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Electronically Filed Supreme Court SCWC-12-0000398 13-OCT-2017 09:47 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
DENNIS T. IHARA, Petitioner/Claimant-Appellee, Cross-Appellant,
vs.
STATE OF HAWAI#I, DEPARTMENT OF LAND AND NATURAL RESOURCES Respondent/Employer-Appellant, Cross-Appellee, Self-Insured.
SCWC-12-0000398
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-12-0000398; CASE NO. AB 2008-266 (2-07-40277))
OCTOBER 13, 2017
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY WILSON, J.
I. INTRODUCTION
This case raises two questions concerning the law of
workers’ compensation in Hawai#i as it relates to permanent
partial disability (PPD) awards. First, must a PPD award for an *** FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER ***
unscheduled injury that is not comparable to a scheduled injury
be supported by some factual finding of a determinate percentage
of impairment of a physical or mental function of the whole
person? This question relates to a required component in the way
the PPD award for such an injury must be calculated under HRS §
386-32(a).1 Second, may a PPD determination be based on a
claimant’s post-injury inability (or reduced ability) to perform
the usual and customary work activities in the position the
1 HRS § 386-32(a) states:
Permanent partial disability. Where a work injury causes permanent partial disability, the employer shall pay the injured worker compensation in an amount determined by multiplying the effective maximum weekly benefit rate prescribed in section 386-31 by the number of weeks specified for the disability as follows:
. . .
Other cases. In all other cases of permanent partial disability resulting from the loss or loss of use of a part of the body or from the impairment of any physical function, weekly benefits shall be paid at the rate and subject to the limitations specified in this subsection for a period that bears the same relation to a period named in the schedule as the disability sustained bears to a comparable disability named in the schedule. In cases in which the permanent partial disability must be rated as a percentage of the total loss or impairment of a physical or mental function of the whole person, the maximum compensation shall be computed on the basis of the corresponding percentage of the product of three hundred twelve times the effective maximum weekly benefit rate prescribed in section 386-31. (Emphasis added.)
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claimant occupied prior to the injury?2 This question relates to
the range of permissible methods by which the degree of partial
impairment may be assessed. With the qualifications detailed
below, we answer both questions in the affirmative.
II. BACKGROUND
In March, 2012, the Labor and Industrial Relations
Appeals Board (the LIRAB or the Board) awarded Ihara $250 in
permanent partial disability (PPD) benefits and found the
Department of Land and Natural Resources (DLNR) liable for
vocational rehabilitation services. Both Ihara and DLNR appealed
to the Intermediate Court of Appeals (ICA). The ICA vacated the
LIRAB’s award of $250 in PPD and related vocational
rehabilitation services, and it remanded to the LIRAB for further
proceedings. On certiorari, Ihara seeks reversal of the ICA’s
decision to vacate the LIRAB’s award of permanent partial
disability benefits to Ihara. Ihara contends the ICA erred in
holding that (1) the LIRAB was required to calculate the award
based on a percentage-based finding of impairment, and (2) that
2 We consider only the issues raised by Ihara in his application for writ of certiorari. His application presented three questions: Did the ICA gravely err in ruling that a PPD award requires a finding of some mental or physical impairment? Did the ICA gravely err in ruling that PPD must equal impairment? Did the ICA gravely err in ruling that PPD should not be based on a claimant’s ability to work? We reformulate his first question more precisely above; we combine his second and third questions in the discussion below.
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the LIRAB erred when it considered work activities in determining
Ihara’s PPD award.
A. Ihara’s employment and injury
Ihara was employed as a Deputy Registrar at the Bureau
of Conveyances, a division within DLNR. Although he was a Deputy
Registrar, Ihara was in charge of operations for the Bureau of
Conveyances and effectively performed the duties of the
Registrar. Ihara described the Bureau as being in a state of
“disarray and dysfunction,” explaining that “the Land Court
section staff was pitted against the Regular System section
staff.” Job stress caused Ihara to experience trouble sleeping,
memory lapses, anxiety, and depression.
Ihara reported to DLNR that he suffered increased
hypertension and stress resulting from the pressures of his
position, and that this injury occurred on approximately
February 1, 2007. On March 21, 2007, DLNR filed a Form WC-1:
Employer’s Report of Industrial Injury, which documented Ihara’s
claim and the nature of his injury, and on May 17, 2007, Ihara
filed a Form WC-5: Employee’s Claim for Worker’s Compensation
Benefits. Ihara’s physician, Dr. Ronald A. Morton, submitted a
letter stating that Ihara was in reasonably good health with
controlled hypertension, but that high work stress had caused a
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recent and marked elevation in his blood pressure.
