DALE RUTER, Employee/Appellant, v. MN DEP=T OF CORRECTIONS, SELF-INSURED, Employer, and SPECIAL COMPENSATION FUND, Intervenor.

 

WORKERS= COMPENSATION COURT OF APPEALS

JANUARY 17, 2003

 

HEADNOTES

 

CREDITS AND OFFSETS; STATUTES CONSTRUED - MINN. STAT. ' 176.021, SUBD. 7.  Where the employee received disability benefits from the Minnesota State Retirement System as a covered correctional worker, the compensation judge correctly ordered that the amount of such benefits be offset against workers= compensation benefits payable to the employee.

 

PERMANENT TOTAL DISABILITY - CALCULATION OF BENEFITS ; PERMANENT TOTAL DISABILITY - SUPPLEMENTARY BENEFITS.   Where the employee receives disability benefits from the Minnesota State Retirement System (MSRS) as a covered correctional worker, and where his permanent total disability benefits are being offset by those benefits, the employee is not presently entitled to receive supplementary benefits because his reduction in permanent total disability benefits results from an offset of MSRS disability benefits, and the compensation judge correctly denied his claim for supplementary benefits.

 

PENALTIES.  Where the compensation judge found, and this court affirmed, that the employee is not yet entitled to supplementary benefits, the employee=s claim for penalties based on a vexatious delay in payment of supplementary benefits is denied.

 

Affirmed in part and reversed in part.

 

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

Compensation Judge: William R. Johnson

 

                                                                      OPINION

 

MIRIAM P. RYKKEN, Judge

 

The employee appeals from the compensation judge=s determination that the self-insured employer is entitled to take an immediate offset against the employee=s permanent total disability benefits for disability payments the employee receives from the Minnesota State Retirement System.  The employee also appeals from the judge=s finding that the employee is not yet entitled to payment of supplementary benefits.  We affirm in part and reverse in part.

 

BACKGROUND

 

On June 21, 1990, Dale A. Ruter, the employee, sustained an admitted injury to his low back, while employed by the State of Minnesota, Department of Corrections.  On that date, the employer was self-insured for workers= compensation liability.  Although the employee initially returned to work after his injury, his low back symptoms progressively worsened, and he received intermittent medical treatment over the years.  The employee missed time from work between September 1994 and February 1995 due to his low back condition.  He returned to work for the employer in February 1995, but on February 14, 1996, he underwent two-level fusion surgery to his low back and has remained off work since February 13, 1996.   The self-insured employer has paid various workers= compensation benefits to and on behalf of the employee, including temporary total and permanent total disability benefits, rehabilitation expenses and medical expenses.  The employee eventually was adjudicated to be permanently totally disabled as of December 4, 1997.

 

Since February 13, 1996, the employee has been paid Minnesota State Retirement System (MSRS) disability benefits as a covered correctional employee, pursuant to Minn. Stat. ' 352.95, subd. 1.  In addition, the employee received a retroactive payment of disability benefits from MSRS, in the amount of $6,750.79, for the period from October 19, 1994, through February 21, 1995.  As of the hearing on March 27, 2002, the employee was receiving a monthly MSRS disability benefit of $3,026.00.

 

As of August 13, 1996, the self-insured employer reduced the employee=s temporary  total disability benefits by offsetting his receipt of MSRS disability benefits, as allowed by Minn. Stat. ' 176.021, subd. 7.  That reduction was approved by administrative decision, confirmed by a compensation judge following a de novo review, and affirmed by this court and the Minnesota Supreme Court on appeal.^[1]  The employer has continued to offset the employee=s permanent total disability benefits.

 

On February 25, 2000, the employee filed a claim petition alleging that his ongoing permanent total disability benefits were being improperly offset by his MSRS disability benefits.  In his claim petition, the employee also made various claims, including a claim for entitlement to supplementary benefits pursuant to Minn Stat. ' 176.132, payment of penalties, recalculation of benefits, recovery of Minnesota and federal taxes, economic recovery compensation and impairment compensation.  He also alleged that the offset provisions of the statute violated the Minnesota and federal constitutions.    

