Rebutting the AMA Rating Schedule
(Determining "An" Employee's Loss of Earning Capacity)

By Arthur Johnson, Esq.

Section § 4660(a), the implementing permanent disability section calls for the calculation of "an" employee's diminished future earning capacity.

Prior to SB899, § 4660(a) used a different standard. It used "diminished ability of such injured employee to compete in an open labor market" as the overall standard for determining permanent disability benefits. That standard has now been changed pursuant to SB899 to require the overall standard to be " an employee's diminished future earning capacity".

Under the old schedule, the California Supreme Court LeBoeuf case (48CCC587), held that vocational evidence is admissible and relevant to the determination of the loss of ability to compete in an open labor market, and such vocational testimony in appropriate circumstances can and should be used to expand the permanent disability to reflect the true loss of ability to compete in the open labor market. SB899 did not overrule the LeBoeuf case. The ability to present vocational evidence as a supplemental adjunct to the rating schedule, pursuant to paragraph (a) of Labor Code § 4660, still exists, but with the use of a different standard. The standard now is "loss of earning capacity".

Labor Code § 4660(b)(1) and (2) are a direction for the administrative director to prepare a rating schedule. The rating schedule under (b)(1) utilizes the AMA guides for physical impairment. Under (b)(2) the rating schedule utilizes a formula based on RAND studies "and upon data from additional empirical studies".

Most reasonable commentators and analysts agree (including the committee on health education) that the new rating schedule is deficient in assessing permanent disability. Nevertheless the rating schedule has been promulgated. However, it is rebuttable per L.C. § 4660(c), as the schedule is my "prima facie" evidence of the disability. It can be rebutted by producing vocational evidence of "an" employee's diminished future earning capacity per paragraph (a) of Labor Code § 4660. Paragraph (b)(1) and (2) covers scheduled ratings. To the extent that there is an actual loss of earning capacity that is not measured by the scheduled AMA guides to impairment or the numeric formula based on RAND studies, as set forth in the new rating schedule, both section (a) of the implementing statute (§ 4660) and the LeBoeuf case, contemplate vocational evidence as to diminished future earning capacity to rebut the scheduled rating. A scheduled rating is prepared pursuant to the formal rating instructions utilizing the AMA schedule. Rebuttal evidence, once it is shown to be persuasive and better evidence than that procured by the rating schedule itself, replaces that rating as promulgated pursuant to § 4660(b)(1) and (2).

Particular note should be made of labor Code § 4660(a)'s use of the word "an" employee's diminished future earning capacity. That is an individual employee. That calls for a determination of the loss of earning capacity of the employee whose case is brought before the WCAB. Section (a) does not use the words similarly "situated employee" or "aggregate findings of average loss of earning capacity" . It speaks instead of an employee's diminished future earning capacity. Thus, Section (a), when one is looking at the overall ability to utilize vocational evidence to rebut and supplement the rating schedule, looks at an employee's diminished future earning capacity, the diminished future earning capacity of the employee coming before the WCAB for decision. Clearly that is as it should be. (We do not represent someone with an average loss of earning capacity. We represent an employee whose earning capacity loss is specific as to him or her.)

For those employees who return to work with no loss of earning capacity, they obtain the rating schedule rating which is clearly going to be lower under the new schedule than the old schedule in 99% of the cases. The same analysis applies to those persons who have transferable skills and while not returning to the same employment, can find suitable alternative employment with no loss of future earning capacity. Those people also receive the much lower AMA rating under the new schedule.

However, for those people who have a true loss of earning capacity, a greater loss of earning capacity than reflected in the AMA rating prepared pursuant to the rating schedule promulgated by the administrative director pursuant to § 4660(b)(1) and § 4660(b)(2), the statute contemplates vocational evidence a la the LeBoeuf case to show the true loss of earning capacity.

From a socioeconomic standpoint, this is as it should be. Those people who have no loss of earning capacity because they return to their job or a similar job with no loss of earnings clearly do not need the permanent disability benefits economically, except for some compensation for the fact they have lost bodily function (impairment).

For those workers who cannot return to work at all or who return to work with a greatly diminished future earning capacity, Labor Code § 4660(a) contemplates that those employees should be compensated for their actual loss of earning capacity. Whatever that percentage is translates into that rating value pursuant to the rating schedule value chart, be it 50%, 90% or 100%. Those are the people for whom a loss of earning capacity rating is truly meaningful. Those people who are economically disadvantaged because they can no longer produce in the labor market at an economic value as they could before their injury need the benefit of a permanent disability rating that clearly reflects their actual loss of earning capacity in order to make their mortgage payments, in order to put their kids through school and college, in order to meet the expenses of daily necessities, and to perhaps make up for the pension that they will not earn because they are now too disabled to earn substantial amounts of money. The purpose of the permanent disability rating schedule for those who have truly lost future earning capacity is to adequately compensate them. In the 9-19-2006 veto message of SB815, Governor Schwarzenegger stated, "If we found that seriously injured workers were falling through the cracks, we would fix it." He stated that "I am committed to making any changes necessary to ensure that workers unfairly impacted by workers' compensation reform receive appropriate medical treatment and indemnity benefits".

To the extent that vocational evidence can ensure that seriously injured workers who have a major economic impact imposed on them by their disability are not unfairly impacted or disadvantaged, the present rating system will work well without any major reforms being needed. However, this depends on the ability of applicant attorneys to present vocational evidence to measure the true loss of earning capacity for those workers who have been seriously impacted by their disabilities and cannot return to pre-injury employment earnings levels.