PA Workers’ Compensation Benefits Not Reduced by Social Security Retirement COLA

As we have discussed in prior blog entries, the sweeping 1996 amendments to the Pennsylvania Workers’ Compensation Act (“Act”) included a credit of 50% of the Social Security Retirement benefit (known formally, yet indelicately, as “Old Age” benefit), against the receipt of the workers’ compensation benefit.

Unlike PA workers’ compensation benefits, however, Social Security Retirement (“SSR”) benefits have a “cost of living adjustment,” (“COLA”) to allow the recipients to keep pace with growing inflation (and don’t get us started on the ridiculous unfairness of the absence of a similar provision within the PA Workers’ Compensation Act).  What had been unclear was whether the 50% offset against the workers’ compensation benefits included the COLA in the SSR.  A recent decision from Commonwealth Court of Pennsylvania resolved this novel issue in favor of injured workers (not to mention justice and fairness).

In the case of Cheryl McCartney v. Commonwealth of Pennsylvania (Workers’ Compensation Appeal Board),  Ms. McCartney suffered a disabling work-related injury in 1997, which was accepted by the issuance of a Notice of Compensation Payable (“NCP”).  In 2017, the injured worker began to receive SSR benefits, and the workers’ compensation insurance carrier began taking the 50% credit.

Subsequently, the injured worker received several COLAs to her SSR benefits.  Each time, the workers’ compensation insurance company increased its offset accordingly.  Finally, the injured worker challenged the offset as applying to the COLA.

In litigation before the Workers’ Compensation Judge (“WCJ”), the injured worker was successful in her argument.  The WCJ decided that the Act was silent on the issue and allowing such an increase to the offset “does not seem to serve the humanitarian purposes of the . . . Act or the purpose of the COLA increase in SSR benefits.”  Instead, the WCJ observed that allowing such an increased offset would diminish the value of the workers’ compensation benefit being received, since the workers’ compensation benefit has no analogous COLA provision.  As the WCJ observed, “[t]he offset allowed [in Section 204(a)] is set at the time the SSR benefit is received and shall not be readjusted based on SSR COLA increases.”  The WCJ did note that this only applied to the increase at issue and not the prior adjustments, since those had not been challenged.

Upon appeal, the Workers’ Compensation Appeal Board (“WCAB”) reversed the decision of the WCJ, and allowed the increased offset based on the COLA.  The WCAB found that the language in the Act was unambiguous, and that the offset was to include any amount received in SSR benefits.

The Commonwealth Court of Pennsylvania then reversed the WCAB, concluding that the WCJ had made the correct decision.  Note that this decision was barely a majority, at 4-3, with two dissents, so it was obviously a close call.

Initially, the Court reviewed the Act, and the law of statutory construction, and found that since the Act failed to address how COLA was to be treated, the Act was silent on that issue.  As such, the law was ambiguous.  The Court then moved on to other factors relevant to this decision.  The goals of the legislators were found to be an important consideration.  Since the offset provision was created “to reflect the legislative intent to connect the offset to an employer’s contribution to the SSR benefits,” it was critical that the COLA was in no way provided by the Employer.  The contributions made by the Employer were frozen when the injured worker stopped being paid wages by the Employer.

In reviewing how to balance the Act, and the Congressional intent, the Court noted that:

“Once the ambiguous language of Section 204(a) is construed pursuant to the rules of statutory construction and precedent requiring the liberal construction of the Act due to the Act’s remedial purpose and humanitarian nature, increasing Employer’s offset for amounts it did not contribute to the SSR system violates those principles.”

In fact, the Court found that to allow this increased offset, for which the Employer contributed nothing, would represent a “windfall.”  And, of course, this would run contrary to the Act’s remedial purpose and humanitarian nature, as discussed above.

The Court then examined the status of the workers’ compensation laws in other States, and how they handle this issue.  Notably, many of these States have COLA provisions within their workers’ compensation system, so the comparisons were not identical.  The Court, in particular, was persuaded by a decision from the Colorado Supreme Court, denying an increased offset based on SSR COLA (Colorado’s workers’ compensation system also does not contain a COLA provision).

Based on everything it had considered, the Court determined:

“For the foregoing reasons, we conclude that the 50% offset language of Section 204(a) is ambiguous as to whether it applies to federally funded COLA increases to an injured worker’s SSR benefits and, therefore, the Court was required to examine other factors to ascertain the General Assembly’s intent in enacting that provision. After applying the rules of statutory construction and relevant precedent, and considering the persuasive decisions from other jurisdictions, we hold the Board’s interpretation of Section 204(a) that permits Employer to increase its offset based on Claimant’s receipt of a COLA increase to her SSR benefits, which are intended to “counter the effect of inflation and, thereby, to maintain [the SSR benefits’] value,” Herny, 776 So.2d at 933-34 (emphasis added), is contrary to the General Assembly’s intent, Congressional intent, and the humanitarian purpose of the Act. Therefore, the Board’s Order is reversed.”

As attorneys who represent injured workers throughout the State of Pennsylvania, we applaud the Court for making the fair and right decision.  We also commend the excellent work performed by the attorneys who pursued this case and obtained some degree of justice for injured workers across Pennsylvania.