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Electronically Filed Supreme Court SCWC-XX-XXXXXXX 30-MAY-2025 08:07 AM Dkt. 20 OP
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
DELBERT P. COSTA, JR., Petitioner/Claimant-Appellee-Appellant,
vs.
COUNTY OF HAWAIʻI, DEPARTMENT OF WATER SUPPLY, Respondent/Employer-Appellant-Appellee,
and
COUNTY OF HAWAIʻI, HEALTH AND SAFETY DIVISION, Respondent/Adjuster-Appellant-Appellee.
SCWC-XX-XXXXXXX
APPEAL FROM THE LABOR AND INDUSTRIAL RELATIONS APPEALS BOARD (CAAP-XX-XXXXXXX; CASE NO. AB 2014-143(WH); DCD NO. 9-12-00934(H))
May 30, 2025
RECKTENWALD, C.J., McKENNA, EDDINS, GINOZA, AND DEVENS, JJ.
OPINION OF THE COURT BY RECKTENWALD, C.J.
I. INTRODUCTION
This case involves the failure of employer, County of
Hawaiʻi, Department of Water Supply, and its adjuster, *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER ***
(collectively the County) to make timely payments of temporary
total disability (TTD) benefits to employee, Delbert P. Costa,
Jr., after he suffered a workplace injury.
It is uncontested that TTD benefits were due Costa for
the relevant periods. The question before this court is whether
Costa is entitled to receive penalty payments arising from the
County’s failure to timely pay TTD benefits as required under
Hawaiʻi Revised Statutes (HRS) § 386-92 (Supp. 1996). The County
offers two rationales for why such a penalty is inappropriate.
First, the County argues that no penalty can be levied because
“TTD benefits were not ordered by the Director until [the]
April 25, 2014 [supplemental decision.]” Second, the County
argues that because it “disputed liability for the work injury in
its initial report,” it was protected from incurring any future
penalty for late payments. We reject both of these arguments.
Based on the plain reading of HRS § 386-92, the
statutory scheme of Hawaiʻi workers’ compensation laws, and its
legislative history, we hold that a penalty may be properly
imposed where an employer or its carrier fails to make timely TTD
benefit payments where liability is not denied and there is no
question that compensation is due the injured worker.
II. BACKGROUND
On May 9, 2012, Delbert Costa suffered a stress injury
while employed by the County. Costa reported the injury to the
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County on May 9, 2012, and the County filed an industrial injury
claim on September 19, 2012. The County completed a WC-1
“Employer’s Report of Industrial Injury” contesting
compensability pending investigation and a medical examination,
which found the injury was not work-related. The County did not
contest that TTD benefits would be due Costa if the injury was
determined to be compensable. In a letter dated October 31,
2012, the County informed Costa that, “[i]f the claim is found to
be compensable, payment of benefits will be made pursuant to
Chapter 386 and the Hawaii Workers’ Compensation Medical Fee
Schedule.”
On December 7, 2012, Costa filed a WC-5 “Employee’s
Claim for Workers’ Compensation Benefits” asserting he suffered
from “stress causing physical & mental ailments” following
“multiple incidents over past 5-6 [years] regarding job position
assignments[,] being overlooked, causing extreme distress
continuing to progress to heath illness.” A disability
compensation hearing was convened on April 23, 2013, to determine
inter alia whether the claim was compensable. 1
On June 24, 2013, the Director of the Department of
Labor and Industrial Relations, Disability Compensation Division
1 At this hearing, the County only contested the cause of Costa’s injury and not the fact that he had sustained an injury and was disabled. The County argued that Costa’s injury was due to a personnel matter rather than from the performance of his job duties.
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(Director) rendered a decision (the Director’s decision) finding
that the County had “failed to provide substantial evidence to
overcome the presumption [of compensability,]” and concluding
that Costa “suffered a personal injury (stress) on 5/9/2012
arising out of and in the course of employment.” The Director’s
decision also determined Costa’s average weekly wages. Pursuant
to HRS §§ 386-21 (Supp. 2009) and 386-26 (Supp. 2006), the
Director ordered the County to pay “such medical care, service
and supplies as the nature of the injury may require.” The
Director’s decision further noted “[t]he matters of average
weekly wages, temporary disability, permanent disability and/or
disfigurement, if any, shall be determined at a later date.” The
County did not appeal the decision and did not pay TTD benefits
to Costa.
On August 12, 2013, Costa applied for a second hearing
before the Disability Compensation Division to determine the
issue of nonpayment of TTD benefits. Costa argued that because
the County did not appeal the Director’s decision, TTD benefits
were due and payable, and a penalty for late payment of these
benefits was appropriate pursuant to HRS § 386-92.
At the County’s request, the Director ordered Costa to
appear for an independent psychological evaluation by a provider
of the County’s choosing as provided in HRS § 386-79 (Supp.
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1996). The independent psychological evaluation administered by
Dr. Rogers took place on December 17, 2013.
The disability compensation hearing requested by Costa
on the issue of nonpayment of TTD benefits was held on February
25, 2014. At the hearing, the County relied on the results of
the independent psychological evaluation to contest the
compensability of TTD benefits, arguing that the disability was
due to Costa’s preexisting traits and not his work duties.
