No. 03-639
IN THE SUPREME COURT OF THE STATE OF MONTANA
2004 MT 370
DALE REESOR,
Petitioner and Appellant,
v.
MONTANA STATE FUND,
Respondent and Insurer.
APPEAL FROM: Workers’ Compensation Court, State of Montana,
The Honorable Mike McCarter, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Thomas J. Murphy (argued), Murphy Law Firm, Great Falls, Montana
For Respondent:
Thomas E. Martello (argued), Special Assistant Attorney General,
Montana State Fund, Helena, Montana
For Amicus Montana Self-Insurers Association:
Bradley J. Luck, Robert E. Sheridan (argued), Garlington, Lohn &
Robinson, PLLP, Missoula, Montana
For Amicus Montana Trial Lawyers Association:
Laurie Wallace (argued), Bothe & Lauridsen, P.C., Columbia Falls,
Montana
Argued and Submitted: May 5, 2004
Decided: December 22, 2004
Filed:
__________________________________________
Clerk
Justice Jim Regnier delivered the Opinion of the Court.
¶1 Dale Reesor (Reesor) filed a petition for hearing before the Workers’ Compensation
Court in which he alleged he suffered injury arising out of and in the course of his
employment with Northwest Equipment in Cascade County, Montana, an employer insured
by the State Compensation Insurance Fund (State Fund). Reesor contended that § 39-71-710,
MCA, unconstitutionally denied him equal protection under the laws; specifically, he
received lower permanent partial disability (PPD) benefits because of his age. The Workers’
Compensation Court rejected Reesor’s claim and held § 39-71-710, MCA, was
constitutionally sound because the receipt of social security retirement benefits, or eligibility
for such benefits, was a rough yardstick for determining whether there will be future wage
loss, and thus the statutory framework did not violate equal protection guarantees. Reesor
appeals from this conclusion. We reverse and remand.
¶2 The only issue on appeal is whether the age limitation on PPD benefits, set forth in
§ 39-71-710, MCA, violates Article II, Section 4 of the Montana Constitution.
BACKGROUND
¶3 On January 13, 2000, Reesor injured his right shoulder when he fell from the back of
a truck in the course and scope of his employment with Northwest Equipment in Cascade
County, Montana. Reesor was sixty-five years old at the time of injury. He began receiving
social security retirement benefits on May 24, 1999, his sixty-fifth birthday.
¶4 He reached maximum medical improvement on May 10, 2002, and his doctor rated
him at four percent permanent partial impairment. The State Fund paid temporary total
disability benefits from January 22, 2000, through August 2, 2002. At that point, the State
2
Fund paid PPD from June 10, 2002, through September 15, 2002, a total of fourteen weeks
of PPD/Impairment benefits or $2,975, representing his impairment award.
¶5 Due to his age, Reesor received no other PPD benefits other than the impairment
award. Pursuant to § 39-71-710, MCA, Reesor was not eligible to receive expanded PPD
benefits based on other enumerated factors set forth in § 39-71-703, MCA, specifically, age,
education, lifting restrictions and wage loss. If he had been eligible for additional benefits
pursuant to statute, he would have received an additional entitlement of $20,081.25 in PPD
benefits.
STANDARD OF REVIEW
¶6 When reviewing a question of constitutional law, this Court reviews conclusions of
law to determine whether they are correct. Henry v. State Compensation Ins. Fund, 1999 MT
126, ¶ 10, 294 Mont. 449, ¶ 10, 982 P.2d 456, ¶ 10. Statutes are presumed to be
constitutional, and the party challenging the constitutionality of a statute bears the burden of
proving, beyond a reasonable doubt, that the statute is unconstitutional. State v. Butler, 1999
MT 70, ¶ 8, 294 Mont. 17, ¶ 8, 977 P.2d 1000, ¶ 8.
DISCUSSION
¶7 Whether the age limitation on PPD benefits, set forth in § 39-71-710, MCA, violates
Article II, Section 4 of the Montana Constitution.