At the request of DLNR, Dr. Ajit Arora performed an
Independent Medical Examination and Dr. Jon Streltzer performed
an Independent Psychiatric Examination on Ihara. Dr. Arora’s
report from May 21, 2007 diagnosed Ihara with “[e]ssential
hypertension, genetically based, with temporary aggravation.”
Dr. Streltzer’s report from June 19, 2007 stated that Ihara
suffered from “Adjustment Disorder with Anxiety, Primary
Insomnia, Occupational Problem (not a mental disorder), and High
Blood Pressure.” Based on Dr. Arora’s and Dr. Streltzer’s
Independent Medical Examination and Independent Psychiatric
Evaluation, DLNR accepted compensability for Ihara’s claim as a
temporary aggravation.
The Department of Human Resources Development, Employee
Claims Division, instructed the doctors to submit reports and
statements to the Department of Human Resources Development,
State Workers’ Compensation Division, documenting the medical
services rendered in relation to his increased stress and
hypertension. Various notes from Dr. Morton were submitted, as
well as from psychiatrist Dr. Dennis Lind, excusing Ihara from
work and stating that he was disabled for certain dates. Ihara
was put on unpaid medical leave with his last day at work being
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June 12, 2007.
On June 19, 2008 the claims manager of the Employee
Claims Division wrote to Drs. Lind and Morton requesting their
opinions as to whether Ihara could return to work. On June 25,
2008, Dr. Lind responded that Ihara had reached medical stability
and could work in other situations, but not at DLNR. Dr. Morton
wrote on June 27, 2008 that Ihara could return to regular duty
and had reached medical stability.
Based on Dr. Lind’s assessment that Ihara had reached
medical stability but could only work in other situations, DLNR
discharged Ihara from his position at the Bureau of Conveyances
via a letter dated July 11, 2008. Relying on Dr. Lind’s “medical
assessment,” DLNR determined that Ihara was “medically
disqualified for continued civil service employment,” not only
for the Deputy Registrar position but also for “any DLNR
employment.”
B. Hearings before the Department of Labor and Industrial Relations and the LIRAB
Ihara claimed eligibility for temporary total
disability benefits and vocational rehabilitation services.
Ihara’s employer, DLNR, disputed his eligibility for some of
those benefits and services. Disputes concerning benefits are
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decided by the director of the Department of Labor and Industrial
Relations. HRS § 386-86(a)-(b)(1993 & Supp. 2014). The director
conducts an informal hearing on the claim and issues findings of
fact and conclusions of law. Id. After an initial hearing in
March 2008 and a decision in May 2008, the director, in a
supplemental decision in October 2009, stated that DLNR was
required to pay Ihara for “such medical care, services and
supplies as the nature of the injury may require,” as well as
weekly compensation for Ihara’s temporary total disability and
temporary partial disability for the relevant weeks of his leave.
In addition, the director found that no permanent disability
resulted from Ihara’s injury. Both Ihara and DLNR appealed the
decision to the LIRAB.
In its March 13, 2012 decision and order, the Board
found that Ihara was entitled to certain periods of temporary
total disability as a result of his work injury and to vocational
rehabilitation benefits for certain periods. The Board concluded
that Ihara was entitled to benefits for permanent partial
disability in the amount of $250 based on its finding that the
DLNR’s statement in its July 11, 2008 letter that Ihara was
medically disqualified from his position served as an admission
that Ihara was permanently disabled.
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The Board finds that Employer’s statement that Claimant was “medically disqualified” for his position was an admission or acknowledgement that Claimant was permanently disabled. The Board finds this to be especially so, because Employer sought out and received opinions of medical stability from Drs. Morton and Lind before it sent this letter.
The Board credits the opinions that Claimant sustained no ratable impairment. However, Employer’s July 11, 2008 letter admitted or acknowledged permanent disability, stated that Claimant was “medically disqualified” for his position, and terminated him therefrom. Therefore, the Board finds that Claimant sustained permanent partial disability in the amount of $250.
Both the DLNR and Ihara appealed the LIRAB’s decision to the ICA.
C. ICA proceedings
The ICA vacated the Board’s ruling awarding Ihara $250
in PPD benefits on two grounds. First, the ICA held that the
statute governing PPD benefits requires the assignment of a
percentage of impairment for unscheduled injuries, i.e., for
injuries not listed in the statute. More precisely stated, the
statute requires the assignment of a percentage of impairment for
injuries not specifically listed in the statute or comparable to
those listed in the statute. The Board had failed to assign any
percentage of impairment to Ihara’s injury, instead awarding him
a lump sum of $250.
