LLOYD G. SHELTON, Employee/Cross-Appellant, v. NATIONAL PAINTING & SANDBLASTING and WAUSAU INS. CO., Employer-Insurer, and NATIONAL PAINTING & DRYWALL and GRINNELL MUT./ASU RISK MGMT., Employer-Insurer/Appellants, and MN DEP'T OF LABOR AND INDUS., Intervenor.

 

WORKERS= COMPENSATION COURT OF APPEALS

JULY 28, 2000

 

HEADNOTES

 

CONTRIBUTION & REIMBURSEMENT; APPORTIONMENT - EQUITABLE; STATUTES CONSTRUED - MINN. STAT. ' 176.101, SUBD. 5(2).  Where there was evidence that the employee was permanently and totally disabled and the employee=s admitted work-related injury was a substantial contributing factor in that disability, the compensation judge was permitted to include all ratable permanent partial disability in reaching the statutory threshold provided for in Minn. Stat. ' 176.101, subd. 5(2), even though some of that permanency did not impact the employee=s ability to work, and the mere fact that the employee had received a permanent partial disability rating for an injury that preceded the disabling injury did not, as a matter of law, entitle the last insurer to equitable apportionment.

 

CREDITS & OFFSETS - SOCIAL SECURITY OFFSET; STATUTES CONSTRUED - MINN. STAT. ' 176.101, SUBD. 4.  The plain meaning of Minn. Stat. ' 176.101, subd. 4, contemplates a dollar-for-dollar reduction in Athe amount of the weekly compensation benefits being paid by the employer@ by Athe amount of any disability benefits being paid by any government disability benefit program,@ without regard for the subdivision=s provision providing for a minimum workers= compensation benefit based on the statewide average weekly wage.

 

PENALTIES; STATUTES CONSTRUED - MINN. STAT. ' 176.225, SUBD. 1.  Where the judge=s own findings appeared inconsistent with his refusal to award penalties, particularly under the nondiscretionary language of the current version of Minn. Stat. ' 176.225, subd. 1, the issue of penalties was remanded to the compensation judge for further consideration and explanation.

 

Affirmed in part, reversed in part, and remanded in part.

 

Determined by Pederson, J., Johnson, J. and Rykken, J.

Compensation Judge:  Donald C. Erickson       

 

 

OPINION

 

WILLIAM R. PEDERSON, Judge

 

National Painting and Drywall and Grinnell Mutual Reinsurance Company, on the risk for a June 1996 work injury in this matter, appeal from the compensation judge=s order dismissing their claim for contribution and/or reimbursement against an insurer on the risk for a February 1983 injury and from the judge=s determination that, pursuant to Minn. Stat. ' 176.101, subd. 4 (1995), the Social Security offset shall not reduce the employee=s permanent total disability benefits below sixty-five percent of the statewide average weekly wage.  The employee cross-appeals from the judge=s denial of penalties pursuant to Minn. Stat. ' 176.225, subd. 1 (1995).  We affirm the denial of contribution, we reverse the order establishing the employee=s minimum compensation rate for permanent total disability, and we reverse the denial of penalties and remand the issue for reconsideration and further findings.

 

BACKGROUND

 

Lloyd Shelton began working as a painter for National Painting and Drywall and its predecessor, National Painting and Sandblasting, [without distinction, the employer] in 1971, having left school after the eighth grade, partly due to a diagnosed narcolepsy, and having never pursued a GED/HSED.  The primarily industrial and commercial work performed by Mr. Shelton [the employee] was physically demanding and varied, involving application of paint by brush and sprayer as well as by roller.  The job also entailed operation of sandblasting equipment, vinyl wallpaper hanging, sheetrock taping and sanding, and application of stucco.  The job frequently required the employee to lift five-gallon pails of paint weighing about eighty-five pounds each, to maneuver and set up portable compressor units, to operate power hoses and other hand and power tools, and to handle building materials.  The job required repetitive upper extremity activity throughout the work day, frequently above shoulder height.

 

On February 4, 1983, the employee sustained a severe work-related hyperextension of his cervical spine when he struck his head on an overhead furnace duct while at work on his job with the employer.  At the time of the injury, the employer was insured against workers= compensation liability by Wausau Insurance Company [Wausau], and the employee was about forty years old and earning a weekly wage sufficient to qualify him for a maximum workers= compensation rate of $290.00.  Following his injury, the employee noted headaches and soreness in his neck, with radiation out into his shoulders.  His symptoms gradually worsened to include sleep disturbance and, eventually, loss of arm strength.  In October of 1984, the employee was referred to neurosurgeon Dr. W. S. Pollard.  On December 7, 1984, Dr. Pollard performed an anterior cervical diskectomy at C4-5, with removal of spurs.  The employer and Wausau admitted liability for the neck injury and paid disability benefits to the employee from December 6, 1984, through April 12, 1985, as well as benefits for a 15% permanent partial disability of the back.

