Kramer v. WCAB (Rite Aid Corp.)

• Decision Date: 28 September 2005
• Parties: Denise KRAMER, Appellee/Cross-Appellant, v. WORKERS' COMPENSATION APPEAL BOARD (RITE AID CORPORATION), Appellant/Cross-Appellee.
• Court: Pennsylvania Supreme Court

883 A.2d 518

584 Pa. 309

Denise KRAMER, Appellee/Cross-Appellant, v. WORKERS' COMPENSATION APPEAL BOARD (RITE AID CORPORATION), Appellant/Cross-Appellee.

Supreme Court of Pennsylvania.

Argued December 2, 2003.

Decided September 28, 2005.

Perry David Merlo, Lancaster, Mary T. Stark, Calvin Vroome, Philadelphia, for Rite Aid Corp.

Lawrence R. Chabin, for PA Trial Lawyers Ass'n, appellant amicus curiae.

Ronald Lee Calhoon, Deborah L. Packer, Harrisburg, for Denise Kramer.

James A. Holzman, Amber Marie Kenger, Richard C. Lengler, Harrisburg, for W.C.A.B Andrew Edson Greenberg, Norristown, for PA Defense Institute, appellee amicus curiae.

Thomas Joseph Kuzma, Harrisburg, for Dept. of Labor and Industry, appellee amicus curiae.

Before: CAPPY, C.J., CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and LAMB, JJ.

OPINION

Justice CASTILLE.

These cross-appeals raise two related issues: (1) whether Section 204(a) of the Pennsylvania Workers' Compensation Act (the "Act"), 77 P.S. § 71(a), allows all employers, or only self-insured employers, to take an offset against a claimant's workers' compensation benefits in the amount of a severance payment made by the employer to that claimant; and (2) whether, if such an offset is allowable, Section 204(a) violates equal protection considerations under the Pennsylvania and/or United States Constitutions. In this case, a Workers' Compensation Judge ("WCJ") found that appellant/cross-appellee Rite Aid Corporation, a privately insured employer (hereinafter "Employer"), properly took the offset and the Workers' Compensation Appeal Board ("the Board" or "WCAB") affirmed. The Commonwealth Court reversed, however, finding that the Section 204(a) offset was available only to self-insured employers. None of the tribunals below addressed the equal protection claim raised by appellee/cross-appellant Denise Kramer (hereinafter "Claimant"): the workers' compensation tribunals, because they lacked authority over a constitutional challenge claim, and the Commonwealth Court, because it ruled in Claimant's favor on non-constitutional grounds. For the reasons set forth below, we find that Section 204(a) allows all employers to offset workers' compensation benefits in the amount of a severance payment, and that, so construed, Section 204(a) does not violate equal protection. We therefore reverse the order of the Commonwealth Court and reinstate the underlying decision of the WCJ.

Claimant worked for Employer in its Shiremanstown, Pennsylvania facility when she sustained a work-related neck injury on February 20, 1998. Claimant received workers' compensation benefits for temporary total disability through June 28, 1998, when she returned to work with injury-related restrictions. On March 12, 1999, Employer relocated its Shiremanstown facility to Maryland, and as a consequence, Claimant was laid off. Following the layoff, Employer reinstated Claimant's workers' compensation benefits.¹ Subsequently, Claimant also received a check from Employer in the amount of $3,355.02, representing the net amount of severance pay due to Claimant as a result of Employer's relocation. The payment was part of a "Severance Agreement" contained in a January 7, 1998 Addendum ("Addendum") to the most recent collective bargaining agreement ("CBA") between Employer and Teamsters Local 776 ("Union"), the union for Employer's employees, which covered the period from July 27, 1997 through July 23, 2000. Before July 27, 1997, prior CBAs had required Employer to remain in Pennsylvania, but the most recent CBA allowed Employer to leave the state and relocate to Maryland. Under the Addendum, employees agreed not to engage in a strike, slowdown, or boycott, in exchange for severance payments at the time of their layoff. Nothing in the CBA or the Addendum addressed the prospect of offsetting these anticipated severance payments against workers' compensation benefits.

On May 14, 1999, Employer sent Claimant a Notice of Compensation Benefits Offset ("Offset Notice"), informing her that it was authorized under Section 204(a) of the Act to treat the severance payment as a credit against Claimant's workers' compensation benefits. Section 204(a) states, in relevant part:

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 section 108 [occupational disease] and 306 [schedule of compensation for total disability], except for benefits payable under section 306(c) [disability resulting from certain permanent injuries].