¶8 Article II, Section 4, of the Montana Constitution provides that “[n]o person shall be
denied the equal protection of the laws.” Reesor contends the failure of the Workers’
Compensation Act (WCA) to extend the same PPD benefits to “retired persons” as to
younger workers, pursuant to § 39-71-710, MCA, violates his rights to equal protection under
the Montana Constitution.
3
¶9 Section 39-71-710, MCA, termination of benefits upon retirement, provides:
(1) If a claimant is receiving disability or rehabilitation compensation
benefits and the claimant receives social security retirement benefits or is
eligible to receive or is receiving full social security retirement benefits or
retirement benefits from a system that is an alternative to social security
retirement, the claimant is considered to be retired. When the claimant is
retired, the liability of the insurer is ended for payment of permanent partial
disability benefits other than the impairment award, payment of permanent
total disability benefits, and payment of rehabilitation compensation benefits.
However, the insurer remains liable for temporary total disability benefits, any
impairment award, and medical benefits.
(2) If a claimant who is eligible under subsection (1) to receive retirement
benefits and while gainfully employed suffers a work-related injury, the
insurer retains liability for temporary total disability benefits, any impairment
award, and medical benefits.
¶10 When addressing an equal protection challenge, this Court must first identify the
classes involved, and determine if they are similarly situated. Geil v. Missoula Irr. Dist.,
2002 MT 269, ¶ 35, 312 Mont. 320, ¶ 35, 59 P.3d 398, ¶ 35. Reesor maintains the two
classes involved in this appeal are: (1) PPD eligible claimants who receive or are eligible to
receive social security retirement benefits; and (2) PPD claimants who do not receive and are
not eligible to receive social security retirement benefits.
¶11 The State Fund initially challenges Reesor’s classification scheme contending these
classes are not similarly situated because the added benefit of social security serves the same
purpose as replacing lost wages, and specifically, Reesor only suffers a partial wage loss yet
receives full social security retirement benefits. Corollary to this argument is the State
Fund’s assertion that workers’ compensation benefits and social security retirement benefits
are part of an integrated system of wage loss benefits, and both benefits serve the same
purpose to restore earnings due to wage loss, the cause of wage loss being irrelevant.
Relying upon Watson v. Seekins (1988), 234 Mont. 309, 763 P.2d 328, it contends workers’
4
compensation offset statutes prevent double dipping, and receiving both social security
retirement benefits and disability benefits is, in essence, double dipping.
¶12 We agree with Reesor, however, when he asserts that both classes are similarly
situated because both classes have suffered work-related injuries, are unable to return to their
time of injury jobs, have permanent physical impairment ratings and must rely on § 39-71-
703, MCA, as their exclusive remedy under Montana law. The claimant’s age, as a result of
eligibility to receive social security retirement benefits, is the only identifiable distinguishing
factor between the two classes. Furthermore, chronological age and the corresponding
eligibility for social security retirement benefits is unrelated to a person’s ability to engage
in meaningful employment. Therefore, we conclude the classes are similarly situated for
equal protection purposes.
¶13 Next, in addressing an equal protection challenge, we must select the appropriate level
of scrutiny to apply to the challenged legislation. When reviewing equal protection
challenges, we apply one of three recognized levels of scrutiny: strict scrutiny, middle-tier
scrutiny, or rationality review. Powell v. State Compensation Ins. Fund, 2000 MT 321, ¶¶
17-19, 302 Mont. 518, ¶¶ 17-19, 15 P.3d 877, ¶¶ 17-19. This Court applies strict scrutiny,
the most stringent level of review, when a law affects a suspect class or threatens a
fundamental right. Under this standard, the State has the burden of showing the law is
narrowly tailored to serve a compelling government interest. Powell, ¶ 17. We apply
middle-tier scrutiny when the law affects a right conferred by the Montana Constitution, but
is not found in the Constitution's Declaration of Rights. Powell, ¶ 18. Middle-tier scrutiny
requires the State to demonstrate the law in question is reasonable and its interest in the
resulting classification outweighs the value of the right to an individual. Powell, ¶ 18. We
5
apply the rational basis test when neither strict nor middle-tier scrutiny applies. Under this
standard, the government must illustrate that the objective of the statute is legitimate and
such objective is rationally related to the classification used by the Legislature. Powell, ¶ 19.