 

Upon releasing the employee to return to work, Dr. Pollard did not place any formal restrictions on the employee=s activities but simply advised him to be careful of lifting and sudden moves.  The employee later testified that he was subsequently careful of what he was doing but continued to experience soreness in his neck for at least a year and thereafter experienced periodic flare-ups that included soreness, stiffness, and a feeling of tiredness across the back of his neck.  His return to work was to full duties as a journeyman painter, however, and he was able to perform all of his regular duties without the necessity of medical treatment for his neck.

 

On April 18, 1994, the employee was seen at the Duluth Clinic by Dr. J. E. Henry for evaluation of right shoulder pain, which was markedly exacerbated at night and with repetitive motion.  Dr. Henry diagnosed right shoulder pain and Atendinitis with impingement vs possible rotator cuff tear,@ noting that the employee was Astatus post-single level anterior cervical fusion . . . with intermittent cervical stiffness only.@  The employee received an injection in his right anterolateral rotator cuff, was given a prescription for Motrin, and was referred for physical therapy.  The employee noted improvement with the injection and evidently did not follow up with Dr. Henry.  The employee later testified that his upper extremity symptoms gradually returned and worsened over the next two years, particularly with activities such as sanding sheetrock, texturing ceilings, and carrying buckets of paint and bags of texture material.

 

On June 19, 1996, after sandblasting for three days in a mechanical basket, the employee reported pain so severe that he could not raise his arms up to hold the sandblasting hose.  On June 21, 1996, he sought treatment with Dr. David Webb, who found the employee=s passive elevation to more than forty-five degrees very painful and his active motion painfully limited.  Among other conditions, Dr. Webb diagnosed a possible degenerative tear of the rotator cuff.  The employee received another injection into the AC joint, into the subacromial bursa, and intra-articularly into the shoulder joint.  The employee subsequently experienced complete relief of pain and was given a sling for his right arm and a prescription for Vicodin.  When he returned to Dr. Webb on June 27, 1996, he was released to return to work with restrictions.  The doctor indicated at that time that definitive surgical intervention could be postponed until the winter Aoff-season,@ provided the employee=s symptoms and function could be managed conservatively for the time being.  On July 29, 1996, however, the employee complained to Dr. Webb that his left shoulder in particular and also his elbows were bothering him.  After examination, Dr. Webb reiterated that surgical treatment was indicated and referred the employee to Dr. Larry Reich.  On July 30, 1996, Dr. Reich concurred with the recommendation for surgery and referred the employee to Dr. Michael Gibbons.

 

The employee went off work about that time and did not thereafter return to work with the employer.  The employee=s bilateral shoulder, elbow and forearm conditions were ultimately held to constitute a Gillette-type^[1] injury culminating on June 19, 1996.  At the time of this injury, the employer was insured by Grinnell Mutual Reinsurance Company [Grinnell], and the employee was fifty-three years old and earning a weekly wage sufficient to qualify him for the maximum workers= compensation rate of $615.00.

 

On August 23, 1996, Dr. Gibbons diagnosed bilateral shoulder impingement, worse on the right side, with significant osteophytes.  Examination of the employee=s cervical spine on that date revealed good range of motion, and the employee was able to touch his chin to his chest and to both shoulders. Dr. Gibbons administered injections into the employee=s left shoulder and recommended Aoperative intervention of the right shoulder including open acromioplasty, distal clavicle excision and exploration of the rotator cuff for possible full thickness tear.@  A month later, on September 23, 1996, Dr. Gibbons performed the recommended surgery, noting and repairing a full thickness rotator cuff tear.  Physical therapy was commenced on October 15, 1996, and on November 4, 1996, the employer and Grinnell referred the employee to Stubbe & Associates for a rehabilitation consultation.  The referral included a specific request for medical management and a determination of the employee=s ability to return to the employer.  The file was assigned to QRC Helen Lamberson-Sauve, who found the employee eligible for rehabilitation services.