Second, based on its analysis of the statute’s
legislative history, the ICA held that PPD may not be based on
“ability to work,” because, unlike total disability awards, PPD
benefits are essentially indemnity payments for loss of bodily
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integrity, not compensation to replace loss of wages. The ICA
found that the Board improperly awarded Ihara permanent partial
disability benefits based on his reduced ability to work. The
ICA noted that the Board’s award of PPD benefits was based on the
ambiguous position that, though Ihara suffered no ratable
impairment, nonetheless he was “medically disqualified” to return
to his position at DLNR, and the Board accordingly awarded him
PPD benefits, based on his reduced ability to work.
The ICA found the Board’s position on the extent of
Ihara’s impairment ambiguous. Either the Board meant by its
findings that Ihara suffered no impairment at all, or it meant
“that he had suffered some impairment, but in an amount incapable
of being measured.”3
The ICA vacated the Board’s award and remanded “for a
determination of whether Ihara had suffered a permanent
impairment, and if so, the percentage of the impairment and the
award of PPD benefits based on that percentage.”4
3 As noted infra, an award of permanent partial disability benefits for an unscheduled injury that is not comparable to a scheduled injury must be based on a finding of a determinate degree or percentage of impairment.
4 Vocational rehabilitation services are available for employees who suffer permanent disability. HRS § 386-25(b)(Supp. 2014). Because the ICA vacated the Board’s award of PPD benefits to Ihara, it also vacated the Board’s determination that Ihara was entitled to vocational (continued...)
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III. STANDARDS OF REVIEW
A. Appeals from agency determinations relating to workers’ compensation
Appellate review of a LIRAB decision is governed by the
provisions of the Hawai#i Administrative Procedure Act relating
to judicial review of agency action. HRS § 91-14(g)(1993);
Bocalbos v. Kapiolani Med. Ctr. for Women & Children, 93 Hawai#i
116, 123, 997 P.2d 42, 49 (App. 2000). Under those provisions,
the reviewing court “may affirm the decision of the agency or
remand the case with instructions for further proceedings.” Id.
The reviewing court also “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” (1) violate provisions of the constitution
or a statute, (2) are beyond the agency’s statutory authority or
jurisdiction, (3) used “unlawful procedure,” (4) were “[a]ffected
by other error of law,” (5) were clearly erroneous, or (6) were
arbitrary or capricious “or characterized by abuse of discretion
or clearly unwarranted exercise of discretion.” HRS § 91-
14(g)(1)-(6). To be reversed as clearly erroneous, the agency’s
4 (...continued) rehabilitation services. The ICA then remanded that issue to the Board “for a redetermination consistent with its final decision on the PPD issue.”
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findings, conclusions, decisions or orders must be clearly
erroneous “in view of the reliable, probative, and substantial
evidence on the whole record.” HRS § 91-14(g)(5); Poe v.
Hawai#i Labor Relations Bd., 87 Hawai#i 191, 195, 953 P.2d 569,
573 (1998). As to conclusions of law, the LIRAB’s conclusions
will be reviewed de novo, under the right/wrong standard. Tate
v. GTE Hawaiian Tel. Co., 77 Hawai#i 100, 103, 881 P.2d 1246,
1249 (1994). As to findings of fact, an “agency’s findings
should be ‘sufficient to allow the reviewing court to track the
steps by which the agency reached its decision.’” Kauai Springs,
Inc. v. Planning Comm’n of Cty. of Kauai, 133 Hawai#i 141, 164,
324 P.3d 951, 974 (2014)(citation omitted); Int’l Bhd. of Elec.
Workers, Local 1357 v. Hawaiian Tel. Co., 68 Haw. 316, 328, 713
P.2d 943, 953 (1986)(“A remand pursuant to HRS § 91–14(g) is
appropriate if an agency’s findings are incomplete”). “When
mixed questions of law and fact are presented, an appellate court
must give deference to the agency’s expertise and experience in
the particular field. The court should not substitute its own
judgment for that of the agency.” In re Water Use Permit
Applications, 94 Hawai#i 97, 119, 9 P.3d 409, 431
(2000)(citation, braces, and internal quotation marks omitted).
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B. Statutory interpretation
Appellate courts review statutory interpretation de
novo. Van Ness v. State, Dep’t of Educ., 131 Hawai#i 545, 558,
319 P.3d 464, 477 (2014), as corrected (Feb. 4, 2014). “When
construing a statute, our foremost obligation is to ascertain and
give effect to the intention of the legislature, which is to be
obtained primarily from the language contained in the statute
itself.” Id. (citation omitted). The “broad humanitarian
purpose of the workers’ compensation statute read as a whole
requires that all reasonable doubts be resolved in favor of the
claimant.” Id. (braces, underscoring, and citation omitted).
The statute must be “construed . . . liberally” in order to
effect its “beneficent purposes.” Puchert v. Agsalud, 67 Haw.
25, 36, 677 P.2d 449, 457 (1984).
