Ferguson v. Workers' Compensation Appeals Board

Opinion

KLINE, P. J.

This case presents the heretofore unresolved question whether the 50 percent increase in workers’ compensation recovery provided *1617in Labor Code section 45531 for cases of serious and willful misconduct by an employer is to be calculated on the basis of the entire workers’ compensation award, including nonindemnity payments, or must be calculated only on the basis of the compensation indemnity. We hold that the 50 percent increase is to be calculated on the entire award, not just compensation indemnity, provided the total benefits do not exceed the amount necessary to fully compensate the worker.

Background

On September 14, 1988, petitioner Judy A. Ferguson (applicant) slipped and fell on a wet floor while employed as a general merchandise clerk for respondent Raley’s Supermarkets (Raley’s). This admitted industrial injury resulted in the need for medical treatment and vocational rehabilitation. Applicant was paid temporary disability indemnity and awarded a permanent disability indemnity of 61 percent, the equivalent of $66,780, payable at $210 per week.

Applicant also sought a 50 percent increase in her award under section 4553, alleging serious and willful misconduct by Raley’s. The matter proceeded to hearing on April 24, 1991, before Workers’ Compensation Judge (WCJ) Christopher E. Hamilton. It was undisputed that there were no safety mats on the linoleum floor in the kitchen area, which was frequently wet and slippery from water and grease as a result of spray from a sink and a backed-up drain. It was also undisputed that Raley’s knew of the dangerous condition, as other employees had fallen and complained to management. Applicant’s work supervisor was aware of the dangerous condition, but chose not to put down safety mats because they were a “nuisance.” Instead, employees were advised to “walk like a duck” in the wet kitchen area. Other than advising employees to walk carefully, Raley’s took no action to correct the hazardous condition.

On August 29, 1991, the WCJ issued his decision, finding inter alia that applicant’s injury occurred as a result of Raley’s serious and willful misconduct. The WCJ ordered a one-half increase in applicant’s total compensation benefits, including all nonindemnity payments, and reserved jurisdiction for determination of future increased compensation under section 4553 as a result of the serious and willful finding.

Raley’s petitioned for reconsideration on September 23, 1991, contesting both the finding of serious and willful misconduct and the calculation of increased compensation on the basis of all the compensation benefits applicant received.

*1618On October 8, 1991, the WCJ filed his report on reconsideration, recommending that the board deny Raley’s petition. As relevant to the issues before this court, the WCJ stated as follows: “[S]o long as an injured worker’s total compensation award is less than the actual damages he could have recovered but for elimination of his right to sue, the added portion of the award over and above his normal compensation benefits would not amount to an unconstitutional penalty or be tantamount to punitive or exemplary damages, which the Appeals Board would have no authority to award. [^Q I think there can be no doubt in the present case that applicant’s award of increased compensation still does not exceed damages she could have obtained if this were a negligence claim rather than a workers’ compensation case. It seems doubtful there was any negligence on her part.”

The board granted reconsideration on November 22, 1991, and on August 24, 1993, affirmed the WCJ’s finding that applicant’s injury occurred as a result of Raley’s serious and willful misconduct. The board held, however, that the 50 percent increase in compensation pursuant to the section 4553 award applied only to compensation (temporary and permanent) indemnity and not to nonindemnity benefits.

Applicant seeks review, contending that the “amount of compensation otherwise recoverable” under section 4553 includes nonindemnity benefits such as medical treatment payments, medical-legal fees, and vocational rehabilitation costs payable to third parties. We agree.

Discussion

I

Section 4553 provides in relevant part: “The amount of compensation otherwise recoverable shall be increased one-half, together with costs and expenses not to exceed two hundred fifty dollars ($250), where the employee is injured by reason of the serious and willful misconduct of [the employer] . . . .”