¶14 The Workers’ Compensation Court applied the rational basis test to Reesor’s equal
protection challenge to § 39-71-710, MCA. Relying heavily upon Butte Community Union
v. Lewis (1986), 219 Mont. 426, 712 P.2d 1309, Reesor sets forth various arguments to
suggest his claim deserves middle-tier level of scrutiny. However, we see no need to depart
from our analysis set forth in Henry wherein we stated that equal protection claims brought
by an injured worker are generally reviewed pursuant to the rational basis test. See Henry,
¶ 32.
¶15 We next turn to the heart of equal protection analysis, that is, whether the
government’s stated objective bears a rational relationship to the statutory classification
adopted by the Legislature and set forth in § 39-71-710, MCA. We said in Henry that “[a]
classification that is patently arbitrary and bears no rational relationship to a legitimate
governmental interest offends equal protection of the laws. As we have previously held,
equal protection of the laws requires that all persons be treated alike under like
circumstances.” Henry, ¶ 36 (quoting Davis v. Union Pacific R. Co. (1997), 282 Mont. 233,
242-43, 937 P.2d 27, 32).
¶16 It is well settled that the rational basis test requires the government to show the
contested statute had a legitimate objective, and such objective bears a rational relationship
to the classification adopted by the Legislature. Henry, ¶ 33. The Legislature articulated
Montana’s public policy and objective of our workers’ compensation laws in § 39-71-105,
MCA, which states in pertinent part:
6
For the purposes of interpreting and applying Title 39, chapters 71 and 72, the
following is the public policy of this state:
(1) It is an objective of the Montana workers' compensation system to
provide, without regard to fault, wage supplement and medical benefits to a
worker suffering from a work-related injury or disease. Wage-loss benefits are
not intended to make an injured worker whole; they are intended to assist a
worker at a reasonable cost to the employer. Within that limitation, the
wage-loss benefit should bear a reasonable relationship to actual wages lost as
a result of a work-related injury or disease.
¶17 Again, the State Fund urges that social security retirement benefits and state disability
benefits serve the same purpose of restoring earnings due to wage loss and relies on a
Washington State Supreme Court opinion, Harris v. Dept. of Labor (Wash. 1993), 843 P.2d
1056, for the proposition that the cause of wage loss, whether retirement, disability or
unemployment, is not relevant. As such, it asserts the purpose of § 39-71-710, MCA, is to
coordinate wage replacement benefits and avoid duplicity in the award of benefits.
¶18 We see no reason to rely on case law from other jurisdictions, however, when our
Legislature has clearly and unambiguously spoken. See Henry, ¶ 35. As clearly pronounced
in § 39-71-105(1), MCA, the primary goal of workers’ compensation benefits is to establish
a wage replacement for injured workers, certainly a legitimate and appropriate governmental
interest.
¶19 The issue in this case is whether it is fair to deny men and women full PPD benefits
simply because their age makes them eligible to receive social security retirement or similar
benefits. We conclude that the disparate treatment of partially disabled claimants based upon
their age, because they are receiving or are eligible to receive social security retirement
benefits, is not rationally related to that legitimate governmental interest.
¶20 The State Fund reasons § 39-71-710, MCA, is rationally related to a legitimate
government goal because the Legislature is simply attempting to coordinate the wage loss
7
benefits provided by social security retirement with PPD benefits provided by workers’
compensation; it argues this is a legitimate and worthwhile legislative attempt to provide
relief to employers who are compelled to contribute to the program. It asserts it is entirely
rational for the Legislature to limit a claimant from receiving double benefits for the same
loss. Relying upon Flynn v. State Compen. Ins. Fund, 2002 MT 279, 312 Mont. 410, 60 P.3d
397, and Watson, amicus asserts this Court has recognized the interrelatedness of wage loss
benefits and the legitimate rationale for prevention of over-replacement or duplication of
disability paid.