 

In January 1997, the parties agreed to a rehabilitation plan calling for a return to work with the date-of-injury employer and medical management.  On January 13, 1997, the employee commenced a work conditioning program, and on February 25 and 26, 1997, he underwent a functional capacities evaluation [FCE].  On March 3, 1997, Dr. Gibbons reviewed the results of the FCE with the employee.  Dr. Gibbons opined that the employee had reached maximum medical improvement and rated the employee=s whole-body permanent partial impairment at 9% - - 3% for resection of the distal end of the clavicle and an additional 6% for a full thickness rotator cuff tear.  Dr. Gibbons also reported that A[c]urrently, they are planning on having him retire and go for disability due to the restrictions as a result of his injury.@  The employee thereupon applied for Social Security disability benefits, and the QRC placed her file Aon a hold status by the account=s request.@

 

On September 16, 1997, Dr. Gibbons referred the employee to physical medicine specialist Dr. Skip Silvestrini.  After reviewing the employee=s treatment history with the employee and his QRC, Dr. Silvestrini issued the following diagnosis:  ABilateral upper cross syndrome with secondary myofascial pain because of chronic impingement and cumulative trauma to his shoulders.  He is status post cuff repair on the right.  He has bilateral epicondylitis which is part of the above phenomenon.@  The doctor recommended a conditioning program and prescribed Amitriptyline Ato try to help improve his sleep cycle as well as give him some relief with regard to the sub-clinical or reactive depression that I am seeing.@

 

On September 22, 1997, QRC Lamberson-Sauve reported as follows:

 

By agreement with all parties and with Ms. Schultz' approval,^[2] Mr. Shelton=s rehabilitation file has been on a temporary hold status since March 1997 as the process of requesting Social Security Disability Benefit for Mr. Shelton was initiated.  Due to Mr. Shelton=s long standing employment history as a journeyman painter for NPD, Incorporated, his inability to return to that employment due to permanent physical restrictions, and in light of his age, work history, educational level and general labor market in the area, it was the consensus of all parties that a job search effort would not be of benefit to Mr. Shelton=s file.

 

On November 25, 1997, Dr. Silvestrini opined that the employee was unable to return to work and would be unable to do more than very sedentary activity, since even sitting at a computer terminal caused increasing pain.  On January 6, 1998, QRC Lamberson-Sauve reported that the employee had begun receiving Social Security disability benefits as of January 3, 1998, and that he had been found eligible for such benefits as of July 1, 1997.  The QRC also reported that the adjuster on the file Ahas now directed me to close rehabilitation services.@  In concluding her report of January 6, 1998, the QRC stated, AWith no further outlook for return to work activity, and determination that he will receive SSD benefit, no further rehabilitation services are anticipated, and the rehabilitation file will be closed as of this report dated January 6, 1998.  The R-8 will be filed as appropriate.@

 

On July 7, 1998, Grinnell filed an NOID alleging that the employee=s weekly benefits payable as temporary total disability benefits would cease as of July 9, 1998, as the employee had received the one hundred four weeks of temporary total allowed by statute.  Pursuant to an Order on Discontinuance, served on July 29, 1998, benefits were discontinued, and on August 24, 1998, the employee filed a claim petition seeking permanent total disability benefits continuing from January 6, 1998, due to his neck injury of February 4, 1983, and his bilateral shoulder and elbow injuries of June 19, 1996.  The employee also filed an Objection to Discontinuance on August 31, 1998, and the pleadings were consolidated pursuant to an Order dated October 22, 1998.

 

During the summer of 1998, and after discontinuance of his total disability benefits, the employee obtained employment working for his son at a business called the Trolley Station.  He typically worked four hours a day, five days a week, and was paid $5.25 an hour.  He requested temporary partial disability benefits, but they were denied by Grinnell on grounds that the employee=s job was not suitable gainful employment.  Additional rehabilitation services were not assigned.

 

On November 19, 1998, the employee was examined by orthopedist Dr. Paul Yellin at the request of Wausau.  On examination, Dr. Yellin found no limitation of motion in the employee=s cervical spine.  He noted that, during the first year following the employee=s neck surgery, the employee had experienced gradual improvement and had been able to work by limiting his work activities.  Moreover, the employee had reported that he had not received any treatment for his cervical spine since 1987.  Dr. Yellin concluded that the employee did not require specific restrictions as a result of his neck injury of February 4, 1983, and that that injury was not a substantial contributing factor to the employee=s wage loss or need for medical treatment commencing in 1996.

 

On December 11, 1998, the compensation judge issued an Order for Joinder of the Special Compensation Fund because of a potential issue of supplementary benefits.  A few days later, on December 22, 1998, the employee was evaluated by orthopedist Dr. Nolan Segal at the request of Grinnell.  Dr. Segal reported that the employee did have limited range of motion of the cervical spine consistent with cervical osteoarthritis and was in need of restrictions for his neck and shoulder and upper extremity conditions.  Both Dr. Yellin and Dr. Segal opined that the employee had a 6% whole body impairment related to his right rotator cuff tear.^[3]

 

On February 5, 1999, the employee was seen by Karen Jarocki Strewler for an independent vocational evaluation at the request of Grinnell.  In an undated report, apparently faxed to counsel for Grinnell on March 29, 1999, Ms. Strewler reported as follows:

 

Mr. Shelton explained to this consultant it was his understanding he was not released to return to work and was Permanent Total Disabled.  This was supported by his doctors, as well as his QRC and the insurance representative, as he was not able to return to work as a painter.  Additionally, he reported the insurance company and QRC had supported he was not able to work elsewhere.  Mr. Shelton explained he had not asked Dr. Silvestrini for a release to return to work as he did not want to go to work in a sedentary or desk type job because of his Narcolepsy condition as well [as] his continued physical difficulties with his neck, shoulder, elbows, etc.

