# Rodgers v. Workers' Compensation Appeals Board

> California Supreme Court · July 5, 1984 · 36 Cal. 3d 330

URL: https://www.frixlaw.com/law-library/cases/9849963

## Case

- **Full name:** ARTHUR RODGERS, Petitioner, v. WORKERS’ COMPENSATION APPEALS BOARD, TRANSCON LINES, INC., Et Al., Respondents
- **Court:** California Supreme Court
- **Decided:** July 5, 1984
- **Citations:** 36 Cal. 3d 330; 204 Cal. Rptr. 403; 682 P.2d 1068; 49 Cal. Comp. Cases 513; 1984 Cal. LEXIS 192
- **Precedential status:** Published
- **Opinion:** Dissent by Reynoso
- **Judges:** Kaus, Reynoso, Bird
- **Cited by:** 8 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9849963

## Opinion text

REYNOSO, J.
I respectfully dissent. The employer, in my view, should pay benefits equal to the proportion of damages attributable to both the employer and the employee. Only then should the employer become eligible for a statutory credit.
A tripartite relationship exists in a lawsuit involving workers’ compensation and a third party: a dispute between employer and employee is gov *343 erned by workers’ compensation (Lab. Code, § 3600); between employee and third party the principles of comparative negligence apply (Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [ 119 Cal.Rptr. 858 , 532 P.2d 1226 , 78 A.L.R.3d 393 ]); and between third party and employer the court must apply in concert the doctrines of workers’ compensation, comparative negligence and joint and several liability. The problem arises in reconciling the tension between the no-fault doctrine of workers’ compensation and the basic premise of comparative negligence, that liability is imposed in direct proportion to fault. Nevertheless, since in California employee recoveries are legislatively favored, 1 the fashioning of an equitable result should not affect an employee’s right of recovery.
The analysis, as the majority points out, correctly begins with Associated Construction & Engineering Co. v. Workers’ Comp. Appeals Bd. (1978) 22 Cal.3d 829 [ 150 Cal.Rptr. 888 , 587 P.2d 684 ], The court concluded in Associated Construction that in a situation where the employer and the third party defendant are each partially negligent the employer must be denied reimbursement or credit “until the ratio of his contribution to the employee’s damages corresponds to his proportional share of fault.” {Associated Construction, supra, at p. 843.) The intent of the rule was to insure that the employer did not profit from his own wrong. The court expressly chose not to decide how “allegations of employee negligence . . . would affect the proportional contribution of the employer.” (Ibid.) The majority nevertheless maintains that the instant situation is a mere extension of Associated Construction; the same unalloyed comparative negligence principles, it decides, should apply. It is with that conclusion I take fundamental issue.
Associated Construction dealt with the relationship between the employer and the third party defendant; the present case involves, in addition, the relationship between the employer and the employee. As a consequence, the policy interests that underlie the workers’ compensation statutes must be weighed against the policies that underlie the doctrine of comparative negligence.
The workers’ compensation statutes create a “social contract” between the employer and the employee. The employee is guaranteed recovery irrespective of fault. In exchange, the employer’s duty to pay is statutorily limited. As the Court of Appeal in this case correctly stated, “The economic philosophy which supports a no-fault workers’ compensation system places the economic burden of on-the-job injuries on the employer as a cost of doing business. The damage to or wearing out of human ‘machinery’ is *344 viewed as another cost of production which should be borne by the industry. [Citation omitted.] Such a system places the burden of industrial accidents on the party who has the greatest control over workplace safety. In exchange for carrying the responsibility for injury compensation, the employer avoids the cost, delay and risk of greater liability of court proceedings. The employee receives guaranteed compensation in exchange for giving up the right to sue the employer.”
Further, workers’ compensation benefits are not designed as a substitute for personal injury tort damages. They differ not only in degree, but also in kind. “In tort actions damages are normally awarded for the purpose of compensating the plaintiff for injury suffered, i.e., restoring him as nearly as possible to his former position, or giving him some pecuniary equivalent.” (4 Witkin, Summary of Cal. Law (8th ed. 1974) p. 3137 (italics in original).) 2 Since the basic purpose of tort damages is indemnification to the injured party such damages include, but are not restricted to, loss of earning power, impairment of future earning capacity, property damage, and loss of business.