After the hearing, the Director issued a supplemental
decision on April 25, 2014, (the Director’s supplemental
decision) finding, inter alia, that the County’s “objection . . .
that the 6/24/2013 decision determined that [TTD] was to be
determined at a later date is without merit since the 6/24/2013
decision was rendered finding the claim for stress compensable.
Without appeal of said decision, employer obstructed benefits
payable to the claimant.” The Director’s supplemental decision
awarded Costa TTD benefits for various periods, starting from May
14, 2012, in the amount of $21,389.18. 2 The Director also imposed
a 20% penalty on the County for late payment of TTD benefits
under HRS § 386-92, totaling $4,277.84.
2 From May 14, 2012, through June 4, 2012, and from August 15, 2012, through January 7, 2013, Costa was awarded TTD benefits in the amount of $15,996.24. Additionally, from January 8, 2013, through December 17, 2013, Costa received TTD benefits under a prior shoulder injury. Thus, for these weeks of concurrent disability, the Director found the County was liable for the difference in the compensation rates, amounting to $5,392.94.
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On May 7, 2014, the County appealed the Director’s
supplemental decision to the Labor and Industrial Relations
Appeals Board (LIRAB) and filed a motion for partial stay of TTD
benefits and the penalty. The LIRAB granted the County’s motion
in part, only staying the assessment of penalties.
On January 31, 2018, the LIRAB reversed the Director’s
supplemental decision. Applying the plain language of HRS
§§ 386-31(b) (Supp. 2005) and 386-92 and the legislative purpose
as discussed in Panoke v. Reef Development of Hawaiʻi, Inc., 136
Hawaiʻi 448, 363 P.3d 296 (2015), the LIRAB found that “TTD
benefits were not due or payable under HRS § 386-31(b) prior to
the Director’s June 24, 2013 final decision on compensability.
Accordingly, under HRS § 386-92, there is no statutory basis for
a penalty against Employer for non-payment of TTD [benefits]
prior to June 24, 2013.”
As for the penalties assessed for the County’s
nonpayment of TTD benefits after the Director’s decision, the
LIRAB concluded that, because Costa had been disabled under a
previous shoulder injury and the County paid TTD benefits for the
period from January 8, 2013, to December 13, 2013, the penalty
should not have been imposed by the Director for Costa’s May 9,
2012 stress injury. For the periods from May 14, 2012, to
June 4, 2012, and August 15, 2012, to January 7, 2013, the LIRAB
found no statutory basis to assess the penalty under HRS
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§ 386-92, finding that the County had a reasonable basis to
challenge liability for payment of the TTD benefits based on
Dr. Rogers’ independent psychological evaluation. Notably, that
evaluation occurred after the Director’s decision had determined
the compensability of Costa’s stress injury.
The LIRAB Chair dissented, arguing that, after the
Director’s decision, the compensability of Costa’s injury could
no longer be denied and the County “was then required to comply
with its statutory duty (‘shall pay’) under HRS Section
386-31(b), for the prompt payment for TTD benefits within ten
(10) days of the Employer being notified of the disability,
without waiting for decision [sic] from the Director.” The Chair
further reasoned that the County “did not have any medical basis
to support its position that [Costa] was not entitled to TTD
. . . until receipt of [the independent psychological evaluation]
on January 14, 2014.” Therefore, since the TTD benefits were
“untimely and/or unpaid” for the period from May 14, 2012 through
June 4, 2012 and from August 15, 2012 through December 17, 2013,
the Chair “conclude[d] that [the County] is subject to payment of
a 20% penalty in the amount of $4,277.84, pursuant to HRS Section
386-92, for [the relevant] periods[.]” (Emphasis omitted.)
Costa appealed the LIRAB’s decision to the Intermediate
Court of Appeals (ICA). The ICA affirmed, although it held (1)
the LIRAB’s decision and order erroneously applied the “clear and
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convincing” evidentiary standard, instead of the required
“preponderance of the evidence” standard set out in HRS
§ 91-10(5) (2012), and (2) the LIRAB erred in “concluding that
HRS § 386-92 is punitive rather than remedial in nature.”
However, according to the ICA, Costa’s rights were not prejudiced
as a consequence of these errors. The ICA agreed with the
LIRAB’s finding that the Director’s decision ordered only
compensation for medical costs pursuant to HRS §§ 386-21 and 386-
26, but deferred a determination on average weekly wages and TTD
benefits to a later date. Thus, the ICA reasoned the record did
not support the imposition of a penalty.
Costa applied for a writ of certiorari, and we accepted
his application.
III. STANDARDS OF REVIEW
A. The LIRAB’s Decision
Appellate review of agency decisions is governed by the
Hawaiʻi Administrative Procedure Act. HRS § 91-14(g) (2012),
“Judicial review of contested cases” provides:
Upon review of the record the court may affirm the decision of the agency or remand the case with instructions for further proceedings; or it may reverse or modify the decision and order if the substantial rights of the petitioners may have been prejudiced because the administrative findings, conclusions, decisions, or orders are:
(1) In violation of constitutional or statutory provisions; or
(2) In excess of the statutory authority or jurisdiction of the agency; or
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(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or
(6) Arbitrary, or capricious, or characterized by abuse of discretion or clearly unwarranted exercise of discretion.