 

Ms. Strewler administered vocational testing and a transferable skills analysis.  In assessing the employee=s transferable skills, Ms. Strewler noted that the skills acquired by the employee were very specific to the industrial/commercial painting industry and were not highly transferable to alternative vocational areas.

 

In the summary and conclusions portion of her report, Ms. Strewler opined that, if a job offer were made which included work activities within the employee=s restrictions and matching his pre-injury wage, it would be her opinion that the employee is not permanently and totally disabled.  She also expressed the opinion that, since the employee considered himself to be retired and was collecting Social Security and union disability pension benefits, and since he had no plans to return to the competitive labor market unless he could obtain employment at his union pay scale, the employee has essentially withdrawn from the competitive labor market.  On the other hand, Ms. Strewler also stated,

 

Given the medical opinions of Drs. Gibbons, Silvestrini, Yellin and Segal, as well as taking into consideration Mr. Shelton=s age, other medical diagnoses, educational level, work experience/history, DOI wage, vocational testing results, lack of transferrable skills outside that of the specific vocational area of commercial/industrial painting, and the geographical region in which Mr. Shelton resides, it is this consultant=s opinion Mr. Shelton is Permanently Totally Disabled.

 

On April 1, 1999, the employee was seen for an independent vocational evaluation by Kandise Garrison at the request of counsel for the employee.  In a report of that same date, Ms. Garrison opined that

 

[g]iven his work history, his education, and his residual physical capacity, I would concur with the opinion of the QRC, Helen Sauve, that there is Ano further outlook for return to work activity.@  In my opinion, Mr. Shelton is precluded from competitive employment and is permanently and totally disabled.

 

The matter came on for a hearing before a compensation judge at the Office of Administrative Hearings on April 9, 1999.  On the morning of trial, the employee amended his claim to include a claim for penalties pursuant to Minn. Stat. ' 176.225, subd. 1.  Issues for determination by the judge included (1) whether the employee was permanently and totally disabled and, if so, the date on which he became so disabled;^[4] (2) whether the employee voluntarily withdrew from the labor market; (3) whether the employee failed to diligently search for work after July 1996; (4) the employee=s claim for additional permanent partial disability related to the 1983 and 1996 injuries; (5) whether the employee is entitled to penalties from Grinnell due to an alleged frivolous defense to the employee=s permanent total disability claim; and (6) whether Grinnell is entitled to contribution or reimbursement from Wausau and the 1983 injury.  Evidence introduced at trial included the employee=s testimony, as well as his pre-hearing deposition testimony; the employee=s medical and rehabilitation records; the deposition of Dr. Segal; and the testimony of Kandise Garrison and Karen Strewler.

 

In a Findings and Order issued July 9, 1999, and amended July 28, 1999, the compensation judge determined that the employee became permanently and totally disabled on January 6, 1998, when the insurer terminated rehabilitation benefits without the need for a job search.  He further determined that the employee did not voluntarily withdraw from the labor market.  He concluded that, after $25,000 in permanent total disability benefits had been paid, the insurer was entitled to an offset for the employee=s receipt of Social Security benefits, but the employee=s compensation rate could not be reduced below sixty-five percent of the statewide average weekly wage.  The judge awarded additional permanent partial disability benefits against both injuries, but denied Grinnell=s claim for contribution against Wausau.  The judge also declined to award penalties.  Grinnell appeals from the denial of contribution and from the Social Security offset determination, and the employee cross appeals from the denial of penalties.^[5]

 

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.

 

A[A] decision which rests upon the application of a statute or rule to essentially undisputed facts generally involves a question of law which [the Workers= Compensation Court of Appeals] may consider de novo.@  Krovchuk v. Koch Oil Refinery, 48 W.C.D. 607, 608 (W.C.C.A. 1993).

 

DECISION

 

Contribution/Equitable Apportionment

 

Grinnell argues that substantial evidence does not support the compensation judge=s finding that, after recovering from surgery, the employee had minimal functional limitations as a result of his cervical spine injury of February 4, 1983.  It contends that the judge ignored uncontroverted testimony that the employee continued to suffer from the effects of that injury up to the present time, that the employee self-limited his work activities, that his neck would get sore and be tired depending on his activity, and that the injury caused him to cut back on his recreational activities.  Grinnell urges this court to adopt the opinion of Dr. Nolan Segal, who apportioned the employee=s disability between his cervical condition and his upper extremity condition, assigning fifty percent liability to each.  We are not persuaded.

