On April 19, 2004, Governor Arnold Schwarzenegger signed Senate Bill 899, enacting emergency legislation to reform California’s workers’ compensation system. Recently a California appeals court ruled that this emergency legislation, and particularly the apportionment provisions of this legislation, can be applied in workers’ compensation cases that are not yet final. Marsh v. Workers’ Compensation Appeals Board.

A significant reform enacted by Senate Bill 899 was the repeal and replacement of various statutes dealing with the apportionment of an employee’s permanent disability award. Apportionment is the process the Workers’ Compensation Appeals Board uses to determine what portion of an employee’s injuries are legally attributable to the worker’s industrial injuries and, consequently, to the employer.

Prior to the passage of Senate Bill 899, the Workers’ Compensation Appeals Board did not apportion permanent disability awards based on the pathology, or causation, of the injury. Instead, the workers’ compensation statutes focused on the disability itself, rather than the cause of the disability, and an employer could be held liable for the full extent of a disability, even where an employee’s preexisting, but non-disabling, condition or disease may have been a contributing cause of the injury.

For example, in Pullman Kellogg v. Workers’ Compensation Appeals Board, a case decided in 1980, a plumber brought a workers’ compensation claim for chronic bronchitis after years of exposure to dangerous fumes and airborne particulates at work. The plumber’s physician opined that the worker’s chronic bronchitis was 50% due to industrial exposure and 50% due to the worker’s long history of smoking. Conversely, the employer’s physician opined that the worker’s injury was 90% due to smoking and 10% due to the exposure. In spite of this disparity, the Court of Appeal held that the full amount of the disability must be apportioned to the plumber’s industrial exposure. The Court reasoned that there was no medical evidence to establish that the plumber would have been disabled even if he had not been exposed to the harmful substances at work.

Senate Bill 899 announced that apportionment of a permanent disability now must be based on causation, and an employer will be liable only for that “percentage of permanent disability directly caused” by the industrial injury. Senate Bill 899 also instructed that these new apportionment provisions apply to all pending workers’ compensation claims, “regardless of the date of injury.”

In Marsh v. Workers’ Compensation Appeals Board, the Court of Appeal addressed whether these new apportionment requirements apply where a permanent disability award was issued before the reform legislation was passed. In this case, ten days before the reform legislation was passed, the workers’ compensation judge issued a finding that the worker’s industrial injury had caused the employee a 70% permanent disability.

Although the workers’ compensation judge had decided the worker’s permanent disability award, the Court of Appeal found the decision was still pending and not yet final because the Workers’ Compensation Appeals Board had not issued a final judgment and all appeals of the judgment had not yet been exhausted. Accordingly, the Court of Appeal concluded that the disability award must be reviewed anew in light of the new apportionment provisions – even if this means reopening discovery to determine the causation of the industrial injury.

What this means for employers: There may be a basis for reconsideration of a workers’ compensation disability award that has been issued, if the award is not yet final, i.e., if no final judgment has been issued and all appeals have not yet been exhausted. These new apportionment rules are likely to reduce workers’ compensation costs for employers.