Wage Continuation Plans: Taking Credit Against The Cap

Court of Appeals holds an employer may take credit for wage continuation benefits paid under an occupational injury leave policy against the combined benefit cap.

The Workers’ Compensation Act of Colorado (Act) expressly permits an employer to establish a plan that pays injured workers who are unable to work due to a temporarily disabling work injury more than the workers would have received in temporary total disability (TTD) benefits. It incentivizes employers to create those plans by permitting them to “take credit” on their admission forms in the amount the employer would have paid in TTD or temporary partial disability (TPD) benefits if not for the plan, and they are entitled to a reimbursement from the insurer of the equivalent TTD amount.

However, if the employer “charges” the worker “with any earned vacation leave, sick leave, or other similar benefits” during the time of disability, then the employer cannot claim a credit on the admission form or seek reimbursement from the insurer.

In Baum, claimant appealed the final order of the Panel of the Industrial Claim Appeals Office (Panel), which affirmed the summary judgment of the director of the Division of Workers’ Compensation in favor of claimant’s self-insured employer. After claimant sustained an admitted work-related injury, his employer paid him full pay under its wage continuation plan as part of its occupational injury leave (OIL) benefits and also claimed a credit on its final admission of liability (FAL) for the comparable TTD benefits it otherwise would have had to pay but for the OIL plan. This credit increased claimant’s reported TTD benefits and pushed him over the statutory cap, so claimant challenged the employer’s right to take the credit, arguing that the benefits paid to him were “similar to vacation or sick leave.” The employer filed a motion for summary Judgment, arguing that its wage continuation plan was valid and it was entitled to claim the credit.

Claimant argued that the similarities between the OIL benefits provided under the wage continuation plan were sufficiently similar to sick and vacation leave, and therefore they should be considered “other similar benefits” under the statute. He noted that the OIL benefits accrue at the same rate that claimant accrues sick leave, and OIL was also used up at the same rate as sick leave. Also, if a worker ran out of OIL, sick leave could be converted to OIL, and vacation leave could be converted to sick leave.

The Court of Appeals affirmed the Panel’s decision that the employer was entitled to take the credit. The Court held that the OIL benefits were not sufficiently similar to vacation or sick leave to be considered “other similar benefits.” The key difference was that OIL benefits could only be accessed when a worker has suffered a compensable work-related injury. The Court listed several other differences between the sick leave, vacation leave, and the OIL benefits. It ultimately reasoned that if “the mere fact that wage continuation plan benefits are accrued and earned makes them too similar to vacation and sick leave to qualify for the TTD credit,” any incentive an employer had for creating a wage continuation plan would vanish. As a result, the court concluded that the employer’s wage continuation plan was valid, and it could claim the TTD credit.

Baum v. Indus. Claim Appeals Office, No. 18CA1990 (Colo. Ct. App. June 20, 2019)

Would you like to know more? Contact Brad Miller at bmiller@pollartmiller.com or 877-259-5693.


From the September 2019 Newsletter