Extended Compensation Under the North Carolina Workers’ Compensation Act
Extended Compensation Under the North Carolina Workers’ Compensation Act: Lessons from the Industrial Commission’s Early Decisions
Richard T. Granowsky
NC Board Certified Specialist in Workers’ Compensation Law
Hill Evans Jordan & Beatty, PLLC,
November 3, 2021
Introduction
The 2011 amendments to the NC Workers’ Compensation Act (“the Act”) created a 500-week cap on temporary total disability benefits (“TTD”) in claims filed on or after June 24, 2011, subject to the possibility of extended compensation to qualified claimants. Following the effective date of the amendments, the first cases subject to the cap reached the 500-week threshold in January of 2021. On September 29, 2021, the Full Commission filed its first decision on an extended compensation application in Milton Nobles v. NC Department of Health and Human Services, I.C. File No. X51195. An increasing number of Deputy Commissioner level decisions are being filed. This article examines the lessons from these early decisions.
The Statutory Provisions
N.C. Gen. Stat. §97-29(b) provides that an employee shall not be entitled to TTD compensation greater than 500 weeks from the first date of disability unless the employee qualifies for “extended compensation.” An employee may not apply for extended benefits until 425 weeks (8.17 years) have passed since his or her first date of disability. N.C. Gen. Stat. §97-29(c). To qualify for extended compensation, a plaintiff must prove “a total loss of wage-earning capacity. N.C. Gen. Stat. §97-29(c). Where extended compensation is approved, the benefit is subject to a dollar-for-dollar limitation in the amount of the retirement benefit received by the plaintiff after the age of full retirement under the Social Security Act. Id. Since the passage of the 2011 amendments, there has been uncertainty as to how the Commission would implement the cap and the extended compensation provisions and whether the cap would ultimately prove to be broadly applicable or easily overcome. The early answer appears to be that the burden on a Plaintiff to obtain an award of extended compensation is significant.
Distinct from cases subject to the 500-week cap are those cases that qualify for permanent and total disability (“PTD”) under N.C. Gen. Stat. §97-29(d). PTD cases are limited to those involving: (1) The loss of both hands, both arms, both feet, both legs, or any two thereof; (2) Spinal injury involving severe paralysis of both arms, both legs, or the trunk; (3) severe brain or closed head injury; or (4) Second-degree or third-degree burns to thirty-three percent or more of the total body surface. See N.C. Gen. Stat. §97-29(d). The 500-week cap does not apply to PTD cases.
Transaction Costs
The early cases demonstrate that hearings on contested applications for extended benefits are expert heavy, complex, and involve significant litigation costs. In cases where it is evident that the plaintiff will be able to demonstrate a total loss of wage-earning capacity, defendants have a rational economic incentive to avoid the transaction costs involved in defending an application for extended benefits. Transaction costs associated with the application for extended benefits are significant for plaintiffs as well as defendants. As discussed below, a contested extended compensation application requires medical and likely vocational expert testimony in addition to lay testimony. In many cases, plaintiffs will need to retain their own vocational experts to build their cases. Moreover, cases that last over 500 weeks are likely to be medically complex, involve multiple treating physicians and consulting physicians, vocational experts, and have a large volume of medical and vocational records. The need to depose multiple experts and possibly retain additional experts increases the front-end investment and the potential costs of a loss to plaintiffs.
An unrepresented plaintiff would be at a severe disadvantage in pursing extended compensation in a contested case. Assuming the plaintiff can obtain counsel, a successful application for extended compensation would result in a presumptive award of 25% of the future compensation to plaintiff’s counsel, reducing the plaintiff’s extended compensation to 75% of the prior TTD benefit. In addition, when a successful applicant receives Social Security retirement benefits after reaching full retirement age, defendants will be able to reduce the extended compensation by the amount of the plaintiff’s primary Social Security Act retirement benefit. In evaluating a potential representation, plaintiff’s counsel will need to weigh the litigation costs, risk of loss, and the timing and amount of the future reduction in compensation when the plaintiff takes his or her full retirement under the Social Security Act.
Given the relatively high costs and uncertainty to each party in a contested extended compensation case, parties will be incentivized to consider the extent to which claims can be settled on a compromise basis as an alternative to litigating these cases. In evaluating extended compensation cases for settlement, both sides will need to learn to how to estimate exposures in light of the Social Security retirement credit and be alert to the increased likelihood of Medicare interests complicating settlement in this population.
The Early Opinion and Awards of the Industrial Commission
In Milton Nobles v. NC Department of Health and Human Services, I.C. File No. X51195, September 29, 2021, the Full Commission reversed the opinion of the deputy commissioner below and denied the plaintiff’s application for extended benefits. Mr. Noble, the plaintiff, was employed by the State of North Carolina as a forensic healthcare technician at Central Regional Hospital when he was physically assaulted by a psychiatric patient under his care on June 26, 2011 (2 days after the effective date of the 2011 amendments). The plaintiff was struck in the head knocking him to the ground and resulting in a loss of consciousness. Following the assault, the plaintiff complained of headache, blurred vision in the right eye, and pain in his right shoulder and neck in addition to minor abrasions and swelling that were evident on physical examination. The plaintiff was taken out of work by his medical providers and the State initiated the payment of benefits under the Workers’ Compensation Act pursuant to an Industrial Commission Form 63, Payment without Prejudice, specifically listing injuries to plaintiff’s right eye, mouth, and right shoulder. The State did not thereafter deny the claim within the time allowed resulting in the Form 63 establishing the compensability of the conditions listed on the Form 63.
