Diaz v. WILDERNESS RESORT ASS'N

COURT OF APPEALS OF VIRGINIA

Present: Judges Elder, McClanahan and Haley
Argued at Richmond, Virginia

NICOLASA A. DIAZ
OPINION BY
v. Record No. 1846-09-2 JUDGE LARRY G. ELDER
APRIL 20, 2010
WILDERNESS RESORT ASSOCIATION AND
LIBERTY MUTUAL INSURANCE COMPANY

FROM THE VIRGINIA WORKERS’ COMPENSATION COMMISSION

Wesley G. Marshall (Law Offices of Wesley G. Marshall PLC, on
briefs), for appellant.

Christopher R. Costabile (Law Offices of Christopher R. Costabile,
on brief), for appellees.

Nicolasa A. Diaz (claimant) appeals from a decision of the Workers’ Compensation

Commission terminating the obligation of Wilderness Resort Association and Liberty Mutual

Insurance Company (hereinafter collectively employer except where otherwise noted) to pay her

temporary disability benefits pursuant to an award and declining claimant’s request for penalties

and interest based on what she contends was employer’s late payment of those benefits. On

appeal, claimant contends the commission erroneously concluded that the application was

properly docketed, that employer and carrier properly paid all compensation due pursuant to the

award, and that claimant was not entitled to statutory penalties or interest. We hold the record

supports the commission’s conclusion that employer’s hearing application was properly

docketed. We also hold the commission erred in concluding that the wages employer paid

claimant constituted compensation for purposes of determining whether all compensation due

under the award had been paid and whether employer and carrier owed penalties and interest.
Finally, we conclude the commission erred in not awarding (a) penalties on all late paid

compensation and (b) interest on compensation delayed during the pendency of this appeal.

Thus, we affirm in part, reverse in part, and remand for further proceedings consistent with this

opinion.

I.

BACKGROUND

On February 23, 2000, while working as a housekeeper for employer, claimant sustained

a compensable injury to her back. Employer paid benefits for various periods of disability, and

in 2003, following a dispute about claimant’s entitlement to additional benefits, the commission

entered an award for temporary total disability benefits commencing July 19, 2003, and

continuing. Claimant returned to light-duty work with employer on August 1, 2004, at which

time she was paid a gross weekly wage of $415.20 or higher, which was greater than her gross

pre-injury average weekly wage of $310.93. Employer notified the carrier that claimant had

returned to work, and the carrier ceased its payments of disability compensation.

Later that month, the commission sent its standard letter to the carrier indicating its

records reflected an outstanding award and notifying the carrier that if payments had been

terminated, it was required to file an executed termination of wage loss award form or an

employer’s application for hearing to end the award. The carrier responded that claimant had

returned to work at a wage greater than her pre-injury wage and indicated that, although it had

provided claimant with an agreement to pay benefits form and a termination of wage loss award

form on two occasions, she had not signed the forms.

By letter dated November 19, 2004, the commission notified the carrier it “ha[d] been

advised that because of difficulties in obtaining an executed Termination of Wage Loss Award,

[it] ha[d] unilaterally terminated [claimant’s] compensation benefits.” The commission directed

-2-
employer “to submit evidence that benefits have been reinstated or a basis upon which benefits

may be suspended” within two weeks. Employer thereafter submitted properly executed

termination of wage loss award forms covering six different periods of temporary partial and

total disability, including not only the period for which the award was outstanding but also for

several one- to three-day periods during 2002.

By notice dated April 20, 2005, the commission notified the carrier that it was required to

file additional forms before the commission could enter the requested orders. By letter dated

June 5, 2005, the commission again notified the carrier that it required additional forms to

terminate the outstanding award and it explained with specificity what forms were needed. It

emphasized that “[u]ntil the proper agreements are received the outstanding award is in effect.”

Employer apparently took no additional action to submit the requested paperwork, and by

letter of December 5, 2005, claimant’s attorney sought full compliance with the ongoing award

and a twenty percent penalty for non-compliance. Claimant also sought compliance with the

outstanding medical award and temporary total disability for several additional one- to three-day

periods of disability in 2005. The commission issued a show cause order commanding the

carrier to appear before the commission. The carrier filed an affidavit indicating it had

authorized payment for thirteen days of temporary total disability benefits and payment of a

twenty percent penalty, as well. The commission entered an order on February 27, 2006,

dismissing the show cause.

On March 2, 2006, the commission again sent the carrier its standard form letter

indicating the award remained outstanding and that it assumed payments under the award were

continuing. By letter dated May 3, 2006, claimant’s attorney forwarded employer’s attorney a

supplemental agreement to pay benefits form, executed by claimant, for one of the periods for

which the commission had indicated it still required such documentation, and claimant’s counsel

-3-
asked the carrier to forward the appropriate form to the commission, which it appears the carrier

never did.

On March 1, 2007, the commission yet again sent the carrier its standard form letter

indicating an award was outstanding and that it assumed payments under the award were

continuing.

By letter to the commission dated June 23, 2008, claimant’s attorney renewed his request

for entry of an order requiring employer to comply with the outstanding award and for

assessment of a twenty percent penalty on all compensation more than 14 days past due.

Claimant’s attorney indicated that if employer disputed its obligation to pay compensation or

penalties, claimant desired an evidentiary determination or entry of an order to show cause.