“Under HRS § 91-14(g), conclusions of law are
reviewable under subsections (1), (2), and (4); questions
regarding procedural defects under subsection (3); findings of
fact under subsection (5); and an agency’s exercise of discretion
under subsection (6).” United Pub. Workers, AFSCME, Local 646,
AFL-CIO v. Hanneman, 106 Hawaiʻi 359, 363, 105 P.3d 236, 240
(2005) (brackets omitted) (quoting Paul’s Elec. Serv., Inc. v.
Befitel, 104 Hawaiʻi 412, 416, 91 P.3d 494, 498 (2004)).
B. The LIRAB’s Statutory Interpretation
Appellate courts generally review questions of
statutory interpretation de novo. Gillan v. Gov’t Emps. Ins.
Co., 119 Hawaiʻi 109, 114, 194 P.3d 1071, 1076 (2008). “[W]here
the language of the law is plain and unambiguous, courts must
give effect to the law according to its plain and obvious
meaning.” Mikelson v. United Servs. Auto. Ass’n, 108 Hawaiʻi 358,
360, 120 P.3d 257, 259 (2005) (internal quotations and citations
omitted). However, where a statute’s language is ambiguous, the
appellate court must “defer to the agency’s expertise and . . .
follow the agency’s construction of the statute unless that
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construction is palpably erroneous.” Panoke, 136 Hawaiʻi at 461,
363 P.3d at 309 (quoting Vail v. Emps.’ Ret. Sys., 75 Haw. 42,
66, 856 P.2d 1227, 1240 (1993)).
IV. DISCUSSION
Costa raises two issues before this court:
1. Whether the ICA gravely erred by not properly applying the legislative intent and purpose in use of WC-1 forms by employers and which interpretation failed to compensate [Costa] for delays in temporary disability benefits contrary to the remedial nature of the statute as recognized by this Court?
2. Whether the ICA’s conclusion [that Costa] was not entitled to penalties under [HRS] Section 386-92 . . . is inconsistent with this Court’s decision in Panoke. . . .
Neither party contests that TTD benefits were owed for
the relevant periods. The sole question then is whether, under
HRS § 386-92, the ICA and the LIRAB erred in overturning the
Director’s imposition of a penalty for failure to timely pay TTD
benefits.
Costa advances two arguments in favor of imposing a
penalty. First, Costa argues that a penalty was appropriate
because the statutory scheme requires payment of TTD benefits if
a finding of compensability is not appealed, without need to wait
for a separate decision on TTD. Second, Costa asserts that the
ICA and the LIRAB misconstrued this Court’s holding in Panoke to
mean that “an employer in every situation will never be subject
to a penalty under Section 386-92, HRS, if it initially
controverted the claim.”
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The County counters that a penalty was not appropriate
because “TTD benefits [for the relevant periods] were not ordered
by the Director until April 25, 2014, and [the County] disputed
liability for the work injury in its initial report[.]” The
County argues that a plain reading of HRS § 386-92 supports its
position.
We disagree.
A. Disputing Liability at the Outset Does Not Create an Indefinite “Safe Harbor” Under HRS § 386-92
We begin with the County’s contention that penalties
may not be levied for failure to timely pay TTD benefits because
the County “disputed liability for the work injury in its initial
report[.]” In essence, the County asks this court to construe
HRS § 386-31(b) to provide an indefinite safe harbor for
employers to delay TTD benefit payments that are initially
controverted. As discussed below, we reject this approach as it
would lead to an absurd result that is in conflict with the plain
language, legislative intent, and remedial nature of HRS §§ 386-
31(b) and 386-92.
1. The liberal construction of Hawaiʻi workers’ compensation laws supports the imposition of penalties
Hawaiʻi courts have consistently recognized the
importance of a liberal construction to give effect to our
workers’ compensation laws. See, e.g., In re Palama, 34 Haw. 65,
67 (Haw. Terr. 1937) (“The great purpose of [workers’
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compensation laws] . . . is to provide means for compensating the
employee for pecuniary loss arising out of his disability to
work, and to accomplish that purpose the statute should receive a
liberal construction.”). As this court explained in Davenport v.
City & County of Honolulu,
It is well-established in Hawaiʻi that chapter 386 is social legislation that is to be interpreted broadly. The legislature has chosen to treat work-related injuries as a cost of production to be borne by industry. Accordingly, chapter 386 is construed liberally in favor of coverage providing compensation for an employee for all work connected injuries, regardless of questions of negligence and proximate cause.
100 Hawaiʻi 481, 491, 60 P.3d 882, 892 (2002) (internal citations
and quotations omitted).
Hawaiʻi workers’ compensation laws are “highly remedial
in character. Their paramount purpose is to provide compensation
for an employee for all work-connected injuries, regardless of
questions of negligence and proximate cause.” Flor v. Holguin,
94 Hawaiʻi 70, 79, 9 P.3d 382, 391 (2000) (quoting Evanson v.
Univ. of Haw., 52 Haw. 595, 600, 483 P.2d 187, 191 (1971)). As
this court has explained, our workers’ compensation laws
“represent a socially enforced bargain: the employee giving up
his right to recover common law damages from the employer in
exchange for the certainty of a statutory award for all work-
connected injuries.” Van Ness v. State Dep’t of Educ., 131
Hawaiʻi 545, 558, 319 P.3d 464, 477 (2014) (quoting Evanson, 52
Haw. at 598, 483 P.2d at 190). “[T]he slightest aggravation or
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acceleration of an injury by the employment activity mandates
compensation.” Korsak v. Hawaiʻi Permanente Med. Grp., 94 Hawaiʻi
297, 305, 12 P.3d 1238, 1246 (2000) (quoting DeFries v. Ass’n of
Owners, 999 Wilder, 57 Haw. 296, 308, 555 P.2d 855, 862 (1976).