In the weeks following the assault, plaintiff complained of vision loss in his right eye as well as symptoms of traumatic brain injury, post-traumatic stress disorder (PTSD), and depression. He was thereafter evaluated by multiple medical providers without a clear consensus being reached among the various providers as to the nature and extent of plaintiff’s physical and psychological diagnoses. Plaintiff remained out of work with ongoing TTD benefits being paid by the State for greater than 425 weeks, and plaintiff filed an application for extended compensation. The evidence of record before the Commission at the close of evidence included contradictory expert medical testimony that ranged from the plaintiff being credible and unable to work due to PTSD and depression resulting from the assault to testimony that plaintiff was malingering, not credible, and not disabled.
The deputy commissioner below had found the plaintiff to be credible. He also found his treating psychiatrist, who opined that plaintiff could not return to work as a result of his PTSD and depression, credible. The deputy commissioner concluded that plaintiff’s PTSD and depression were materially causally related to his compensable injury and therefore compensable and that plaintiff had sustained a total loss of wage-earning capacity because of his compensable long-term, chronic PTSD and chronic major depression related to the assault. Based on these findings of fact and conclusions, the deputy commissioner awarded extended compensation benefits under N.C. Gen. Stat. §97-29(c).
The Full Commission found that the plaintiff was not credible and found the medical experts who testified that the plaintiff was malingering or that his reported symptoms were not supported by objective tests, were more persuasive. In reaching its ultimate conclusion denying extended compensation to the plaintiff, the Commission noted that the Form 63 filed by the State at the outset of the claim did not list PTSD and depression as admitted conditions related to the assault, and therefore the burden of proof remained on plaintiff to prove that his alleged PTSD and depression were causally related to the assault on June 26, 2011. The Full Commission rejected the medical causation opinion of the plaintiff’s treating psychiatrist noting that this provider relied solely on the subjective complaints of the plaintiff without any diagnostic testing or objective findings to support his diagnosis of PTSD. The Full Commission concluded that the plaintiff failed to prove he suffered from PTSD or depression caused by the assault on June 26, 2011. The Full Commission further concluded that there were no work restrictions currently assigned in connection with the accepted eye, mouth and shoulder conditions, and therefore, plaintiff failed to establish he sustained a total loss of wage-earning capacity because of his compensable injury, and he is not entitled to extended compensation.
The Full Commission’s decision in Nobles highlights the significance of the Commission’s power to determine the credibility of witnesses and find facts. In this case, the Full Commission found expert opinions based on objective tests more persuasive than the psychiatrist’s opinion, which was based on the plaintiff’s subjective complaints. In reaching its decision, the Full Commission highlighted both the plaintiff’s burden of production and burden of persuasion. Although the plaintiff presented testimony that was sufficient to make out his claim for extended compensation if credited by the Full Commission, the plaintiff failed to persuade the Full Commission that he had suffered a total loss of wage-earning capacity.
To establish a right to extended compensation, the burden is on plaintiff to prove a “total loss of wage-earning capacity”. In filed Deputy Commissioner level opinions, this language has been interpreted as the “complete destruction of the ability to earn wages”, Tapper v. Penske Logistics, LLC, I.C. File No. 55957, Saunders, DC, October 7, 2021, and alternatively, that a plaintiff “cannot receive weekly compensation beyond 500 weeks if the employee has any wage-earning capacity.” Miller v. NC Dept. of Pub. Inst., I.C. File No. Y01414, Howell, DC, October 19, 2021. It is clear that the applicable standard for extended compensation is more restrictive than the standard for establishing total disability under the second prong of the Russell test, which requires evidence that the plaintiff is capable of some work, but after a reasonable effort, has been unsuccessful in his or her efforts to obtain employment; Russell v. Lowes Product Distribution, 108 N.C. App. 762, 765, 425 S.E.2d 454, 457 (1993). Consistent with this distinction, a plaintiff applying for extended compensation cannot rely on a prior presumption of continuing disability obtained through a form agreement or opinion & award.
If the compensability of a particular condition has not been established previously in a claim, the plaintiff has the burden to prove the compensability of that condition in its application for extended benefits. In a case admitted on a Form 60 or a Form 63 where no subsequent denial was issued, only the conditions that expressly appear in the Form 60 or Form 63 are established as compensable. It is common for the conditions listed in Form 60s and Form 63s to be narrowly drafted. In particular, it is unlikely that associated mental health conditions, which tend to develop over time, will be listed in a Form 60 or Form 63. As is generally true in hearings before the Commission, expert medical testimony is required to establish medical causation on complicated medical questions.