In contrast, compensation benefits, as the Court of Appeal noted in its opinion in this case, “are not intended to make whole, persons who have suffered ‘detriment from the unlawful acts or omission of another.’ (Civ. Code, § 3281.) Unrelated to concepts of ‘fault’ or ‘wrong,’ benefits paid under the compensation system are ultimately tied to the notion that injured workers are to be compensated for their loss of competitive status in the labor market. The purpose of workers’ compensation is to rehabilitate, not to indemnify. (Solari v. Atlas-Universal Service, Inc. (1963) 215 Cal.App.2d 587, 600 [ 30 Cal.Rptr. 407 ].)” Workers’ compensation benefits include rehabilitation rights—rights that are not a part of civil actions. (Lab. Code, § 139.5.) “These special rights, which have no counterpart in civil or tort law, cannot be settled or commuted (Lab. Code, § 5100.6). They are specially designed to provide retraining, through government and private agencies, in order to return the injured to his or her old job or to new employment compatible with the physical impairment of the employee. Elaborate rehabilitation plans may cover many months or years and include counseling, on-the-job training, job assistance programs, schooling, tuition and maintenance benefits during the term of the plan.” (Conference of Cal. Workers’ Comp. Judges (1980) Civil Litigation & Workers’ Comp.: Legal Practice, pp. 32-34.)
Benefits, aside from medical expenses, depend on the worker’s earnings. Under sections 4653 and 4658 of the Labor Code benefits, temporary and *345 permanent, are calculated against “65 percent of the average weekly earnings” of the employee. As such, the injured employee does not recover all the costs flowing from his injury. Nor under workers’ compensation is he intended to. The Legislature has recognized these distinctions between tort damages and compensation benefits saying that, “damages means the recovery allowed in an action at law as contrasted with compensation. ” (Lab. Code, § 3209; italics added.) The Court of Appeal also noted the distinctions. In State Comp. Ins. Fund v. Williams (1974) 38 Cal.App.3d 218, 226 [ 112 Cal.Rptr. 226 ], the court said, “the amount of such an award [by the WCAB] is . . . not an element of damage insofar as the employee is concerned.”
The employer’s obligation to pay for all damages arising from “employment negligence” 3 (employer plus employee) derives from the nature of the tradeoff inherent in the worker’s compensation system. To relieve the employer of that part of the obligation attributable to the employee’s negligence is to give employers the benefit of the system while not insisting they shoulder the burden. It is noteworthy that, in the absence of a third party defendant, the employer would be obliged to pay worker’s compensation up to the statutory limit, even if the employee were completely at fault. The majority is incorrect when it states that “even if the employer were an ordinary tortfeasor, it would not be liable for that portion of the employee’s tort damages,” (referring to that amount attributable to the employee’s own negligence) (maj. opn., ante, at p. 337; italics in original) because the employer is never an ordinary tortfeasor relative to the employee. He, like the employee, is already governed by a social contract that does not look to fault. As such, the employer has an obligation to pay compensation proportional to all employment negligence. It only remains to demonstrate formulas that, in application, reflect such policies.
II
Each party’s liability or recovery reflects the policy considerations that govern the various parts of the tripartite relation. The correct formula is applied as follows:
(1) The employer. The employer receives a credit or reimbursement only if it has paid benefits greater than the proportion of damages attributable to both the employer and the employee. At no time does the employer pay more than the statutory limit set by workers’ compensation.
*346 (2) The employee: The employee receives damages in an amount equal to all damages not attributable to his own negligence. The employee also receives compensation determined in a manner that does not turn on the measure of either the employee’s or the employer’s negligence. The employee’s compensation is limited though. He receives whichever is less: the statutory limit on compensation or the amount of damages attributable to both the employer and the employee. 4
(3) The third party: The third party is responsible for the amount attributable to the third party’s own negligence. In addition, if the statutory limits on compensation are less than the amount of damages attributable to the employer’s own negligence then, under joint and several liability, the third party will be responsible for the difference. 5
The equitable considerations addressed in part I compel attribution of the employee’s negligence to the employer not only in the credit context but in the reimbursement context as well. If we are faithful to that equitable balance then the benefits should always accrue to the employee; no other result reasonably follows since the intent of the imputation, regardless of the context, is to give the employee the full benefit of workers’ compensation in the form of uncompromised compensation. The majority correctly noted that there is no good reason “why the scope of an employer’s subrogation right should vary depending on whether it has paid compensation benefits before the civil judgment or after.” The formula just outlined will reach a similar result in either a reimbursement context or a credit context. As such, the majority is incorrect when it concludes that, unlike the credit context, attribution of the employee’s fault in the reimbursement context leads to a third party windfall. Let us examine why.