To give effect to this broad purpose, “[t]he workers’
compensation statute[ 3] rests on the presumption that a claimed
injury is work-connected and therefore compensable.” Cadiz v.
QSI, Inc., 148 Hawaiʻi 96, 107, 468 P.3d 110, 121 (2020) (citation
omitted).
2. The plain language of HRS § 386-92 supports the imposition of penalties
The plain language of HRS § 386-92 supports imposing a
penalty on the County for failure to pay TTD benefits due Costa.
HRS § 386-92, “Default in payments of compensation, penalty”
provides:
If any compensation payable under the terms of a final decision or judgment is not paid by a self-insured employer or an insurance carrier within thirty-one days after it becomes due, as provided by the final decision or judgment, or if any temporary total disability benefits are not paid by the
3 HRS § 386-85 (1993) provides in relevant part that:
In any proceeding for the enforcement of a claim for compensation under this chapter it shall be presumed, in the absence of substantial evidence to the contrary:
(1) That the claim is for a covered work injury[.]
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employer or carrier within ten days, exclusive of Saturdays, Sundays, and holidays, after the employer or carrier has been notified of the disability, and where the right to benefits are not controverted in the employer's initial report of industrial injury or where temporary total disability benefits are terminated in violation of section 386-31, there shall be added to the unpaid compensation an amount equal to twenty per cent thereof payable at the same time as, but in addition to, the compensation, unless the nonpayment is excused by the director after a showing by the employer or insurance carrier that the payment of the compensation could not be made on the date prescribed therefor owing to the conditions over which the employer or carrier had no control.
(Emphases added.)
On its face, the plain language of HRS § 386-92
requires (“shall”) the imposition of a 20% penalty when, after 10
days of receiving notice of a disability, an employer fails to
pay TTD benefit to the injured employee unless the employer
controverted “the right to benefits” in its initial report. 4
Here, the County controverted whether Costa’s
disability was work-related, and thus not compensable, in its
initial report. However, the County did not appeal the
Director’s decision finding Costa’s injury compensable. 5 Thus,
4 The record shows that Costa provided oral notice of his stress injury to his supervisor on May 9, 2012. An employer is required to file a WC- 1 form within seven working days after becoming aware of an injury causing a worker to be absent from work for one day or more. HRS § 386-95 (Supp. 2002). The WC-1 filed by the County was dated September 19, 2012, more than three months after Costa first reported his injury to the County.
The Director found, however, that Costa did not report his May 9, 2012 injury to the County until September 18, 2012, the day before the County filed its September 19, 2012 report. Because this finding of fact has not been challenged on appeal, it is binding on this court. Nevertheless, we note this potential issue for guidance to employers and to the bar going forward.
5 The County did not controvert the disability again until it sought an independent evaluation under HRS § 386-79 in October 2013.
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under HRS § 386-87 (1993), the Director’s decision became “final
and conclusive between the parties” after the relevant statutory
period ended. 6
The County essentially asks this court to read HRS
§ 386-92 as creating an indefinite safe harbor, whereby an
employer may withhold uncontroverted TTD benefits indefinitely
without incurring a penalty, provided they controverted the
disability at the outset of the claim. The plain language of the
statute does not compel such a reading. Instead, the statute on
its face clearly contemplates withholding payment of TTD benefits
only where such benefits are actively controverted, and not where
such benefits were previously but are no longer controverted.
This reading is confirmed by the use of the present,
and not a past tense: “where the right to such benefits are not
controverted in the employer’s initial report of industrial
injury.” HRS § 386-92 (emphasis added).
To hold otherwise would lead to an absurd result or
otherwise negate the very purpose of the statute. See Tauese v.
Dep’t of Labor & Indus. Rels., 113 Hawaiʻi 1, 31, 147 P.3d 785,
815 (2006) (requiring courts “to construe statutes so as to avoid
absurd results”) (citation omitted); City & Cnty. of Honolulu v.
6 HRS § 386-87(a) provides in relevant part that “[a] decision of the director shall be final and conclusive between the parties . . . unless within twenty days after a copy has been sent to each party, either party appeals therefrom to the appellate board[.]”
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Hsiung, 109 Hawaiʻi 159, 173, 124 P.3d 434, 448 (2005) (rejecting
statutory interpretations that “render[] any part of the
statutory language a nullity”).
This plain language reading of HRS § 386-92 is further
confirmed by the broader statutory scheme of HRS chapter 386, as
well as the chapter’s legislative history.
3. The statutory scheme of HRS chapter 386 supports the imposition of penalties
When HRS § 386-92 is read in the context of HRS chapter
386, it becomes clear that the County was not permitted to
withhold payment of uncontroverted TTD benefits without incurring
a penalty.