 

A pretrial conference was held before a compensation judge on October 2, 2000, to determine the issues to be addressed at a later evidentiary hearing.  Both parties submitted memoranda outlining their positions on the issues that should be addressed.  By Order on Motion issued on December 14, 2001, the compensation judge outlined the issues to be addressed at hearing.  Neither party appealed from the order at that time.

 

On January 9, 2001, before a hearing was held on the employee=s claim petition, the self-insured employer served and filed a notice of intention to discontinue benefits, advising of a further reduction in the employee=s permanent total disability benefits based on an increase in his MSRS disability benefits.  By decision issued following an administrative conference held on February 5, 2001, a compensation judge determined that the self-insured employer had reasonable grounds to reduce the employee=s benefits.  The employee filed an objection to discontinuance, outlining various claims, including an objection to the offset of his MSRS disability benefits from his permanent total disability benefits.  The employee=s objection to discontinuance was eventually consolidated with his claim petition and both were scheduled for hearing on March 27, 2002.  At that hearing, the compensation judge identified the following issues to be addressed, as outlined in his previous order:

 

1.  Whether the State of Minnesota, the self-insured employer, is entitled to immediately offset the employee=s permanent total disability benefits by his Minnesota State Retirement System disability benefits, pursuant to Minn. Stat. ' 176.021, subd. 7.

 

2. Whether the employee is entitled to payment of supplementary benefits.

 

By Findings and Order served and filed on May 22, 2002, the compensation judge determined that the self-insured employer was entitled to take an immediate offset for the employee=s MSRS disability benefits.  The compensation judge also determined that the employee was not entitled to payment of supplementary benefits, based upon the provisions of Minn. Stat. ' 176.021, subd. 7.   The compensation judge also noted that the employee=s challenge to the constitutionality of the statutory offset against workers= compensation benefits  was preserved for appeal, and that his claim for potential penalties was reserved for future litigation.   The employee appeals from the findings and order.  The employee now also appeals from the compensation judge=s order filed on December 14, 2001. 

 

STANDARD OF REVIEW

 

"[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

 

Limitation of Issues Addressed at Hearing

 

We first address the employee=s appeal from the compensation judge=s Order on Motion, served and filed December 14, 2001.  In that Order, the compensation judge narrowed the issues to be addressed at the hearing held on March 27, 2002.  He also identified claims made by the employee that were either moot or not yet ripe for adjudication, were outside of the compensation judge=s statutory authority (tax consequences of benefits and offset), or were preserved for appeal (employee=s constitutional challenge).  In his notice of appeal, the employee argued that the December 14, 2001, order Ais appealable because it was not ripe for appeal until Judge Johnson=s final order of [May] 22^nd was issued.@  In his brief, the employee identified various issues that the compensation judge determined would not be considered at the hearing, and stated as follows:

 

Mr. Ruter raises many other issues which were summarily dismissed by Judge Johnson.  These include the tax treatment of his pension benefits, various errors in calculating the workers= compensation benefits to which he is entitled, and whether the offset is being applied not only to his MSRS benefits, but to his TRA [Teachers Retirement Association] benefits which cannot be used for offset under any theory. He also challenges the constitutionality of Minn. Stat. ' 176.021 [,] subd., 7 [,] as applies to him.  These latter claims will be addressed briefly in order to preserve them for appeal; but for present purposes, this brief will concentrate principally on the effect of the present offset on Mr. Ruter=s vested pension benefits, and the effect of the Weston doctrine with respect to (a) his MSRS pension benefits; and (b) his social security disability benefits.

 

(Ee. Brief, p. 3.)

 

The employee, however, did not address these issues further in his brief.  Any other issues allegedly raised by the appeal of the pretrial order are deemed waived since they were not sufficiently addressed in the employee=s brief to warrant consideration on appeal.  AIssues raised in the notice of appeal but not addressed in the brief shall be deemed waived and will not be decided by the court.@  Minn. R. 9800.0900, subp. 2.