77 P.S. § 71(a).² As a result of the Offset Notice, Claimant received no workers' compensation benefits from June 5, 1999 through August 9, 1999, after which her total disability benefits resumed.

On May 20, 1999, Claimant filed an Offset Review Petition alleging that Employer's offset was unconstitutional, was contrary to the Act, was not timely taken, and that the benefits paid her were not in the nature of severance benefits. Employer denied Claimant's allegations. The WCJ denied Claimant's petition on January 21, 2000, holding that the $3,355.02 lump sum Claimant received under the CBA was, in fact, a severance payment as defined in the relevant regulations, see 34 Pa.Code 123.2,³ and that Employer timely and properly took an offset pursuant to Section 204(a) of the Act. The WCJ also concluded that he lacked jurisdiction over Claimant's equal protection challenge to the offset provision. Claimant appealed to the Board, which affirmed, and which also concluded that it lacked authority to pass upon Claimant's constitutional challenge.

Claimant then appealed to the Commonwealth Court, arguing that: (1) the $3,355.02 payment was not a severance benefit, but was "otherwise earned income;" (2) even if the payment was a severance benefit, it was not subject to a Section 204(a) offset because Employer, who was privately insured, was not "directly liable" for the payment of Claimant's workers' compensation benefits;⁴ and (3) Section 204(a), as amended in 1996 to provide for the offset of severance benefits, and as interpreted by the tribunals below, violated equal protection. A panel of the Commonwealth Court reversed in a published opinion by the Honorable Rochelle S. Friedman. The panel first found that the $3,355.02 lump sum payment to Claimant was a severance payment because she had received it pursuant to the CBA Addendum, and under the heading "Severance Agreement," which provided for "severance benefits." The panel further found that nothing in the Severance Agreement limited Employer's ability to apply a severance pay offset under Section 204(a). However, the panel agreed with Claimant that Employer was not entitled to the severance benefit offset. The panel noted that an injured employee who subsequently receives a severance payment paid by an "employer directly liable" for the payment of workers' compensation in effect forfeits workers' compensation disability benefits in the amount of those severance payments. The panel then found that the offset provision is intended to be afforded to the employer, not its private insurer, noting that the Act does not always use the terms "employer" and "insurer" interchangeably, and that it is the insurer who is directly liable for the actual payment of workers' compensation benefits. Because Employer here was not directly liable for the payment of Claimant's workers' compensation benefits, but rather was insured, making its insurer directly liable, the panel held that Employer was not entitled to a Section 204(a) offset. Judge Dan Pellegrini filed a Concurring Opinion in which he concurred in the result only. Judge Pellegrini would have found that Employer was not entitled to the offset for a different reason, i.e., because the check received by Claimant was not a severance payment, but instead was otherwise earned income. Kramer v. Workers' Compensation Appeal Bd. (Rite Aid Corp.), 794 A.2d 953 (Pa.Cmwlth.2002).

In workers' compensation appeals, this Court will affirm the adjudication below unless we find that an error of law was committed, that constitutional rights were violated, that a practice or procedure of a Commonwealth agency was not followed, or that any necessary finding of fact is not supported by substantial evidence of record. 2 Pa.C.S. § 704; Hannaberry HVAC v. Workers' Compensation Appeal Bd. (Snyder, Jr.), 575 Pa.66, 834 A.2d 524, 527 (2003) (collecting cases). For purposes of appeal, the pertinent historical facts in this case are undisputed. The questions raised are purely legal (statutory construction in Employer's appeal; constitutionality in Claimant's appeal); as such, this Court's review is plenary. See Hannaberry, 834 A.2d at 527.

I. Employer's Appeal: Availability of Severance Benefit Offset

Employer argues that the language in Section 204(a) is ambiguous at least insofar as it concerns the applicability of the offset provision to privately insured employers. Employer posits that, if the General Assembly had intended to restrict the availability of severance offsets only to self-insured employers, it could have done so easily and explicitly by using the modifier "self-insured." Indeed, Employer notes that the Act contains a separate provision, Section 305, 77 Pa.C.S. § 501(a)(2), specifically addressing self-insurance. In Employer's view, the severance benefit offset adopted in 1996 reflects a legislative determination that a claimant should not receive duplicate benefits in the form of severance pay and workers' compensation for the same loss of earnings. The offset thereby curtails the cost of work injuries. Employer notes that workers' compensation insurance rates are based in part upon claims history, and therefore, the reduction of workers' compensation benefits via severance...