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DID YOU KNOW? THE BOARD HAS RETIRED THE CONCEPT OF THE COMPENSABLE RETIREMENT. The Death Knell of the Trifecta: Zamora and the so-called “Compensable Retirement”

by | Dec 17, 2013 | NYS Workers Compensation |

A Brief Summary:

Zamora reshaped the landscape of New York workers’ compensation law and opened PPD claims to challenges on labor market attachment (provided you can get the case reopened). It also dramatically tightened the legal standards for claimant’s seeking an involuntary withdrawal finding, or those seeking the much vaunted third-leg of the trifecta: pension benefits, Social Security benefits and a compensable retirement under the WCL.

Under the old standards, a PPD claimant only needed to show that he or she retired, at least in part, due to a work-related disability in order to secure ongoing benefits that were immune to suspension under American Axle. After Zamora, the Board has conformed its rulings to place a higher burden on claimants seeking a finding of involuntary withdrawal or involuntary retirement. After a brief evolution in legal analyses, the Board confirmed that even after a finding of involuntary withdrawal, a claimant’s benefits are still subject to a challenge under American Axle provided the claim is properly before the Board. Recent Board Panel case law established that a finding of involuntary withdrawal, or involuntary retirement only opens the door to post-separation indemnity benefits; and to get through that door the claimant must make a showing of attachment to the labor market in the first instance, and also as benefits continue provided that the case is reopened. County of Nassau, 2013 NY Wrk Comp. 20702386; Monroe Muffler & Brake, 2013 NY Wrk. Comp. 99506849.

When confronted with a claim on involuntary withdrawal or involuntary retirement, carriers and self-insured employers should be prepared to challenge the claimant by demanding proof of labor market attachment in the wake of the claimant’s separation from employment and try to avoid the invocation of Zamora’s “permissible inference” about ongoing lost wages after separation. Even losing at that point, however, carrier’s and SIEs can nonetheless demand ongoing proof of attachment to justify a continuing payment order or the updating of awards when a PPD case is reopened.

Employers who can control the terms of their retirement policies and plans should seek to close out the first leg of the trifecta by including terms offsetting retirement payments or pension payments against cotemporaneous worker’s compensation awards, and requiring all employees to certify under penalty of perjury that they are not retiring due to a work-related injury before being granted a retirement or pension. Incentive retirement offers should be similarly structured and should also require a claimant’s certification for his reason to retire to act as a disincentive to a subsequent claim for a compensable retirement through the Workers’ Compensation Board.

The Details:

Until recently Board Panels and the Third Department held the standard for involuntary withdrawal from the labor market shockingly low. “As a general rule, a withdrawal is not voluntary where there is evidence that the claimant’s disability caused or contributed to the retirement.” Matter of Bury v. Great Neck UFSD, 14 AD3d 786 (3d Dept. 2005). Once the presiding Law Judge was satisfied that a claimant had retired due to his or her work injury, often even with the most remote of links, the claimant automatically received the benefit of an inference that his or her ongoing lost wages after retirement were attributable to his or her work-related injury. Matter of Pittman v. ABM Indus., Inc., 24 A.D.3d 1056, 1057 (3d Dept 2005); Matter of Dudlo v Polytherm Plastics, 125 AD2d 792, 793 (3d Dept. 1986). Taken together, these legal principles created what practitioners sometimes call a “compensable retirement.”

A carrier did have a defense to such a claim, but the standard of proof was practically unreachable in most cases. To rebut the mandatory inference of Pittman a carrier had to produce direct and positive proof that something other than the disability was the sole cause of claimant’s reduced earning capacity after retirement. Pittman, 24 A.D.3d 1056, 1058.

