ALAN WOODS, Employee/Appellant, v. ERSKINE MFG. and AUTO OWNERS INS., Employer-Insurer.
WORKERS= COMPENSATION COURT OF APPEALS
JUNE 30, 2000
CREDITS & OFFSETS - CREDIT FOR OVERPAYMENT; PENALTIES. Under the particular circumstances of this case, where the employer and insurer improperly took a credit that was allowable under case law but was in direct violation of a compensation judge=s order, the employer and insurer need not return the money withheld but are liable for a penalty pursuant to Minn. Stat. ' 176.225.
ECONOMIC RECOVERY COMPENSATION; REHABILITATION - COOPERATION. Where the employee=s rehabilitation assistance ended well over a year prior to maximum medical improvement, the employee=s noncooperation with rehabilitation was too remote to justify forfeiture of ERC, and the judge=s decision to the contrary is reversed.
Affirmed in part and reversed in part.
Determined by Wilson, J., Wheeler, C.J., and Pederson, J.
Compensation Judge: William R. Johnson
DEBRA A. WILSON, Judge
The employee appeals from the compensation judge=s denial of his request for repayment of a credit taken by the employer and insurer, from the judge=s denial of a penalty, and from the judge=s denial of economic recovery compensation for the employee=s permanent impairment. We affirm in part and reverse in part.
On February 8, 1994, the employee sustained an admitted work-related low back injury while employed by Erskine Manufacturing [the employer]. Surgery to treat this injury was performed in April of 1995, and the employer and insurer ultimately paid the employee various benefits, including medical expense benefits, certain wage loss benefits, and impairment compensation for a 15% whole body impairment.
The matter initially came on for hearing before a compensation judge on April 8, 1998. Issues at that time included the employee=s weekly wage, and any resulting underpayment of benefits; whether the employee was entitled to temporary total disability benefits during certain periods of unemployment; whether the employee was entitled to economic recovery compensation [ERC] for his permanent impairment; and whether the employer and insurer had overpaid wage loss benefits during a period in which the employee was receiving income from a company called Strategic Telecom Systems [STS].
In a decision issued on May 27, 1998, the compensation judge determined, in part, that the employee=s average weekly wage on the date of injury was $293.22 and that the employee had been underpaid wage loss benefits, during certain periods, in that it Aappear[ed]@ that the employer and insurer had been paying benefits during those periods based on a weekly wage of $274.23. Additional temporary total disability benefits were awarded for some periods but denied for others, based primarily on the judge=s conclusions as to whether the employee had been cooperating with rehabilitation efforts and/or diligently seeking alternate employment. With regard to the employer and insurer=s overpayment claim, the judge concluded that the employee had earned income of $3,000, for work performed for STS, during a period in which the employer and insurer had paid temporary total disability benefits, and he found that the employer and insurer were Aentitled to a credit pursuant to Minn. Stat. ['] 176.179 against future benefits for the amount of the overpayment.@ Finally, concluding that the employee had reached maximum medical improvement [MMI] but had not received notice of MMI until the date of hearing, the judge determined that it was premature to resolve the employee=s claim for ERC.
The employee appealed from the compensation judge=s decision, claiming that the judge erred in his decision as to weekly wage; his denial of temporary total disability benefits from and after November 4, 1996, on job search and noncooperation with rehabilitation grounds; his finding that the employee had reached MMI effective as of the date of hearing; and his conclusion that the employer and insurer were entitled to a credit for overpayment, based on the employee=s earnings from STS. This court affirmed the judge=s decision on all issues except the credit issue. While affirming the judge=s factual finding that the payment from STS represented wages, we remanded the matter for recalculation of the credit, if possible, on a week-to-week basis. In discussing the issue, we noted that the employer and insurer had the burden of proving entitlement to a credit under Minn. Stat. ' 176.179. Woods v. Erskine Manufacturing, slip op. (W.C.C.A. Dec. 2, 1998).