The meaning of this statute must, in the first instance, be sought in the language of the enactment itself. (Leroy T. v. Workmen’s Comp. Appeals Bd. (1974) 12 Cal.3d 434, 438 [115 Cal.Rptr. 761, 525 P.2d 665].) Our role is to ascertain the intent of the Legislature so as to effect the purpose of the law. (Moyer v. Workmen’s Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230 [110 Cal.Rptr. 144, 514 P.2d 1224].) In so doing, we are to harmonize the various parts of the statute with the general tenor and scope of the statutory framework as a whole (Youngblood v. Workers’ Comp. Appeals Bd. (1989) *1619216 Cal.App.3d 764, 772 [265 Cal.Rptr. 211]); where the Legislature has prescribed the meaning to be given precise terms used in a statute, that meaning is binding on the courts. (People v. Western Air Lines, Inc. (1954) 42 Cal.2d 621, 638 [268 P.2d 723]; People v. Aadland (1961) 193 Cal.App.2d 584, 590 [14 Cal.Rptr. 462].)

Section 4553 cannot be read without reference to section 3207, which defines “compensation.” From the time our workers’ compensation scheme was initially established, this critical term has consistently been given an expansive meaning, described as including “every benefit or payment” conferred upon employees. (Stats. 1917, ch. 586, § 3, subd. (3), p. 833.) Section 3207 currently provides that “ ‘[compensation’ means compensation under Division 4 [Workers’ Compensation and Insurance] and includes every benefit or payment conferred by Division 4 upon an injured employee, including vocational rehabilitation, or in the event of his [or her] death, upon his [or her] dependents, without regard to negligence.” (Italics added.) This broad language leaves no doubt that compensation includes vocational rehabilitation costs and, by virtue of their location in division 4, medical treatment payments and medical-legal fees. (§§ 4600, 5811; Adams v. Workers’ Comp. Appeals Bd. (1976) 18 Cal.3d 226, 231 [133 Cal.Rptr. 517, 555 P.2d 303].)

If medical-legal fees are “compensation” for calculating increased compensation under section 5814,2 as determined by the Supreme Court in Adams, then surely the cost of medical treatment, a more immediate and significant benefit to an injured employee, must also be treated as “compensation” within the meaning of section 4553.3 It would be unconscionable for an employer, whose quasi-criminal or intentional conduct under section 4553 causes injury to an employee, to benefit from a more constrictive statutory interpretation of “compensation” than applies to an employer who, in violation of section 5814, merely delays unreasonably in the payment of benefits.

*1620Finally, the legislative history of section 4553 and related provisions of section 132a4 is also consistent with an expansive interpretation of the former statute. Before enactment of the predecessor to section 4553, the workers’ compensation system provided an employee a choice of remedies if his or her injury was caused by the employer’s gross negligence or willful misconduct. The employee could either claim workers’ compensation benefits or maintain an action at law for damages. (Stats. 1913, ch. 176, § 12, subd. (b), pp. 283-284.) This provision was deleted in 1917 and a section enacted specifying a one-half increase in compensation in the event of serious and willful misconduct by the employer as the employee’s sole remedy. (Stats. 1917, ch. 586, § 6, subd. (b), p. 834.) “The clear implication is that the addition in 1917 of the ‘exclusive remedy’ limitation and the provision for a penalty for the willful misconduct of the employer was a substitute for the previous right of an employee to bring an action at law.” (Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465, 472 [165 Cal.Rptr. 858, 612 P.2d 948, 9 A.L.R.4th 758] (hereafter Johns-Manville), italics added.)

Prior to amendments made in 1982, sections 4553 and 132a both contained a $10,000 limit on the amount recoverable for the one-half increase in compensation from an employer guilty of either serious and willful misconduct or unlawful discrimination. Section 132a incorporated by reference the “provisions of [sjection 4553” with regard to “increased compensation.”5 Effective January 1, 1983, sections 4553 and 132a were both amended. The reference to the “provisions in [s]ection 4553” was deleted from section 132a, but the statute specifically retained the $10,000 limit on the amount recoverable against an employer. (Stats. 1982, ch. 922, § 1, p. 3364.) The $10,000 limit on the amount of increased compensation was, however, removed from section 4553, thereby eliminating any restriction on the actual amount that may be awarded under section 4553 when an injury is caused by an employer’s serious and willful misconduct. (Stats. 1982, ch. 922, § 10, p. 3369.) From this it may be inferred that in 1982, the last time it modified section 4553, the Legislature intended no restriction on the basis upon which the increased compensation award is to be calculated.

