IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
OWEN M. HENDERSON,
DIVISION ONE
Appellant, 3a»
No. 73561-6-1 ~
v.
UNPUBLISHED OPINION 2
DEPARTMENT OF LABOR &
INDUSTRIES,
Respondent. FILED: January 17, 2017
Dwyer, J. — The Department of Labor and Industries is entitled to reduce
workers' compensation benefits when the claimant also receives federal Social
Security retirement income. The governing provisions of the Industrial Insurance
Act direct the Department to use the claimant's "average current earnings," as
defined by the federal Social Security Act, to calculate the reduction. Here, the
Department complied with the applicable statutes in determining the offset
amount. Accordingly, we affirm.
I
In 1991, Owen Henderson sustained an injury in the course of his
employment as a real estate agent. He filed a claim for benefits, which the
Department allowed, and, for the most part, his claim has remained open since
that time.
No. 73561-6-1/2
Twenty years after the injury, Henderson was receiving workers'
compensation benefits of $3,928.96 per month. On March 15, 2011, the Social
Security Administration notified the Department that Henderson was authorized
to receive Social Security retirement benefits of $1,203 per month beginning in
April 2011.
The Department issued an order in June 2011 to implement a reduction in
Henderson's workers' compensation benefit amount based on his receipt of
Social Security income. However, the Department cancelled that order a month
later after learning from Henderson, and confirming with the federal agency, that
he intended to voluntarily forgo his receipt of Social Security benefits so as to
continue to receive the full amount of his state benefits. Although Henderson
soon thereafter rescinded his waiver of Social Security benefits, he
disingenuously opted not to inform the Department of his decision.
Once the Department became aware that Henderson was, in fact,
receiving Social Security retirement income, the Department issued a second
order on March 2, 2012 reaffirming its intent to reduce his workers' compensation
benefit amount. The Department's order provided that Henderson's benefits
would be offset by the amount of his monthly Social Security payment, resulting
in a new monthly benefit rate of $2,725.96. The order provided that the new rate
would go into effect on April 1, 2012, that the Department would deduct funds for
overpayments that accrued between October 2011 and March 2012, but that
Henderson could not be charged for the amounts paid between April and
September 2011, during which time Henderson received both benefits. See
No. 73561-6-1/3
RCW 51.32.220(2), (4) (Department must provide notice before reducing benefits
and may assess charges for overpayments that accrue only within six months
prior to the date of notice). This allowed Henderson to retain much of his
dishonestly accrued overpayments.
Not content with merely his ill-gotten windfall, Henderson appealed the
Department's March 2012 order. Following a hearing, both an industrial appeals
judge, and, later, the Board of Industrial Insurance Appeals, affirmed the
Department's order.
Henderson then appealed to superior court. The superior court upheld the
Department's calculation of the Social Security offset.1 Henderson now appeals
to us.
II
Washington's Industrial Insurance Act, Title 51 RCW, governs judicial
review of workers' compensation cases. Rogers v. Dep't of Labor &Indus., 151
Wn. App. 174, 179, 210 P.3d 355 (2009). This court reviews the superior court's
decision, not the Board's order. RCW 51.52.140. As with the superior court's
review of an administrative appeal, our review is based solely on the evidence
and testimony presented to the Board. RCW 51.52.115; Bennerstrom v. Dep't of
Labor & Indus., 120 Wn. App. 853, 858, 86 P.3d 826 (2004).
We review the superior court's decision in the same manner as other civil
cases. Mason v. Georqia-Pac. Corp., 166 Wn. App. 859, 863, 271 P.3d 381
1The superior court also determined that Henderson failed to timely perfect his appeal.
However, the Department does notcontend that the superior court's ordershould be affirmed on
this basis and expressly concedes that Henderson timely served the Board with his notice of
appeal.