In March of 1999, the employee filed claim petitions alleging entitlement to ERC for his permanent impairment, to a refund of the $3,000 that the employer and insurer had already taken as a credit against the benefits awarded by the compensation judge in his May 27, 1998, decision, and to penalties pursuant to Minn. Stat. ' 176.225. At the hearing before the compensation judge on remand, held September 9, 1999, the parties agreed to try the issues raised by the employee=s March 1999 claim petitions, in addition to the credit issue. In a November 8, 1999, decision, the compensation judge denied the employee=s claims for ERC, for refund of the $3,000, and for penalties. He did, however, award the employee an additional $1,000.07, plus interest, for temporary partial disability benefits during the period of his employment by STS. The employee appeals.
STANDARD OF REVIEW
In reviewing cases on appeal, the Workers= Compensation Court of Appeals must determine whether Athe findings of fact and order [are] clearly erroneous and unsupported by substantial evidence in view of the entire record as submitted.@ Minn. Stat. ' 176.421, subd. 1 (1992). Substantial evidence supports the findings if, in the context of the entire record, Athey are supported by evidence that a reasonable mind might accept as adequate.@ Hengemuhle v. Long Prairie Jaycees, 358 N.W.2d 54, 59, 37 W.C.D. 235, 239 (Minn. 1984). Where evidence conflicts or more than one inference may reasonably be drawn from the evidence, the findings are to be affirmed. Id. at 60, 37 W.C.D. at 240. Similarly, A[f]actfindings are clearly erroneous only if the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed.@ Northern States Power Co. v. Lyon Food Prods., Inc., 304 Minn. 196, 201, 229 N.W.2d 521, 524 (1975). Findings of fact should not be disturbed, even though the reviewing court might disagree with them, Aunless they are clearly erroneous in the sense that they are manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole.@ Id.
Pursuant to Minn. Stat. ' 176.101, subds. 3e and 3p (repealed 1995), ERC is payable for an employee=s permanent impairment unless the employee obtains physically and economically suitable employment, as specified in subdivision 3e, prior to 90 days post MMI or the end of approved retraining, whichever is later. For purposes of this appeal, it is undisputed that the employee reached MMI effective April 8, 1998, the date of the first hearing before the compensation judge. It is also undisputed that the employee did not obtain suitable employment within the specified statutory period. However, finding that the employee had engaged in a persistent pattern of noncooperation with rehabilitation efforts, the judge nevertheless determined that the employee was not entitled to ERC for his permanent partial disability. We reverse.
Minn. Stat. ' 176.102, subd. 13, provides in part as follows:
Subd. 13. Discontinuance. All benefits payable under chapter 176 may, after a determination and order by the commissioner or compensation judge, be discontinued or forfeited for any time during which the employee refuses to submit to any reasonable examinations and evaluative procedures ordered by the commissioner or compensation judge to determine the need for and details of a plan of rehabilitation, or refuses to participate in rehabilitation evaluation as required by this section or does not make a good faith effort to participate in a rehabilitation plan.
Pursuant to this provision, ERC may be forfeited if the employee fails to make a good faith effort to cooperate with rehabilitation. See, e.g., Thomle v. Coca-Cola Bottling Midwest, 43 W.C.D. 6 (W.C.C.A. 1990). This court has cautioned on several occasions that forfeiture of ERC is not appropriate in the absence of a Astrong showing@ or persistent pattern of noncooperation or bad faith conduct. See, e.g., Kroll v. Hines & Sons, Inc., 47 W.C.D. 454 (W.C.C.A. 1992). In addition, because Ait is the employee=s employment status within the 90-day post-MMI period that is generally determinative of entitlement to ERC, e.g., Gibbons v. Weyerhaeuser, 482 N.W.2d 480, 46 W.C.D. 329 (Minn. 1992), it is the employee=s cooperation or noncooperation during that period that is probably most relevant when the issue is forfeiture of ERC.@ Regan v. Log House Foods, Inc., 50 W.C.D. 29, 40 (W.C.C.A. 1993).