 

Offset for MSRS Disability Benefits

 

                        The employer is currently offsetting the employee=s MSRS benefits from his permanent total disability (PTD) benefits, which results in a total offset of the employee=s PTD benefits.  The compensation judge found that Minn. Stat. ' 176.021, subd. 7, controls the timing of the offset for MSRS disability benefits, and that the employer was entitled to take an immediate offset of the MSRS benefit against the employee=s PTD benefits.  The compensation judge also found that the provisions of Minn. Stat. ' 176.101, subd. 4, do not apply to the employee=s benefit payments at this point.

 

The employee appeals from those findings, arguing that the employer is incorrectly offsetting his benefits.  He argues that his workers= compensation benefits may be offset by his MSRS benefits only to the extent that his disability pension benefits exceed the benefits to which he would have been entitled as an ordinary retiree of the Minnesota Department of Corrections, and that the offset violates the Minnesota and federal constitutions.  He contends that the timing of an offset for MSRS benefits is controlled by Minn. Stat. ' 176.101, subd. 4, and therefore the employer=s immediate and ongoing offset for his MSRS benefits does not comply with the workers= compensation statute.  We disagree.

 

At the time of the hearing, the employee received a monthly MSRS disability benefit of $3,026.00.  In addition, since January 1, 1998, he has received a Teachers Retirement Association disability benefit; at the time of the hearing, his monthly Teachers Retirement benefit was $609.86.  At the time of the hearing, the employee was also receiving social security benefits of $1,207.00 per month.^[2]  The employer is taking an offset for the employee=s MSRS disability benefits and has taken an offset against his temporary total and PTD benefits since August 13, 1996.  

 

As we noted earlier, the issue of the timing of an offset for MSRS benefits was addressed through earlier litigation on this claim.  During that litigation, the employee was receiving temporary total disability benefits, and therefore the issue addressed was whether the employer could take an offset immediately against the employee=s temporary total disability benefits.  The specific issue now on appeal is whether an offset can be taken from the employee=s PTD benefits.  The employee argues that any offset against PTD benefits is controlled by Minn. Stat. ' 176.101, subd. 4, and that the employer has prematurely taken an offset for his MSRS benefits.^[3]  The employee argues that any offset is premature since none is allowed under Minn. Stat. ' 176.101, subd. 4, until the employee has been paid $25,000 in PTD benefits.

 

In this case, the employee has not yet been paid that requisite threshold amount of PTD benefits, and the  compensation judge found that Minn. Stat. ' 176.101, subd. 4, therefore has no application.  We agree.  Since Minn. Stat. ' 176.101, subd. 4, does not allow an offset for benefits until after an employee has been paid $25,000 in PTD benefits, and since the employee has not yet been paid that threshold amount, that statutory section does not apply to the employee=s benefits at this point.  We therefore affirm the compensation judge=s finding that Minn. Stat. ' 176.101, subd. 4, is inapplicable. 

 

The compensation judge found that Minn. Stat. ' 176.021, subd. 7, controls the timing of the offset for MSRS disability benefits, and that the employer was entitled to take an immediate offset of the MSRS benefit against the employee=s PTD benefits, based on the reasoning set forth in Weston v. University of Minn./Duluth, slip op. (W.C.C.A. May 20, 1999).  In Weston, this court concluded that the language of Minn. Stat. ' 176.021, subd. 7, controlled the timing of an offset for MSRS disability benefits from the employee=s PTD benefits, that the statute was clear and unambiguous, and that the self-insured employer was entitled to offset any MSRS disability benefits paid to the employee against the PTD compensation being paid.  Based on Weston, the compensation judge found that Minn. Stat. ' 176.021, subd. 7, controls the timing of the offset the employer may take, and concluded that the employer was properly offsetting the employee=s PTD benefits by the amount of MSRS disability benefits the employee receives.  We agree.  Minn. Stat. ' 176.021, subd. 7, allows for an immediate offset of MSRS disability benefits from the employee=s ongoing PTD benefits.  Just as the statute allowed an immediate offset from the employee=s temporary total disability benefits, Ruter, 569 N.W.2d 407, 57 W.C.D. 129, the statute allows an immediate and ongoing offset from the employee=s PTD benefits.   We find that the compensation judge appropriately applied the provisions of Minn. Stat. ' 176.021, subd. 7, and allowed an immediate offset of the employee=s MSRS benefits from his PTD benefits.  Accordingly, we affirm.