*1621“The Legislature is presumed to have in mind existing law when it passes a statute.” (Clark v. Workers’ Comp. Appeals Bd. (1991) 230 Cal.App.3d 684, 695-696 [281 Cal.Rptr. 485].) Moreover, if the Legislature carefully employs a term in one statute and deletes it from another, it must be presumed to have acted deliberately. (Ibid.) Accordingly, the alterations to sections 4553 and 132a effective in 1983 provide compelling evidence of a legislative intent to increase the potential recovery for an employee who suffers an injury caused by the serious and willful misconduct of an employer under section 4553.

For the foregoing reasons, we are persuaded the legislative scheme contemplates that an award for increased compensation due to the serious and willful misconduct of an employer under section 4553 must be calculated with reference to “every benefit or payment conferred by Division 4 upon an injured employee” (italics added), as broadly defined in section 3207 to include medical treatment payments, medical-legal fees and vocational rehabilitation costs, as well as all indemnity benefit payments.

The remaining question is whether an increased compensation award under section 4553 calculated in this manner may in certain circumstances be constitutionally excessive.

II

The workers’ compensation system only authorizes payment of “compensation” for work-related injuries and does not authorize punitive damages (State Dept. of Corrections v. Workmen’s Comp. App. Bd. (1971) 5 Cal.3d 885, 888-889 [97 Cal.Rptr. 786, 489 P.2d 818] (hereafter Jensen);6 Cal. Const., former art. XX, § 21, now art. XIV, § 4). The board reasoned that a 50 percent increase in the full amount of medical treatment and like nonindemnity benefits payable to third parties would amount to punitive damages and therefore impose an unconstitutional penalty. Though we disagree that an award increased in this manner will necessarily exceed the constitutional limit, we agree it may in some cases have that effect.

To be sure, the serious and willful misconduct remedy provided by section 4553 is “punitive” in the sense that it requires an employer to pay an injured employee more than would be required in the absence of such *1622misconduct.7 Thus the remedy departs to some extent from the no-fault principle upon which our workers’ compensation system is primarily based. It bears noting, however, that this departure may be made only in the event of an exceptionally high degree of employer fault, surpassing even gross negligence. (Mercer-Fraser Co. v. Industrial Acc. Com. (1953) 40 Cal.2d 102, 120 [251 P.2d 955].) “Serious and willful misconduct” within the meaning of section 4553 is an act deliberately done for the express purpose of injuring another, or intentionally performed whether with knowledge that serious injury is a probable result or with a positive, active, wanton, reckless and absolute disregard of its possibly damaging consequences. (Ibid.) “In sum, the provisions of section 4553 were designed to penalize intentional misconduct of an employer . . . .” (Johns-Manville, supra, 27 Cal.3d at p. 473.)8

While an award for increased compensation under section 4553 may be said to constitute a “penalty,” however, it does not necessarily provide the injured worker more than is necessary to fully compensate him or her for the injury sustained and is therefore not comparable to exemplary damages. (Jensen, supra, 5 Cal.3d at pp. 888-891; People v. Superior Court (Kardon) (1973) 35 Cal.App.3d 710, 713-714 [111 Cal.Rptr. 14]; see Adams v. Workers’ Comp. Appeals Bd., supra, 18 Cal.3d at p. 229; see also State Compensation Ins. Fund v. Workers’ Comp. Appeals Bd. (1982) 130 Cal.App.3d 933, 941 [182 Cal.Rptr. 171].) Because conventional workers’ compensation benefits do not fully compensate an employee for his or her injuries and other detriment, the increase allowed under section 4553 may only provide full or more nearly full compensation than would be available in the absence of the employer’s serious and willful misconduct. (See Burton v. Workers’ Comp. Appeals Bd. (1980) 112 Cal.App.3d 85, 90-91 [169 Cal.Rptr. 72];9 cf. Jensen, supra, 5 Cal.3d at pp. 888-892.)