In the present case, substantial evidence may in fact support the compensation judge=s conclusion that the employee demonstrated a persistent pattern of noncooperation with rehabilitation efforts, as specified by case law. However, the employee=s rehabilitation assistance ended at least fifteen months prior to the MMI date found by the judge and affirmed by this court in the first appeal of this matter. As previously noted, the 90-day post-MMI period is Amost relevant@ in evaluating cooperation with rehabilitation for purposes of ERC entitlement, and, while we decline to draw any hard line, noncooperation well over a year prior to MMI is simply too remote to justify a forfeiture. See Milton v. Bridgestone, slip op. (W.C.C.A. Oct. 15, 1996) (compensation judge improperly focused on events in 1993 when evaluating ERC claim of employee who reached MMI in 1995). Moreover, as we have said on numerous occasions in the past, the diligence of an employee=s job search, standing alone, is irrelevant to the form of benefits payable for permanent impairment. See, e.g., Hansford v. Berger Transfer, 46 W.C.D. 303 (W.C.C.A. 1991). As such, we are unpersuaded by the compensation judge=s attempt to bolster his decision by discussing the employee=s weak job search efforts during the 90-day post-MMI period.
It may well be true, as the compensation judge reasoned, that the employee himself was largely responsible for the termination of rehabilitation assistance at the end of 1996. However, the employee has already been penalized for this conduct by the judge=s denial of temporary total disability benefits for certain periods. Moreover, regardless of the employee=s noncooperation, the employer and insurer could have avoided any potential liability for ERC by providing the employee with physically and economically suitable employment prior to the end of the 90-day post-MMI period. Because, however, the employee did not obtain suitable work, and because his past noncooperation with rehabilitation was simply too remote in time to the period most relevant to the form of benefits payable for permanency, we reverse the judge=s decision and hold that the employee is entitled to ERC for his 15% whole body impairment.
Between February 5, 1996, and May 13, 1996, the employee earned $3,000 from STS while at the same time receiving temporary total disability benefits from the employer and insurer. In his decision following the first hearing in this case, the compensation judge found that the employer and insurer were entitled to a $3,000 Acredit@Apursuant to Minn. Stat. ['] 176.179 against future benefits for the amount of the overpayment@ (emphasis added). In his order, the judge awarded the employer and insurer Aa credit in the amount of $3,000.00 for benefits they overpaid the employee while he was receiving income from [STS],@ specifying again that Athe employer and insurer [were] entitled to take this credit against future benefits as allowed by Minn. Stat. ['] 176.179" (emphasis added). The employer and insurer did not appeal. However, prior to the hearing on remand, the employer and insurer applied the credit to the benefits awarded to the employee in the compensation judge=s first decision, reducing the employee=s payment under the award by the full $3,000.
In his claim petitions, the employee alleged entitlement to return of the $3,000 and to penalties, arguing that the employer and insurer violated the terms of Minn. Stat. ' 176.179 and the judge=s order by taking the full $3,000 credit against the past due benefits awarded by the compensation judge rather than as a 20% credit against future weekly benefits as provided by statute. However, in his decision on remand, the compensation judge recharacterized the issue as a dispute about the amount of benefits due to the employee for the period in question, rather than whether the employer and insurer were entitled to a Acredit@ under Minn. Stat. ' 176.179. Recalculating the employee=s benefit entitlement in view of the employee=s income from STS, the judge concluded that the employee was now entitled to $1,000.07 in temporary partial disability benefits, a calculation that recognized the fact that the employer and insurer had already taken their $3,000 Acredit@ for overpayment. The judge also denied the employee=s penalty claim, citing the Acomplicated nature of this transaction@ and his conclusion that the matter had never been properly characterized as a credit question to begin with. The employee appeals from the judge=s decision on both points, again asking for return of the $3,000 withheld by the employer and insurer and for penalties based on the employer and insurer=s inappropriate action in offsetting the $3,000 against his award.
The employee=s arguments have substantial merit, and the judge=s attempt to recast the issue as a mere benefit calculation question, rather than a credit issue, is unconvincing. In his first decision, the judge clearly indicated that the employer and insurer were entitled to a $3,000 credit against future benefits. The issue became one of benefit calculation, on remand, only because the employer and insurer had already offset the $3,000 against the judge=s award. However, our conclusion to this effect does not resolve the issue.
