New York versus New Jersey: Temporary Total Disability.

Why paying partial-temporary disability benefits in New Jersey is wrong.

New Jersey is not a wage-loss state. It is an impairment state. However, some Judges are confused about this and have issued bench decisions awarding partial temporary disability benefits. Luckily those decisions come from Law Judges and do not have any precedential value and are incorrect. Let’s talk about why an award of partial temporary disability is wrong and also the interesting reasons why no one is doing anything about it.

Theoretical Underpinnings of Workers’ Compensation Schemes in both states.

First, it is important to understand the basic difference between a “wage loss” compensation state compensation scheme and a “whole man” or “impairment” state. Prior to the 2007 reforms, New York could be held out as an example of a “wage loss” compensation scheme. Before the reforms, if an injured worker hurt her back and has a significant medical impairment, but did not suffer a reduction in wages, no compensation would be paid. Another good example of a wage loss compensation scheme is the Longshore and Harbor Workers’ Compensation Act as it relates to certain classes of injuries. Under the those compensation schemes, if the injured worker can not demonstrate a reduction in earnings, no compensation could be awarded.

This is easily contrasted with New Jersey’s strong “impairment” theme. Injured workers are compensated according to their residual medical impairment. That is why in New Jersey an injured worker can collect a $100,000 award for a partial permanent disability to the low back, then immediately go back to work at higher wages without jeopardizing her award. It is also why the New Jersey workers’ compensation courts are so keenly focused on the medical reports and IME findings.

The New Jersey statutory scheme is intended to compensate for medical impairments, not wage losses. The Courts apply a two part test for the claimant to show both a “objective medical evidence of a functional restriction of the body, its members or organs” and “impairment of the employee’s ability to work” or “carrying on the “ordinary pursuits of life.” Satisfying the first test is easy: did the petitioner sustain an injury? Getting past the second hurdle to compensability is even easier: Does the petitioner allege that his activities of daily living are curtailed or limitied? Or that their work is “harder” now or more tiring since the accident? In almost every case, the petitioner can not show a wage loss because there is no subsequent wage loss. In fact, they don’t have to – they merely have to allege that their activities of daily living (“pain while playing with my kids,” difficulty playing soccer with my friends,” or “pain when driving long distances”) are now harder then they were before. Those types of flimsy claims are nearly impossible for an employer/respondent to defend against. And that is all the Statute requires because consideration of wage loss is not a part of the compensation scheme.

However, there are some Judges, including supervising judges, who do not understand this ideological distinction.

According to Administrative Supervising Judge Renee Riccardelli, writing for a publication called “Workers’ Compensation Resources”:

Temporary partial disability benefits are not included in the New Jersey workers’ compensation statute and that term is not used in the state. Although the matter has never been adjudicated, the Division of Workers’ Compensation interprets the New Jersey statute to entitle some workers to benefits that correspond to temporary partial disability benefits in other states. The New Jersey temporary partial disability benefits are provided to a worker who has been released for light duty work by the authorized treating doctor while receiving curative treatment and because of the work-related injury or disease the worker earns less than he or she did prior to the injury or disease. The benefits are only paid if the worker has a reduction in earnings for more than 7 days. The temporary partial disability benefits stop under four circumstances: (1) the period of temporary disability has reached 400 weeks; or (2) the worker returns to full-duty; or (3) the doctor releases the worker for full-duty work; or (4) the worker has reached the point of maximum medical improvement when additional treatment will no longer improve the worker’s medical condition. The weekly temporary partial disability benefit is the amount that, in combination with the worker’s earning, are equal to the benefits the worker would have received if totally disabled. Thus a worker who earned $500 per week on the date of injury and who earns $200 a week in light-duty work while receiving curative treatment would receive temporary partial disability benefits of $150 a week, for a total of $350. A worker who earned $500 per week on the date of injury and who earns $300 a week in light-duty work while receiving curative treatment would receive temporary partial disability benefits of $50 a week, for a total of $350. A worker who earned $500 per week on the date of injury and who earns at least $350 a week in light-duty work while receiving curative treatment is not entitled to temporary partial disability benefits.

While an interesting piece of rhetoric, and seemingly fair, this is just wrong. The source of these comments is here.

The argument for partial temporary disability benefits in New Jersey confuses “fairness” with what the law requires. Certainly, employers and carrier in New Jersey can choose to voluntarily compensate their injured employees earning less due to their injuries, but they don’t have to.

Poor reasoning in non-precedential cases

Also, this argument, and the silliness found in the recent decision (2012) in Jose Soto v. Herr’s Foods, ignore the trade-off implicit in an “impairment” state like New Jersey. That trade off is this: while the petitioner is not compensated for wage loss, they also don’t have to show or prove any wage loss to get compensated. You see, it works both ways. Judges want to do the “fair” thing, and that is cute, but what is fair in the individual case violates the statutory scheme. Because it is not “fair” that a worker who has not suffered any wage loss gets to recover huge sums for medical impairment alone, unless the State is an impairment state. Clearly, the law judge never had to explain to an angry employer that their workers’ compensation premiums are going up next year because they paid a huge award for a worker who has returned to his old job and is earning more money now than before the accident.

Although this may seem like inhuman rationalism, it actually underpins the whole justification for these statutory schemes of compensation.