Practically, cases in this line followed a fairly common fact pattern. Usually, a claimant from a fairly large employer that provided a pension or retirement plan would be injured at work. Medical treatment would begin and at some point the claimant, a treating doctor, or both, would determine that the claimant’s former work duties were unmanageable given the work injury and the claimant would “retire.” A savvy claimant’s counsel would then step into the case and raise “involuntary withdrawal” and a claimant would, in short order, appear and testify that their doctor recommended retirement, or they simply couldn’t return to their former employment due to a work injury. Even where a claimant took an incentive-based retirement, or a regular service-based retirement, such statements were usually sufficient to satisfy the Bury standard of proof; and the Law Judge would then turn to the carrier or self-insured employer and ask them to produce proof that the claimant’s ongoing lost wages were solely due to something other than the claimant’s work injury. Usually, the best proof a carrier could offer was proof of poor economic conditions, which only occasionally was sufficient to overcome the mandatory “inference” laid out in Pittman.

At many large employers, self-insured municipalities and basically any employer that offered some type of retirement package, the “compensable retirement” became the third-leg of what is commonly referred to as the “trifecta” – a claimant obtaining a pension, Social Security benefits, and a compensable retirement from the Workers’ Compensation Board. With no offset against old-age Social Security benefits, and with retirement contracts that usually provided no offset provisions, these claimants could retire and earn more money than they did working full duty.

I can tell you from experience, defense attorneys met claims for a compensable retirement under Pittman with a great deal of frustration. The claimant’s burden was almost laughably low while the defense carried a burden almost impossible to meet.

Thankfully, in 2012 the Court of Appeals handed down its decision in Zamora v. New York Neurologic Associates, 19 N.Y.3d 186 (2012). Everyone active in New York workers’ compensation has probably seen a dozen articles on the sea change this case made in New York workers’ compensation law. Permanent Partial Disability claimant’s lost a layer of protection against labor market attachment challenges and cases that sat paying out lifetime PPD benefits suddenly had hope, and a chance, to reign in benefits and force a claimant to produce labor market attachment proofs.

Apart from providing hope, Zamora threw out Pittman and the its progeny and replaced the mandatory presumption regarding the cause of lost wages with a permissible inference. To get this inference, a claimant now needed to set forth evidence showing that his or her ongoing lost wages were indeed causally related to the claim. The Court of Appeals went further, and by example softened the defense standards for a compensable retirement:

By finding alternative work consistent with his or her physical limitations, or at least showing reasonable efforts at finding such work, the claimant can prove to the Board that the cause of his or her reduced income is a disability, rather than unwillingness to work again . . .

If . . . the Board considers a disability to be one that prevents the claimant from pursuing the trade in which she was engaged at the time of the accident, while allowing her to undertake many other jobs that pay as well, it will likely not make the inference.

In the wake of Zamora, the Board revised its approach to involuntary withdrawal analyses in two phases. Ossing, 2012 NY Wrk. Comp. 30501462 is solid example of the Board’s first evolution beyond Pittman and its approach to claimants with a permanent disability.

In Ossing the Board considered a claimant who was found to have a permanent disability and was later sent a letter by his employer informing him that he would be “removed from payroll” because he had missed more than one year of work. The claimant subsequently retired, apparently to preserve what vested retirement rights he had at the time, and turned to the workers’ compensation Board seeking a compensable retirement. At the trial level, the Law Judge found that the claimant voluntarily withdrew from the labor market and closed the case. On appeal, the Board reversed, ruling that Zamora now required claimant’s to both show that the work-related disability was the reason for separation from employment and that the claimant has found “alternate work consistent with his or her physical limitations, or at least [show] reasonable efforts at finding such work.” Id. citing Zamora. Further citing Zamora, the Board noted that “[t]his evidentiary burden, if carrier, can prove to the Board that the cause of his or her reduced income is a disability, rather than an unwillingness to work again. Id.

In applying this analysis, the Board found that the letter from the employer about the claimant’s impending termination was the claimant’s impetus for taking a retirement and that his withdrawal was involuntary. However, the Board went on to rule, citing Zamora, “that to compel an inference of causally related lost earnings from …an involuntary separation would illogically constrain the ability of the Board to find facts, and would shift the burden of proof from claimant to employer. As such any inference is applied is based on the Board’s evaluation of the evidence on disability and attachment.” Finding that the record contained no evidence of post-retirement attachment, the Board returned the case to the hearing level for development of the record on “whether and to what extent the claimant looked for work…even through the claimant need not meet the standard of American Axle (2010 NY Wrk Comp 80303659).”