In keeping with the presumption of compensability for
workers’ compensation claims, HRS chapter 386 envisions employers
paying TTD benefits to disabled employees without delay. For
example, HRS § 386-31(b), “Temporary total disability,” provides
in relevant part:
The employer shall pay temporary total disability benefits promptly as they accrue to the person entitled thereto without waiting for a decision from the director, unless this right is controverted by the employer in the employer’s initial report of industrial injury. The first payment of benefits shall become due and shall be paid no later than on the tenth day after the employer has been notified of the occurrence of the total disability, and thereafter the benefits due shall be paid weekly[.]
By requiring employers to not delay in paying TTD
benefits prior to a definitive adjudication by the Director as to
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their entitlement to TTD benefits, HRS chapter 386 envisions
paying benefits to employees whose disability may in fact not be
compensable. Where an employer pays TTD benefits to an employee
for a disability that is later determined to be not compensable,
HRS § 386-52 (1993) provides for those payments to “be deducted
from the amount payable as compensation” either “by shortening
the period during which the compensation must be paid, or by
reducing the total amount for which the employer is liable[.]” 7
HRS § 386-52(a) & (a)(2); see also Hawaiʻi Administrative Rules
(HAR) § 12-10-24 (eff. 1981). 8 However, “[i]f overpayment cannot
be credited, the director shall order the claimant to reimburse
the employer.” HRS § 386-52(a)(3).
Payment of TTD benefits, once begun, cannot be
terminated except “upon order of the director or if the employee
is able to resume work.” HRS § 386-31(b). Otherwise, benefits
7 HRS § 386-52(a)(1) includes a notice requirement that provides:
The employer notifies the injured employee and the director in writing of any such credit request stating the reasons for such credit and informing the injured employee that the employee has the right to file a written request for a hearing to submit any evidence to dispute such a credit[.]
8 HAR § 12-10-24 provides:
For the purpose of section 386-52(a), HRS, an employer may, with the approval of the director, deduct from an amount payable as compensation any advance payments made to the injured employee if the employee had been notified in writing at the time the advance was made that the payments were in lieu of compensation.
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may only be terminated following notice to the employee and an
opportunity to be heard:
When the employer is of the opinion that temporary total disability benefits should be terminated because the injured employee is able to resume work, the employer shall notify the employee and the director in writing of an intent to terminate the benefits at least two weeks prior to the date when the last payment is to be made. The notice shall give the reason for stopping payment and shall inform the employee that the employee may make a written request to the director for a hearing if the employee disagrees with the employer. Upon receipt of the request from the employee, the director shall conduct a hearing as expeditiously as possible and render a prompt decision [awarding or denying compensation within 60 days].
HRS § 386-31(b).
Thus again, even where benefits should be rightfully
terminated by an employer because the temporary disability has
ended, HRS § 386-31(b) envisions the employer continuing to pay
benefits for a minimum of two weeks. The employer would then
need to seek reimbursement from the employee under HRS § 386-52.
HRS chapter 386 thus evinces a preference, in keeping with the
liberal construction discussed supra, toward employers presuming
compensability, paying TTD benefits initially and without delay,
and only then seeking recovery of unmerited payments after the
fact.
An employer’s failure to comply with the requirements
of HRS § 386-31(b), either by failing to promptly pay out TTD
benefits or by improperly terminating TTD benefit payments is
subject to penalty under both HRS §§ 386-31(b) and 386-92: “[a]n
employer or insurance carrier who fails to comply with this
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section shall pay not more than $2,500 into the special
compensation fund upon the order of the director, in addition to
other penalties prescribed in section 386-92.” HRS § 386-31(b).
To read HRS § 386-92 to permit an employer to contest
the compensability of a disability and then delay the payment of
TTD benefits – even after a determination that the disability is
compensable – would lead to an absurd result, especially
considering the larger statutory context of chapter 386.
4. The legislative history of HRS chapter 386 supports the imposition of penalties
This interpretation of HRS §§ 386-31(b) and -92 is also
confirmed by the legislative history of these statutes.
In 1969, HRS § 97-30(b), the then-controlling workers
compensation law equivalent to HRS § 386-31(b), was amended to
“compel the prompt payment of temporary total disability
benefits.” 9 S. Stand. Comm. Rep. No. 268, in 1969 Senate
Journal, at 988. The legislature recognized that “it is vitally
9 Prior to the 1969 amendment, HRS § 97-30(b) (Supp. 1963) provided:
Where a work injury causes total disability not determined to be permanent in character, the employer, for the duration of such disability but not including the first two days thereof shall pay the injured employee a weekly benefit at the rate of sixty-six and two-thirds per cent of his average weekly wages, but not more than $75 nor less than $18 a week, or, if his average weekly wages are less than $18 a week, at the rate of one hundred per cent of his average weekly wages. In case the total disability exceeds seven days, the compensation shall be allowed from the date of such disability.
(. . . continued)
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important that the benefits be paid immediately upon its accrual
to replace the loss of wages caused by the work injury.” H.
Stand. Comm. Rep. No. 178, in 1969 House Journal, at 694.
In 1971, HRS § 386-92 was amended to permit the
Director to impose a penalty on employers that failed to make
timely TTD benefit payments to injured employees. 10 The
(continued . . .)
