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Temporary disability payments do not delay payment of disability retirement benefits nor is it an offset under the County Retirement Law
By Edward L. Faunce, Esq.

The Porter case: a decade of litigation over the meaning and implementation of Gov't Code §31724 which protects members of the County Retirement Law systems from losing their workers’ compensation temporary disability benefits either by way of delaying their retirement effective date or requiring the employee to reimburse the TD benefits received..

Mary Porter, a bus driver who was a member of Orange County Employees Retirement System (OCERS), suffered a disabling accident. She last received regular compensation on February 14, 2000 and, following a P&S medical report on June 12, 2000, she applied for disability retirement on March 5, 2001. After an administrative hearing, OCERS found that the driver was not entitled to an earlier effective date than the date OCERS received her application. Thus, the driver suffered a hiatus in pay, i.e., no wages and no disability retirement for thirteen months, from February 15, 2000 to March 5, 2001. OCERS found that Porter “knew or should have known” much earlier than her filing date of March 5, 2001 that she was permanently incapacitated from her duties.

The controlling effective date statute, Government Code §31724, provides in part:

“When it has been demonstrated to the satisfaction of the board that the filing of the member's application was delayed by administrative oversight or by inability to ascertain the permanency of the member's incapacity until after the date following the day for which the member last received regular compensation, such date will be deemed to be the date the application was filed.”

This last paragraph of the section includes a “deemer” clause requiring that the actual date of filing the application be retroactively adjusted if Porter did not know on the day after her regular date of compensation that she was permanently incapacitated from returning to her duties. This date adjustment would allow payment of Porter’s disability retirement benefits retroactively to the date she last received regular compensation, i.e., February 15, 2000.

Porter challenged OCERS’s interpretation of “knew or should have known” because the statutory language only says if there was “delay.” Thus, a workers’ compensation attorney handling a psychiatric claim must factor in disputes over both the “good faith” requirement as well as what is the actual cause of the injury.

The first court round ended with an unpublished Court of Appeal decision declaring that “knew or should have known” was not the standard. (Porter v. Board of Retirement of the Orange County Employees' Retirement System (Dec. 23, 2005, G034319) [nonpub. opn.] The Court held that any delay after the date of last compensation qualified Porter to have her application deemed filed on the day after she was last regularly compensated.

The Court remanded the matter for the trial court to determine whether plaintiff had elected to begin retirement as of February 15, 2000, and if so, whether she is required to reimburse for any payments she received for leave of absence or sick leave or both. The Superior Court, on remand, found that despite having already used her sick leave, that Porter had declared that she consented to an earlier date for retirement. Gov’t Code §31724 also states:

“the retirement of a member who has been granted or is entitled to sick leave shall not become effective until the expiration of such sick leave with compensation unless the member consents to his retirement at an earlier date.”

The Superior Court found that the first time Porter could have exercised her right to consent to an earlier date, despite having already used her sick leave, was after the Retirement Board found her disabled and entitled to retire. Thus, the utilization of the sick leave prior to that determination was made on the basis of her financial necessity and not on the basis of consenting or electing to do so once she actually had a choice.

But also on remand, the Superior Court signed a new judgment further remanding the matter back for further administrative hearings to determine how much and when Porter had received temporary disability (TD) pay under the Labor Code. In fact, the judgment said that OCERS was entitled to recover all the benefits which Porter had received under Division 4 of the Labor Code. This ruling was based on the first paragraph of Gov’t Code §31724 which said:

“If the proof received, including any medical examination, shows to the satisfaction of the board that the member is permanently incapacitated physically or mentally for the performance of his duties in the service, it shall retire him effective on the expiration date of any leave of absence with compensation to which he shall become entitled under the provisions of Division 4 (commencing with §3201) of the Labor Code or effective on the occasion of the member's consent to retirement prior to the expiration of such leave of absence with compensation.”

This second Superior Court judgment prompted another appeal from Porter in which she challenged, as a matter of law, that she could be forced to disgorge all workers’ compensation benefits in order to receive her disability retirement. (Porter v. Board of Retirement of the Orange County Employees' Retirement System (June 18, 2008, G038450) (nonpub. opn.)). However, the appeal resulted in an extraordinary reduction of the issues. OCERS conceded on appeal that it was only seeking reimbursement of TD benefits in order to delay the implementation of the disability retirement. This second Porter Appeal case resulted in another remand this time to obtain the actual figures on how much TD was paid and during what period of time.

Upon remand, the trial court returned the matter to OCERS to determine when and how much Porter received in temporary disability benefits, and Porter's “ability to repay these benefits.” OCERS adopted the hearing officer's findings that Porter received “workers' compensation temporary total disability payments between February 23, 2000 and June 21, 2000” and that she did not believe she could repay that amount.

Porter asked the Superior Court to reconsider its former Judgment that TD benefits could delay Porter’s disability retirement effective date or require that Porter reimburse the amount she received as TD. She argued that she had not been on a “leave of absence with compensation” as required by §31724 because she was not a safety employee who would be entitled to full salary for a year with contributions made to her retirement plan under Labor Code §4850.

The Superior Court determined that leave of absence with compensation does not include workers’ compensation tempory disability benefits. Thus, the Superior Court ordered OCERS to set aside its decision denying Porter an earlier retirement date and to find her entitled to disability retirement from February 15, 2000 with no “offsets for sick leave or workers' compensation temporary disability payments.”

Now it was OCERS's turn to appeal. This time, the Court of Appeal, in a published decision, affirmed the Superior Court and declared that TD pay is not a compensated leave of absence. (Porter v. Bd. of Ret. of the Orange Cnty. Employees' Ret. Sys. (Cal. App., 2013)) Therefore, OCERS may not delay Porter's disability retirement effective date during the time that TD benefits are paid. In other words, Porter may receive both TD and disability retirement benefits simultaneously.

This lengthy Porter litigation has established the following principles:

1. Where there has been delay in filing a disability retirement application past the date of regular compensation because the employee did not know that they were permanently precluded from returning to work, the application is deemed filed on the day after regular compensation and allows for retroactive recovery of retirement benefits.

2. The employee is entitled to use their sick leave pay during the processing of the disability retirement application and, after the retirement system finds that they are disabled, the employee may elect to take a lump sum payout of their sick leave, providing the local labor contract allows this option.

3. The Retirement system cannot delay the effective date of a disability retirement because the member received or is receiving TD pay under the Labor Code.

And thus ends a decade of litigation over the meaning and implementation of Gov't Code §31724 which protects members of the County Retirement Law systems from losing their workers’ compensation temporary disability benefits either by way of delaying their retirement effective date or requiring the employee to reimburse the TD benefits received.

Edward L. Faunce, Esq.
Faunce, Singer & Oatman
315 N. Vine Street
Fallbrook, CA 92028
Phone: 1-800-874-2284
www.public-pensions.com

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