Employer and carrier responded by filing an employer’s application for hearing form

dated July 8, 2008. That application, completed by the carrier’s attorney, alleged claimant had

returned to light-duty work on August 1, 2004, at her pre-injury average weekly wage. Although

the carrier had earlier terminated claimant’s temporary total disability compensation payments

upon her return to work in 2004, the carrier indicated that in conjunction with filing the 2008

application for hearing, it made a lump sum payment to claimant for temporary total disability at

the rate of $207.28 due under the award for the period from her return to work on August 1,

2004, through July 8, 2006, two years prior to the date on which it completed the application for

hearing form. The application also requested “credit for overpayment of benefits” for that same

-4-
period. The carrier issued claimant a check for $20,551.90, which indicated it was disability

compensation for the relevant time period 1 at the lower rate of $206.68. 2

Claimant’s attorney opposed employer’s application for hearing, alleging, inter alia, that

the check should instead have been for $20,935.28. The commission’s dispute resolution

department determined that the carrier’s application was supported by probable cause and

referred it to the hearing docket. Employer defended on the ground “that the employer was

paying [wages] at or above the comp rate for all days except when the claimant was out of work

and that the payments were therefore not late.” Employer also offered evidence of the temporary

total disability compensation payments the carrier made to claimant in the course of the 2006

show cause proceeding for twelve dates in 2005, and claimant stipulated that employer made

payments to her on February 23, 2006, totaling $354.36. 3 Finally, employer offered wage

evidence showing claimant returned to light-duty employment with it in 2004 and that she had

remained employed by employer since that time, earning more than her pre-injury average

weekly wage every week during that period.

In a written decision dated December 22, 2008, the deputy held as follows:

When the employer filed its application [for hearing] on July 8,
2008, it was required by Rule 1.4(C) to pay benefits through the
alleged date of return to work [on August 1, 2004]. Rule 1.4(E)
[further] provides that no change in condition may be considered
unless filed “within two years from the date compensation was last
paid pursuant to an award.” In an effort to comply with this
section, the employer paid the claimant $20,551.90 for temporary

1
The check indicated it was for compensation through “07/08/08,” but the parties agreed
the date indicated should have been 2006 rather than 2008.
2
Claimant was initially paid temporary total disability compensation at the rate of
$206.68 under a July 18, 2002 award. In 2003, however, the parties agreed that the correct
weekly compensation rate was $207.28, and the commission entered an order to that effect.
3
These payments were erroneously based on the compensation rate of $206.68 rather
than $207.28. See supra footnote 2.

-5-
 total disability benefits for the period August 1, 2004 through July
8, 2006. However, the correct amount due the claimant was
$20,936.29. We find that the application is void ab initio.

On that basis, the deputy held claimant was entitled to “the underpayment and penalties.”

The employer and carrier filed a request for review, again alleging that because employer

paid claimant wages in excess of her compensation rate through the date of the hearing, the

application for hearing was not void ab initio. Employer conceded that when it filed its

application for hearing asking to terminate the award, it underpaid the amount of compensation

due to bring its payments under the outstanding award current to within two years of the date of

the filing of the application. 4

On review, a majority of the commission rejected the deputy’s ruling and sided with

employer, holding “employer’s application was valid.” Noting that the employer “erroneously

paid a lesser amount than the owed $20,936.29,” the commission nevertheless concluded

employer’s payment of wages to claimant for light-duty work at a rate equal to or greater than

her pre-injury average weekly wage constituted the payment of compensation under the tolling

provisions of Code § 65.2-708. It reasoned as follows:

[T]he dissent argues that [Code §] 65.2-708(C), the tolling
provision for the two-year statute of limitations . . . in [Code
§] 65.2-708(A)[,] does not apply when an employee is under an
Award. The effect of such a holding would be that [§] 65.2-708(C)
applies to employees but not to employers, since employer’s
applications seek to terminate [existing] awards. If no award
exists, then there would be no basis upon which an employer could
file a change in condition application. Indeed, the Commission
routinely dismisses employer change in condition applications
which are filed when an award is not in place.

4
Employer conceded it owed a total of $20,936.29 for the entire period between August
1, 2004, and July 8, 2006, and made a lump sum payment of only $20,551.90, which would
result in an underpayment of $384.39. In so doing, it may have overlooked the payments of
temporary total disability for various dates in 2005 it made on February 23, 2006. Under either
method of calculation, however, employer’s payment was insufficient to satisfy the
commission’s “strict interpretation of [Rule 1.4’s] provisions,” Specialty Auto Body v. Cook, 14
Va. App. 327, 331, 416 S.E.2d 233, 235 (1992), and employer does not contend otherwise.
-6-
 However, if the Virginia General Assembly intended to
preclude employers from invoking [Code §] 65.2-708(C), it could
have done so within the language of the statute. There is simply no
exception specified within the language of [Code §] 65.2-708(C)
that indicates that this provision is inapplicable to change in
condition filings by employers.
Here, the employer paid wages at a rate greater than or
equal to the pre-injury wage to an employee who was physically
unable to return to [her] pre-injury work due to a compensable
injury and who was provided work within [her] capacity. Pursuant
to the plain language of [§] 65.2-708(C), this is all that is required
for the wages to “be considered compensation.”
Accordingly, we terminate the outstanding award effective
July 8, 2006[,] as the employer properly paid compensation in
connection with the filing of its application pursuant to [Code
§] 65.2-708(C). In passing, we note that our decision on this issue
clearly works no hardship on the claimant, as [s]he has, even under
our holding, been overpaid by over $20,000 which the carrier will
not be able to recover by way of a credit or otherwise.

The commission terminated the award as of July 9, 2006, and denied claimant’s request for

penalties and interest.

Commissioner Diamond dissented, agreeing with the deputy’s ruling that employer’s

application was void ab initio. She cited Scott v. Scott, 16 Va. App. 815, 433 S.E.2d 259 (1993),

for the proposition that subsection (C) of Code § 65.2-708 extends the statutory period in

subsection (A) of that statute “‘to prevent employers from lulling partially disabled workers into

a false sense of security during this two year period by providing employees light duty work at

their pre-injury wage for two years and then terminating the employee without liability for future

disability benefits.’” She averred subsection (C) “would only apply if the employee was not

under award for compensation benefits and needed to file a change in condition application to

receive an additional award of compensation” and “does not mean we will now equate wages

[paid to an employee who has returned to work for her employer in a light-duty capacity] as

compensation which was paid pursuant to an award.”