IV. DISCUSSION
On certiorari, Ihara raises as issues (1) whether a PPD
award for an unscheduled injury requires a finding of some mental
or physical impairment and (2) whether a PPD award may reflect a
claimant’s reduced ability to work. To address these issues, we
provide a brief overview of the relevant portions of the workers’
compensation statute.
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A. Legislative and administrative background of permanent partial disability
Workers’ compensation statutes “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 Hawai#i 70, 79, 9 P.3d 382, 391, on reconsideration in part,
94 Hawai#i 92, 9 P.3d 404 (2000). The Hawai#i workers’
compensation statute “is social legislation that is to be
interpreted broadly.” Davenport v. City & Cty. of Honolulu,
Honolulu Fire Dep’t, 100 Hawai#i 481, 491, 60 P.3d 882, 892
(2002). The statute provides “an injured employee’s exclusive
remedy for an injury arising out of and in the course of
employment.” Iddings v. Mee-Lee, 82 Hawai#i 1, 5, 919 P.2d 263,
267 (1996). In addition, the statute embodies a presumption of
compensability, and that “presumption has been described as one
of the ‘keystone principles’ of our workers’ compensation plan.”
Flor, 94 Hawai#i at 79, 9 P.3d at 391.
Various benefit categories exist to meet different
workers’ varied circumstances. Two types of permanent disability
are relevant to our discussion here: total disability and
permanent partial disability. Total disability benefits
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compensate a worker for his or her loss of wage-earning capacity,
while PPD benefits compensate a worker for the loss of bodily
integrity, that is, the loss of a physical or mental function.
HRS § 386-31(a); HRS § 386-32(a). If an employee is injured on
the job and is unable to work in any capacity after the injury,
he or she is eligible for a total disability benefit. H. Stand.
Comm. Rep. No. 418-70, in 1970 House Journal, at 976. Total
permanent disability payments are wage replacement benefits meant
to compensate the worker for the permanent loss of wage-earning
capacity where the worker is unable to find work on the regular
labor market. Id. The purpose of a PPD award, on the other
hand, is to compensate a worker for the loss or impairment of a
physical or mental function. Unlike total disability, a PPD
award is not based on the amount of wages lost. H. Stand. Comm.
Rep. No. 193, in 1969 House Journal, at 702. A PPD award is
payable to the worker even if the worker returns to work, and the
amount of the award derives from the extent of a worker’s
impairment rather than his or her wage-earning capacity. See HRS
§ 386-32(a).
The distinction between total disability and PPD
benefits is further clarified in the legislative history of the
1970 amendments to the statute. “‘[T]otal disability’ is defined
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as ‘disability of such an extent that the disabled employee has
no reasonable prospect of finding regular employment of any kind
in the normal labor market.’ . . . Permanent partial
disability compensation payments under the law, however, are
based primarily on impairment of physical or mental function and
not on ability for work.” H. Stand. Comm. Rep. No. 418-70, in
1970 House Journal, at 976. Thus, the legislature intended that
total disability benefits should compensate a worker for wages
lost when he or she is unable to find regular employment of any
kind due to a work-related injury, whereas PPD benefits should
compensate for the loss or impairment of a mental or bodily
function, irrespective of wage-earning capabilities.
PPD injuries divide into two basic classes, scheduled and
unscheduled. 2 Modern Workers Compensation § 200:10 (Thomson
Reuters 2017). Scheduled losses or injuries are those
specifically listed and provided for by statute; unscheduled
losses or injuries are those not specifically listed. Id.
Methods for determining or calculating the amount of compensation
for permanent partial injuries differ depending on whether the
injury is scheduled or unscheduled. HRS § 386-32(a) illustrates
the method for determining the amount of compensation for
scheduled injuries. It includes a schedule of body parts whose
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loss is covered by permanent partial disability benefits, with
the amount of compensation varying based on the specific body
part. The schedule lists benefits to be paid for specific
losses, e.g., a finger or hand. HRS § 386-32(a).
For loss or impairment of a function that is not listed
in the schedule, or is not comparable to a scheduled injury, the
permanent partial disability is rated as a percentage of the
total loss or impairment of a physical or mental function of the
whole person.5 HRS § 386-32(a). The percentage is used to
calculate the dollar amount of the PPD award according to a
formula in the statute. HRS § 386-32(a) provides that the
“maximum compensation” for an unscheduled PPD injury “shall be
computed on the basis of the corresponding percentage . . . .”
Id. (emphasis added).
