The recent Commonwealth Court case of Krushauskas v. Workers’ Compensation Appeal Board (General Motors) sets a disturbing precedent that should cause all claimant’s practitioners to take note. Essentially, the court enables an employer to unilaterally suspend benefits and then allow the illegal conduct to be retroactively sanctioned, years later. Moreover, the retroactive absolution of any wrongdoing was used as the justification for failing to award a penalty notwithstanding the recognition that the Workers’ Compensation Act had been violated. The result is truly breathtaking.

The facts of Krushauskas are somewhat intricate and contribute greatly to the result. As the old adage goes, bad facts make bad law. Unfortunately, the facts of the case could not have been more difficult to overcome.

The injured worker, Thomas Krushauskas, hurt his right shoulder on September 7, 2005, while working for General Motors as a stock picker. GM accepted the claim as compensable by issuing a notice of compensation payable, which indicated that Krushauskas was to receive $711.59 per week as of the first date of disability on September 14, 2005.

Almost two years after an alleged illegal suspension of indemnity benefits, on March 9, 2008, Krushauskas filed a penalty petition alleging that the employer unilaterally suspended his indemnity benefits as of July 1, 2006, in the absence of a supplemental agreement, judge’s decision or other competent authority to do so. GM denied these allegations in a timely manner and the case was assigned to a workers’ compensation judge.

The Commonwealth Court quoted the Workers’ Compensation Appeal Board directly, as to the relevant facts in the record before the WCJ. Given the specific and unique nature of the facts, that verbatim description is reiterated as follows:

“In support of [his penalty petition, the] claimant testified [before the WCJ on December 8, 2008,] that he injured his right shoulder on July 7, 2005, and continued to work until September 7, 2005. [The employer] acknowledged the work injury and began paying workers’ compensation benefits as of September 14, 2005 [until approximately July 1, 2006]. [On cross-examination, the claimant testified that] in May 2006, claimant, as a member of the UAW, was invited to attend employer’s attrition plan meeting. After that meeting, claimant signed Form A of the Special Attrition Plan, for receipt of a lump sum of $35,000.00, and Form B, which provided inter alia, that claimant was not under duress, and was not disabled. Form B also contained a general release of all claims against [the employer], including disability pay and benefits. Despite acknowledging the signing of [the Special Attrition Plan, the] claimant insisted that it was not his intention to retire.

“In defense, [the employer] introduced into evidence the Special Attrition Plan and presented the [deposition] testimony of its personnel director, Robert Cramer, and its administrative assistant, Stacey Pasceri.

“Mr. Cramer testified that in the spring of 2006[,] Employer and the [UAW] negotiated a Special Attrition Program or Enhanced Retirement Program as an incentive to reduce the workforce. All of the employees both working and non[-]working were invited to attend a meeting where the program was explained. No employee was forced to accept the program. Those who accepted it had 45 days thereafter to revoke acceptance. Claimant did not revoke his acceptance of the plan.

“Ms. Pasceri’s testimony corroborated Mr. Cramer’s and established that claimant had signed both [Form] A and [Form] B [of the Special Attrition Plan] as of May 11, 2006.”

Following a full litigation of the matter, the WCJ denied Krushauskas’ penalty petition. The WCJ did find that GM violated the act by unilaterally and illegally suspending the claimant’s wage loss benefits as of July 1, 2006. Furthermore, the WCJ agreed with Krushauskas that GM failed to procure a supplemental agreement, notification of benefit offset, WCJ decision or other competent vehicle authorizing the suspension. However, the WCJ was unable to identify a corpus of money upon which to base a percentage for the purposes of a monetary penalty. This was due to the WCJ’s unilateral determination that there was no past compensation owed to the injured worker.

In arriving at the conclusion that no compensation was due, the WCJ found that Krushauskas voluntarily retired from the workforce when he signed GM’s special attrition plan. The WCJ also suspended Krushauskas’ benefits, sua sponte, retroactive to July 1, 2006, the date of GM’s unilateral suspension, thus sanitizing its illegal activity. The WCJ’s rationale in this regard centers around the credibility determination. The WCJ found that Krushauskas was not believable as to his testimony that he only retired due to his inability to perform the job because of his work injury. Also, Krushauskas’ testimony was inconsistent with paragraph five of Form B as described above, which indicated that he was agreeing he was not disabled. Ostensibly, it did not sit well with the WCJ that Krushauskas had signed documents that acknowledged his voluntarily retirement from the workforce, received a vested pension and also the sum of $35,000 as part of his voluntary retirement, while testifying to the contrary.

On appeal to the WCAB, Krushauskas argued that he was not on notice as to the retirement issue, since GM never filed a suspension petition, or any other petition. Also, Krushauskas contended that the WCJ erred in finding that he voluntarily removed himself from the workforce.

