Caputo v. Workers' Comp. Appeal Bd.

• Decision Date: 05 January 2012
• Citation: 34 A.3d 908
• Parties: Judith CAPUTO, Petitioner v. WORKERS' COMPENSATION APPEAL BOARD (COMMONWEALTH of Pennsylvania), Respondent.
• Court: Pennsylvania Commonwealth Court

34 A.3d 908

Judith CAPUTO, Petitioner

v.WORKERS' COMPENSATION APPEAL BOARD (COMMONWEALTH of Pennsylvania), Respondent.

Commonwealth Court of Pennsylvania.

Argued Sept. 14, 2011.Decided Jan. 5, 2012.

Vincent J. Quatrini, Jr., Greensburg, for petitioner.

James A. Mazzotta, Pittsburgh, for respondent Commonwealth of Pennsylvania.

BEFORE: LEADBETTER, President Judge, and McGINLEY, Judge, and COHN JUBELIRER, Judge, and LEAVITT, Judge, and BROBSON, Judge, and McCULLOUGH, Judge, and BUTLER, Judge.¹OPINION BY Judge LEAVITT.

Judith Caputo (Claimant) petitions for review of an adjudication of the Workers' Compensation Appeal Board, which affirmed the decision of the Workers' Compensation Judge (WCJ) to deny her offset review petition. On appeal, Claimant argues that the Board erred. She contends that the offset provision in Section 204(a) of the Workers' Compensation Act (Act) ² that reduced her compensation disability by a portion of her “old age” Social Security retirement benefits violates the Equal Protection Clause of Article I, Section 1 of the Pennsylvania Constitution.³ Finding no merit to Claimant's constitutional challenge, we affirm.

Claimant worked for the Commonwealth's Department of Military and Veterans Affairs (Employer) at the Hollidaysburg Veterans Home. In 2002, she sustained a work-related injury and was awarded total disability benefits in the amount of $452.85 per week. In August 2006, Claimant's income from disability compensation was augmented by her Social Security retirement benefits in the amount of $862 per month. One month later she began receiving a pension benefit of $405.47 per month from the State Employes Retirement System (SERS).

On December 5, 2006, Employer filed a Notice of Workers' Compensation Benefit Offset advising Claimant that it was taking a credit toward her disability compensation. The credit was equal to 50% of her Social Security benefit, or $99.31 per week, and $74.56 per week for her SERS pension benefit. Employer further advised Claimant that it was suspending payment of her disability benefit until March 14, 2007, in order to recoup its overpayment of $2,955.79 in disability compensation. Finally, Employer advised Claimant that when her disability compensation resumed after March 14, she would receive a benefit in the amount of $278.98 per week, which represented the difference between her weekly disability compensation of $452.85 and Employer's combined offset of $173.87 per week.

Claimant filed an Offset Review Petition alleging that Employer was not entitled to an offset credit of $173.87 per week. Claimant argued that Employer had to prove its entitlement to a credit before taking one, and that Employer could not suspend her benefits during the period of recoupment. The matter was assigned to a WCJ, and a hearing was held. On August 18, 2008, the WCJ circulated a decision and order granting in part and denying in part Claimant's review petition. Relevant to the present appeal, the WCJ concluded that Employer was entitled to deduct $99.31 per week from Claimant's disability benefit, which equalled 50% of her Social Security retirement benefit. ⁴ Claimant appealed to the Board, asserting, inter alia, that the offset for Social Security retirement benefits permitted by Section 204(a) of the Act is unconstitutional. The Board affirmed the WCJ's decision without addressing the constitutional issue. Claimant now petitions for this Court's review.⁵

On appeal,⁶ Claimant argues that the offset provision in Section 204(a) for Social Security retirement benefits violates the Equal Protection Clause of Article I, Section 1 of the Pennsylvania Constitution. Claimant urges this Court to follow the reasoning of the Utah Supreme Court in Merrill v. Utah Labor Commission, 223 P.3d 1089 (Utah 2009), which held that a similar offset provision in Utah's Workers' Compensation Act was unconstitutional under the equal protection provision of the Utah Constitution. Employer counters that this Utah precedent has little or no instructive value given our Supreme Court's holding in Kramer v. Workers' Compensation Appeal Board (Rite Aid Corp.), 584 Pa. 309, 883 A.2d 518 (2005). In Kramer the Supreme Court rejected an equal protection challenge to an offset in Section 204(a) for an employer-provided severance benefit, and Employer argues that this analysis applies with equal force to the statutory offset for Social Security and pension benefits.