 

Claim for Supplementary Benefits

 

The employee argues that he is entitled to supplementary benefits pursuant to Minn. Stat. ' 176.132, based on the reduction in his benefits that results from the offset of his MSRS disability benefits.  The compensation judge found that the employee is not yet entitled to supplementary benefits, because Minn. Stat. ' 176.021 prohibits payment of supplementary benefits when an employee=s benefit level is reduced by an offset for MSRS disability benefits.  Prior to its repeal in 1995, Minn. Stat. ' 176.132 addressed supplementary benefits and provided in pertinent part in subdivision 2(d):

 

In the event an eligible recipient is receiving no compensation or is receiving a reduced level of compensation because of prior limitations in the maximum amount payable for permanent total disability or because of reductions resulting from the simultaneous receipt of old age or disability benefits, the supplementary benefit shall be payable for the difference between the actual amount of compensation currently being paid and 65 percent of the statewide average weekly wage as computed annually.

 

Minn. Stat. ' 176.021, subd. 7 (1990), addresses the offset for MSRS disability benefits, to be taken from workers= compensation benefits, and provides the following limiting language concerning the effect of an MSRS offset on an employee=s entitlement to supplementary benefits:

 

If an employee covered by the Minnesota state retirement system receives total and permanent disability benefits pursuant to section 352.113 or disability benefits pursuant to 352.95 and 352 B.10, the amount of disability benefits shall be deducted from workers= compensation benefits otherwise payable. . . .  Notwithstanding the provisions of section 176.132, a deduction under this subdivision does not entitle an employee to supplemental benefits under section 176.132.

 

(Emphasis added.)  Those employees whose workers= compensation benefits are being offset by MSRS disability benefits are not entitled to supplementary benefits based on the reduced benefit level resulting from that offset.  On that basis, the compensation judge determined that the employee is not yet entitled to supplementary benefits because his workers= compensation benefit payment is offset by his MSRS disability benefits.  As the compensation judge explained in Finding No. 2:

 

W[ere] the deduction taken for other benefits (other than MSRS disability benefits) [the employee] would meet the statutory criteria and receive supplementary benefits.  However, because of the statutory offset he does not satisfy the criteria of the law.  On this issue the statute could not be clearer.  As long as the benefits being offset are MSRS disability benefits the employee cannot take into account the deduction to argue his workers= compensation benefits are below the maximum supplementary benefits rate.

 

The compensation judge further explained in his memorandum that:

 

The employee in this case argues that the State of Minnesota as his employer has unfairly and incorrectly taken the statutory offset against his workers= compensation benefits as set out in Minn. Stat. ' 176.021, subd. 7.  As to the fairness or unfairness of that offset the Compensation Judge has no jurisdiction to address such a constitutional argument and that is reserved for appeal.  The employee thus reserves his constitutional challenge to Minn. Stat. ' 176.021, subd. 7[,] for appeal.  As to the incorrectness of the employer=s actions the employee=s arguments are without merit.  The statute could not be much plainer.  It allows the offset in question in explicit terms.  Beyond that the statute goes one step further and sets out that the provisions of Minn. Stat. ' 176.132 do not apply in this type of situation and the employee cannot qualify, at this time, for the payment of supplementary benefits.  He can so qualify once his MSRS disability benefits convert from disability to retirement benefits at age 62.  Until that time the statute does not allow the employee to receive those benefits.

 

There is no dispute that once he reaches age 62 the employee=s MSRS benefits will  convert from disability benefits to MSRS retirement benefits.  At that point, no offset will be taken for the employee=s MSRS retirement benefits until he has been paid the statutory threshold amount of PTD benefits, $25,000, as set forth in Minn. Stat. ' 176.101, subd. 4.  Once the employee has met that threshold, his PTD benefits then may be reduced by both his social security benefits and his MSRS retirement benefits.  At the present time, however, the employee receives MSRS disability benefits, his PTD benefits are being offset by those benefits, and  he is not presently entitled to receive supplementary benefits because his reduction in PTD benefits results from an offset by MSRS disability benefits.  Minn. Stat. ' 176.021, subd. 7.  The compensation judge correctly denied the employee=s claim for supplementary benefits, and we affirm.