The WCAB affirmed the WCJ’s decision, but failed to address the argument that the WCJ was without authority to suspend indemnity benefits in the absence of a suspension petition. Krushauskas then appealed to the Commonwealth Court, essentially making the same arguments that had been presented to the board.

The Commonwealth Court began its analysis by noting that an “absolute and unreasonable strictness” is not required in workers’ compensation pleadings. The issue is whether one party effectively puts the other on notice as to the theory of relief that is sought during the pendency of any petition. If notice is present, the WCJ will be authorized to grant the relief requested, as long as the party would not have been misled by the form of the petition, had notice of the relief sought, and had a full and fair opportunity to contest the basis for the allegations. Quoting from a prior case, the court stated:

“The underlying rationale for not allowing a [WCJ] to grant relief which an employer had not requested is that doing so is prejudicial to the claimant, who, never having been put on notice that the employer seeks such relief, has no opportunity to defend against it.”

The court concluded that the total sum of case law supports the notion that a WCJ has authority to suspend or terminate a claimant’s benefits in the absence of a formal petition where doing so would not be prejudicial to the claimant and the injured worker was adequately put on notice. This notice issue, the court found, is determined on a case-by-case basis given the “totality of the circumstances” of a particular situation.

Returning to the facts of the case under review, the court found that Krushauskas “clearly had notice” that a suspension was possible, and that he had a full and complete opportunity to defend it at every level. Moreover, Krushauskas never objected to the line of questioning regarding voluntary removal from the workforce, in context of a penalty/reinstatement petition. In fact, during redirect, Krushauskas testified as to the circumstances surrounding his removal from the workforce. The WCJ also continued the matter for leave of both parties to pursue the retirement issue further. Based on the above analysis, the court found that the WCJ did not err in treating GM’s response to Krushauskas’ penalty petition as a request for suspension. Given that the underlying petition was one with the limited issue of merely seeking the imposition of penalties, it is rather troubling that the court allowed an outright attack to the status of the claimant’s benefits. Nonetheless, Krushauskas demonstrates that claimant’s attorneys should always be aware of potential relief that has not been specifically requested.

While of lesser significance and not as shocking, the court also had to address whether a suspension of benefits was proven by the employer. The court turned to City of Pittsburgh v. WCAB (Robinson), where it held that to get a suspension of benefits in such instances, an employer must prove that under the “totality of the circumstances,” the claimant has voluntarily retired from the workforce. Under Robinson, where a claimant accepts a retirement pension, the injured worker is presumed to have voluntarily retired from the workforce, and the employer is entitled to a suspension, unless the claimant can show that he is seeking employment or that the work-related injury forced him to retire.

In Krushauskas, it was undisputed that the claimant had accepted a retirement pension. Therefore, the burden shifted to Krushauskas to show that he was either actively looking for employment or that his work-related injury forced him to retire. Krushauskas never asserted that he was actively looking for employment. Additionally, as mentioned above, the WCJ found Krushauskas’ testimony regarding the reasons for retirement not credible. Therefore, the court found that the suspension was appropriate. Again, since the conclusion is not beyond keeping with relevant authority had a suspension petition been filed and litigated, the troubling aspect of the suspension remains that it was granted in the context of the claimant seeking to remedy illegal behavior.

The last issue addressed by the court, and perhaps the most distressing, was whether the WCJ erred in denying the penalty petition based on an inability to identify a corpus of money upon which to base a penalty. The court agreed with the WCJ and board that since Krushauskas was found to have voluntarily retired from the workforce, no benefits were owed and therefore, a penalty was appropriately denied. The obvious problem with this analysis is that the only reason there is no corpus of money is because the WCJ unilaterally and retroactively suspended benefits when the relief was never even requested. The supersedes fund was designed to remedy situations where insurance carriers pay money that is ultimately determined not to have been owed. Claimants were never intended to bear the burden of the uncertainty. More importantly, until now, employers have never been retroactively authorized to violate the act.

Could the WCJ, WCAB or Commonwealth Court award a penalty? Of course. Even if the court were singularly focused on the claimant not being entitled to the indemnity benefits, there would have been nothing wrong with quantifying the amount of money that would have been paid absent the illegal conduct and awarding a penalty on that amount, without actually directing a reinstatement of benefits. This would at least keep insurers honest. The dissent by President Judge Dan Pellegrini analogizes the employer’s defense that it was OK to unilaterally suspend benefits since the claimant did not deserve the compensation, to a murderer whose defense is that the victim deserved to die. That about says it all. •

Christian Petrucci is a solo practitioner and past co-chairman of the Philadelphia Bar Association’s workers’ compensation section. He concentrates his practice in workers’ compensation litigation and Social Security disability.