reading of the revised Labor Code, there is no longer consideration given for diminished earning capacity or diminished ability to compete in the open labor market.

But what does it all mean?

For starters, the statutory authority the LeBoef and Dahl cases relied upon no longer exists. Accordingly, a Vocational Rehabilitation Expert’s report should no longer be considered to increase the permanent disability impairment based on a diminished earning capacity or inability to compete in the open labor market. Further clarification was provided, and the Legislative intent of this revision was made clear, in the citation on Page 4, item 27, of the Assembly Committee of Insurance, hearing date of August 31, 2012. Therein, the legislature confirmed that the revision of Senate Bill 863 “eliminates the diminished future earnings capacity from the determination of permanent disability and limits the definition of permanent disability to include only a consideration of how age and occupation affects the overall classification of employment of the injured worker, rather than the individual injured worker’s ability to compete in the open labor market or reduction of future earnings”.

So what should we do? Object to and dispute liability for payment of Vocation Rehabilitation Reports, for post January 1, 2013 dates of injury. Why? There is no legal consideration given to applicant’s diminished earnings capacity or applicant’s diminished ability to compete in the open labor market, when calculating permanent disability.

Please feel free to contact our office if you would like to further discuss this issue, or any other questions you may have.