 

Equitable apportionment is ultimately a question of fact for the compensation judge and does not necessarily require choosing between conflicting medical opinions.  Ringena v. Ramsey Action Programs, 40 W.C.D. 880, 883 (W.C.C.A. 1987), summarily aff=d (Minn. Mar. 28, 1988); see also Goetz v. Bulk Commodity Carriers, 303 Minn. 197, 200, 226 N.W.2d 888, 891, 27 W.C.D. 797, 800 (1975) (equitable apportionment is determined not based on a precise formula but based on all of the facts and circumstances of the case).  In determining apportionment, factors to be considered include Athe nature and severity of the initial injury, the employee=s physical symptoms following the initial injury and up to the occurrence of the second injury, and the nature and severity of the second injury.@  Goetz, 303 Minn. at 200, 226 N.W.2d at 891, 27 W.C.D. at 800.

 

In the present case, the employee returned to full duty at a physically demanding job without formal restrictions from his doctor.  He performed that job without loss of time from work or medical treatment for some ten years.  When he was seen by Dr. Henry in 1994, the employee described Aintermittent cervical stiffness only.@  When he was examined by Dr. Gibbons on August 23, 1996, he had a normal range of motion of the cervical spine.  The employee testified to soreness and a tired feeling with activity, but he also testified that AI worked through the neck injury, and that never slowed me down to the point where I couldn=t work.@  Given the employee=s testimony and the opinions expressed by Dr. Yellin, the compensation judge could reasonably find that the 1983 injury did not play a substantial role in the employee=s permanent total disability.  Accordingly, we affirm that factual determination.  Hengemuhle, 358 N.W.2d at 59, 37 W.C.D. at 239.

 

Grinnell also argues that the judge=s denial of contribution/apportionment was erroneous as a matter of law.  In the present case, a 15% whole body impairment is a statutory prerequisite to establishing permanent total disability.  See Minn. Stat. ' 176.101, subd. 5.^[6]  Wausau compensated the employee for a 15% permanent partial disability to the back in 1985.^[7]   In 1999, Grinnell compensated the employee for a 6% whole body impairment related to his right shoulder surgery.  At trial, the parties agreed that the employee satisfied the current permanency threshold for permanent total disability.^[8]  At Findings 36 and 37, the compensation judge rated an additional 3% impairment related to the employee=s right shoulder and an additional 7% related to the back, consequent to the 1983 injury.  Therefore, after converting the Aold law@ permanency to a whole body rating, the employee has been compensated for permanency totaling 24.62%, 9% by Grinnell and 15.62% by Wausau.  Grinnell argues that it is incongruous to use a permanent partial disability rating from an admitted injury to meet the permanency threshold for permanent total disability and yet to conclude that that same disability is not a substantial contributing cause of the employee=s permanent total disability.  Grinnell contends that, if the permanent total disability attributable to the employee=s cervical spine is significant for purposes of meeting the threshold pursuant to Minn. Stat. ' 176.101, subd. 5, then it must also be considered significant when apportioning liability for ongoing permanent total disability benefits.  To find otherwise, Grinnell argues, not only ignores a significant disability present with respect to the cervical spine but also renders the permanent partial disability thresholds arbitrary and capricious.^[9] We are not persuaded.

 

This court has had opportunity to construe subdivision 5 in two recent cases, Frankhauser v. Fabcon, Inc., 57 W.C.D. 239 (W.C.C.A. 1997), and Metzger v. Turck, Inc., 59 W.C.D. 229 (W.C.C.A. 1999).  In Frankhauser, the issue was whether nonwork-related permanent partial disability may be counted toward the threshold permanency ratings.  The court held that

 

an employee who has sufficient ratable permanent partial disability from any cause may establish entitlement to benefits for permanent total disability if he or she meets the remaining eligibility requirements - - that is, if  Athe employee=s physical disability . . . causes the employee to be unable to secure anything more than sporadic employment resulting in an insubstantial income,@ id.; see also Schulte v. C.H. Peterson Constr. Co., 278 Minn. 79, 153 N.W.2d 130, 24 W.C.D. 290 (1967) - - as long as the employee=s work-related injury is a substantial contributing cause of that disability.

 

Frankhauser, 57 W.C.D. at 252 (emphasis in original).