The 1969 amendment added the following paragraph to § 97-30(b):
Temporary total disability benefits shall be paid promptly as it accrues and directly to the person entitled thereto without waiting for a decision from the director, unless the right to the benefits is controverted by the employer. The first payment of benefits shall become due and shall be paid no later than on the tenth day after the employer has been notified of the occurrence of the total disability, and thereafter the benefits due shall be paid weekly except as otherwise authorized pursuant to section 97- 52.
1969 Haw. Sess. Laws Act 18, § 1 at 25 (emphasis added).
10 Originally codified as HRS § 97-101 in 1963, HRS § 386-92 (Supp. 1973) was amended in 1971 to provide:
If any compensation payable under the terms of a final decision or judgment is not paid by a self-insured employer or an insurance carrier within thirty-one days after it becomes due, as provided by such final decision or judgment, or if any temporary total disability benefits are not paid by said employer or carrier within ten days, exclusive of Saturdays, Sundays, and holidays, after being notified of the disability, and where the right to said benefits are not controverted, there shall be added to the unpaid compensation an amount equal to ten per cent thereof payable at the same time as, but in addition to, the compensation, unless the nonpayment is excused by the director of labor and industrial relations after a showing by said employer or insurance carrier that the payment of the compensation could not be made on the date prescribed therefor owing to the conditions over which he had no control.
(Text added by amendment underscored.)
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legislature recognized that prior to the amendment, “[t]he law
[did] not provide a remedy for the effective enforcement of the
[benefit] provision.” S. Stand. Comm. Rep. No. 216, in 1971
Senate Journal, at 878; H. Stand. Comm. Rep. No. 757, in 1971
House Journal, at 1007. The penalty was adopted to create such
an enforcement mechanism.
Subsequent amendments to HRS chapter 386 also support
this reading. For example, in 1979, the legislature again
evinced its intent to ensure timely payment of TTD benefits when
it amended HRS chapter 386 by “providing a procedure which would
enable an injured worker to have a prompt determination on his
right[s]” where such payments had been unilaterally terminated by
the employer. H. Stand Comm. Rep. No. 834, in 1979 House
Journal, at 1551.
And again, in 1995, the penalty for late TTD benefit
payments was increased from 10% to 20% as part of a package of
reforms meant to improve the efficiency of our workers’
compensation scheme. H. Conf. Comm. Rep. No. 112, in 1995 House
Journal, at 1005-07; H. Stand Comm. Rep. No.575, in 1995 House
Journal, at 1241-44. In reforming the workers’ compensation
statutes, the legislature expressed its intent was “to enable the
injured worker to receive timely and the most effective medical
treatment and rehabilitation.” H. Stand Comm. Rep. No. 575, in
1995 House Journal, at 1242.
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The legislative history of the relevant sections of HRS
chapter 386 does not support a reading that permits an employer
to delay payments indefinitely after an injury was determined to
be compensable, regardless of whether or not compensability was
initially challenged, as argued by the County. Instead, read as
a whole, the legislative history clearly indicates the
legislature’s intent for injured workers to receive prompt
payment of TTD benefits when due.
5. Distinguishing Panoke
Our decision in Panoke does not require a different
outcome. The Panoke court considered inter alia whether the
LIRAB erred in denying a penalty for delayed payments of TTD
benefits to an injured worker. 136 Hawaiʻi at 466-68, 363 P.3d at
314-316. There, we held that “[b]ecause coverage for [the
employee’s] injuries was still in dispute for the period [at
issue], and payments for that period had not been subject to a
final judgment, [the employer and its carrier] are not liable for
additional penalties under HRS § 386-92.” Id. at 468, 363 P.3d
at 316.
In Panoke, the employee filed an initial injury report
when he injured his back on the job; his employer did not
controvert the claim. Id. at 451, 363 P.3d at 299. However,
several weeks later, the employee filed a second injury report,
complaining of pain in his shoulders, which he attributed to his
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injury. Id. His employer controverted liability for this second
injury report, contending that the pain in his shoulders resulted
not from his work injury but from when the employee broke his
shoulders in a scooter accident. Id. at 452, 363 P.3d at 300.
After a hearing, the director found the injuries were
compensable. Id. at 453, 363 P.3d at 301. The employer
immediately appealed. Id.
In considering whether, on these facts, the ICA erred
in declining to assess a penalty against the employer, this court
explained that, under HRS § 386-92, the 20% penalty applies
either (1) if the TTD benefits are not paid “within thirty-one
days after it becomes due, as provided by the final decision or
judgment” or (2) if TTD benefits are not paid “within ten days
. . . after the employer or carrier has been notified of the
disability, and where the right to benefits are not controverted
in the employer's initial report of industrial injury[.]” Id. at
467, 363 P.3d at 315 (quoting HRS § 386-92) On the Panoke facts,
neither of those conditions were met. Id. at 468, 363 P.3d at
316.
First, we noted that there was no “final and conclusive
decision” within the meaning of HRS § 386-87. Id. Because the
employer timely filed an appeal to the LIRAB, the Panoke
director’s decision did not become final regarding the
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compensability of work-related injuries for purposes of assessing
a penalty for nonpayment. Id.