 

The employee currently has a claim pending before Ramsey County District Court, on remand from the Minnesota Court of Appeals.  He commenced an action against the State of Minnesota, Department of Labor and Industry, Workers= Compensation Division, seeking, among other requested relief, a declaration that the offset provisions included in Minn. Stat. ' 176.021, subd. 7, are unconstitutional.  In that action, the employee seeks damages in the form of reimbursement of offset workers= compensation benefits and an accounting of offset benefits.  He also seeks a conversion of his MSRS disability benefits to MSRS retirement benefits, arguing that since he has now attained the age of 55, he is entitled to receive retirement benefits as opposed to disability benefits.  In that action, a judge in Ramsey County District Court granted the employer=s motion for summary judgment, and the employee appealed that order to the Minnesota Court of Appeals, which has since remanded the matter to the district court to address issues related to the employee=s eligibility to receive MSRS retirement benefits as opposed to disability benefits and whether such eligibility is retroactive to when the employee attained the age of 55.  At oral argument before this court, the employee requested that we stay any decision on his appeal to this court until after a final determination is made in that separate matter; we decline to do so.  This court=s jurisdiction is limited to interpretation of Minn. Stat. Ch. 176, and we therefore have addressed the employee=s current workers= compensation claims in view of the provisions of that statute. Based on the employee=s current receipt of MSRS disability benefits and permanent total disability benefits, we affirm the compensation judge=s findings and order concerning the offset of MSRS disability benefits against his PTD benefits and his ineligibility for supplementary benefits resulting from that offset.  If the employee ultimately prevails in his district court action, he is free to file a claim for underpayment or recalculation of his workers= compensation benefits.

 

Additional Issues

 

During his opening argument at hearing, the employee claimed entitlement to penalties based on his contention that  supplementary benefits had been Avexatiously delayed@ for three years.  Counsel for the employee acknowledged that this matter would most likely be appealed, and that A[w]hether penalties are allowable in this case probably ultimately depends upon whether or not Mr. Ruter ultimately prevails at the Supreme Court,@ and the employee Ahas a right . . . at least to have the penalty issue seriously considered@ depending on the outcome of the matter on appeal.  (Transcript of Hearing, 13.)  At hearing, the compensation judge stated that the employee reserved the issue of penalties; there was no further discussion of that claim during the hearing.  At Finding No. 3, the compensation judge stated as follows:

 

3.  PENALTIES.  The employee reserves a claim for penalties in this matter.  It is difficult for the Compensation Judge to see how a claim for penalties is appropriate when the employer has simply followed the clear wording of the statute.  However, the employee reserves such claim.

 

As we have affirmed the compensation judge=s finding that the employee is not yet entitled to supplementary benefits, we reverse the compensation judge=s finding that the employee=s claim for penalties is reserved.  There is no basis for penalties due to a delay in supplementary benefits, since the employee is not presently entitled to supplementary benefits, and therefore his claim for penalties is denied.

 

The employee also argues that the offset made by the employer from his PTD benefits by the amount of his MSRS benefits represents a violation of the Minnesota and federal constitutions.  The compensation judge found that he had no authority to rule on the constitutional issues.  This court has no jurisdiction either to address the constitutionality issues, and therefore the employee=s constitutional challenge is preserved for further appeal.  Quam v. State, 391 N.W.2d 883, 809, 39 W.C.D. 32, 39-40 (Minn. 1986).^[4]

In his brief, the employee also presents arguments concerning the applicability of the statute=s offset provisions to his Teachers Retirement Association benefits.  That issue was not addressed at the evidentiary hearing on March 27, 2002.  On appeal, this court may not consider matters not contained within the record before the compensation judge.  Minn. Stat. ' 176.421, subd. 6; Gollop v. Gollop, 389 N.W.2d 202, 203, 38 W.C.D. 757, 758 (Minn. 1986).  We therefore do not address the issue of whether Minn. Stat. ' 176.021, subd. 7, applies to the employee=s Teachers Retirement Association benefits.