 

In Metzger, this court held that, in establishing the permanent partial disability thresholds for permanent total disability, Aany substantial ratable permanent partial disability will satisfy that goal, whether or not that permanent partial disability is a factor in the employee=s wage loss or inability to work.@  Metzger, 59 W.C.D. at 237.  The court emphasized the long held distinction between permanent partial disability, compensable in the form of damages separate and distinct from wage loss benefits,^[10] and wage replacement benefits, which are dependent on ability to work.  In his concurring opinion, Judge Johnson referenced the rule, frequently reiterated by this and the supreme court, that an injured employee=s ability to work is dependent not on the employee=s level of permanent partial disability but on the employee=s Aphysical condition, in combination with his age, training, and experience, and the type of work available in his community.@  Schulte v. C. H. Peterson Constr. Co., 278 Minn. 79, 83, 153 N.W.2d 130, 133-34, 24 W.C.D. 290, 295 (1967), quoted in Metzger, 59 W.C.D. at 239 (Johnson, J., concurring).

 

In this case, what is significant is the compensation judge=s determination that the employee is permanently and totally disabled and that the employee=s work-related injury of June 19, 1996, is a substantial contributing factor in that disability.  The compensation judge was permitted to include all ratable permanent partial disability in reaching the statutory threshold, even if some of that permanency did not impact the employee=s ability to work.^[11]  The mere fact that an employee has received a permanent partial disability rating for an injury that preceded the disabling injury does not, as a matter of law, entitle the last insurer to equitable apportionment.  Accordingly, we affirm the compensation judge=s denial of apportionment in this matter.

 

Social Security Offset

 

In his Findings and Order, the compensation judge determined that the employee has been permanently and totally disabled since January 6, 1998, and that, after the payment of $25,000 in permanent total disability benefits, Grinnell may reduce its ongoing permanent total disability payments by the amount of the employee=s Social Security disability benefit.  However, the judge also determined that the amount of the weekly compensation benefits being paid may not be reduced below sixty-five percent of the statewide average weekly wage, pursuant to the judge=s reading of Minn. Stat. ' 176.101, subd. 4 (1995), which provides in part as follows:

 

Subd. 4.  Permanent total disability.  For permanent total disability, as defined in subdivision 5, the compensation shall be 66-2/3 percent of the daily wage at the time of the injury, subject to a maximum weekly compensation equal to the maximum weekly compensation for a temporary total disability and a minimum weekly compensation equal to 65 percent of the statewide average weekly wage.  This compensation shall be paid during the permanent total disability of the injured employee but after a total of $25,000 of weekly compensation has been paid, the amount of the weekly compensation benefits being paid by the employer shall be reduced by the amount of any disability benefits being paid by any government disability benefit program if the disability benefits are occasioned by the same injury or injuries which give rise to payments under this subdivision.

 

The parties here agree that, after a total of $25,000 in permanent total disability benefits have been paid by the employer and insurer, a reduction in weekly compensation benefits is allowed for Social Security benefits paid to the employee.  The question presented here is whether the minimum weekly benefit referred to in the first sentence of subdivision 4 of Minn. Stat. ' 176.101, based on the statewide average weekly wage [SWAWW], is the minimum weekly benefit only at the time of the determination of the employee=s initial workers= compensation rate, and only prior to the $25,000 threshold=s triggering of the employer and insurer=s offset for other government benefits received, or whether, as the compensation judge concluded, that minimum benefit remains the minimum workers= compensation benefit payable by the employer and insurer even after the triggering of the offset.  We conclude that the former construction, rather than the compensation judge=s construction, is the proper one.

 

Minn. Stat. ' 645.16 provides that A[t]he object of all interpretation and construction of laws is to ascertain and effectuate the intention of the legislature.  Every law shall be construed, if possible, to give effect to all its provisions,@ and A[w]hen the words of a law in their application to an existing situation are clear and free from all ambiguity, the letter of the law shall not be disregarded under the pretext of pursuing the spirit.@  Moreover, pursuant to Minn. Stat. ' 645.08(1), words and phrases are to be construed according to their plain meaning.  Each party in this case argues that the statute is not ambiguous and that construing the words and phrases according to their plain meaning supports its own position.  An analysis of each party=s respective interpretation of the statute=s language and of that party=s application of that language to the facts of this case may be helpful.