¶21 Reesor contends § 39-71-710, MCA, contravenes the WCA’s public policy because
it departs from analysis based on wage loss, and instead hinges its denial of benefits based
upon an injured worker’s age alone--being eligible for social security benefits at the age of
65. The Amici correctly point out that while under other circumstances, the WCA does
provide for reduction of benefits in order to offset receipt of other disability benefits, such
as social security disability benefits, the Act does not dictate the elimination of such benefits.
They contend there is no legitimate rationale to completely eliminate a class of benefits to
otherwise eligible claimants simply because of their age. We further observe, as pointed out
by Reesor, that there is no coordination between the two social systems--WCA and social
security retirement benefits. He questions why WCA benefits should be reduced by
eligibility of social security retirement benefits when injury does not increase one’s amount
of social security benefit.
¶22 As a preliminary matter, the WCA is an exclusive statutory remedy whereby an
injured worker gives up the right to sue in tort in exchange for guaranteed wage loss
compensation for his injuries. The WCA contemplates only wage loss due to injury; it is not
8
a need based system. While workers’ compensation and social security retirement may be
similar in that both are social programs, social security retirement benefits, unlike workers’
compensation, provide the recipient with supplemental income after he contributes to the
program throughout his working life. Once a recipient qualifies to receive social security
retirement by working the requisite number of quarters, the triggering event to receive
benefits is reaching the retirement age as specified by the federal statute. This is in direct
contrast to workers’ compensation benefits which are available only if a worker is injured
while in the course and scope of employment and experiences wage loss as a result of such
injury.
¶23 We also conclude that the Flynn and Watson cases are distinguishable. Both cases
addressed reduction of disability benefits through the offset provisions of the WCA. As we
said earlier, social security retirement benefits and social security disability benefits are two
distinct programs and cannot offset one another due to the fact that both programs are based
on completely different concepts. We see no reason why a forty-year-old injured worker
should receive full PPD benefits pursuant to § 39-71-703, MCA, and a sixty-five-year-old
worker with an identical injury should receive only an impairment award due to the fact he
has reached social security retirement age. There is no rational basis to deny a class of
injured workers a category of benefits based upon their age.
¶24 The dissent urges that there was a clear purpose to this legislation: to prevent double
payment to an employee out of two different government programs which are designed to
replace a loss of wages. The problem with this analysis is that social security retirement
benefits are not wage loss benefits. There is no requirement that to be entitled to social
security benefits a person must stop working. In 2000, the federal government enacted the
9
Senior Citizen’s Freedom to Work Act (42 U.S.C. 402) which eliminated the earnings limit
for workers over the age of 65. Thus, there is no longer a reduction in social security
retirement benefits due to wages regardless of the amount of wages earned by individuals age
65 and older.
¶25 Therefore, we conclude that providing PPD benefits to a younger person in Reesor’s
situation in the amount of $23,056.25 under the WCA, but limiting Reesor’s benefit, based
on his age, to only $2,975 pursuant to § 39-71-710, MCA, violates the Equal Protection
Clause found in Article II, Section 4 of the Montana Constitution. There has been a failure
to demonstrate a rational basis for the infringement of such a constitutionally protected right,
therefore, we hold that § 39-71-710, MCA, is unconstitutional.
¶26 We reverse the decision and judgment of the Workers’ Compensation Court for re-
determination of benefits due to Dale Reesor.
/S/ JIM REGNIER
We Concur:
/S/ W. WILLIAM LEAPHART
/S/ PATRICIA O. COTTER
/S/ JAMES C. NELSON
10
Justice Jim Rice dissenting.
¶27 I respectfully dissent. In my view, the standards under the law of equal protection
are neither fully stated nor applied by the Court.
“The constitutionality of a legislative enactment is prima facie
presumed, and every intendment in its favor will be presumed,
unless its unconstitutionality appears beyond a reasonable doubt.
The question of constitutionality is not whether it is possible to
condemn, but whether it is possible to uphold the legislative
action which will not be declared invalid unless it conflicts with
the constitution, in the judgment of the court, beyond a
reasonable doubt.”