-7-
 Commissioner Diamond relied upon the ruling in Genesis Health Ventures, Inc. v. Pugh,

42 Va. App. 297, 591 S.E.2d 706 (2004), in which the injured claimant returned to work for the

pre-injury employer, at which time the employer stopped paying compensation but failed to file

an application for hearing to terminate the disability award until a little over two years later.

Commissioner Diamond noted that the commission’s claims examiner rejected the application as

invalid under Rule 1.4 (tracking the language of Code § 65.2-708(A)); that the commission

affirmed on review; and that the Court of Appeals affirmed the rejection because, quoting Pugh,

42 Va. App. at 299-300, 591 S.E.2d at 707, ‘“the application was not “filed within two years

from the date compensation was last paid pursuant to [the] award” and . . . did not satisfy the

requirement of Rule 1.4(E).’”

Finally, Commissioner Diamond reasoned that “[t]he most logical way to address this

issue is to require the employer to file an application when the employee returns to work and if

the employer does not follow the rules, then the employer must pay the correct amount of

compensation as awarded by the Commission.” She argued that, “[o]therwise, the

[commission’s] Benefits Administration Department will not be able to determine if the

application is technically correct.”

Claimant noted this appeal.

II.

ANALYSIS

Claimant contends the commission erroneously concluded that employer’s application for

hearing was properly docketed, that employer’s payment of wages should be considered the

payment of compensation due pursuant to the outstanding award, and that those payments were

made in a timely fashion such that claimant was not entitled to statutory penalties or interest. For

the reasons that follow, we hold the commission properly concluded it had authority to consider

-8-
employer’s application for hearing but erroneously concluded both that employer had paid all

compensation due under the award and that claimant was not entitled to penalties or interest.

A. APPLICABLE LAW AND RULES

On review on appeal, we must defer to the commission’s findings of fact if supported by

credible evidence in the record. Rusty’s Welding Serv., Inc. v. Gibson, 29 Va. App. 119, 127,

510 S.E.2d 255, 259 (1999) (en banc). “When a challenge is made to the commission’s

construction of its rules, ‘our review is limited to a determination of whether the commission’s

interpretation of its own rule was reasonable.’ We will not set aside the commission’s

interpretation of its rules unless that interpretation is arbitrary and capricious.” Boyd v. People,

Inc., 43 Va. App. 82, 86-87, 596 S.E.2d 100, 102-03 (2004) (quoting Classic Floors, Inc. v. Guy,

9 Va. App. 90, 93, 383 S.E.2d 761, 763 (1989)). As to issues of statutory construction,

[a]lthough “the practical construction given to a statute by public
officials charged with its enforcement is entitled to great weight by
the courts and in doubtful cases will be regarded as decisive,” [S.]
Spring Bed Co. v. State Corp. Comm’n, 205 Va. 272, 275, 136
S.E.2d 900, 902 (1964), “when an issue involves a pure question of
statutory interpretation, that issue does not invoke the agency’s
specialized competence but is a question of law to be decided by
the courts.” Alliance to Save the Mattaponi v. Commonwealth,
270 Va. 423, 442, 621 S.E.2d 78, 88 (2005).

Commonwealth v. Barker, 275 Va. 529, 536, 659 S.E.2d 502, 505 (2008); see Gordon v. Ford

Motor Co., 55 Va. App. 363, 370 n.5, 685 S.E.2d 880, 883 n.5 (2009) (en banc).

Pursuant to Code § 65.2-708(A), “a party may ask the commission to ‘review any award’

of benefits based upon a change of condition.” Gordon, 55 Va. App. at 369, 685 S.E.2d at 883

(quoting Code § 65.2-708(A)). That subsection provides in relevant part as follows:

Upon its own motion or upon the application of any party
in interest, on the ground of a change in condition, the Commission
may review any award and on such review may make an award
ending, diminishing or increasing the compensation previously
awarded, subject to the maximum or minimum provided in this
title . . . . No such review shall affect such award as regards any
-9-
 moneys paid except [under certain circumstances not applicable in
the instant case]. No such review shall be made after twenty-four
months from the last day for which compensation was paid,
pursuant to an award under this title, except [under certain
circumstances not applicable in the instant case].

Code § 65.2-708(A). “This section is the only statutory authority for a review on the ground of a

change in condition,” and both the claimant and the insurer or employer derive “the same” rights

“to make such application” “from the same source.” Bristol Door & Lumber Co. v. Hinkle, 157

Va. 474, 477, 161 S.E. 902, 903 (1932) (decided under § 47 of a predecessor version of the

Workers’ Compensation Act, 1918 Va. Acts. ch. 400).

We recently observed that

the twenty-four-month limitation of Code § 65.2-708(A) “is not a
statute of limitations in the ordinary sense. It does not provide that
[a party] has twenty-four months from the date the change in
condition occurred to file.” Rather subsection A provides that the
change in condition must occur within twenty-four months from
the date [for which] compensation was last paid.

Gordon, 55 Va. App. at 369, 685 S.E.2d at 883 (quoting Armstrong Furn. v. Elder, 4 Va. App.

238, 241, 356 S.E.2d 614, 615 (1987) (applying former Code § 65.1-99, now Code

§ 65.2-708(A))). It is also well settled that the time provisions of Code § 65.2-708 are not

jurisdictional and may be waived. Binswanger Glass Co. v. Wallace, 214 Va. 70, 74, 197 S.E.2d

191, 194 (1973) (decided under the predecessor statute, Code § 65.1-99).