 

In support of the compensation judge=s construction of the statute, the employee argues that the first sentence of the current statute establishes that the ultimate Aminimum@ for weekly permanent total disability compensation is A65 percent of the statewide average weekly wage.@^[12]  Sentence two of the subdivision provides that, once benefit payments have totaled $25,000, the weekly permanent total disability benefit being paid by the employer Ashall be reduced by the amount of any disability benefits being paid by any government disability benefit program@  so long as those latter benefits Aare occasioned by the same injury.@  The employee=s position is that the weekly benefit reduction required under the statute is no longer required once the SWAWW-determined minimum set by the first sentence is reached.  He argues that the pivotal word in this case and in subdivision 4 is the word Aminimum.@  Arguing from Webster=s Ninth New Collegiate Dictionary, he contends that application of the common meaning of Aminimum@ to the statute precludes reduction of permanent total disability benefits below A65 percent of the statewide average weekly wage@ and that any other construction of the provision renders the statutory Aminimum@  not really the Aminimum.@  In order for the first sentence of subdivision 4 to maintain its integrity of meaning, he argues, the second sentence must be read so as to allow reduction of total disability benefits by Social Security no further than to the Aminimum@ of A65 percent of the statewide average weekly wage.@

 

On appeal from that interpretation of the statute, Grinnell contends that the first sentence of the subdivision clearly provides only for calculation of the employee=s basic and initial weekly compensation.  Grinnell argues that that initial weekly compensation is Aequal to the maximum weekly compensation for a temporary total disability@ (emphasis added) on June 19, 1996 - - $615.00.  The second clause in the second sentence, Grinnell suggests, clearly implies that some new event will occur Aafter a total of $25,000 of weekly compensation has been paid.@  That new event, they contend, is that Athe amount of the weekly compensation benefits being paid by the employer [in this case $615.00] shall be reduced by the amount of any disability benefits being paid by any government disability benefit program.@

 

We are compelled to agree with the analysis offered by Grinnell.  A minimum compensation rate has always been a part of Minn. Stat. ' 176.101, subd. 4, and prior to 1995 it was not uncommon for workers= compensation benefits to be reduced below the minimum, even to the point of a complete offset.  See Skalicky v. Anderberg, 312 Minn. 548, 253 N.W.2d 155, 29 W.C.D. 466 (1977).  The only amendment to subdivision 4 in the 1995 legislation was of the amount of the minimum, and we do not construe that amendment to suggest also a change in the method of calculating the Social Security offset.  In Potucek v. City of Warren, 535 N.W.2d 333, 53 W.C.D. 88 (Minn. 1995), the supreme court stated that as follows:

 

[S]ection 176.101, subd. 4 contemplates a simple dollar-for-dollar reduction in the Aamount of the weekly compensation benefits being paid by the employer@ by the amount of any disability benefits being paid by any government disability benefit program . . .

 

In recognition that workers= compensation is but one element of a system of wage-loss protection, the Minnesota legislature early on provided a means for coordinating workers= compensation with the federal social security system and the state pension system.

 

Potucek, 535 N.W.2d 333, 336, 53 W.C.D. 88, 91.

 

Construing and applying the plain meaning of Minn. Stat. ' 176.101, subd. 4, to the facts of this case does not, after all, even invoke the statutory minimum.  At the time of the employee=s injury, his weekly compensation rate for permanent total disability was $615.00.  It was this weekly compensation of $615.00 that was being paid to the employee when the total benefit payments reached the $25,000 threshold.  According to the plain language of the statute, the $615.00 being paid to the employee Ashall be reduced by the amount of any disability benefits being paid by any government disability benefit program.@  We find nothing unclear or ambiguous about this language.  If the legislature had intended to limit application of the offset, it could have added limiting language.  But the legislature did not do so.

 

We concede that the 1995 legislation did increase the amount of permanent total disability benefits payable to low income workers, at least to the point where they become subject to an offset.  But with the repeal of supplementary benefits also came an essential reduction in workers= compensation benefits in general. See Minn. Stat. ' 176.132 (1994).^[13]  We cannot agree that the insertion of a minimum weekly compensation of sixty-five percent of the statewide average weekly wage in Minn. Stat. ' 176.101, subd. 4, somehow evinces a legislative intent to shift authorization for payment of the cost of supplementary benefits to that subdivision.

 

We note also that the interpretation of the compensation judge, as urged by the employee, would result in an inconsistent application of the Social Security offset and is essentially irreconcilable with Minn. Stat. ' 176.645 (1995).^[14]  If the weekly compensation benefit cannot be reduced below sixty-five percent of the statewide average weekly wage, a reduction for Social Security benefits would never be applicable to an injured worker entitled to the minimum, although it would be applicable in varying degrees to others.  Rather than a reduction Aby the amount of any disability benefits being paid by any government disability benefits program,@ the reduction would be by a portion of any disability benefits, or perhaps none at all.  Moreover, unless the Aminimum@ changes annually with the adjustment of the statewide average weekly wage, all permanently and totally disabled workers will fall below sixty-five percent within one year of their injuries.^[15]  Yet to provide an increase in compensation benefits tied to the statewide average weekly wage runs contrary to Minn. Stat. ' 176.645, which specifically applies to benefits payable under section 176.101, subd. 4.  Not only would the escalation in benefits exceed the two percent cap on adjustments provided by the statute, but it would occur annually instead of being deferred to the fourth anniversary of the date of injury.^[16]

 

We therefore hold that the plain meaning of Minn. Stat. ' 176.101, subd. 4, contemplates a dollar-for-dollar reduction in Athe amount of the weekly compensation benefits being paid by the employer@ by Athe amount of any disability benefits being paid by any government disability benefit program@ (emphasis added), without regard for a minimum.