Every possible presumption must be indulged in favor of the constitutionality
of a legislative act. The party challenging a statute bears the burden of proving
that it is unconstitutional beyond a reasonable doubt and, if any doubt exists,
it must be resolved in favor of the statute.
Powell v. State Compensation Ins. Fund, 2000 MT 321, ¶ 13, 302 Mont. 518, ¶ 13, 15 P.3d
877, ¶ 13 (citations omitted) (emphasis added) (quoting Stratemeyer v. Lincoln County
(1993), 259 Mont. 147, 150, 855 P.2d 506, 508-09). We are to declare a statute to be valid
“unless the constitutional violation is ‘clear and palpable.’” Linder v. Smith (1981), 193
Mont. 20, 31, 629 P.2d 1187, 1193 (citing Noll & Kenneady v. Bozeman (1975), 166 Mont.
504, 507, 534 P.2d 880, 881). In my view, and for the reasons set forth herein, the Court has
not engaged in an analysis with the purpose of determining “whether it is possible to uphold”
the challenged legislation, granted “every possible presumption” in favor of the act, nor
established that the asserted violation is “clear and palpable.”
¶28 Neither has the Court stated what impermissible discriminatory purpose is at work
here. “‘It is a basic equal protection principle that the invidious quality of a law claimed to
11
be discriminatory must ultimately be traced to an impermissibly discriminatory purpose.’
None exists here.” State v. Price, 2002 MT 229, ¶ 41, 311 Mont. 439, ¶ 41, 57 P.3d 42, ¶ 41
(citation omitted). This is consistent with the United States Supreme Court’s requirement
that, in analyzing equal protection challenges to legislation, there must be “some reason to
infer antipathy” in the act:
[C]ourts are quite reluctant to overturn governmental action on the ground that
it denies equal protection of the laws. The Constitution presumes that, absent
some reason to infer antipathy, even improvident decisions will eventually be
rectified by the democratic process and that judicial intervention is generally
unwarranted no matter how unwisely we may think a political branch has
acted.
Vance v. Bradley (1979), 440 U.S. 93, 97, 99 S.Ct. 939, 942-43, 59 L.Ed.2d 171, 176. The
Court has failed to identify any such impermissible purpose or antipathy.
¶29 These standards are particularly relevant when engaging in rational basis review,
which requires the greatest amount of deference to be given the Legislature. “[I]n applying
this ‘rational basis’ test, ‘a discrimination will not be set aside if any state of facts reasonably
may be conceived to justify it.’” Johnson v. Sullivan (1977), 174 Mont. 491, 498, 571 P.2d
798, 802 (emphasis added) (quoting McGowan v. Maryland (1961), 366 U.S. 420, 426, 81
S.Ct. 1101, 1105, 6 L.Ed.2d 393, 399); see also Kottel v. State, 2002 MT 278, ¶ 55, 312
Mont. 387, ¶ 55, 60 P.3d 403, ¶ 55 (“a classification is reasonable if any reasonably
conceivable state of facts provides a rational basis for it”).
¶30 For these reasons, the Appellant strenuously argued that this Court should overrule
our longstanding precedent which has applied rational basis review in these matters, see, for
12
example, Powell, ¶ 21, and asked the Court to apply middle tier scrutiny. Rational basis
review gives broad discretion to the Legislature and its enactments are to survive challenges
if the Court can even conceive of a reason to justify the act. The Court’s action today adds
to a recent trend of striking down legislative enactments despite the purported exercise of
deferential rational basis review.1 I disagree with such application, believing it to be
inconsistent with the law of equal protection.