As we also have recently observed, “Subsection [(C)] of Code § 65.2-708, in turn,

operates as a tolling provision that extends th[e] limitation [in subsection (A)]. This tolling is

effected by an expanded definition of compensation to include wages paid to a claimant for

light-duty work that are equal to or greater than his pre-injury wages . . . .” Gordon, 55 Va. App.

at 369-70, 685 S.E.2d at 883. As set out in subsection (C),

All wages paid, for a period not exceeding twenty-four
consecutive months, to an employee (i) who is physically unable to
return to his pre-injury work due to a compensable injury and
- 10 -
 (ii) who is provided work within his capacity at a wage equal to or
greater than his pre-injury wage, shall be considered compensation.

Code § 65.2-708(C).

Pursuant to subsection (A) of the statute, the commission has developed Rule 1.4, which

provides in relevant part that if an employer wishes to have a change-in-condition application

docketed and set for hearing, “[c]ompensation shall be paid through the date the application was

filed, unless” “[t]he application alleges the employee returned to work, in which case payment

shall be made to the date of the return.” Rule 1.4(C)(1). 5 In addition, subsection (E) of Rule 1.4,

which tracks the language in the last sentence of Code § 65.2-708(A), provides that “[n]o change

in condition application under § 65.2-708 of the Code of Virginia shall be accepted unless filed

within two years from the date compensation was last paid pursuant to an award.”

B. DOCKETING OF EMPLOYER’S APPLICATION

Neither Code § 65.2-708 nor the related commission rule, Rule 1.4, provides a time

limitation within which an employer must file a change-in-condition application after a claimant

returns to work at or above his pre-injury wage, as it must if it wishes to have the commission

terminate an outstanding award without the claimant’s consent. 6 See May v. Hartz Broadway,

5
In Sargent Electric Co. v. Woodall, 228 Va. 419, 323 S.E.2d 102 (1984), based on
language in the predecessor to present Rule 1.4, the Court, without discussion, interpreted the
rule’s “‘returned to work’” language to mean “returned to work at an average weekly wage equal
to [the employee’s] pre-injury wage.” 228 Va. at 422 n.1, 425, 323 S.E.2d at 103 n.1, 105
(quoting Rule 13 as it existed prior to the amendment effective May 1, 1979) (emphasis added).
The commission gives present Rule 1.4(C)(1) a similar construction. See Odin, Inc. v. Price, 23
Va. App. 66, 70, 474 S.E.2d 162, 163-64 (1996) (noting the commission’s holding that where a
claimant was under an outstanding award of temporary total disability and “returned to work at a
lesser wage” with the employer’s knowledge, the employer was “not entitled to unilaterally
discontinue payment of compensation” and was required to “file an Agreed Statement of Fact
[endorsed by both parties] memorializing the return to work,” along with “a Supplemental
Memorandum of Agreement for the temporary partial disability that was clearly due,” or “an
Employer’s Application for Hearing”).
6
This issue is distinct from the question of how long an employer may wait after
terminating compensation to file the related change-in-condition application. Other than the
- 11 -
No. 218-80-32 (Va. Workers’ Comp. Comm’n Aug. 22, 2007). Code § 65.2-708(A) provides

instead simply that, subject to certain exceptions not applicable here, “[n]o such review shall be

made after twenty-four months from the last day for which compensation was paid.” Code

§ 65.2-708(A) (emphasis added); see also Rule 1.4(E) (providing in the commission’s rule

relating to employers’ applications for hearing that “[n]o change in condition application under

§ 65.2-708 . . . shall be accepted unless filed within two years from the date compensation was

last paid pursuant to an award”). Construed together, the statute and Rule 1.4 require that where,

as here, a claimant under an outstanding award returns to work earning a wage at or above her

pre-injury wage and the employer unilaterally ceases making payments under the award, if the

employer waits more than two years after the last date for which it paid compensation to request

a hearing to terminate the award, it must pay “compensation” as defined by the Act through a

date no less than two years prior to the date on which it files its application for hearing.

Here, claimant returned to work on August 1, 2004, at which time employer ceased

making compensation payments under the award, and employer filed its application to terminate

two-year restriction in Code § 65.2-708(A), see also Rule 1.4(E), in the case of an employee’s
return to work at or above his pre-injury wage, neither the statute nor the rule explicitly states
how long an employer may wait after terminating compensation to file the related
change-in-condition application. Compare Rule 1.4(C)(1) (providing that upon an employer’s
filing of a change-in-condition application, “[c]ompensation shall be paid through the date the
application was filed, unless . . . 1. [t]he application alleges the employee returned to work, in
which case payment shall be made to the date of the return [to work]” (emphasis added)), with
Rule 1.4(C)(2) (providing that upon an employer’s filing of a change-in-condition “application
alleg[ing] a refusal of selective employment or medical attention or examination, . . . payment
shall be made to the date of the refusal or 14 days before filing, whichever is later” (emphasis
added)), and Rule 1.2(B) (providing that upon an employee’s filing of a change-in-condition
application, “[a]dditional compensation may not be awarded more than 90 days before the filing
of the claim” (emphasis added)). For all types of change-in-condition applications other than an
employer’s application based on a return to work at or above the claimant’s pre-injury wage, the
commission’s rules contain explicit time limitations for when compensation may be terminated
in relation to when the application is filed. See Rules 1.2 & 1.4. We need not consider on these
facts whether some other legal principle might require an employer to file by a date earlier than
“twenty-four months from the last day for which compensation was paid” because claimant has
not advanced such an argument in this case.
- 12 -
the award on July 8, 2008, almost four years later. Thus, in order to have its application for

hearing docketed, employer was required to pay “compensation” within the meaning of Code

§ 65.2-708 through at least July 8, 2006, the date two years prior to the filing of the application.