*1623The theory that the calculation of increased compensation authorized by section 4553 against all compensation awarded, including nonindemnity benefits, is constitutionally excessive has evolved erroneously from language in the Supreme Court’s opinion in E. Clemens Horst Co. v. Industrial Acc. Com. (1920) 184 Cal. 180 [193 P. 105, 16 A.L.R. 611] (hereafter Horst),10 decided shortly after the initial passage of California’s workers’ compensation system in 1916 and the ensuing enactment in 1917 of the serious and willful statute, the predecessor to section 4553.11 The opinion in Horst includes the following two sentences: “It is . . . to be presumed the legislature found that the actual injury by loss of earnings and other elements of damage, not including expenses for costs of treatment and the like, would be at least fifty per cent more than the fixed schedule would come to, and that it was deemed just if the injury was caused by willful misconduct of the employer he should be made to pay a greater proportion of the burden, and that the allowance in such a case should be increased by adding fifty per cent thereto. Thus considered, the additional allowance is really for additional compensation in the strict sense, and not for exemplary damages.” (Horst, supra, 184 Cal. at p. 193, italics added.)

Although the first sentence quoted above appears to exclude “expenses for costs of treatment and the like” from the amount upon which the 50 percent *1624increase would be based, this language is dicta. The constitutionality of a 50 percent increase in the injured employee’s temporary disability indemnity benefits was at issue in Horst only because of its arguably punitive character. (Horst, supra, 184 Cal. at pp. 182, 192-193.) The analysis in Horst concentrates on the court’s constitutional determination that the remedy for an employer’s willful misconduct is chiefly designed to provide more nearly full compensation to an injured employee rather than to penalize an employer. (Jensen, supra, 5 Cal.3d at p. 889.) Horst did not specifically consider the type of “compensation” which provides the basis for calculation of the 50 percent increase, nor has the Supreme Court ever addressed that question.

We are not bound by Supreme Court dicta we do not find relevant and compelling. (Chevron U.S.A., Inc. v. Workers’ Comp. Appeals Bd. (1990) 219 Cal.App.3d 1265, 1272 [268 Cal.Rptr. 699]; see generally, 9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 785, p. 756.) Moreover, “[i]t is axiomatic that cases are not authority for propositions not considered.” (People v. Gilbert (1969) 1 Cal.3d 475, 482, fn. 7 [82 Cal.Rptr. 724, 462 P.2d 580].) “ ‘Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.’ (Webster v. Fall (1925) 266 U.S. 507, 511 [69 L.Ed. 411, 413, 45 S.Ct. 148].)” (Canales v. City of Alviso (1970) 3 Cal.3d 118, 127-128, fn. 2 [89 Cal.Rptr. 601, 474 P.2d 417].)

Consequently, so long as an award for increased compensation under section 4553 calculated on the basis of all compensation received by the injured worker, including indemnity as well as nonindemnity benefits, does not provide the injured worker more than is necessary to fully compensate the worker for all damages he or she sustained as a result of the injury caused, at least in part, by the willful misconduct of the employer, the award does not constitute punitive damages and is therefore not constitutionally excessive. “The [legislative] policy choice is ... to offer the augmented award for serious and willful misconduct in trade for the relatively rare award of punitive damage.” (Azevedo v. Abel (1968) 264 Cal.App.2d 451, 459-460 [70 Cal.Rptr. 710], italics added; accord, Magliulo v. Superior Court (1975) 47 Cal.App.3d 760, 778 [121 Cal.Rptr. 621].)12

*1625We believe the phrase “full and complete compensation,” as that term is employed in Horst (184 Cal. at p. 193), refers to the amount of compensatory damages a worker could be awarded in a civil action if entitled to sue in tort. Such a compensatory damages award does not exceed the amount that may be awarded under the workers’ compensation system because it is not punitive. A workers’ compensation award may not be deemed punitive in the constitutional sense merely because it exceeds that which could be awarded in the absence of willful misconduct. As noted in Horst, “the ordinary schedule of compensation [established under the workers’ compensation system] was not considered to be full and complete compensation for the injuries received.” (Ibid.) Thus, a workers’ compensation award exceeding that payable under “the ordinary schedule of compensation” is not ipso facto more than may be justified as “full and complete compensation.”