Why no one appeals these bad decisions.

Fear of an even worse decision, somehow agreeing with the Law Judge’s determination, at the appellate level. Stark, naked fear that the Appellate Division Judges will mis-apply the fundamental logic of the “impairment” compensation system adopted in New Jersey and blend some “wage loss” theory into their interpretation of the Act in pursuit of notional “fairness” in one individual case at the expense of the academic cohesiveness and predictability in the rest of the system. This fear is not entirely unfounded. As I will discuss below, there is already one poorly-decided Appellate-level case out there which could be used by the proponents of a “wage loss’ theory to support their arguments for “partial temporary disability benefits” in New Jersey (I discuss the Perez v Capitol Ornament decision, below).

New Jersey already has a twisted “odd lot” doctrine which blends a “loss of earning capacity” analysis on top of compensation for impairment which is frequently relied upon by judges to reward the elderly, the slow-witted, and the uneducated. Additionally, there is some case law (the seminal decision in Perez v. Capitol Ornament, Concrete Specialties, Inc., 288 N.J. Super. 359 [App. Div. 1996]) which could be twisted to serve as a basis for consideration of a wage loss in determining compensability. The decision in Perez, supra is one of the oddest in all of New Jersey compensation. In that case, the Appellate Division found that a workers’ compensation judge could consider the petitioner’s limited educational and intellectual resources in reaching a decision on a level of impairment and compensation. [Note: I couldn’t find a copy of Perez in a “free’ online database – most likely due to the age of the decision, so I include a link to the decision here hosted on my site].

In Perez, the Appellate Panel took notice that the petitioner

was born in Puerto Rico in 1954. He has a sixth grade education, no special education or training beyond that, and is unable to read, write, or understand English. From the age of eighteen, he travelled back and forth between the United States and Puerto Rico working as a farm laborer in Puerto Rico and in landscaping and construction in the United States.

Perez at 363. The Appellate Panel found that the petitioner’s lack of education, illiteracy, and lack of transferable skill should have been considered by the Law Judge in formulating an overall award.

The Appellate Panel cited to a number of decisions in their written opinion, and demonstrated both a confusion of the terms of art and revealed they did not understand the foundation of New Jersey’s compensation scheme.

The Panel cited to Katz v Township of Howell, a pre-reform (New Jersey’s Workers’ Compensation Act was significantly revised in 1979) case in which the Court stated that “compensation is measured by the impairment of earning capacity, immediate or in the future” to stand for the porposition that vocaitonal ability or earning capacity is the standard for assessing compensation in New Jersey. Katz is an outlier decision, rarely cited (if ever) for the proposition that “earning capacity” is compensated in New Jersey. In fact, the decision in Katz actually states, in the sentence immediately preceding the one quoted by the Perez panel:

Contrary to classical theories that workmen’s compensation is based solely upon impairment of earning capacity, our statutory provision for compensation of partial permanent disability, has been authoritatively construed not to require a showing of ‘immediate impairment of earning power’ but to be satisfied by a ‘personal injury which detracts from the ‘former efficiency’ of the workman’s ‘body or its members in the ordinary pursuits of life.“ [citations omitted]

The Panel in Katz was citing Everhart v. Newark Cleaning & Dyeing Co., 119 N.J.L. 108, 111 (E. & A. 1937).

New Jersey is not a wage loss state in determining workers’ compensation awards. Temporary disability awards are not subject to some other standards of applicability. The wrong decision reached in Soto and the incorrect reasoning of Judge Riccardelli are an attempt to graft on a “wage loss” component into a impairment compensation scheme. If allowed to do so, such hybridization threatens the cohesiveness of the statutory whole and would throw into question those cases where the claimant can demonstrate medical impairment (i.e, some injury) but not wage loss (i.e., most cases).

The New York Example.

New Jersey’s practitioners should be forewarned. Combining “wage loss” and “impairment” theories does not result in a predictable, cohesive workers’ compensation. For evidence of that, academic observers should watch what is currently happening in New York.

For more than 100 years, New York operated a hybrid wage loss/impairment catastrophe, where certain injuries (hands, feet, arms, legs, eyes, toes, and fingers, for example) were “scheduled losses” and therefore subject to limitations on maximum benefits payable. However, the claimant did not have to show wage loss in order to keep the “statutory award” for a scheduled body part. In this way, New York is identical to New Jersey for “scheduled loss” (New Jersey’s “Chart”) but for one aspect: in New York, employers are given a dollar-for-dollar credit for all temporary disability benefits issued against the overall value of any scheduled loss award.

In New York, other body parts (neck, back, systems) were not subject to scheduled losses and instead awards were made for wage loss. In 2007 New York revised this system and make the permanent partial disability awards for the previously-unscheduled body parts (neck, back, systems) more akin to scheduled losses with limitations to benefits. However, there is also a wage loss compenent (vocational assement) and benefits are suspended or reduced if the claimant returns to employment but makes the same or more wages then was earned pre-loss.

This has resulted in a confused, incohesive system in which claimants are now actively avoiding determinations that they have reached maximum medical improvement so as to avoid the “capping” of their benefits and the unknown implications of the hybrid wage loss/impairment system now in place for those injuries.

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Greg Lois is the managing partner of LOIS LLC, a 19-attorney law firm dedicated to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@lois-llc.com