The commission concluded that employer’s payment of wages to claimant for light-duty

work at a rate equal to or greater than her pre-injury wage constituted the payment of

“compensation” as defined in Code § 65.2-708(C), thereby satisfying the time provisions of

Code § 65.2-708(A). Under the commission’s reasoning, per subsection (C) of Code § 65.2-708,

employer’s ongoing payment of these wages to claimant beginning on the date of her return to

work on August 1, 2004, tolled the subsection (A) statute of limitations for up to twenty-four

consecutive months, until August 1, 2006. Per subsection (A), employer then had twenty-four

months from August 1, 2006—the date the tolling ceased—to file a timely change-in-condition

application. Thus, employer’s filing on July 8, 2008—just three weeks before the expiration of

the statute of limitations on August 1, 2008—was timely.

Claimant contends, as the dissenting commissioner posited, that subsection (C) applies

only to applications submitted by claimants and not to those submitted by employers. She points

to various appellate decisions commending the commission’s promulgation of its Rule 1.4 “to

police th[e] tendency of employers and insurers to terminate first and litigate later,” Dillard v.

Commission, 416 U.S. 783, 789, 94 S. Ct. 2028, 2032, 40 L. Ed. 2d 540, 547 (1974), quoted with

approval in Speciality Auto Body v. Cook, 14 Va. App. 327, 330-31, 416 S.E.2d 233, 235

(1992). She cites the evolution of the various subsections of Code § 65.2-708 in support of her

argument.

We hold the commission properly interpreted Code § 65.2-708(C) as it applies to toll the

provisions of subsection (A). In our recent decision in Gordon, which involved a claimant’s

- 13 -
application for hearing, we stated as follows without making any distinction between

applications filed by claimants and those filed by employers and carriers:

Subsection C sets forth a caveat to the operation of the subsection
A statute of limitations by providing that wages, when paid under
the prescribed circumstances, are “considered compensation.” As
a result, the payment of such wages tolls the statute of limitations
in the same manner as the payment of compensation. This caveat,
in turn, is subject to the condition that the wages will cease being
treated as compensation at the point when “a period” of such
payment of wages “exceed[s] twenty-four consecutive months.”

Gordon, 55 Va. App. at 372, 685 S.E.2d at 884 (quoting Code § 65.2-708(C) (emphasis

omitted)).

We see nothing in the language of the statute or its context within the Workers’

Compensation Act (the Act) to indicate subsection (C) applies to extend the statute of limitations

only for change-in-condition applications filed by claimants. “In construing statutes, courts are

charged with ascertaining and giving effect to the intent of the legislature.” Crown Cent.

Petroleum Corp. v. Hill, 254 Va. 88, 91, 488 S.E.2d 345, 346 (1997). “That intention is initially

found in the words of the statute itself, and if those words are clear and unambiguous, we do not

rely on rules of statutory construction or parol evidence, unless a literal application would

produce a meaningless or absurd result.” Id. “[W]here the legislature has used words of a plain

and definite import[,] the courts cannot put upon them a construction which amounts to holding

the legislature did not mean what it has actually expressed.” City of Va. Beach v. ESG Enters.,

243 Va. 149, 152-53, 413 S.E.2d 642, 644 (1992). Although the Act is “highly remedial” and

should “be liberally construed [in favor of claimants] to advance its purpose . . . [of

compensating employees] for accidental injuries resulting from the hazards of the employment,”

Henderson v. Cent. Tel. Co., 233 Va. 377, 382, 355 S.E.2d 596, 599 (1987), “‘statutory

construction may not be used to extend the rights created by the Act beyond the limitations and

purposes set out therein,’” Corp. Res. Mgmt. v. Southers, 51 Va. App. 118, 126, 655 S.E.2d 34,
- 14 -
38 (2008) (en banc) (quoting Garcia v. Mantech Int’l Corp., 2 Va. App. 749, 754, 347 S.E.2d

548, 551 (1986)).

Subsection (C) provides simply that “all wages paid . . . to an employee [that meet certain

requirements] shall be considered compensation.” This subsection provides no language

indicating it applies only to claimants’ applications for hearing or only when no compensation

award is then in effect. Cf. Hinkle, 157 Va. at 477, 161 S.E. at 903 (holding that subsection

(A)’s predecessor statute provides claimants and employers with “the same” rights upon the

occurrence of a change in condition). “Had the legislature intended a different result, it could

easily have used different language.” Scott, 16 Va. App. at 819, 433 S.E.2d at 262.

We also see nothing in the history of the evolution of the statute contravening its

language and compelling the conclusion that subsection (C) does not apply to the determination

of whether an employer’s application for hearing was timely filed. 7 Claimant points to our

decisions in Greene v. Gwaltney of Smithfield, Inc., 13 Va. App. 486, 413 S.E.2d 650 (1992),

and Scott, 16 Va. App. 815, 433 S.E.2d 259, for the proposition that the legislature’s sole

purpose in enacting Code § 65.1-55.1, the predecessor to Code § 65.2-708(C), was to benefit

claimants by “‘prevent[ing] possible abuse by employers of the two year limitation period

[previously] set forth in Code § 65.1-99 [and now codified in § 65.2-708(A)].’” Scott, 16

Va. App. at 819, 433 S.E.2d at 262.

It is true we held in Greene, 13 Va. App. at 492, 413 S.E.2d at 654, that the legislature, in

enacting Code § 65.1-55.1, “recognized the problem identified by Greene”–the need “to prevent

employers from lulling partially disabled workers into a false sense of security during this two

year period by providing employees light duty work at their pre-injury wage for two years and

then terminating the employee without liability for future disability benefits,” Scott, 16 Va. App.