Second, we noted that the Panoke employer was not
liable for a penalty for failure to make immediate payments
“because the claim was still controverted.” Id. In the absence
of a final judgment and an appeal before the LIRAB, liability for
the injury remained in controversy throughout the period for
which penalties were sought. Id.
Further, the Panoke court rejected the employee’s
argument that a penalty was appropriate because the employer had
failed to controvert liability in the initial injury report. Id.
This, we explained, would have been impossible as the
controverted shoulder injury did not arise in the initial injury
report. Id.
The facts here easily distinguish Panoke. Here,
despite controverting the initial injury report, the County did
not appeal the Director’s decision that Costa’s injuries were
compensable. Thus, after the statutory twenty-day period
provided for in HRS § 386-87, the Director’s decision became
“final and conclusive” in the absence of an appeal to the LIRAB,
triggering the County’s duty to pay TTD benefits. Failure to
begin paying TTD benefits at the latest within thirty-one days of
the decision becoming final would incur a penalty under HRS
§ 386-92. Holding that penalties are appropriate on these facts
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is consistent with our decision in Panoke, with the plain meaning
of the statutory scheme, and with the policy concerns addressed
by the legislature in crafting our workers’ compensation laws.
Further, once the Director’s decision that Costa’s
injuries were compensable became final, liability was no longer
in controversy. Because compensability was not again
controverted until the County sought an independent psychological
evaluation, which was in all events after the period for which a
penalty is here sought, the County could no longer shield itself
from paying TTD benefits without incurring a penalty simply
because it had initially controverted compensability.
The County’s argument to that effect here is similar to
the argument raised by the employee in Panoke and must be
rejected on similar grounds. There, as discussed above, the
employee argued that because the employer had not controverted
the first of the two injury reports, it had waived its ability to
challenge the second. Rejecting this argument, [this court],
acknowledging the absurd result it would produce, reasoned:
Holding that [the employer] had not controverted [the employee’s] shoulder injury for the purposes of HRS § 386-92, merely because they had not done so in the initial injury report . . . would have the effect of allowing employees to subsequently add any injuries to their claims and prevent their employers from controverting them without paying a penalty.
Panoke, 136 Hawaiʻi at 468, 363 P.3d at 316.
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Here, the County asks this court to hold that by simply
controverting the initial injury report, HRS § 386-92 was
indefinitely satisfied for purposes of avoiding penalties for
late TTD benefit payments. This reading of HRS § 386-92 would
lead to an equally absurd result, allowing employers to
controvert whether an injury was work related at the outset and
then either not pay or delay indefinitely TTD benefits that are
no longer in controversy. Because such a reading is contrary to
the manifest legislative intent in providing for penalties “in
cases where liability is not denied and there is no question that
the compensation is due [to] the injured worker[,]” we reject
this argument. S. Stand. Comm. Rep. No. 216, in 1971 Senate
Journal, at 878; see also H. Stand. Comm. Rep. No. 757, in 1971
House Journal, at 1007.
For the reasons set out above, we hold that, consistent
with the plain meaning of HRS § 386-92, the Director may properly
impose a 20% penalty where an employer or its carrier fails to
make timely TTD benefit payments in cases where compensability is
no longer denied and there is no question that the compensation
is due the injured worker.
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B. A Blanket Reservation Clause Does Not Contravene Otherwise Final and Conclusive Findings of Fact and Conclusions of Law Purporting to Determine Compensability and Award Benefits
One final issue to be determined here is the impact of
the reservation clause in the Director’s decision on the County’s
duty to pay TTD benefits once compensability was established.
The County argues that, even if they were not within
the safe harbor created by controverting Costa’s claim under HRS
§ 386-31(b), the penalty under HRS § 386-92 is inappropriate
because “TTD benefits were not ordered by the director until
April 25, 2014[.]” In effect, the County argues that because the
decision contained a blanket reservation clause which provided
that “[t]he matters of average weekly wages, temporary
disability, permanent disability and/or disfigurement, if any,
shall be determined at a later date[,]” no payment was due until
such a determination occurred at a later date. The County points
to the Director’s supplemental decision, which explicitly ordered
payment of TTD benefits under HRS § 386-31(b).
In Bocalbos v. Kapi᷾olani Medical Center, 89 Hawaiʻi
436, 437, 974 P.2d 1026, 1027 (1999) (per curiam), a workers’
compensation case involving a TTD benefits appeal before the
LIRAB, this court held that LIRAB decisions and orders are final,
appealable orders for purposes of HRS § 91-14, irrespective of
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the decision and order’s reservation clause. As we explained in
Bocalbos:
We take judicial notice, based on other workers’ compensation cases that have been before us, that it is the standard practice of the director of labor in any decision awarding temporary disability benefits, regardless of the nature or extent of the injury, to state that “the matter of permanent disability and/or disfigurement, if any, shall be reserved for later determination.” Such a blanket reservation clause, apparently made for the protection of the injured worker, should not be used to prevent timely appellate review of an otherwise final decision on the matters of medical and temporary disability benefits.
Id. at 443, 974 P.2d at 1033.
The same reasoning applies here. Because chapter 386
envisions injured workers receiving TTD benefits “promptly as
they accrue,” we clarify that such a blanket reservation clause
should not be used to prevent timely payment of TTD benefits that
have been finally and conclusively determined to be due an
injured employee. See HRS § 386-31(b).
