| Added On August 12, 2011
The California Supreme Court weighed in on a controversial and pivotal worker’s compensation case this week- granting a victor for employers and insurers. The issue involved cost of living increases for worker’s compensation claimants. Specifically, the high court grappled with interpretation of a 2002 law giving administrators some leeway in calculating cost of living increases for claimants. There are currently three options for determining the appropriate figure: (1) retroactively to Jan. 1 after the year in which the worker is injured; (2) retroactively to Jan. 1, 2004, for every case regardless of the date of injury, or; (3) the date the first benefit payment becomes due.
In the instant case, the court was deciding a dispute surrounding a pivotal date in the determination of cost of living increases. The claimant was injured in 2004 and was set to receive $728 per week for the rest of his life beginning in 2006. He contended that cost of living adjustments, which are statutorily set each year, should be added to reflect the cost of living as of January 1, 2005. The administration countered by arguing that any adjustments should be calculated on the January 1 date subsequent to the first receipt of payments- January 1, 2007.
The trial court and appeals court sided with the employee stating that it was only fair to include cost of living adjustments from the first of the year immediately following injury, not the beginning of payouts. The appeals court specifically opined that “setting the [cost of living adjustments] from the permanent and stationary date causes that worker to see his or her payment exposed to the ravages of inflation.”
Conversely, the California supreme court held that the California legislature intended the statute to reflect the intention to calculate cost of living adjustments from the year immediately following the first year of eligibility of benefits, not the year of injury.
This holding directly impacts injured workers seeking worker’s compensation benefits in that payouts could be drastically reduced from the amount they may be expecting. For instance, if a worker is injured today and does not begin receiving payments until 2013, cost of living adjustments are not added until the following January 1. Thus, the payment amount may reflect the cost of living of the year of injury but are applied in a subsequent year where inflation has dramatically increases costs for claimants.