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The city of Pittsburgh’s failure to show that reducing a fire captain’s workers’ compensation benefits would not cause financial hardship does not mean the city cannot reduce the benefits to recoup prior payments, the Commonwealth Court has ruled.

The decision in City of Pittsburgh v. Workers’ Compensation Appeal Board (Lacava) overturns a decision from a workers’ compensation judge, which held that the recoupment raises a “presumption of prejudice,” or hardship, to a claimant that an employer must rebut. Judge Mary Hannah Leavitt, who wrote the three-judge panel’s memorandum opinion, determined that the workers’ compensation judge’s holding was based on an incorrect interpretation of a 2007 decision.

In a footnote, Leavitt explained that in dicta in the court’s 2007 case Maxim Crane Works v. Workers’ Compensation Appeal Board (Solano), the court held that there is a presumption that a recoupment will cause a hardship when an employer waits two years before satisfying a notice obligation. She also noted the court’s May decision in City of Pittsburgh v. Workers’ Compensation Appeal Board (Wright), which the court referred to as City of Pittsburgh I, addressed similar issues.

In that case, the court held “that the WCJ erred in construing Maxim Crane to mean there is always a ‘presumption of prejudice’ that an employer must overcome in order to recoup an overpayment of compensation, no matter how implemented,” she said. “Because the employer in Maxim Crane failed to follow [workers' compensation] regulations, the recoupment was set aside.”

According to Leavitt, Robert Lacava injured his neck in 2005 while lifting a heavy chainsaw onto a fire truck. At the time, he earned $78,000 a year.

Pittsburgh paid him heart and lung benefits until he elected to take a disability pension, which replaced the heart and lung benefits with workers’ compensation benefits.

The city issued Lacava a Form LIBC-761 workers’ compensation offset notice in November 2006, indicating that it would reduce his compensation by the amount of his disability pension that the city funded. The notice also indicated that it had been overpaying Lacava for approximately one year, for a total of more than $5,000. The city planned to offset $50 each week until the full amount was paid back.

Lacava filed a petition for a review, alleging that the calculation was wrong. He also challenged the city’s ability to recoup the money, arguing that it created a financial hardship, and contended that because the city failed to send him a Form LIBC-756—which is called the “employee’s report of benefits for offsets”—before notifying him they intended an offset, the offset was invalid.

The workers’ compensation judge found that the recoupment calculation was correct, and Lacava’s argument about the Form LIBC-756 was waived. The judge further held that because the city did not rebut Lacava’s presumed hardship, the offset would only be allowed going forward and the recoupment would be denied.

Lacava maintained before the Workers’ Compensation Appeal Board that the Form LIBC-756 issue had not been waived, and the city argued that the judge had incorrectly interpreted Maxim Crane.

The board held that sending a Form LIBC-756 was required in every case. Because the city did not satisfy that condition, the board held that the appropriate course of action was to allow the city’s ongoing offset based on the date after Lacava received the Form LIBC-761.

Leavitt turned to the court’s decision in City of Pittsburgh I for guidance on both the Form LIBC-756 and hardship issues.

In that case, the court determined that the board erred when it held that failure to provide a claimant with the form barred recoupment when the board found the claimant had waived the issue. Leavitt added in a footnote that because the court deemed the issue waived in Lacava’s case, the court would not address the workers’ compensation judge and appeal board’s remedies.

Leavitt ultimately held that, under the circumstances, the issue of whether the recoupment resulted in financial hardship or could have been structured differently was moot.

“By the time claimant filed his review offset petition challenging the recoupment in December 2008, employer had nearly completed the recoupment, and by the time the WCJ issued a decision, the recoupment had been completed for almost 17 months,” Leavitt said. “He stated only that it was ‘difficult’ to pay the household bills while employer was recouping the $50 per week, but he was nevertheless able to do so.”

Michael B. Dodd of O’Brien, Rulis & Bochicchio, who represented the city of Pittsburgh, said recent rulings out of the Commonwealth Court have given more discretion to judges when it comes to determining whether a hardship exists and how to structure an equitable offset.

“They’re starting to recognize that just saying there’s a hardship because the benefits are stopped” is not enough to establish a hardship, he said. “You have to go beyond saying the claim is now effected” so there is a hardship.

Colarusso and Cohen attorney Herbert Cohen, who represented Lacava, did not return a call for comment.

Max Mitchell can be contacted at 215-557-2354 or mmitchell@alm.com. Follow him on Twitter @MMitchellTLI.

(Copies of the 11-page opinion in City of Pittsburgh v. Workers’ Compensation Appeal Board (Lacava), PICS No. 14-1274, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)