Business on Hold Due to COVID 19? Here’s Why Temporary Disability Benefits Might Still be Owed During the Shutdown

March 25, 2020

While the world grapples with the sudden and far-reaching impacts of COVID-19, the effects of its spread have been felt across all businesses and communities. As our government struggles to stem the spread of the disease, we have been forced to adapt to a rapidly changing social and legal landscape, which can lead to uncertainty regarding legal obligations to employees.

With more and more employees ordered to stay home from work and shelter in place, unique challenges have arisen particularly in the workers’ compensation arena concerning injured workers’ entitlement to benefits. In some cases, injured workers whose work restrictions were being accommodated by an employer on a temporary basis—and thus were entitled to at most temporary partial disability benefits—are now being ordered to stay home for reasons which are wholly unrelated to their ability to work or their industrial injury. Are benefits still owed? May the employer or carrier end temporary disability benefits while business is shut down? While this situation may seem unprecedented, the law has addressed analogous situations which may provide guidance on this unique problem.

It is settled law that when an applicant is terminated from employment for good cause, they are not entitled to receive temporary disability. The inquiry turns on what exactly constitutes “good cause” for termination. In the case of Manpower Temporary Services v. WCAB (Rodriguez) the court dealt with just such a situation, and the case provides some guidance on what we can expect with our current situation (71 CCC 1614 (writ denied)). In Rodriguez, an injured worker was paid temporary disability benefits while off work until they were placed on modified duty, and the work restrictions were accommodated by the employer. While working modified duty, the applicant allegedly violated a company policy, and was terminated “for cause.” The defendant ceased temporary disability benefits until the applicant underwent a surgery for the industrial injury, where benefits were resumed. Applicant later demanded payment of temporary disability from the period after the termination through the date of the surgery, which defendant denied.

At trial, the WCJ ordered the defendant to pay temporary disability payments for the period after the termination but before the surgery at a rate based on applicant’s wages while on modified duty. The defendant argued that the applicant was not entitled to temporary disability for this period because modified duty was available, and the applicant would have been working but for the termination.

On reconsideration, the WCAB found that the defendant failed to show that the termination was for “good cause,” as the stated reason for the termination—tardiness and unexcused absences—was not supported by the trial record. The decision of the WCAB turned on whether the applicant’s termination was based on “good cause,” which, in the context of a termination, refers only to the applicant’s own misconduct. Terminations based on business decision, cyclical layoffs, or lack of available work, by extension would not be “good cause” for termination. The implication of the Rodriguez court was that unless applicant’s termination was a result of their own misconduct sufficient to constitute “good cause,” the employer would still be liable for at least temporary partial disability benefits post-termination, even if the work restrictions might have otherwise been accommodated.

Similarly, in Bedoya v. Ashley Furniture Industries the court applied the holding of Rodriguez to a situation in which an applicant was not returned to work due to the closure of the employer’s plant (2018 Cal. Wrk. P.D. Lexis 396). After the applicant was given work restrictions, the applicant was unable to return to work due to the plant closure, and the defendant failed to demonstrate that modified work was available, or that they would have offered the applicant modified work if any was available. The WCAB distinguished situations where the applicant voluntarily leaves the work force through retirement or were terminated due to the misconduct (potentially no TD owed) and analogized to situations where the “employee’s inability to work for full wages is a function of his or her industrial injury” (TD is owed).

The court further implied that temporary total as opposed to partial benefits might also be owed in this situation, through application of the “odd lot” doctrine. This doctrine, established in Pacific Employers Ins. Co. v. Industrial Acc. Com. (Stroer), applies where a worker who is only “partially disabled may receive temporary total disability payments if his partial disability results in a total loss of wages.” (52 Cal.2d 417, 421). The burden of proof is on the defendant to show that “work within the capabilities of the partially disabled employee is available.” If the defendant does not show that modified work would be available, the employer may be liable for temporary total disability. A showing that modified work was available, by contrast, might mean the applicant is only entitled to temporary partial disability i.e. the difference in wages between full and modified duty.

Extrapolating the holdings of these cases to our present situation with COVID-19 and employees being required to stay home, we feel it is likely that applicants who were working modified duty or who were given work restrictions which could be accommodated, but are nevertheless unable to work due to the Governor’s order, would not be found to be a “termination for cause,” and at least temporary partial, if not total, disability would be owed. Even though work within the applicant’s restrictions might be available with the employer, and may have even been offered, and the applicant would have returned to work but for the order, we feel this situation does not rise to the level of a “good cause” termination of that employee, an inquiry which focuses on the misconduct of the applicant. Our current predicament with COVID-19, is more akin to the fact pattern in the Rodriguez case with the plant closure being the primary factor preventing a return to work, and we feel the applicant’s temporary disability rate, provided modified work would otherwise be available, would be based on the applicant’s wages on modified duty, rather than on a complete loss of wages.

In sum, because of the precedents established in cases where an applicant’s termination or inability to return to work is not for cause, but due to other outside factors unrelated to the injury—such as plant closure or other layoffs— the WCAB is likely to find that temporary disability benefits would be owed to effected applicants.

We are certain to see a rise in COVID-19 related issues in workers’ compensation in the months and years to come, but as in most cases, the court’s prior precedents in analogous situations is instructive and help guide our responses, which could bring much needed certainty in this uncertain time.