County of San Luis Obispo v. Workers' Compensation Appeals Board

Petitioner County of San Luis Obispo (County) seeks review of an order of the Workers’ Compensation Appeals Board (WCAB) awarding respondent Russell Barnes a 10 percent penalty under Labor Code section 5814^[1] on all medical benefits, past, present and future, for a single instance of delay in paying a previously assessed penalty of $97.87. The County has been paying medical benefits to Barnes for more than 25 years and continues to do so. At the time this petition was filed, the County had paid medical expenses on Barnes’s behalf exceeding $650,000. The County contends that a penalty in excess of $65,000 for an inadvertent delay in paying a $97.87 penalty constitutes harsh and unfair treatment not intended by the Workers’ Compensation Act. We agree and shall reverse.

Facts

Barnes was injured in 1973 while working for the County. In 1981, the WCAB awarded him 100 percent permanent disability and future medical care.

In 1991, Barnes sought multiple penalties for the County’s alleged delays in providing and paying for certain medical benefits in the previous 10 years. The WCAB awarded Barnes a single 10 percent penalty under section 5814^[2] on all medical benefits, past, present and future. The parties “informally” agreed that a penalty check would issue at the end of each quarter after medical expenses paid in the previous quarter were calculated. Nothing in the record indicates that the parties’ agreement contained a time limit for paying the quarterly penalties.

In 1997, Barnes filed a petition for multiple penalties for alleged unreasonable delays in paying benefits from 1991 to 1997, including a delay in paying the penalty for the quarter ending April 30, 1995, in the amount of $97.87. The check was issued timely on May 11, 1995, but was not sent to Barnes until July 15, 1995. Barnes did not notify the County that he would seek a penalty for delay in receiving the May 11 check until he filed the petition for penalty in 1997.

Guided by these principles, we review the totality of circumstances and apply the “fair balance” test to determine whether the delay in this case was unreasonable.

The WCAB awarded the penalty because the County could not explain the delay. However, the mere existence of a delay does not support assessment of a penalty. (Stuart, supra, 18 Cal.4th at p. 1216.) Uncontradicted evidence in the record gives rise to the inference that the delay was inadvertent. The claims adjuster testified that she was not aware of any delay until July 15, 1995, when the check arrived from Chicago. She also testified that, as soon as she received the check, she mailed it to Barnes. These are not the actions of an employer “bent on delaying payment.” (Smith v. Workers’ Comp. Appeals Bd. (1986) 186 Cal.App.3d 1451 , 1458 [ 231 Cal.Rptr. 364 ].) Moreover, at the time the penalty check was issued, the County had been paying Barnes’s medical expenses for more than 25 years and making quarterly penalty payments without complaint from Barnes for approximately four years. Certainly, the County would not intentionally delay paying the sum of $97.87 and risk the possibility of liability for a penalty in excess of $40,000.^[3] (See Bams v. Workers’ Comp. Appeals Bd. (1989) 216 Cal.App.3d 524 , 530 [ 266 Cal.Rptr. 503 ] [WCAB must accept as true the intended meaning of unimpeached and uncontradicted evidence].)

Several other factors are relevant to our inquiry. (See Souza, supra, 69 Cal.App.4th at p. 733 [“[T]he nature of the inadvertence must be considered in light of the magnitude of the delay, as well as all other relevant factors, in determining whether the delay was unreasonable”],) As soon as the County became aware that the check was not sent to Barnes, it mailed the check to him. (Id. at pp. 730, 733 [prompt corrective action is relevant in determining whether delay unreasonable].)

In addition, the parties’ 1991 agreement did not contain a timetable for payment, and the record indicates the penalty checks were not mailed to

In Avalon Bay Foods v. Workers’ Comp. Appeals Bd., supra, 18 Cal.4th at pages 1179-1180, the Supreme Court held that the 60-day time limit in section 4603.2^[4] applies to payment of medical transportation expenses because such expenses are an aspect of the broader class of medical treatment. As the penalty here relates to medical treatment and such penalties become “part and parcel of the original compensation award” (Anderson v. Workers’ Comp. Appeals Bd. (1981) 116 Cal.App.3d 954 , 960 [ 172 Cal.Rptr. 398 ]), it is a reasonable extension of Avalon Bay Foods to apply section 4603.2 to the quarterly penalty payments. Thus, the County had at least until June 30, 1995, to issue the penalty check for the quarter ending April 30, 1995.

Unintentional delays for periods longer than 15 days have been found reasonable in a number of cases with somewhat similar circumstances. In Kampner v. Workers’ Comp. Appeals Bd., supra, 86 Cal.App.3d 376 , for example, the court found a 26-day delay under the circumstances not unreasonable. Similarly, in Smith v. Workers’ Comp. Appeals Bd., supra, 186 Cal.App.3d at page 1458, the appellate court concluded a 22-day delay was not unreasonable under the circumstances. Following the approach of Kampner, the majority looked at the circumstances surrounding the delay, including the prompt payment of the initial amount and the lack of diligence of the employee in bringing the underpayment to the employer’s attention, and concluded 22 days was not unreasonable.

Another relevant factor is that there is no history of improper processing of benefit payments or evidence of institutional neglect such as repeated

In addition, Barnes contributed to the delay by failing to notify his employer that the check had not arrived within the usual four to five weeks. Failure of the employee to give notice of delayed receipt of a benefit payment is relevant in determining reasonableness of the delay. (See, e.g., Souza, supra, 69 Cal.App.4th at p. 732 [employee contributed to delay in receiving payment of death benefit by not taking prompt action on receipt of erroneous check]; see also Smith v. Workers’ Comp. Appeals Bd., supra, 186 Cal.App.3d at p. 1458 [employee’s delay in notifying employer of error in award payment considered in determining reasonableness of delay]; and see Gleason v. Workers’ Comp. Appeals Bd. (2000) 65 Cal.Comp.Cases 579 [two-month delay paying interest on compromise and release not unreasonable where defendant’s first notice that interest was not included was receipt of applicant’s petition for penalties, and defendant promptly paid interest due].)^[5]

Finally, we consider the size of the late payment in relation to the amount of the potential penalty in fulfilling our duty to examine the entire record for “ ‘fairness, reasonableness, and proportionality in the overall scheme of the workers’ compensation law and the purposes sought to be accomplished by that law.’ ” (Chu v. Workers’ Comp. Appeals Bd., supra, 49 Cal.App.4th at p. 1182; Henry v. Workers’ Comp. Appeals Bd., supra, 68 Cal.App.4th at p. 985; see also State of California v. Workers’ Comp. Appeals Bd. (1996) 44 Cal.App.4th 128 , 139-140 [ 51 Cal.Rptr.2d 606 ] [WCAB can consider size of a delinquency to determine whether the employer acted unreasonably].) In this case, it cannot be disputed that the potential penalty is grossly disproportionate to the amount delayed. The delay did not involve furnishing or paying for medical treatment; therefore, imposing such a grossly disproportionate penalty for an inadvertent delay would not serve the purposes of section 5814. Instead, imposition of a penalty here would upset the balance of fairness and result in a windfall to the applicant out of