No. 73561-6-1/4
(2012). Specifically, we review whether substantial evidence supports the
superior court's factual findings and whether the superior court's conclusions of
law flow from those findings. Rogers, 151 Wn. App. at 180. The superior court's
construction of a statute is a question of law, which we review de novo. Mason,
166 Wn. App. at 863. We give substantial weight to an agency's interpretation of
the law it administers. Bennerstrom, 120 Wn. App. at 858. We view the record
in the light most favorable to the party who prevailed in superior court. Rogers,
151 Wn. App. at 180.
The Social Security Act allows the federal government to reduce the
amount of Social Security disability benefits it pays to a worker under the age of
65 who also receives state disability benefits. 42 U.S.C. § 424a. 42 U.S.C. §
424a(d) contains an exception to the general offset rule: it allows for a "reverse
offset" if a state passes enabling state legislation. Frazierv. Dep't of Labor &
Indus., 101 Wn. App. 411, 416, 3 P.3d 221 (2000). Reverse offset provisions
allow the state to take advantage of the offset the federal government would
otherwise make and thus shift costs to the federal government. Harris v. Dep't of
Labor& Indus., 120 Wn.2d461.469, 843 P.2d 1056 (1993V. Allan v. Dep't of
Labor & Indus., 66 Wn. App. 415, 419, 832 P.2d 489 (1992). Our legislature
passed RCW 51.32.220 and RCW 51.32.225 in order to take advantage ofthis
exception. Frazier, 101 Wn. App. at 416-17. The purpose of the statutory
scheme is to ensure that a disabled person is fully compensated, while
precluding the receipt of overlapping benefits. Ravsten v. Dep't of Labor &
Indus., 108 Wn.2d 143, 149, 736 P.2d 265 (1987).
No. 73561-6-1/5
Under RCW 51.32.220 and RCW 51.32.225, workers' compensation
benefits must be reduced by the amount a person receives in Social Security
benefits or by an amount calculated under the Social Security Act, 42 U.S.C. §
424a(a), whichever is less. Birgen v. Dep't of Labor & Industries, 186 Wn. App.
851. 856, 347 P.3d 503. review denied, 184Wn.2d 1012(2015). The amount of
the offset under 42 U.S.C. § 424a(a) (2)-(6) is generally the amount by which a
claimant's combined monthly state workers' compensation and Social Security
benefits exceed 80 percent of his or her "average current earnings." Birgen, 186
Wn. App. at 856-57. "Average current earnings" is defined under the Social
Security Act as the highest of three amounts, which in most situations is one-
twelfth of the claimant's highest annual earnings during the year of disability or
the preceding five years. 42 U.S.C. § 424a(a)(8); Birgen, 186 Wn. App at 857.
Henderson acknowledges that, for purposes of the Social Security Act, average
current earnings are those on which Federal Insurance Contribution Act (FICA)
taxes are paid. See Fuoate v. Comm'r of Soc. Sec, 776 F.3d 389, 391 (6th Cir.
2015).
Here, Henderson's workers' compensation benefits were reduced by the
amount of his Social Security payment, because that amount was less than the
offset calculated under the Social Security Act. To determine the amount of the
offset under 42 U.S.C. § 424(a), the Department first found that Henderson's
average current earnings were $45,666, or $3,805.50 per month. The
Department then calculated 80 percent of Henderson's average current earnings
as $3,044.40 per month. Finally, the Department subtracted $3,044.40 from
No. 73561-6-1/6
Henderson's combined benefit total of $5,131.96, which resulted in an offset
calculation of $2,087.56. Because this amount exceeded Henderson's Social
Security benefit amount, the Department applied $1,203, the retirement benefit
amount, as the offset.
The Department based its determination of Henderson's average current
earnings on his earned income in 1989 according to an earnings statement
created by the Social Security Administration and provided to the Department by
Henderson. Henderson admitted that this amount was equal to his adjusted
gross income for that year, after business expenses were deducted.
Representing himself on appeal, Henderson concedes that the
Department correctly determined his average current earnings as defined by the
Social Security Act.2 Nevertheless, he argues that because only state law
provides an offset for Social Security retirement income, average current
earnings should be defined according to the definition of wages in Title 51. And
under that definition, he claims, the Department was bound by its 1995
determination of his monthly wages, calculated for the purpose of setting his
workers' compensation benefit amount. Alternatively, Henderson claims that the
Department should have used a figure based on an Internal Revenue Service
(IRS) 1099 form he supplied that listed nonemployee compensation of
$77,696.60 for 1989.
2 Henderson was represented by counsel on appeal to the superior court but has
otherwise acted pro se in these proceedings.
No. 73561-6-1/7
Both the Board and the superior court rejected these arguments. We also
reject them. RCW 51.32.220 and RCW 51.32.225 unambiguously require the
Department to calculate the offset under 42 U.S.C. § 424(a) using average
current earnings as defined by that statute.