7
See infra Part II(C) for a more detailed analysis of the evolution of this statute.
- 15 -
at 819, 433 S.E.2d at 262 (relying on Greene and stating in another context that “[the] statute was

designed to prevent possible abuses by employers of the two year limitation period set forth in

Code § 65.1-99”). Further, settled principles provide that “a statute should, if possible, be given

a reasonable construction which will effect rather than defeat a legislative purpose evident from

the history of the legislation.” Ambrogi v. Koontz, 224 Va. 381, 389, 297 S.E.2d 660, 664

(1982). Here, the statute accomplishes the purpose of protecting claimants regardless of whether

it also applies to applications submitted by employers. We did not hold in Greene or Scott that

the legislature’s only purpose in enacting the predecessor to subsection (C) of Code § 65.2-708

was to protect claimant employees. In short, the language of the statute prevails, and if the

legislature had intended for Code § 65.2-708(C) to apply only to claimants’ change-in-condition

applications, it could have said so.

Of course, to the extent Rule 1.4’s purpose of “policing th[e] tendency of employers and

insurers to terminate first and litigate later” to the detriment of the claimant might conflict with

the tolling provisions of Code § 65.2-708(C), the statute’s provisions would control. See Ashby

v. Ramar Coal Co., 47 Va. App. 8, 13, 622 S.E.2d 230, 232-33 (2005) (noting the commission

lacks power to make rules that are inconsistent with the Act and that in the case of a conflict,

“the statute must prevail”). In any event, we detect no conflict. To the contrary, we conclude the

tolling provision of Code § 65.2-708(C) ensures that injured employees are not deprived of the

financial resources to which they are entitled under the Act (disability compensation or

pre-injury wages) while simultaneously providing that, where an employee is working in

light-duty employment provided by the employer and earning at least his pre-injury average

weekly wage, the employer and carrier may have the commission docket an application

requesting the termination or adjustment of the outstanding award without being required to pay,

in addition to the claimant’s wages, compensation it may never be able to recoup. However, the

- 16 -
issue of the docketing of the employer’s application for hearing is separate and distinct from the

issue of whether the employer and carrier may subsequently be found to owe additional

compensation and penalties under the ongoing award.

Employers will comply with the Act by paying compensation when due under an award

and seek immediate adjustment of an award when circumstances change that may justify

reduction or termination. An employer who fails promptly to request such action does so at its

peril. However, Code § 65.2-708 provides an employer is entitled to file its application for

hearing without bringing its compensation payments current to closer than two years to the date

of filing. 8

C. CLAIM FOR ADDITIONAL COMPENSATION AND PENALTIES

Claimant contends further, however, that the commission erroneously extended

subsection (C)’s statement that the wages of specified employees “shall be considered

compensation” under certain circumstances beyond the confines of Code § 65.2-708 to other

portions of the Act involving calculation of the amount of compensation and penalties to which

she was entitled under the outstanding award. After holding that the wages employer paid would

“be considered compensation” “[p]ursuant to the plain language of [Code §] 65.2-708(C),” the

commission concluded without further explanation that termination of the award effective July 8,

2006, two years prior to the date on which employer filed its application for hearing, was

8
Our decision in Pugh, 42 Va. App. 297, 591 S.E.2d 706, relied upon by claimant and the
dissenting commissioner, does not require the reversal of the commission’s decision to docket
employer’s application for hearing. Pugh involved a claimant who was paid wages upon return
to his full pre-injury employment, see Pugh v. Genesis Health Ventures, Inc., No. 202-16-56 (Va.
Workers’ Comp. Comm’n Jan. 23, 2003), whereas Code § 65.2-708(C)’s expanded definition of
wages expressly applies only where the claimant is “physically unable to return to his pre-injury
work due to a compensable injury” and is “provided work within his capacity at a wage equal to
or greater than his pre-injury wage,” see Nguyen v. Fairfax County Bd. of Sup’rs., 26 Va. App.
100, 103, 493 S.E.2d 391, 392 (1997). Thus, our decision in Pugh does not compel the rejection
of employer’s application for hearing.

- 17 -
appropriate because “the employer properly paid compensation in connection with the filing of

its application.” The commission made no mention of the penalties and interest claimant had

requested and observed that its decision to terminate benefits without awarding any additional

payments “clearly works no hardship on the claimant, as [s]he has, even under our holding, been

overpaid by over $20,000 which the carrier will not be able to recover by way of a credit or

otherwise.” The commission, which had already found that employer did not pay temporary

total disability benefits in the amount due through July 8, 2006, therefore implicitly held that

wages “considered compensation” for purposes of Code § 65.2-708(C) would also be

“considered [timely-paid] compensation” for purposes of the outstanding award. Based on the

above principles of statutory construction and the legislative history surrounding Code

§ 65.2-708(C), we agree that the commission’s holding on this issue in this case was erroneous 9

and that claimant is entitled to unpaid compensation and penalties for late payment.

The language in present Code § 65.2-708 comprises what was once two separate code

sections, §§ 65.1-99 and -55.1. Code § 65.1-99, the predecessor to subsection (A) of Code

§ 65.2-708, provided the time limitation for filing a change-in-condition application. That statute

originally allowed the commission to review an award based on a change in condition “at any

time,” see 1918 Va. Acts. ch. 400, and evolved into the present limit of twenty-four months, see

1977 Va. Acts ch. 380. In 1989, the legislature enacted former Code § 65.1-55.1, the substance

of which is presently codified in subsection (C) of Code § 65.2-708. See 1989 Va. Acts ch. 552.

As already discussed, that enactment was based in some part upon the concern that

9
We note that, on a prior occasion, the commission reached what we hold today to be the
correct conclusion. See Peak v. McNew, No. 158-56-32 (Va. Workers’ Comp. Comm’n June 23,
1994) (“We now consider payment of regular wages to a partially impaired worker to be
‘compensation’ for the purposes of filing change in condition applications . . . because of a
recent specific statutory change extending the definition for that very limited purpose.” (citing
Code § 65.2-708) (emphasis added)).
- 18 -
 unless wages paid in lieu of compensation are treated as
compensation benefits paid under an award, employers will be able
to deprive employees of their full compensation benefits merely by
providing them light-duty employment at their pre-injury wage, in
lieu of paying workers’ compensation benefits, and then
terminating employees with impunity as soon as the period of
limitation provided in Code § 65.1-99 [for filing a change in
condition application] had expired.