To the extent that the medical evidence standing alone is insufficient to establish a total loss of wage-earning capacity, absent obvious futility resulting from other circumstances, a plaintiff seeking extended compensation needs vocational evidence to establish a total loss of wage-earning capacity. A review of the current Deputy Commissioner level opinions demonstrates that a plaintiff without his/her own vocational expert is going to have a difficult time overcoming a labor market survey that identifies potential jobs within the plaintiff’s assigned physical restrictions. When both the plaintiff and defendants present vocational experts, the relative credibility of the respective experts is likely to be determinative in the success or failure of the application for extended benefits. In this regard, the depth and quality of the vocational assessment performed, the credentials of the expert, and quality of the presentation of the expert’s opinion matters.
In Miller v. NC Dept. of Pub. Inst., Y01414, Deputy Commissioner Howell concluded that “[I]n determining loss of wage-earning capacity, the Commission must take into account age, education, and prior work experience as well as other pre-existing and co-existing conditions.” (quoting Wilkes v. City of Greenville, 369 NC 730, 744, 799 S.E.2d 838, 848 (2017)). Although Wilkes was not addressing an application for extended compensation, the reasoning appears equally applicable and the issues traditionally considered in a futility analysis would be properly addressed in a vocational analysis in an application for extended compensation.
Discussion
Since the 500-week cap went into effect on June 24, 2011, parties and their counsel to claims under the Act have been trying to anticipate the real impact of the cap. Long before extended compensation applications started being decided by the Commission, the cap became a material consideration in the valuation of cases for settlement, with plaintiffs’ counsel arguing it was a “soft” cap and defense counsel arguing it would be a “hard” cap. Based on the initial decisions from the Commission, it appears more productive to look to the facts and economic realities of each specific case than to generalize about the cap being either soft or hard. The early opinions make it clear that contested extended compensation applications are subject to full evidentiary hearings comparable to any other full evidentiary hearing where eligibility for compensation is being contested.
Within the set of potential extended compensation cases, there will be cases where there are no genuine issues of material fact and the plaintiff will be entitled to extended compensation. In cases where uncontradicted medical evidence establishes a complete loss of wage-earning capacity or where the work-related limitations combine with pre-existing and co-existing conditions to eliminate any plausible wage-earning capacity, defendants will have an incentive to agree to extended benefits and perhaps consider whether a compromise settlement might be in their interest. Where a plaintiff has some physical wage-earning capacity and is unable to develop credible evidence to prove a total loss of wage-earning capacity, he or she is likely to have a hard time finding representation. Where bad facts combine with a low average weekly wage and advanced age, the odds of finding representation will be particularly low. It is foreseeable that this will result in a number of pro se filings of extended compensation applications.
In many cases, it will be unclear whether or not the Plaintiff will be able to establish a total loss of wage-earning capacity. As demonstrated in the Nobles case, where both sides present competent evidence in support of their positions, the Commission can go either way based on its credibility determinations. The impact of the personal appeal, or lack thereof, of a Plaintiff at the Deputy Commissioner level may be attenuated by the power of the Full Commission to reweigh evidence of record and make its own credibility determinations. Defendants confronted with a questionable application for extended compensation will likely, as a matter of course, obtain a labor market survey to identify low physical demand jobs available in the local labor market. In most cases where a plaintiff is not completely restricted from working as the result of uncontested physical restrictions, the testimony of pain management providers, mental health professionals, and vocational experts is likely to be determinative. In particular, the party with the most credible vocational assessment and testimony will have an advantage. As the party with the initial burden of proof, plaintiffs seeking extended compensation need to be aware of the extent to which the evidence developed in the normal course of their treatment meets, or fails to meet, the evidentiary burden to establish a total loss of wage-earning capacity. In addition, parties will need to be attentive to what conditions have and have not been expressly established as compensable conditions in the case.
Litigating extended compensation cases will be expensive for plaintiffs and defendants alike. As cases move toward the 425-week mark, both sides should be evaluating their cases in light of the existing evidence, the additional evidence required to be successful, the costs of developing the necessary evidence, the burden of trying the case, the risk of loss, and the timing and impact on the compensation amount of plaintiffs’ receipt of Social Security retirement benefits after reaching full retirement age.
Conclusion
The early decisions from the Industrial Commission on extended compensation applications demonstrate that contested cases will involve significant burden and expense to the parties. Refinements in the law are likely as cases reach the appellate courts and decisions are issued. However, the statutory burden on plaintiffs to prove a total loss of wage-earning capacity is certain to limit the pool of plaintiffs who will ultimately receive extended compensation. As counsel, insurance companies, and self-insured employers gain more experience with extended compensation cases, they should become more adept at determining which cases need to be litigated, which should be resolved by agreement or compromise settlement, and how to properly value extended compensation cases for compromise settlement and/or setting reserves to cover extended compensation. Plaintiffs affected by the cap will need assistance in understanding the extent to which their cases meet the criteria for extended compensation, their options, and how to plan financially for the possible complete loss of compensation and/or the reduced compensation that will result from the award of an attorney’s fee and the further reduction upon taking Social Security retirement after reaching full retirement age.