5 The general outline of this “degree of whole person impairment” approach has been described as follows.
Under the impairment of the whole person method of computing workers’ compensation for a permanent partial disability, the calculation of the workers’ compensation payable is the result of a multiplication. The multiplicand is the amount which the statute assigns to the whole person. This may be a flat dollar amount or a number of weeks or months of compensation . . . with the per-week compensation figured as a fraction or percentage of the employee’s pre-injury average weekly wages or earnings or the statewide average weekly wage. The multiplier is the proportion, fraction, percentage or degree (figured up to 100 degrees) of the employee’s impairment.
2 Modern Workers Compensation § 200:18.
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In practice, initial PPD ratings for unscheduled
injuries are typically provided by medical experts using rating
categories outlined in the various editions of the American
Medical Association’s Guides to the Evaluation of Permanent
Impairment (AMA Guides), and then the LIRAB may add additional
percentage points depending on the magnitude of the impairment
rating. See Hawai#i Administrative Rules (HAR) § 12-10-
21(a)(“Impairment rating guides issued by the American Medical
Association, American Academy of Orthopedic Surgeons, and any
other such guides which the director deems appropriate and proper
may be used as a reference or guide in measuring a disability.”).
See also Ibarra v. Fireman’s Fund Ins. Co., Case No. AB 2009-504
(2-06-01173); Chi v. City & Cty. of Honolulu, Case No. AB 2006-
116 (2-04-01998).
It is, however, ultimately the director of the
Department of Labor and Industrial Relations or the Board, and
not the physician, that decides the final PPD rating. Cabatbat
v. Cty of Hawai#i, Dep’t of Water Supply, 103 Hawai#i 1, 9, 78
P.3d 756, 764 (2003), as corrected (Dec. 8, 2003). The LIRAB
generally places great weight upon a physician’s initial
impairment rating, but it is not the only component of the
Board’s assessment. Id. The LIRAB’s decisions show a marked
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pattern in which the Board considers factors other than the
physician’s impairment rating, such as whether the complainant is
able to participate in the same types of hobbies and daily and
work activities as prior to the accident. See, e.g., Belanio v.
State, Case No. AB 2007-532 (1-03-10259) at 8 (claimant’s
inability to return to customary job resulted in 3% PPD); Deponte
v. City & Cty. of Honolulu, Case No. AB 97-624 (2-95-11372) at 3-
4 (claimant’s inability to perform activities of daily living
resulted in 2% PPD); Chi, AB 2006-116 at 3 (claimant awarded 3%
PPD due to inability to engage in recreational and daily living
activities).
Disputes concerning compensation under Hawaii’s
workers’ compensation law are decided by the director. HRS §
386-86(a)-(b). The director conducts an informal hearing on the
claim and issues findings of fact and conclusions of law. Id.
The decision of the director may be administratively appealed to
the LIRAB, which conducts a de novo, trial-like hearing on the
appeal from the director’s determination. HRS § 386-87(a)-(c).
A LIRAB decision may be appealed directly to the ICA. HRS § 386-
73.5; HRS § 386-88.
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B. A PPD award requires a finding of some determinate impairment of a mental or physical function
The ICA held that a PPD award requires a finding of
some percentage of mental or physical impairment. The ICA
concluded that the Board’s findings as to the extent of Ihara’s
impairment were ambiguous. Under the Board’s findings, it is
possible to conclude either that Ihara suffered no permanent
impairment or that he suffered some impairment, but not in a
ratable amount. The ICA concluded that under either of the two
alternative interpretations, the Board erred. As to the first
alternative, “[i]f the LIRAB’s conclusion was that Ihara suffered
no impairment, then its interpretation of HRS § 386-32(a) was
erroneous because a PPD award requires a finding that there is
some mental or physical impairment.” The ICA explained that the
definition section of HRS chapter 386 defines disability as “loss
or impairment of a physical or mental function,” and it concluded
that an impairment is necessary to support a PPD award because
the definition of disability explicitly includes a loss or
impairment. As to the second alternative, that Ihara had
suffered some impairment, but not in a ratable amount, the ICA
concluded that the Board had impermissibly imported Ihara’s
reduced ability to work as a criterion in deciding Ihara’s PPD
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impairment. In the ICA’s view, the legislative intent of the
statute “makes clear that PPD is solely based on a claimant’s
physical or mental impairment and not on his ability to work.”
We consider the ICA’s analysis of the first alternative in this
section and its analysis of the second alternative in the next
section.
In regard to the first alternative, Ihara argues that
the ICA failed to “recognize long-standing precedents which did
not require a finding of some mental or physical impairment in
order to award PPD.” Ihara argues that the Hawai#i workers’
compensation statute has an established history of awarding PPD
even in the absence of impairment, citing a number of the LIRAB’s
administrative adjudications.