Ill

Should the occasion arise where a section 4553 award of increased compensation is challenged by an employer for exceeding the injured employee’s potential civil tort recovery, the board should adjudicate the question in much the same manner as in cases in which credit is claimed in a third party action and employer negligence is in issue. (§ 3861; see Associated Construction & Engineering Co. v. Workers’ Comp. Appeals Bd. (1978) 22 Cal.3d 829, 843-847 [150 Cal.Rptr. 888, 587 P.2d 684]; Bonner v. Workers’ Comp. Appeals Bd. (1990) 225 Cal.App.3d 1023, 1037-1038 [275 Cal.Rptr. 337]; see generally, 1 Hanna, Cal. Law of Employee Injuries & Workers’ Compensation (2d rev. ed. 1994) § 11.42[5], pp. 11-106 to 113.) In this latter context, general tort law, not workers’ compensation law, defines the substantive law concerning recovery in a civil action. (County of San Diego v. Sanfax Corp. (1977) 19 Cal.3d 862, 873-874 [140 Cal.Rptr. 638, 568 P.2d 363].) This includes compensatory damages as follows: (1) the reasonable value of necessary medical expenses thus far incurred and fairly certain to be incurred in the future; (2) the value of loss of earnings or impairment of earning capacity from the time of injury to the time of settlement and loss or impairment of future earning capacity; (3) a reasonable compensation for physical pain, physical disability and mental suffering, including past and future; and (4) the value of all other special losses or *1626expenses that can be proven. (Bonner, supra, 225 Cal.App.3d at p. 1037.) Consideration in this formula of punitive damages, seldom seen (see, e.g., Johns-Manville, supra, 27 Cal.3d at p. 478), is not allowed because to do so would sanction constitutionally excessive damages and completely undermine the exclusivity of section 4553 as a workers’ compensation remedy for an employment injury caused by the serious and willful misconduct of an employer. These same principles should govern the board’s determination when an employer challenges an award of increased compensation as excessive.

Conclusion

The board’s opinion and decision after reconsideration dated August 24, 1993, is annulled. The matter is remanded to the board for further proceedings consistent with the views expressed herein.

Smith, J., concurred.

All further statutory references are to the Labor Code unless otherwise noted.

Section 5814 provides for a 10 percent increase against the “full amount” of the class of benefits awarded where the employer has unreasonably delayed or refused payment of said benefits. (See generally, Rhiner v. Workers’ Comp. Appeals Bd. (1993) 4 Cal.4th 1213 [18 Cal.Rptr.2d 129, 848 P.2d 244].)

Board panels over the years have inconsistently and apparently without much analysis gone both ways on this issue. (Compare, e.g., Crawford v. Futuristic Housing of America (1977) 5 Cal. Workers’ Comp. Rptr. 38 and Krekelberg v. Workers’ Comp. Appeals Bd. (1977) 42 Cal.Comp.Cases 725 with Cabrales v. Workers’ Comp. Appeals Bd. (1989) 54 Cal.Comp.Cases 448 and Avrit v. Workmen's Comp. Appeals Bd. (1967) 32 Cal.Comp.Cases 260.)

Section 132a provides in relevant part: “It is the declared policy of this state that there should not be discrimination against workers who are injured in the course and scope of their employment. [U (1) Any employer who ... in any manner discriminates against any employee because he or she has filed or made known his or her intention to file a claim for compensation with his or her employer or an application for adjudication, or because the employee has received a rating, award, or settlement, is guilty of a misdemeanor and the employee’s compensation shall be increased by one-half, but in no event more than ten thousand dollars ($10,000), together with costs and expenses not in excess of two hundred fifty dollars ($250). Any such employee shall also be entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer.” (Italics added.)

The 50 percent increase in compensation by way of reference to section 4553 as a sanction was added to section 132a in 1972. (1 Herlick, Cal. Workers’ Compensation Law (4th ed. 1990) Penalties, § 11.27, p. 11-40.)

In Jensen, supra, 5 Cal.3d 885, the Supreme Court held that a section 4553 increase against the Department of Corrections did not violate Government Code section 818, which proscribes awards of punitive damages against public entities. (5 Cal.3d at p. 891.)

Insurance Code section 11661 prohibits insurers from insuring employers against liability for the additional compensation recoverable for the serious and willful misconduct of the employer or the employer’s agent.