¶31 The Legislature’s purpose here is clearly set forth: to prevent double payment to an
employee out of two different government programs, both of which are funded by the
employer. The Court rejects this purpose. Without citation to authority, the Court offers its
own analysis and reasons that social security retirement and workers’ compensation serve
distinct purposes, and thus, workers’ compensation cannot be offset. See ¶ 22. However,
though the Court may find the offset provision illogical, the science of the field
acknowledges the inter-relational purpose of social security retirement and workers’
compensation:
Wage-loss legislation is designed to restore to the worker a portion . . .
of wages lost due to the three major causes of wage loss: physical disability,
economic unemployment, and old age. The crucial operative fact is that of
wage loss; the cause of the wage loss merely dictates the category of
legislation applicable. . . . The worker is experiencing only one wage loss and,
in any logical system, should receive only one wage-loss benefit. This
conclusion is inevitable, once it is recognized that workers’ compensation,
unemployment compensation, non-occupational sickness and disability
1
See Henry v. State Compensation Ins. Fund, 1999 MT 126, 294 Mont. 449, 982
P.2d 456; Stavenjord v. State Fund, 2003 MT 67, 314 Mont. 466, 67 P.3d 229; Schmill v.
Liberty Northwest Ins. Corp., 2003 MT 80, 315 Mont. 51, 67 P.3d 290; and now this case.
13
insurance, and old age and survivors’ insurance are all parts of a system
based upon a common principle. If this is denied, then all coordination
becomes impossible and social legislation becomes a grab-bag of assorted
unrelated benefits.
Larson, Workers’ Compensation (2000), § 157.01 (emphasis added). Thus, the Court rejects
the “conceivable basis” offered by the science of the field and, instead, substitutes its own
judgment and analysis. However, that is not our duty, nor is it a proper application of
rational basis review. The question under rational basis review is not whether the Court can
fault the reasoning of the legislation, but, rather, whether the Court can find any reason to
support it. Larson’s analysis, set forth above, is just one way to demonstrate that a rational
reason exists for the legislation. The Court thus errs in its duty.
¶32 This is precisely why, under our standards of constitutional review, we are required
to presume such legitimate purpose. The Legislature may very well have known what it was
doing. “We must assume that the Legislature was in a position and had the power to pass
upon the wisdom of the enactment, and in the absence of an affirmative showing that there
was no valid reason behind the classification, we are powerless to disturb it.” McClanathan
v. Smith (1980), 186 Mont. 56, 66, 606 P.2d 507, 513 (quoting State ex rel. Hammond v.
Hager (1972), 160 Mont. 391, 399, 503 P.2d 52, 56).
¶33 More importantly, for this case, is the fact that we have already passed judgment on
the legislative purpose at issue here, finding it permissible:
In applying the equal protection clause to social and economic legislation,
great latitude is given to state legislatures in making classification. Levy v.
Louisiana (1968), 391 U.S. 68, 88 S.Ct. 1509, 20 L.Ed.2d 436. . . . [W]here
the goals of a classification are legitimate, and the classification is rationally
related to the achievement of those goals, the statute should be constitutionally
14
upheld. Here, the avoidance of duplication or overlapping of benefits is
indeed a reasonable and permissive legislative objective. Though [this] results
in inequality to some, the statute is rationally related to the accomplishment of
that objective. The statute is applied to individuals uniformly and equally, the
difference in treatment relating only to differences in factual situations
between individuals.
McClanathan, 186 Mont. at 67-68, 606 P.2d at 513 (emphasis added) (affirming workers’
compensation offset for social security payments). Stare decisis requires that we follow this
holding.
It must be evident to anyone that the power to declare a legislative enactment
void is one which the judge, conscious of the fallibility of the human
judgment, will shrink from exercising in any case where he can
conscientiously and with due regard to duty and official oath decline the
responsibility.
Stratemeyer, 259 Mont. at 150, 855 P.2d at 508 (citing State v. Dixon (1923), 66 Mont. 76,
84-85, 213 P. 227, 229). Here, it should be evident that the Court, in offering its own
analysis which cites to no authority and ignores the science of the field, thus leading it to
strike down legislation with a conceivable purpose, has failed to give “great latitude” to the
Legislature in make classifications, has failed to give “every intendment” in favor of the
legislation, and therefore, in sum, has failed to properly exercise rational basis review.
¶34 I would affirm the Workers’ Compensation Court.
/S/ JIM RICE
Chief Justice Karla M. Gray and Justice John Warner join in the dissent of Justice Rice.
/S/ KARLA M. GRAY
/S/ JOHN WARNER
15