Failure To Pay Interest On Not A Separate Penalty

The Court of Appeal decide that when an employer makes a late benefit payment, that does not include interest for that late payment, only one Labor Code section 5814 penalty will be awarded.

The applicant sustained an industrial injury that resulted in 100 percent permanent disability award. The applicant was to be paid $224.00 per week for life. The defendant was to receive a third-party credit for $107,000. The employer did not have to make compensation payments until the third-party credit was exhausted.

The applicant notified the carrier the third-party credit was exhausted.  The carrier did not make the first permanent disability payment until six weeks later. The carrier included a retroactive payment that did not include interest.

The applicant sought two separate penalties. One penalty was for the late payment of permanent disability. The other penalty was for not including interest in the late retroactive payment.  The Workers’ Compensation Judge (WCJ) found the six week delay unreasonable and assessed a 10 percent penalty. The WCJ assessed a second 10 percent penalty for failure to pay interest at the time the retroactive payment was made. The defendant filed a Petition for Reconsideration which the Workers’ Compensation Appeals Board (WCAB) denied.  The appellate court analyzed the case law regarding multiple penalties. The court determined that there was no prior penalty awarded in this case. They reviewed Moulton v. WCAB (2000) 84 Cal. App.4th 837 and Soto v. WCAB (1996) 46 Cal. App.4th 1356 to determine that interest and installment payments relate to the same class of benefits. Therefore, only one penalty should be awarded.

The court analyzed that the late payment here was really a single act of misconduct. They indicated it would be unfair to penalize the employer twice for the single transaction. Moreover, they made the proper analogy. If one employer never made any payment that employer would only incur one penalty. This employer would incur two penalties for not paying the interest when making the retroactive benefit payment. This would not be fair. It might deter the employer from paying voluntarily and might encourage the employer to wait to pay until there was an award. Thus, this employer could be treated more harshly than an employer who made no payment at all. If there were two penalties it might also encourage an employer to wait until an award was made because interest is not due until a payment is made. Therefore, there is only one penalty under these set of facts.

Case: California Highway Patrol V. WCAB (Erebia)

Harvey Brown
3501 Jamboree Rd. Suite 602
Newport Beach, CA 92660

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