SUPREME COURT ADDRESSES LIMIT ON .041(K) STIPEND BENEFITS

On June 27, 2008, the Alaska Supreme Court issued a potentially far-reaching decision, Carter v. B&B Construction, Inc., Slip No. 6277, which addresses the two-year limit on payment of stipend benefits under AS 23.30.041(k). As we previously understood that limit based upon Board decisions, stipend benefits were typically payable from the time PPI benefits were exhausted (if the employee was in the “reemployment process”) until completion of a reemployment plan, with the two-year limit only starting upon commencement of an approved plan. Under that scenario, liability for stipend benefits could extend for many months and maybe years before the two-year limit would begin to run. However, the Court's decision in Carter indicates that in some circumstances the limit may start much sooner and may significantly limit an employee's entitlement to stipend benefits. The facts of the Carter case must be understood in order to assess the significance of the decision. Mr. Carter suffered on-the-job injuries to his neck and left shoulder in August 1992. The claim was accepted and paid. He had neck surgery and was found to be stable in April 1993, with a 10% PPI rating. For some unknown reason PPI benefits were not paid. Carter requested a reemployment eligibility evaluation on April 27, 1993, and the RBA requested a statement of extenuating circumstances because the request was more than 90 days after injury. The RBA also believed that Carter had been released to his regular work, which was incorrect. Carter did not provide a statement of extenuating circumstances. In June 1993 Carter filed a claim seeking additional TTD benefits, PPI benefits, medical costs for an unrelated low back condition, and review of the reemployment eligibility “decision.” In September 1994 the Board issued a decision denying TTD benefits but awarding the PPI benefits. The Board also held that the low back condition was not work-related. Because Carter had not provided a statement of extenuating circumstances, the Board upheld the “denial” of reemployment benefits. After an appeal that took several years, the Superior Court ordered in May 1998 that the Board should reconsider the eligibility referral. In August 1999 the Board found that Carter was entitled to an eligibility evaluation because he had shown extenuating circumstances that delayed his request for an evaluation. The employer further appealed that decision without success, causing several more years' delay. In December 2001 Carter was finally referred for an eligibility evaluation. He was found eligible on April 2, 2002, almost ten years after injury. Between 1995 and April 2002, Carter experienced multiple medical problems including seizures, pulmonary emboli, diabetes, a blood clot in his right calf, chronic gastritis, hypercholesterolemia, peptic ulcers, anemia, pancreatitis with bowel dysfunction, and chronic progressive pain from both his neck and low back. By August 2002 the assigned counselor concluded that no reemployment plan could be developed due to Carter's numerous physical problems. In December 2002 Carter filed a workers' compensation claim that requested, among other things, an award of .041(k) stipend benefits from July 14, 1994 (when his permanent partial impairment benefits would have been exhausted) through January 30, 1999, and PTD benefits thereafter. The Board rejected the employee's claim for PTD benefits based on its interpretation of medical testimony from the treating physician that Carter could have been retrained after his work injury but for his non-work-related health problems. Noting the extended delay in the reemployment process due to litigation, the Board limited Carter to two years of stipend benefits on the basis that, although he was totally disabled by then (October 2002) due to his non-work conditions, he “could have been retrained” when he first made his request for reemployment benefits in 1993. The Board found that “the employer has submitted no evidence to contradict the efficacy of a reemployment plan within two years after his initial request for a plan. Consequently we find the employee was eligible for reemployment benefits for at least two years after he requested them.” The Board's decision on Carter's PTD claim was overturned by the Supreme Court. The Court's analysis of the PTD issue focused exclusively on the presumption of compensability. The Court held that if the only medical evidence offered by the employer to rebut the presumption of compensability is uncontroverted, yet inconclusive, the presumption is not overcome. In this case, the only medical evidence at hearing indicated that the employee's non-work injuries were a substantial factor in the employee's PTD status, and the evidence did not rule out the work injury as being another substantial factor. Since the presumption was not overcome, PTD benefits were awarded. However, the Supreme Court rejected Carter's claim for more than four years of stipend benefits prior to the time he was permanently and totally disabled, holding that he was limited to the statutory maximum period of two years even though no plan was developed. In reaching its decision in this case, the Court noted, in reliance on its decision in Binder v. Fairbanks Historical Preservation Foundation, 880 P.2d 117 (Alaska 1994), that AS 23.30.041(k) contains a two-year cap on benefits. In Binder, the employee agreed to a plan and completed it, but upon entering the labor market he learned that his vocational skills remained inadequate for him to secure employment. The Court rejected Binder's argument that time spent in a "failed" plan should not count against the two-year statutory maximum, and instead held that "any time or money (i.e. costs) spent on the implementation of a reemployment plan agreed upon or approved [by the RBA] must be counted toward the statutory maximums set forth in AS 23.30.041(k)...." In Mr. Carter's case, no plan was ever developed, so no time or money was spent implementing an agreed-upon or approved plan. Prior to this decision we would have assumed under those facts that the limit on stipend benefits had not yet commenced. However, the Supreme Court, extending Binder, held that the two-year maximum did in fact apply and only allowed Carter to receive two years of stipend benefits. As a consequence of this decision, Carter received no benefits from the time the stipend benefits would have stopped (July 14, 1996) until he was eligible for PTD benefits (January 31, 1999) even though he was still theoretically willing and able to be retrained. It therefore appears that under the new rule enunciated in Carter, any time spent participating in the reemployment process counts toward the statutory maximum of no more than two years of stipend payments. The Court also addressed the question of when the “reemployment process” begins. The Court held that the reemployment process begins "when the employee begins...active pursuit of reemployment benefits." The Court held that Carter began to actively pursue reemployment benefits on April 27, 1993, when he first requested reemployment benefits. The reemployment process therefore began at that point. The Court specifically rejected the Superior Court's conclusion that the employee began participating in the reemployment process when a rehabilitation specialist was assigned to perform an eligibility evaluation in December 2001. It is unclear at this point how the Carter decision will be interpreted and applied by the Alaska Workers' Compensation Board or the Alaska Workers' Compensation Appeals Commission. It may be that this decision will be narrowly construed to apply only to the unique facts presented in Carter. That is, it might only be applied in cases where no reemployment plan has been developed and the injured worker is only seeking reemployment benefits for a block of time prior to becoming permanently and totally disabled. It seems easier to limit past stipend benefits in a case where there is no longer a practical use for a reemployment plan. In addition, it seems unlikely that stipend benefits will be limited in cases where there is a current approved plan, because a plan is treated like a contract and a plan typically calls for payment of benefits until it is completed. However, it is also possible that an employee for whom a plan has not yet been developed is now limited to two years of stipend benefits after the time PPI will be exhausted, and any plan must now be concluded within that continuously decreasing time period, even if reemployment disputes cause delays. In summary, there are too many implications from the Carter decision to consider in this newsletter format. For this reason, employers and carriers are encouraged to contact an attorney to discuss whether or how the Carter decision may be applied to the specific facts of a case before controverting benefits based on this decision.


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