Ihara is mistaken. His analysis of the LIRAB decisions
confuses the LIRAB’s impairment rating with a physician’s
impairment rating. The LIRAB decisions Ihara cites do, in fact,
serve as instances where a physician gave a 0% impairment rating,
or found no impairment, and yet the LIRAB awarded a small
percentage of PPD. However, these decisions merely show that it
is not necessary for a physician to find a percentage of
impairment under the AMA Guides in order for the LIRAB to award
PPD. The LIRAB decisions he cites do not negate the fact that
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the LIRAB must ultimately find impairment before making a PPD
award. In the decisions Ihara cites, the LIRAB found that the
physician’s 0% or low impairment rating based on the AMA Guides
did not fully reflect the claimant’s total loss or impairment,
and so it further evaluated the record to reach an accurate
impairment rating.6 We approved this practice in Cabatbat when
we quoted the Arizona Supreme Court’s holding that where the AMA
Guides and the physician’s assessment do not give an accurate
portrayal of the total loss of impairment, the director or Board
should take other factors into account to reach an accurate
disability determination. 103 Hawai#i at 9, 78 P.3d at 764
(“when the AMA Guides do not truly reflect a claimant’s loss, the
[administrative law judge] must use his discretion to hear
additional evidence and, from the whole record, establish a
rating independent of the AMA recommendations.” (quoting Slover
Masonry, Inc. v. Indus. Comm’n, 761 P.2d 1035, 1040 (Ariz.
1988))). We later reaffirmed this view when we stated that other
factors affecting a PPD assessment include “skills, education,
job history, adaptability, age, and environment . . . .” Duque
6 See, e.g., Ibarra, AB 2009-504 at 7-8 (awarding claimant 2% PPD despite crediting physician’s 0% impairment rating under the AMA Guides because lower back injury affected ability to work); Chi, AB 2006-116 at 3-4 (awarding claimant 3% PPD for residual eye problems despite AMA Guides rating his vision impairment at 0%).
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v. Hilton Hawaiian Vill., 105 Hawai#i 433, 439, 98 P.3d 640, 646
(2004)(quoting the AMA Guides).
Furthermore, none of the LIRAB decisions Ihara marshals
demonstrate circumstances where the LIRAB found the claimant
suffered no impairment whatever; on the contrary, in each of
these cases, the LIRAB found that the complainant’s daily
activities at home or at work were permanently affected due to
the injury. For example, in Chi, a police officer who was struck
in the eye rated at 0% impairment according to the vision test
outlined in the AMA Guides, but based on testimony that he
suffered from double vision and was no longer able to engage in
certain activities of daily living as a result, the LIRAB awarded
him 3% PPD. AB 2006-116 at 3-4.
It follows that even where a physician finds there is
no impairment under the standards in the AMA Guides, or fails to
give an impairment rating, the LIRAB has the discretion to
consider the entire record, even beyond the physician’s
impairment rating, to determine the most accurate impairment
rating possible. The AMA Guides itself does not require an award
of permanent partial disability to be conditioned upon a finding
of impairment by a physician. Instead, the AMA Guides emphasizes
that it “is not intended to be used for direct estimates of work
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disability. Impairment percentages derived according to the
Guides criteria do not measure work disability. Therefore, it is
inappropriate to use the Guides’ criteria or ratings to make
direct estimates of work disability.” AMA Guides (Fifth Edition,
2000), at 9; id. at 13 (“Impairment percentages estimate the
extent of the impairment of the whole person functioning and
account for basic activities of daily living, not including work.
The complexity of work activities requires individual analysis.
Impairment assessment is a necessary first step for determining
disability.”)(emphasis in original)).
The cases Ihara cites represent instances where the
physician found no percentage of impairment, but after reviewing
the record, the LIRAB found impairment based on additional or
other evidence. None of the cases Ihara highlights include a
scenario where the LIRAB found that there was no impairment
whatever, yet still awarded PPD. Thus, the ICA accurately held
that a PPD award requires a finding of some physical or mental
impairment.
Following Ihara’s hearing, the Board did not determine
Ihara’s PPD using the percentage of impairment, and instead
directly awarded him a monetary lump sum of $250 with no
explanation as to how it calculated the amount of the award.
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The statutory formula uses the impairment percentage to calculate
the monetary amount of the PPD award, stating that “[i]n cases in
which the permanent partial disability must be rated as a
percentage of the total loss or impairment . . . the maximum
compensation shall be computed on the basis of the corresponding
percentage of the product of three hundred twelve times the
effective maximum weekly benefit rate . . . .” HRS § 386-32(a).7
Given this statutory provision, the LIRAB cannot calculate
Ihara’s monetary PPD award in accordance with the statute without
first establishing his percentage of impairment.