Greene, 13 Va. App. at 492, 413 S.E.2d at 654. As enacted in 1989, former Code § 65.1-55.1

provided as follows:

All wages paid, for a period not exceeding twenty-four consecutive
months, to an employee (i) who is physically unable to return to
his pre-injury work due to a compensable injury and (ii) who is
provided work within his capacity at a wage equal to or greater
than his pre-injury wage shall, for the sole purposes of Code
§ 65.1-99, be considered compensation.

1989 Va. Acts ch. 552 (emphasis added). Thus, as originally enacted, former Code § 65.1-55.1

expressly provided that its statement of what type of wages shall “be considered compensation”

applied only to determining whether a change-in-condition application under former Code

§ 65.1-99, now Code § 65.2-708(A), had been timely filed and did not apply to calculating the

amount of compensation ultimately due under the award. See Rose v. Red’s Hitch & Trailer

Serv., Inc., 11 Va. App. 55, 59, 396 S.E.2d 392, 394 (1990).

When the legislature recodified Title 65.1 in 1991, it combined the provisions of former

Code § 65.1-99 and § 65.1-55.1 in the same statute, present Code § 65.2-708. See 1991 Va. Acts

ch. 355. Under settled principles, we presume “that a recodified statute does not make

substantive changes in the former statute unless a contrary intent plainly appears in the recodified

statute.” Waldrop v. Commonwealth, 255 Va. 210, 214, 495 S.E.2d 822, 825 (1998). Applying

these principles in this case, we presume that when the legislature combined these two statutes

and eliminated the language indicating the definition of “wages” to be “considered

compensation” applied only to applications for change in condition, the legislature did not intend

- 19 -
to expand that definition of wages to other parts of the Act. Rather, we presume it intended no

change in the application of the definition and eliminated the phrase, “for the sole purpose of

Code § 65.1-99,” simply because, due to the consolidation of those provisions in a single statute,

that limitation was obvious and no longer required to be expressly stated. See Introduction to

Report of the Virginia Code Commission on the Recodification of Title 65.1 of the Code of

Virginia (1991) (indicating that many of the revisions were to “combin[e] [sections] that, while

topically related, were scattered throughout the title” and that “[d]rafting notes highlighting

significant changes . . . are provided throughout”); id. at 21 (including a drafting note indicating

that “[t]he provisions of [Code § 65.1-55.1] are incorporated into proposed § 65.2-708” and

making no mention of an intent to change the meaning of the provision by removing the

language limiting application of the “considered compensation” language); id. at 36-37

(including a drafting note indicating that due to the interrelationship of the subjects, Ҥ 65.1-55.1

is moved here to subsection C [of § 65.2-708]” and again making no mention of an intention to

change the meaning of former § 65.1-55.1 in doing so). Although we have not expressly

addressed this issue, our prior case decisions support this analysis. See Gordon, 55 Va. App. at

369-70, 685 S.E.2d at 883 (observing that “[s]ubsection [(C)] of Code § 65.2-708 . . . operates as

a tolling provision that extends th[e] limitation [in subsection (A)]” (emphasis added)); Augusta

County Sch. Bd. v. Humphreys, 53 Va. App. 355, 364 n.7, 672 S.E.2d 117, 121 n.7 (2009)

(holding that “[f]or purposes of tolling the statute of limitations on a change-in-condition

application, [Code § 65.2-708(C)] mandates [that all wages meeting certain criteria shall be

considered compensation]” (emphasis added)). Thus, we hold that by crediting employer for

wages paid to claimant following her return to work on August 1, 2004, as against the temporary

total disability compensation required to be paid under the outstanding award for purposes of

- 20 -
satisfying that award, the commission erroneously concluded that employer had paid all

compensation in a timely fashion and that no additional compensation or penalties were due.

Further, contrary to the arguments advanced by employer, Virginia’s prior appellate

decisions make clear in similar contexts that an employer who fails to comply with an

outstanding award is not entitled to be excused from paying past due benefits and penalties

simply because the claimant returned to work at a wage equal to or greater than his pre-injury

wage. As the Supreme Court held in Washington v. United Parcel Service of America, 267 Va.

539, 593 S.E.2d 229 (2004),

the relevant statutes do not give an employer or carrier the
unilateral right to cease paying compensation benefits to a disabled
employee under an outstanding award, when that employee returns
to work and the employer or carrier does not file an application
[for hearing] or [a termination of wage loss award form] 10 along
with a supplemental [agreement to pay benefits form]. 11

Id. at 545, 593 S.E.2d at 232 (footnotes added).

We applied this holding in The Washington Post v. Fox, 49 Va. App. 692, 644 S.E.2d

105 (2007). In Fox, the claimant, who was receiving temporary disability benefits pursuant to an

award, returned to work with the employer in a full-duty capacity at a wage equal to or greater

than his pre-injury wage, and the employer unilaterally ceased paying benefits “without filing the

appropriate paperwork with the commission.” Id. at 694-95, 644 S.E.2d at 106. Twice prior to

the employer’s unilateral cessation of payments, the commission sent the employer’s adjuster its

standard letter stating as follows: “Our records indicate an outstanding award in this case. The

Commission assumes that payments are continuing pursuant to the award. If payments have

10
The commission has replaced the agreed statement of fact form with the termination of
wage loss award form. See Carter v. Denny’s, No. 179-91-88 (Va. Workers’ Comp. Comm’n
Dec. 8, 2000).
11
The commission has replaced the memorandum of agreement form with the agreement
to pay benefits form. See Southers, 51 Va. App. at 129 n.4, 655 S.E.2d at 39 n.4.
- 21 -
ceased, an executed [Termination of Wage Loss Award form] or an Employer’s Application for

