California Supreme Court Rules on Workers’ Comp Payment Increases

The California Supreme Court has ruled that cost of living adjustments in total permanent disability cases are to be calculated starting the January 1 after the injured worker started collecting his or her payments.

The ruling is expected to be greeted by employers with a sigh of relief because it overturns a court of appeal ruling that said the cost of living adjustments (COLA) need to be calculated from back in 2004, when the labor code statutes governing cost of living increases were implemented.

The ruling is going to save the industry “an enormous amount of costs,” said a spokesperson for the Workers’ Compensation Action Network, an association of employers and insurers. “You almost hate to call it a victory because this is the way the statute should have been read all along. But it is.”

The Court said that in coming to its ruling it had to decide what the Legislature had in mind when it passed the labor code provision regarding cost of living increases for those receiving permanent disability payments of life benefit payments.

In the court of appeal case, the California Applicants’ Attorneys Association (CAAA) filed an amicus curiae brief that maintained that the “plain language of the statute mandates that the COLA in fact begins to accrue January 1, 2004 without regard to the date of injury.”

The Court of Appeal, in siding with the CAAA, said that it would not be fair for a worker to be penalized because their case dragged on and they did not begin receiving their benefits for years after their injury.

The Supreme Court said the appeal court’s decision was wrong because according to the language of the statute there could not be an increase calculated to the payment until there actually had been a payment. The Court also said that when the statute mentioned a date of January 2004 as the date from which a COLA needed to be calculated it did not intend that date to be read literally; rather it was intended to be an example.

Cost of living increases in permanent disability cases are calculated based on the annual increase in the average daily wage in the state.

In its opinion, the Court noted that the statutory language is not exactly clear, and suggested the Legislature might want to revisit it.