In Johns-Manville, supra, 27 Cal.3d 465, the Supreme Court held that an employee injured by asbestos exposure who had filed a workers’ compensation claim could later bring a civil action against his employer for fraudulent concealment of asbestos disease. (Id. at p. 469.) The court characterized the employer’s actions as so egregious as to justify an award of punitive damages, which could “be afforded only in an action at law.” (Id. at p. 478, italics added.)

In Burton, the issue presented was the proper calculation of a 10 percent penalty under section 5814 for the employer’s failure to comply with an award of increased workers’ compensation benefits based upon the employer’s discrimination against the employee under section 132a. At that time, proceedings under section 132a for increased compensation as a result of unlawful discrimination were subject to the provisions of section 4553, which provided as pertinent for a 50 percent increase in compensation up to a limit of $10,000. The Court of Appeal held that the 50 percent increase in benefits under section 132a was itself a *1623“separate ‘class of benefits’ ” as defined under Gallamore v. Workers’ Comp. Appeals Bd. (1979) 23 Cal.3d 815 [153 Cal.Rptr. 590, 591 P.2d 1242]. (Burton v. Workers’ Comp. Appeals Bd., supra, 112 Cal.App.3d at p. 91.) Significantly, the court stated: “While the 50 percent increase in compensation provided for in section 132a is often classified by legal writers as a ‘penalty’ [citations], such civil/administrative remedy is not a ‘penalty’ in the sense it is punitive in nature. Rather, the 50 percent increase in the award is compensatory in two ways. First, the employee is compensated for damages directly caused as the result of the employer’s prohibited discriminatory conduct.... Secondly, as the workers’ compensation benefits ordinarily provided do not fully compensate the employee for his injuries and his other detriment, the allowance of the increase in benefits provides more nearly full compensation in those cases where the employer has discriminated against the employee because of the industrial injury. (Cf. [Jensen, supra, 5 Cal.3d 885].) In so providing more adequate compensation, the 50 percent increase does not seek to specifically more fully compensate individual classes of benefits but rather to increase compensation in general. This is supported by the language of section 4553 which specifies a 50 percent increase in ‘compensation otherwise recoverable’ rather than particular classes of benefits.’’ (Burton, supra, 112 Cal.App.3d at pp. 90-91; italics added.)

In Horst, the Supreme Court upheld a finding of serious and willful misconduct against the employer under the newly enacted statute. (Horst, supra, 184 Cal. at pp. 191-192.) Concluding the serious and willful allowance was for additional compensation and thus constitutional, the court held that the Industrial Accident Commission (predecessor to the board) had jurisdiction to enforce the serious and willful award against the employer. (Id. at p. 193.)

Section 6, subdivision (b) of the Workmen’s Compensation Act provided in relevant part: “[W]here the employee is injured by reason of the serious and willful misconduct of the employer, ... the amount of compensation otherwise recoverable for injury or death . . . shall be increased one-half . . . ; provided, however, that said increase of award shall in no event exceed twenty-five hundred dollars.” (Stats. 1917, ch. 586, § 6, subd. (b), p. 834.)

Because the Legislature removed the $10,000 ceiling on a serious and willful recovery under section 4553, we recognize that potentially there is no limit on the amount of benefits or compensation from which the one-half increased compensation award is to be calculated. Given the provisions of section 4600 requiring unlimited, reasonable lifetime medical treatment for the effects of an industrial injury, it is conceivable that there may be circumstances where adding a 50 percent increase in compensation to those “benefits otherwise recoverable” could exceed the injured employee’s potential compensatory recovery in tort and venture into *1625the realm of a constitutionally impermissible punitive damage award. This issue is not before us. Thus, while our holding herein theoretically allows an employee injured by the serious and willful misconduct of his or her employer to obtain the equivalent of civil tort damages, it categorically does not sanction punitive damages as discussed by the Supreme Court in Johns-Manville, supra, 27 Cal.3d at page 478. We emphasize the caveat that while compensation otherwise recoverable within the meaning of section 4553 includes every benefit, constitutional restraints may intersect at some point to prohibit the payment of further compensation under section 4553 which in effect then would be construed as punitive or constitutionally excessive damages.