Once the period for appeal had lapsed and the
Director’s determination on compensability became “final and
conclusive between the parties” under HRS § 386-87, Costa was
entitled to receive “a weekly benefit at the rate of sixty-six
and two-thirds per cent of the employee’s average weekly wages,”
pursuant to HRS § 386-31(b). 11 The uncontested findings of fact
11 HRS § 386-31(b) provides in relevant part:
Where a work injury causes total disability not determined to be permanent in character, the employer, for the duration of the disability, but not including the first three calendar days thereof, shall pay the injured employee a (. . . continued)
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in the Director’s decision determined Costa’s average weekly
wages to be $999.72. Contrary to the blanket reservation clause,
the Director’s decision conclusively determined both that
compensation was due and the amount Costa was entitled to
receive.
Finding the Director’s decision and order final and
conclusive irrespective of a reservation clause is consistent
with this court’s precedent and with the remedial nature of our
workers’ compensation law. See Bocalbos, 89 Hawaiʻi at 443, 974
P.2d at 1033; Van Ness, 131 Hawaiʻi at 558, 319 P.3d at 477.
Further, this interpretation is consistent with the
LIRAB’s recent decision and order, Seghorn v. Department of
Transportation, where the LIRAB came to the opposite conclusion
to the instant case on the applicability of the penalty for
failure to pay TTD benefits. 2019 WL 5069081 (Oct. 9, 2019),
aff’d 154 Hawaiʻi 206, 549 P.3d 345, 2024 WL 2797391 (App. May 31,
2024) (SDO). There, after rejecting an initial challenge to
liability, the Director deferred determination on the issue of
TTD benefits and the employer failed to challenge entitlement to
weekly benefit at the rate of sixty-six and two-thirds per cent of the employee’s average weekly wages, subject to the [certain] limitations[.]
Those limitations provided for in HRS § 386-31(b) do not apply to this case.
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TTD benefits. Id., at *12. Unlike the present case, the LIRAB
found a penalty was applicable. Id., at *13. The Seghorn LIRAB
reasoned:
According to the Hawaiʻi Supreme Court, the legislative purpose behind Section 386-92, HRS is to assess a penalty “in cases where an employer ... is notified of a work injury, does not deny liability for said injury under the law, and still neglects to pay TTD with ten days of notification.” Panoke[, 136 Hawaiʻi] at 467[, 363 P.3d at 315] (citation and quotation omitted). The Panoke Court noted that “the committee reports also suggest that the legislature did not intend for employers contesting a determination of liability by the Director to be required to pay ongoing TTD benefits while the appeal is pending[][.]” [Id.] at 46[7-68, 363 P.3d at 315-16]. The Court quoted from the legislative committee reports that the penalty is intended to apply to cases where “liability is not denied and there is no question that compensation is due the injured worker.” [Id.] at 468[, 363 P.3d at 316].
Employer disputed liability for the November 23, 2015 work injury in its initial report of industrial injury. The Director’s November 2, 2016 decision determined Claimant’s major depressive disorder as compensable. The Director did not award Claimant TTD benefits. Instead, the Director deferred determination on the issue of TTD. Employer could still challenge or dispute liability for and Claimant’s entitlement to TTD, but did not do so. Employer paid Claimant TTD benefits in January and March 2017, which was well past 31 days after the Director's November 2, 2016 decision[.]
There was no decision ordering Employer to pay TTD until the decision on appeal, dated October 18, 2017, but Section 386-31(b) states that TTD benefits should be paid, “. . . without waiting for a decision from the Director, unless the right is controverted. . . .”
On this record, a penalty pursuant to Section 386-92, HRS is appropriate[.]
Id. at *12-13 (emphasis in original).
The LIRAB’s holding and reasoning in Seghorn is
consistent with our holding and reasoning here. We therefore
hold that the ICA erred in affirming the LIRAB’s reversal of
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Director’s imposition of a penalty for late payment of TTD
benefits to Costa pursuant to HRS § 386-92.
V. CONCLUSION
For the reasons stated above, we vacate the ICA’s March
20, 2024 Judgment on Appeal and the LIRAB’s January 31, 2018
Decision and Order reversing the Director’s April 25, 2014
Decision assessing a 20% penalty against the County of Hawaiʻi for
failure to timely pay TTD benefits due Costa under HRS § 386-92.
We remand the case to the LIRAB for further proceedings
consistent with this opinion. The LIRAB shall assess a penalty
in the amount of $4,277.84 12 against the County of Hawaiʻi pursuant
to HRS § 386-92. The LIRAB shall also determine attorneys’ fees
and costs as provided for under HRS § 386-93(b) (Supp. 2012).
Rebecca L. Covert /s/ Mark E. Recktenwald (Herbert R. Takahashi on the briefs) /s/ Sabrina S. McKenna for petitioners /s/ Todd W. Eddins Christine J. Kim (Gary N. Kunihiro /s/ Lisa M. Ginoza on the briefs) for respondents /s/ Vladimir P. Devens
12 It has been more than a decade since the Director imposed the penalty on the County. At oral argument, Costa expressed an openness to seeking interest under either HRS §§ 478-3 (2008) or 636-16 (1993) on remand. Because this issue was not raised before this court, we express no opinion as to the propriety of interest in this context.