We begin with the standard for deciding an equal protection challenge. Article I, Section 1 of the Pennsylvania Constitution provides:

All men are born equally free and independent, and have certain inherent and indefeasible rights, among which are those of enjoying and defending life and liberty, of acquiring, possessing and protecting property and reputation, and of pursuing their own happiness.

Pa. Const. art. I, § 1. Our Supreme Court has summarized the basic principles governing equal protection review as follows:

The essence of the constitutional principle of equal protection under the law is that like persons in like circumstances will be treated similarly. However ... [t]he right to equal protection under the law does not absolutely prohibit the Commonwealth from classifying individuals for the purpose of receiving different treatment and does not require equal treatment of people having different needs. The prohibition against treating people differently under the law does not preclude the Commonwealth from resorting to legislative classifications provided that those classifications are reasonable rather than arbitrary and bear a relationship to the object of the legislation.

Kramer, 584 Pa. at 332–33, 883 A.2d at 532 (quoting Curtis v. Kline, 542 Pa. 249, 254–55, 666 A.2d 265, 267–68 (1995)) (emphasis added).

With the above principles in mind, we turn to the offset provision at issue. Section 204(a) of the Act, 77 P.S. § 71(a), permits an employer or its insurer to take a credit against workers' compensation disability benefits for other types of benefits payable to the employee, including Social Security retirement benefits. The legislature has made the policy decision that because the employer helps to fund Social Security, it should receive a credit towards workers' compensation disability. In full, Section 204(a) provides:

(a) No agreement, composition, or release of damages made before the date of any injury shall be valid or shall bar a claim for damages resulting therefrom; and any such agreement is declared to be against the public policy of this Commonwealth. The receipt of benefits from any association, society, or fund shall not bar the recovery of damages by action at law, nor the recovery of compensation under article three hereof; and any release executed in consideration of such benefits shall be void: Provided, however, That if the employe receives unemployment compensation benefits, such amount or amounts so received shall be credited as against the amount of the award made under the provisions of sections 108 and 306, except for benefits payable under section 306(c) or 307. Fifty per centum of the benefits commonly characterized as “old age” benefits under the Social Security Act (49 Stat. 620, 42 U.S.C. § 301 et seq.) shall also be credited against the amount of the payments made under sections 108 and 306, except for benefits payable under section 306(c): Provided, however, That the Social Security offset shall not apply if old age Social Security benefits were received prior to the compensable injury. The severance benefits paid by the employer directly liable for the payment of compensation and the benefits from a pension plan to the extent funded by the employer directly liable for the payment of compensation which are received by an employe shall also be credited against the amount of the award made under sections 108 and 306, except for benefits payable under section 306(c). The employe shall provide the insurer with proper authorization to secure the amount which the employe is receiving under the Social Security Act.

77 P.S. § 71(a) (emphasis added).

The first step in an equal protection inquiry is to determine whether the statute creates a classification for the unequal distribution of benefits or imposition of burdens. Kramer, 584 Pa. at 333, 883 A.2d at 532. Claimant urges this Court to follow the reasoning of the Utah Supreme Court in Merrill, which held that a similar offset for Social Security retirement benefits in Utah's Workers' Compensation Act ⁷ was unconstitutional under the “uniform operation of laws” provision of the Utah Constitution. ⁸ The Merrill court found that the legislative classification had two factors consisting of: (1) persons of the age of 65 who are (2) eligible for Social Security retirement benefits.⁹ Eligibility, in turn, was based upon other factors, including the number of years the individual has worked and contributed to the Social Security fund. The Court concluded that “[i]ndividuals who are over the age of sixty-five and not receiving social security retirement benefits are treated differently than individuals over the age of sixty-five and receiving social security benefits.” Merrill, 223 P.3d at 1094.¹⁰

In response, Employer points out the courts of our sister states have upheld a 100% offset for Social Security retirement benefits or outright termination of disability benefits at retirement in the face of an equal protection challenge. See, e.g., Satterlee v. Lumberman's Mutual Casualty Co., 353 Mont. 265, 222 P.3d 566 (2009); Rayhall v. Akim Co., Inc., 263 Conn. 328, 819 A.2d 803 (2003); McDowell v. Jackson Energy RECC, 84 S.W.3d 71 (Ky.2002); Case of Tobin, 424 Mass. 250, 675 N.E.2d 781 (1997); Harris v. Department of Labor and Industries, 120 Wash.2d 461, 843 P.2d 1056 (1993); and Brown v. Goodyear Tire & Rubber Co., 3 Kan.App.2d 648, 599 P.2d 1031 (1979).

We decline to adopt the reasoning in Merrill. We disagree with its analysis. In any case,...