Minn. Stat. ' 176.179 provides in relevant part as follows:
When the payments have been made to a person who is entitled to receive further payments of compensation for the same injury, the mistaken compensation may be taken as a full credit against future lump sum benefit entitlement and as a partial credit against future weekly benefits. The credit applied against further payments of temporary total disability, temporary partial disability, permanent total disability, retraining benefits, death benefits, or weekly payments of economic recovery or impairment compensation shall not exceed 20 percent of the amount that would otherwise be payable.
(Emphasis added.) In Cassem v. Crenlo, Inc., 470 N.W.2d 102; 44 W.C.D. 484 (Minn. 1991), the Minnesota Supreme Court held that Minn. Stat. ' 176.179 Aonly allows mistaken compensation to be taken as a full credit against >future lump sum benefit entitlement,=@ not against an award for underpayment of benefits past due. Id. at 108, 44 W.C.D. at 496-97. Reasoning, however, that to allow the employer and insurer to offset its overpayment against its underpayment made Apractical sense,@ with no resulting hardship to the employee, the court nevertheless approved the practice. Id. at 109, 44 W.C.D. at 497. Similarly, in the present case, Minn. Stat. ' 176.179 would not allow the employer and insurer to offset its overpayment of wage loss benefits during the employee=s employment by STS against its underpayment of past due benefits awarded by the judge for other periods; however, pursuant to Cassem, the offset was nevertheless permissible. See also Carlson v. Terry Feldmann=s Imports, slip op. (W.C.C.A. June 5, 1995). Therefore, in the end, what we have here is an employer and insurer who took an otherwise allowable offset in direct violation of the compensation judge=s original decision.
The appropriate result on appeal is not obvious, and we have some sympathy for the employee=s argument that the employer and insurer should be required to comply with the judge=s first order. Because, however, the offset was permissible under case law, and because the employee acknowledged at oral argument that he has in fact received the appropriate net amount of benefits following the compensation judge=s decision on remand, we decline to order the employer and insurer to return the $3,000 that they improperly withheld; there is, as in Cassem, no hardship to the employee. We think, however, that a penalty is appropriate for this conduct, pursuant to Minn. Stat. ' 176.225, in the amount of 10% of the benefits wrongfully withheld. Not only did the employer and insurer violate the compensation judge=s order, they took the entire $3,000 credit prior to the hearing ordered by this court on that very issue. We therefore order the employer and insurer to pay the employee $300.00 accordingly.
 Additional background details may be found in this court=s December 2, 1998, decision.
 By administrative decision issued on June 6, 1998, the employer and insurer were allowed to discontinue rehabilitation assistance based on the employee=s noncooperation. Rehabilitation assistance was subsequently reinstated, at the employee=s request, but Joel Thiem, the employee=s placement specialist, testified that the employee had again stopped cooperating with rehabilitation efforts by the end of October 1996.
 The employee=s last Job Placement Plan and Agreement expired on November 20, 1996. Placement specialist Thiem testified that he had no contact at all with the employee after January of 1997. The employee did not attain MMI until April 8, 1998.
 In his Finding 2, the judge wrote, A[i]t should be noted that this matter no longer deals with a credit or the taking of a credit against future benefits but now becomes simply a determination as to what wage loss benefits the employee was entitled to during the period in question here.@
 Citing Christianson v. Axel H. Oman Constr. Co., 346 N.W.2d 654, 656, 36 W.C.D. 639, 641 (Minn. 1984), for the proposition that the purpose of Minn. Stat. ' 176.179 is to avoid hardship to the employee where application of the credit would completely exhaust the periodic benefits designed to make up for lower post-injury wages.
 Pursuant to Minn. Stat. ' 176.225, subd. 1, penalties are appropriate where an employer and insurer have Aunreasonably or vexatiously delayed payment,@Aneglected or refused to pay compensation,@ or Aintentionally underpaid compensation.@ The compensation judge determined on remand that no penalty was appropriate, but he also made an alternative finding that 10% would be appropriate Agiven the confused nature@ of the case, noting that he believed that Athe employer did not act with malicious intent.@ This alternate finding was reasonable. While a 10% penalty on the entire award is permissible under the statute, we think that 10% of the amount improperly withheld is more in keeping with the circumstances.