 

Penalty

 

Minn. Stat. ' 176.225, subd. 1, as amended effective October 1, 1995, provides in part as follows:

 

Subdivision 1.  Grounds.  Upon reasonable notice and hearing or opportunity to be heard, the commissioner, a compensation judge, or upon appeal, the court of appeals or the supreme court shall award compensation, in addition to the total amount of compensation award, of up to 30 percent of that total amount where an employer or insurer has:

 

(a) instituted a proceeding or interposed a defense which does not present a real controversy but which is frivolous or for the purpose of delay . . . .

 

Before the 1995 amendment, Minn. Stat. ' 176.225 provided that the compensation judge Amay@ award penalties for conduct of the employer or insurer described in that section.  However, the 1995 amendment replaced the discretionary word Amay@ with the mandatory word Ashall.@  Further, the statute defines Afrivolous@ as meaning Awithout a good faith investigation of the facts or on a basis that is clearly contrary to fact or law.@

 

At issue before the compensation judge was whether Grinnell interposed a frivolous defense to the employee=s claim for permanent total disability benefits.  If so, the statute orders that the compensation judge Ashall@ award penalties.  At Finding 40, the compensation judge concluded the following:

 

Although penalties for failure to pay permanent total disability benefits may well be merited in this case, due to the lack of a substantial defense, the Compensation Judge declines to award penalties, particularly in light of the date found for the commencement of PTD benefits.  The award of penalties, under these circumstances, would, in the opinion of the Compensation Judge, result in over compensation for the employee.

 

The employee argues that the compensation judge found that the insurer did not have an Aactual@ defense to the employee=s claim.  Grinnell responds that the compensation judge merely found that the defense asserted was not Asubstantial.@  Grinnell argues that the compensation judge did not find that it had asserted a Afrivolous@ defense but rather merely found that the employer=s defense was not substantial enough to meet its burden of proof.  The issue is complicated.

 

Shortly before trial, Grinnell received the report from its vocational expert, Karen Strewler.  Relying upon Ms. Strewler=s report, the employer and Grinnell contended that the employee was not permanently and totally disabled.  Specifically, they argued that the employee had withdrawn from the labor market and had failed to pursue gainful employment since July 1996.  According to Ms. Strewler, the employee had reported to her that he considered himself to be retired, as he was collecting SSDI benefits along with union disability pension monies, and that he had no plans to return to the competitive labor market unless he could obtain employment at his painters= union pay scale.  Based on those facts, Ms. Strewler had opined that the employee had withdrawn from the competitive labor market.

 

The employee contends that he was clearly permanently and totally disabled under any fair reading of the record.  He notes the judge=s own finding that the employee had been permanently and totally disabled since at least January 6, 1998, when the insurer directed the closure of rehabilitation services without the need for a job search, apparently based on its learning of the employee=s receipt of Social Security disability benefits.  He notes that at no time did the rehabilitation plan ever call for him to search for work with another employer, and he notes the judge=s own conclusion that the employee did not voluntarily withdraw from the relevant labor market.  No one, including the vocational experts, has been able to identify any possible job the employee could do within his current physical restrictions and within his current relevant geographic market.  Even the employer=s own vocational expert conceded that the employee=s alleged withdrawal from the labor market might have been ultimately because of his occupational injury.

 

In the Memorandum accompanying his Findings and Order, the compensation judge noted as follows:

 

Now after directing that rehabilitation be closed and a job search not be done, the insurer, paradoxically, defends the employee=s permanent total disability claim on the ground he did not conduct the job search they refused to authorize.  This not only is inconsistent, it is unfair to the employee.  If the insurer has an actual, as opposed to technical defense, it should reopen rehabilitation and assist the employee in a job search for alternate work.

 

Concluding that the judge=s own findings are at least somewhat inconsistent with his refusal to award penalties, particularly under the nondiscretionary language of the current statute, we reverse the judge=s denial of penalties and remand the issue for reconsideration and further findings.  Should the judge, on closer scrutiny of the facts and upon further consideration of the current statutory language, determine that Grinnell did interpose a frivolous defense as contemplated by Minn. Stat. ' 176.225, subd. 1,^[17] the judge shall determine the amount of the penalty warranted.