RCW 51.32.220 applies to offsets for Social Security disability benefits
and RCW 51.32.225 applies to offsets for Social Security retirement benefits.
The analysis under either statute is the same. Birgen, 186 Wn. App. at 856 n.3.
To calculate the offset for Social Security retirement benefits, RCW 51.32.225
directs the Department to "comply with the procedures in RCW 51.32.220 (1)
through (6)". Specifically with regard to claimants such as Henderson, whose
Social Security retirement benefits were not preceded by federal disability
benefits, "the offset shall be based on procedures established and determined by
the department to most closely follow the intent of RCW 51.32.220." RCW
51.32.225(2). RCW 51.32.220, in turn, instructs the Department to calculate the
offset in accordance with the Social Security Act, 42 U.S.C. § 424(a).
Birgen is instructive. Although it was unclear whether Birgen received
Social Security disability or retirement benefits, the Department calculated the
offset under 42 U.S.C. § 424(a) and then reduced Birgen's workers'
compensation benefit amount by the amount of his Social Security payment.
Birgen, 186 Wn. App. at 855. Birgen challenged the Department's calculation,
claiming that the average current earnings figure used by the Department was
incorrect. Birgen argued that his 1983 earnings should have been adjusted to
account for inflation. Birgen, 186 Wn. App. at 856. Division Two of this court
No. 73561-6-1/8
disagreed because under RCW 51.32.220 the offset must be calculated using
the Social Security Act's definition of average current earnings, that definition is
unambiguous, and it does not provide for a present value adjustment. Birgen,
186 Wn. App. at 856-57, 859.
Here also, as mandated by the statute, the Department calculated the
offset according to the Social Security Act and used Henderson's average
current earnings as defined by that statute. The language of the applicable
statutes precludes Henderson's theory that the offset should be calculated
according to the Industrial Insurance Act's definition of wages.
In addition, Henderson failed to demonstrate that the Department should
have used the higher income figure listed on his IRS 1099 form. The
Department's Social Security offset specialist testified, and Henderson did not
dispute, that the income total set forth on that document included unspecified
amounts not subject to FICA taxes. The IRS 1099 form was thus insufficient to
establish Henderson's average current earnings.
We further reject Henderson's claim that the Department lacked authority
to reduce his workers' compensation benefits because the Department did not
issue rules and procedures related to implementation of the offset. As explained,
RCW 51.32.225 requires the Department to comply with the provisions set forth
in RCW 51.32.220 (1)-(6) and to closely follow the intent of RCW 51.32.220. That
statute instructs the Department to calculate the offset according to 42 U.S.C.
8
No. 73561-6-1/9
§ 424(a). That is exactly the procedure followed here.3 Nothing more was
required.
Contrary to Henderson's claim, the Department did not issue an order
establishing his entitlement to receive the full amount of both his state and
federal benefits. The July 2011 "Notice of Decision" simply provided that the
"offset order dated 06/15/2011 is cancelled." According to the evidence
presented at the Board hearing, the Department cancelled the initial offset order
in reliance on Henderson's representation that he intended to forgo Social
Security retirement benefits. Nothing in the July 2011 notice prohibited the
Department from issuing a second offset order after Henderson rescinded his
waiver of Social Security benefits.
Finally, Henderson appears to allege that evidentiary and procedural
errors occurred at the hearing before the Board. However, his factual assertions
are unsupported by the record and he failed to preserve his claims of error with
respect to any of the issues he now attempts to raise. See Seoich v. Dep't of
Labor& Indus., 75 Wn.2d 312, 316, 450 P.2d 940 (1969). We decline to further
address these arguments.
In most cases, claimants must be satisfied when they receive all that the
law allows them. Here, Henderson expresses great dissatisfaction even though
he has received more than he was lawfully entitled to. Neither the law nor the
equities call out for appellate relief.
3Contrary to Henderson's argument, the superior court did not make a finding that the
Department has created a policy or "P&P" manual. But as the court noted, the Department's
expert testified that he consults a "desk book" thatsets forth the procedure for calculating the
offset under the Social Security Act.
No. 73561-6-1/10
We affirm the judgment of the superior court.
We concur:
£&KXJ.
10
Owen M. Henderson v. Department Of Labor And Industries
Combined Opinion