Accordingly, the ICA correctly vacated Ihara’s PPD
award. A PPD award for an unscheduled injury that is not
comparable to a scheduled injury must be based on a finding of
some determinate percentage of “the total loss or impairment of a
physical or mental function of the whole person.” HRS § 386-
32(a). The percentage may correspond to the percentage of
impairment found by a physician using the AMA Guides. The
percentage may also correspond to a physician’s rating of
7 Ihara also contends that HRS § 386-32(a) only requires that a PPD percentage be used to calculate the maximum PPD for which a claimant is eligible, and that no percentage is required to calculate the PPD a claimant is actually awarded. Even were Ihara’s interpretation of the statutory language correct, the statute mandates that the LIRAB still must find a PPD percentage to set the ceiling of a claimant’s PPD award eligibility. Because the LIRAB failed to establish a percentage, it was unable to calculate the maximum PPD award for which Ihara was eligible.
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impairment based on “any other such guides which the director
deems appropriate and proper,” and therefore “may be used as a
reference or guide in measuring a disability.” HAR § 12-10-
21(a). Where a physician’s estimate of the permanent impairment
under the AMA Guides is zero, the Board nonetheless has the
discretion to find a determinate degree of impairment using
standards not encompassed by the AMA Guides.
C. A claimant’s loss of wage-earning capacity cannot be considered in determining permanent partial disability; however, reduced ability to perform one’s usual and customary work post-injury can be considered in determining PPD
The ICA concluded: “The legislative intent of HRS §
386-32(a) makes clear that PPD is solely based on a claimant’s
physical or mental impairment and not on his ability to work.”
As the ICA stated, the legislative history of the statute
“strengthens the conclusion that awards for PPD are meant to be
based on the extent of a claimant’s impairment and not on his
wage-earning capacity or ability to work.” Accordingly, the ICA
held that inability (or reduced ability) to perform work-related
activities may never be a factor in determining PPD awards.
This analysis fails to distinguish with sufficient
precision between a post-injury reduced ability to perform the
work activities of one’s former position (which may be relevant
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to PPD), on the one hand, and loss of future wage-earning
capacity (which is relevant only to total disability
determinations), on the other. While total disability awards
compensate a worker who has lost his or her wage-earning
capacity, permanent partial disability awards serve a different
purpose: to compensate the worker for a loss of bodily integrity.
Cuarisma v. Urban Painters, Ltd., 59 Haw. 409, 421, 583 P.2d 321,
327 (1978).
Stated differently, loss of wages or earning capacity
is relevant to total disability (whether temporary total
disability or permanent total disability), but it is not a
relevant criterion in determining permanent partial disability.
Id. (“Permanent partial disability compensation is an indemnity
payment for the loss or impairment of a physical function and,
unlike temporary total disability benefits, is not compensation
to replace current loss of wages.”).8 See also H. Stand. Comm.
Rep. No. 418-470, in 1970 House Journal, at 76 (indicating that
while loss of wage-earning capacity affects total disability
8 Cuarisma’s holding was limited to disfigurement benefits, which are a separate category of PPD under the statute. Cuarisma, 59 Haw. at 413, 583 P.2d at 323-24.
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awards, it should not be considered in PPD awards)9. In short,
the ICA correctly held that PPD awards may not be based on wage
loss or earnings loss, because PPD awards rest on a different
rationale than awards for total disability, whether permanent or
temporary total disability.
However, the ICA mistakenly concluded that eligibility
for a PPD award may never be based, even in part, on an inability
or reduced ability, post-injury, to perform one’s usual and
customary work. In so concluding, the ICA incorrectly supposed
that considering the claimant’s post-injury inability to perform
his or her usual and customary work is the equivalent of
considering the loss-of-wages rationale appropriate only to total
disability awards.
A total disability award provides the injured worker
with a replacement income stream because he or she can no longer
work and therefore cannot earn a living. For that reason, loss
of income is a necessary component of a total disability award.
9 The relevant text reads:
[T]otal disability is defined as disability of such an extent that the disabled employee has no reasonable prospect of finding regular employment of any kind in the normal labor market . . . Permanent partial disability compensation payments under the law, however, are based primarily on impairment of physical or mental function and not on ability for work.
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Determination of a PPD award, in contrast, compensates the worker
not for total loss of income but for partial loss of function,
either physical function or mental function. Phrased another
way, a total disability award is ultimately income-based; a
partial disability award is ultimately function-based.
A reduced ability to perform one’s pre-injury work
activities may indicate a permanent partial loss of function,
that is, an impairment, and a permanent partial loss of function
is precisely the kind of loss for which PPD awards compensate the
injured worker. The fact that the loss of function may be
manifested in a reduced ability to perform one’s pre-injury work
activities does not make a PPD award income-based rather than
function-based.