Ossing represents an intermediate step in the Board’s use of Zamora on the issue of involuntary withdrawal. Compared to Pittman, the Board now insisted that the claimant bear the burden in the first instance of proving not only the circumstances of his retirement, but also whether he was simply unwilling to continue working. The Board also adopted a “something-less-than-American Axle” standard that confounded practitioners insofar as the Board simply stated that the claimant had to make a showing of a post-retirement job search, but how genuine that search needed to be was left open-ended. The Ossing interpretation of Zamora left open the possibility that a claimant could, after making some decidedly more significant showings, still end up with a guaranteed stream of benefits unencumbered by the obligation to remain attached under American Axle.

In dealing with unclassified claimants, the Board provided a much simpler analysis that remains unchanged. In Endicott, 2013 NY Wrk. Comp. 0254179, the Board, after following much the analysis it laid out in Ossing, noted in no uncertain terms that only classified claimant’s had any hope of protection.

While an inference of causation may be drawn from a disability-related withdrawal when there has been a finding of permanent partial disability, a claimant with a temporary partial disability must look for work within the limits of his or her partial disability.

Id. (internal citations omitted). So while a PPD claimant might be able to shake off American Axle, an unclassified claimant gets no benefit from a finding of involuntary withdrawal and must continue to seek employment or otherwise remain attached.

The final evolution of the Board’s assimilation of Zamorafor PPD cases is illustrated in County of Nassau, 2013 NY Wrk Comp. 20702386. In Nassau the Board held that although the record demonstrated that the claimant’s permanent partial disability “cause or contributed to her retirement . . . the claimant’s [subsequent] loss of wages is due to her lack of demonstrated attachment to labor market.” In reciting the facts, the Board noted that:

The record in this case reflects that since the claimant stopped working in October 2010 and by her own admission she has not conducted a regular work search. Her work search, such as it was, was sporadic and casual, consisting of few inquiries to business owners of her acquaintance; an occasional review of the newspaper classifieds every now and then; and an occasional internet search. While the claimant testified that she registered with Hempstead Works, there is no evidence of an active participation; the claimant conceded that she conducted a work search on less than a monthly basis and she testified that, in the last year she has applied for a total of five or six jobs. While the claimant stated she maintained a written work search listing, no such listing appears in the record for review by the Board.

The Board went on to note that the claimant could “reattach” to regain ongoing benefits provided she produced proof of attachment meeting the standards of American Axle.

In the same track, in Monroe Muffler & Brake, 2013 NY Wrk. Comp. 99506849 the Board considered a claimant, classified with a PPD in 2000, and his claim for an involuntary withdrawal back in 1995 when he stopped working for the employer of record. At the trial level, the Law Judge held that the claimant was involuntarily withdrawn in 1995 and that, pursuant to Zamora, was thereafter entitled to ongoing benefits without further analysis.

On appeal, the Board affirmed, but for different reasons:

While the Board Panel concurs in the WCLJ’s finding that the claimant’s cessation/separation from employment in 1995 was due at least in part to his crushed foot injury and disability, and while this means that the claimant’s separation from employment was not voluntary, this fact alone no longer compels the application of an inference that the claimant’s subsequent loss of earnings necessarily resulted from the disability. That said, the Board Panel must now evaluate the record on the issue of whether the claimant has shown sufficient attachment to the labor market subsequent to his involuntary removal from the labor market in August 1995 so as to remain entitled to indemnity awards.

The Board went on to analyze the claimant’s post-separation attachment efforts and found them sufficient to justify post withdrawal awards.

In Monroe Muffler and Nassau the Board has reversed its former holdings under Pittman completely.

Claimants can no longer rely on low standards of proof and improperly shifted burdens to claim ongoing benefits after a separation from employment simply because they are classified. When litigating involuntary withdrawal and compensable retirement claims, counsel can now force the claimant to make a higher showing at the outset and, even if initially unsuccessful, can nonetheless force a claimant to produce proof of attachment to the labor market each time the claim reopens.

To discuss how you can prevent the compensable retirement claim or revisit your existing compensable retirement/pension claims, please feel free to contact me.