Court Clarifies the Role of Labor Market Surveys in Reducing PA Workers' Comp Benefits

This past June, a Pennsylvania court clarified the burden an employer must meet when trying to decrease an injured worker's workers' compensation benefits based upon an earning capacity assessment, also referred to as a "labor market survey" (LMS). In Phoenixville Hospital v. Workers' Compensation Appeals Board (Shoap), the Commonwealth Court held that jobs listed in a labor market survey only have to be open and available at the time the survey is conducted and that injured workers do not have to obtain an offer of employment from one of these positions in order for employers to receive a modification of benefits.

Labor Market Surveys

Labor market surveys are completed by vocational experts hired by workers' comp insurance carriers. The vocational experts, sometimes referred to as "vocational counselors," complete a survey of open and available employment positions in the injured worker's geographic region that fit his or her vocational abilities and medical limitations. They also interview the injured worker as part of this assessment. This information is then compiled into a labor market survey, which is provided to the injured worker. Labor market surveys were included in the package of 1996 amendments to the Pennsylvania Workers' Compensation Act known as "Act 57."

Before conducting a labor market survey, the insurer will send the injured worker a Notice of Ability to Return to Work, which lists the physician who released the worker to return to work, the extent of the release and the physician's medical reasons for issuing the release. Once an injured worker receives this notice, Pennsylvania law requires that he or she begin looking for suitable employment.

After the passage of the 1996 amendments, the role of labor market surveys in petitions to modify workers' compensation benefits was unclear. Prior to the passage of the amendments, the prevailing standard was the Kachinski standard, which required employers to prove that work was open and available to an injured worker and make actual job referrals of these open and available positions to the worker before they could reduce workers' compensation benefits. In turn, workers had a duty to pursue the job referrals in good faith.

However, the Commonwealth Court's decision in Phoenixville made it clear that the Kachinski standard no longer applies and that employers have a much easier burden to meet to reduce injured workers' benefits.

Phoenixville Hospital Decision

In Phoenixville, a vocational counselor hired by the insurance company completed a labor market survey that included five positions suitable to the injured worker's vocational abilities and medical limitations. These positions were open and available at the time the LMS was created in June. The injured worker, Annette Shoap, received the LMS in July and applied for all five positions. However, she did not receive a job offer from any of her applications. Shoap also admitted that she had not searched for employment independent of the positions listed in the LMS.

The workers' compensation insurance carrier then filed a petition to modify benefits. The Workers' Compensation Judge (WCJ), however, denied the petition, finding Shoap had followed through on the job referrals in the LMS in good faith and that the jobs were not "open and available" at the time she applied for them. The Workers' Compensation Appeals Board (WCAB) affirmed the WCJ's decision.

On appeal, the Commonwealth Court reversed the WCJ's decision and granted the petition to reduce Shoap's benefits. The court held that under the 1996 amendments to the Pennsylvania Workers' Compensation Act, employers no longer have to provide evidence that the injured worker received a job offer before the employer can reduce workers' comp benefits. Instead, the employer need only establish the injured worker's earning power, which can be done through expert witness testimony, including labor market surveys conducted by vocational counselors.

Moreover, the jobs included in the LMS need only be open and available at the time the survey is conducted because they are not meant to be job referrals, but rather an approximation of potential earnings available to the injured worker. The court said it was irrelevant that the jobs were no longer open and available at the time Shoap applied for them because other positions like them would open up. Based on these findings, the court granted the modification and reduced the worker's benefits.

Conclusion

The Phoenixville decision makes it much easier for employers to prove an injured worker's earning potential and successfully decrease their workers' comp benefits. However, this does not mean that every employer's petition to modify benefits will be successful. An attorney knowledgeable in workers' compensation laws can help injured workers fight these petitions and keep their benefits.

For more information on Pennsylvania's workers' compensation laws, contact the experienced PA workers' comp lawyers at Dugan & Associates today.