Hearing must be filed to end the award.” Id. at 695, 644 S.E.2d at 106. Between 1996 and 2003,

after the employer’s unilateral cessation of payments, the commission sent the employer’s

insurance adjusting service an additional seven letters containing the same or similar

information, but employer’s adjuster failed to file the forms necessary to have the award

terminated. Id. at 695-96, 644 S.E.2d at 106-07. The award terminated by operation of law upon

the passage of 500 weeks during which the award was outstanding. Id. at 696, 644 S.E.2d at

107. Thereafter, the claimant filed an application alleging the employer had underpaid him

because it had ceased making temporary partial disability payments when the claimant ceased to

experience a wage loss in 1996, even though the award remained outstanding for several more

years. Id. The claimant also sought interest and a 20% penalty. Id. at 698, 644 S.E.2d at 107.

The deputy “declined to award back benefits and assess interest and a penalty,” finding

that to do so “would unjustly enrich [the] claimant.” Id. at 698, 644 S.E.2d at 108. The

commission ruled the Supreme Court’s holding in Washington dictated a contrary result, and we

agreed. Fox, 49 Va. App. at 698-99, 703, 644 S.E.2d at 108, 110. We also relied on language in

Uninsured Employer’s Fund v. Peters, 43 Va. App. 731, 601 S.E.2d 687 (2004), that the

claimant’s right to compensation due under the open award had vested, and we held

no legal authority supports [the] employer’s argument that, under
the facts of this case, it should be excused from the consequences
of its decision to unilaterally stop paying [the] claimant
compensation benefits due under the March 19, 1993[,]
outstanding award, when he returned to work with employer in
April 1996, without filing the appropriate paperwork or an
employer’s application with the commission to terminate that
award.

Fox, 49 Va. App. at 700, 644 S.E.2d at 109. We cited the commission’s repeated notifications to

the employer that the award remained outstanding and the employer’s repeated failure to take

appropriate action. Id.
- 22 -
 Similarly, here, although the commission notified employer the award had not been

properly terminated and employer attempted to submit the paperwork necessary to terminate the

award in the fall of 2004, the commission notified employer it had failed to submit certain

additional paperwork that was required to process the termination request. Employer failed to

act in response to that notice, and the commission notified employer on two additional occasions

during 2005 that the award remained outstanding and that it assumed payments under the award

were ongoing. On one of those occasions in 2005, the commission included an itemized list of

the additional documents employer needed to submit in order to have the award terminated, but

by late 2005, employer still had failed to comply.

In 2006, claimant, by counsel, notified the commission that employer was not paying her

pursuant to the outstanding award and sought employer’s full compliance and an award of

penalties. The commission issued a show cause order, and employer responded by paying

compensation for only twelve days of disability rather than the 18 months of disability

compensation then due pursuant to the ongoing award. The deputy dismissed the show cause,

but the commission again immediately sent employer its standard letter indicating the award

remained outstanding and that it assumed payments under the award were continuing. In May

2006, claimant forwarded employer a signed supplemental agreement to pay benefits form

covering one of the periods for which the commission had requested additional paperwork, but

employer apparently took no action with respect to that form.

In 2007, the commission yet again sent the carrier its standard letter indicating the award

remained outstanding, but again employer took no action in response to that letter. In 2008,

claimant renewed her request for entry of an order requiring employer to pay past due

compensation and penalties, and claimant indicated that if employer disputed its obligation to

pay compensation or penalties, she desired an evidentiary hearing or entry of an order to show

- 23 -
cause. The commission issued a second show cause order, and by submission dated July 8,

2008, employer finally requested a hearing seeking to terminate the award.

We hold the facts of this case are legally indistinguishable from Washington, Fox, and

Peters. Although employer submitted some of the forms required for termination, the

commission promptly notified employer it required certain additional forms in order to terminate

the ongoing award. Thereafter, despite repeated notifications like in Fox, employer took no

action whatever to seek termination of the open award for a period of more than three years. On

these facts, we hold the commission erred in failing to order payment of the remaining past due

compensation and penalties pursuant to Code § 65.2-524.

D. CLAIM FOR INTEREST

Claimant also requests payment of interest pursuant to Code § 65.2-707. That code

section provides that “[t]o the extent any payment due under an award is delayed beyond its due

date by reason of an appeal to the full Commission or an appellate court, payments so delayed

shall bear interest at the judgment rate as provided in § 6.1-330.54.” Code § 65.2-707 (emphases

added). Thus, on remand, the commission should determine how much compensation remains

“due [to claimant] under [the] award” within the meaning of Code § 65.2-707. Because penalties

are paid pursuant to Code § 65.2-524, they are not “payment[s] due under an award,” Code

§ 65.2-707, and thus, claimant is not entitled to interest on those sums. 12

III.

For these reasons, we hold the record supports the commission’s conclusion that

employer’s hearing application was properly docketed. We also hold the commission erred in

12
Although the commission’s decisions in other cases, like our own memorandum
opinions, are not binding on us, the commission reached this same conclusion in Kelley v.
Midway Trucking, Inc., No. 197-69-19 (Va. Workers’ Comp. Comm’n Apr. 23, 2001), aff’d per
curiam, No. 2597-03-3 (Va. Ct. App. Feb. 17, 2004).

- 24 -
concluding that the wages employer paid claimant constituted compensation for purposes of

determining whether all compensation due under the award had been paid and whether employer

and carrier owed penalties and interest. Finally, we conclude the commission erred in not

awarding (a) penalties on all late paid compensation and (b) interest on compensation remaining

due during the pendency of the appeal. Thus, we affirm in part, reverse in part, and remand for

further proceedings consistent with this opinion.

Affirmed in part,
reversed in part,
and remanded.

- 25 -