Our conclusion is buttressed by the Board’s expertise
and experience in this complex field. The LIRAB’s administrative
adjudications consistently follow the distinction between wage-
based total disability awards and function-based partial
disability awards. In Belanio, the LIRAB awarded permanent
partial disability based on claimant Belanio’s inability to
perform his usual and customary work. Belanio suffered injuries
to his lower back that prevented him from returning to his usual
and customary job as an equipment operator. LIRAB Case No. AB
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2007-532, at 6. The LIRAB stated that “[b]ased on Claimant’s
testimony and medical evidence restricting Claimant from
returning to his usual and customary job, the Board finds that
Claimant sustained some loss or impairment of physical function.”
Id. In Ibarra, the LIRAB again awarded PPD where an employee
hurt his shoulder at work although -- according to the AMA Guides
-- he was rated at 0% impairment of his whole person. LIRAB Case
No. AB 2009-504, at 6. The LIRAB awarded a 2% PPD award based on
its conclusion that “Claimant’s ability to work, even while [the
doctor] released Claimant to ‘full capacity’ work, was affected
by Claimant’s injury” where the claimant changed jobs following
his injury due to his inability to undertake heavy-lifting
activities. Id. at 7.
The LIRAB’s decisions stand for the proposition that a
claimant’s inability to perform his or her usual and customary
work activities legitimately may be considered in determining PPD
awards, especially where the AMA Guides do not present an
accurate rating of the full extent of the claimant’s impairment
or loss of a physical or mental function. Additionally, as
discussed supra, Cabatbat and Duque support the LIRAB’s
consideration of work activities, in that each holds that other
factors outside of a physician’s impairment evaluation may
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permissibly affect the determination of a claimant’s PPD award.
Cabatbat, 103 Hawai#i at 9, 78 P.3d at 764; Duque, 105 Hawai#i at
439, 98 P.3d at 646.
In Ihara’s case, the LIRAB appropriately considered his
inability to return to his regular course of work when
determining his PPD award:
The Board credits the opinions that Claimant sustained no ratable impairment. However, Employer’s July 11, 2008 letter admitted or acknowledged permanent disability, stated that Claimant was “medically disqualified” for his position, and terminated him therefrom. Therefore, the Board finds that Claimant sustained permanent partial disability in the amount of $250.
However, the LIRAB awarded Ihara a lump sum of $250
without explaining its basis for doing so, when it should have
first determined his percentage of impairment and then calculated
the correct dollar amount of the PPD award according to the
formula in the statute. HRS § 386-32(a). Thus, although the ICA
incorrectly interpreted the law in holding that work activities
cannot play a role in determining PPD awards, it properly vacated
and remanded the LIRAB’s decision awarding Ihara $250 in PPD.
We defer to the LIRAB’s expertise in determining that
Ihara suffered from a permanent partial disability, and do not
substitute our judgment for its judgment concerning that
determination. In re Water Use Permit Applications, 94 Hawai#i
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97, 119, 9 P.3d 409, 431 (2000)(“When mixed questions of law and
fact are presented, an appellate court must give deference to the
agency’s expertise and experience in the particular field. The
court should not substitute its own judgment for that of the
agency.” (citation, braces, and internal quotation marks
omitted)). On the other hand, we find the factual basis for the
Board’s awarding Ihara a lump sum of $250 for his PPD
insufficient to allow us to discern the steps by which the LIRAB
reached that decision. Kauai Springs, 133 Hawai#i at 164, 324
P.3d at 974 (noting that an “agency’s findings should be
‘sufficient to allow the reviewing court to track the steps by
which the agency reached its decision.’” (citation omitted));
Int’l Bhd. of Elec. Workers, 68 Haw. at, 328, 713 P.2d at 953 (“A
remand pursuant to HRS § 91–14(g) is appropriate if an agency’s
findings are incomplete”).
We therefore remand this matter to the LIRAB to
determine the relevant percentage of Ihara’s impairment, as well
as to determine an award of PPD benefits based on that
percentage.
V. CONCLUSION
For the foregoing reasons, we affirm in part the ICA’s
vacating of the LIRAB’s March 13, 2012 decision awarding $250 in
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PPD to Ihara. While we affirm in part, we also correct the ICA’s
rationale for vacating and remanding. We leave intact the
LIRAB’s determination that Ihara suffered some permanent partial
disability. We vacate only the Board’s $250 lump sum award to
Ihara, and we remand to the LIRAB for it to determine the
relevant percentage of Ihara’s impairment, as well as an award of
PPD benefits based on that percentage.
Wayne H. Mukaida /s/ Mark E. Recktenwald for petitioner /s/ Paula A. Nakayama Scott G. Leong and Shawn L.M. Benton /s/ Sabrina S. McKenna for respondent /s/ Richard W. Pollack
/s/ Michael D. Wilson