Attribution of the employee’s negligence to the employer is a mechanism, a device, that may serve different ends. As I use it, it restores to the em *347 ployee a greater measure of his compensation benefits. As discussed earlier, the operating premise of workers’ compensation is that the employee’s compensation benefits should not be reduced because he is in part at fault for the injury. The attribution of the employee’s negligence to the employer insures that result.
Nevertheless, the same attribution has been used for other ends. A case in point is Kemerer v. Challenge Milk Co. (1980) 105 Cal.App.3d 334 [ 164 Cal.Rptr. 397 ]. In Kemerer the third party attempted to have the employee’s negligence imputed to the employer in order to gain for itself & windfall. 6 The manner by which they expected to accomplish this bears demonstrating.
Assume an employer is 20 percent at fault but has already paid $25,000 in workers’ compensation benefits. By the majority’s lights the employer is entitled to a $5,000 reimbursement. If we assume the employee was 30 percent at fault and his negligence was also imputed to the employer, the employer would be denied the reimbursement and, according to both the majority and the third party in Kemerer , the third party would gain $5,000.
The Kemerer court correctly concluded that the third party was not entitled to have its share of liability twice reduced—the consequence of applying the attribution in this manner. But the Kemerer court went further and reached an overbroad result: it decided as well that an employee’s negligence should never be imputed to the employer.
This dissent agrees that attribution is unwarranted if it benefits the third party. But it need not. A third party windfall does not inevitably flow from attribution. I shall demonstrate how the proposed formula prevents that occurrence.
*348 The relationship between the three parties is intertwined. Each party’s liability affects the other two parties’ recovery or liability limit. Thus, even though the focus of the instant case is on the employee-employer strand of the triangle, the third party’s liability computation must be examined so that it does not prevent that equitable arrangement between the employer and employee from being put into effect.
The majority computes the third party’s liability by subtracting from the total damages the damages attributable to the plaintiff, and then subtracting the amount of workers’ compensation already paid. By subtracting the amount of workers’ compensation already paid the third party’s liability computation correctly anticipates the employer’s reimbursement claim, so long as the threshold equals the employer’s share of responsibility. If the threshold is changed, the amount by which the third party’s liability is reduced, and the occasions when it is reduced, should coordinate with that changed threshold.
Such computations sound far more complex than they are. Rather than simply subtracting the amount of workers’ compensation paid, as the majority does, courts applying the higher threshold should proceed in steps. First, they must ask, when determining the third party’s liability to the employee, whether the employer’s contribution has exceeded the threshold. If it does then the court should deduct from the third party’s liability the amount by which the employer’s contribution has exceeded the threshold. If the employer’s contribution does not exceed the threshold, but does exceed the amount of damage attributable to the employer alone, then there should be neither a deduction nor an addition to the third party’s liability. Finally, if the employer’s contribution falls short of the amount of damage attributable to his own negligence, then the amount of the shortfall should be added, as it has always been added, to the third party’s liability under joint and several liability. 7
Thus, attribution does not necessarily lead to a third party windfall. As such Kemerer to the extent it does not permit third party windfalls is correct; but its overall conclusion that attribution is never warranted is incorrect.
A similar situation occurs in Kramer v. Cedu Foundation Inc. (1979) 93 Cal.App.3d 1, 6-9 [ 155 Cal.Rptr. 552 ], where the trial court reduced, once *349 again, the employer’s reimbursement claim by an amount proportionate to the combined negligence of employer and employee. 8 Once again, the Court of Appeal threw out the baby with the bathwater: the Kramer court was correct insofar as it recognized the inaccuracy of the defendant’s formula, but it was overbroad in concluding that, therefore, the employee’s negligence could never be imputed to the employer.
In the year following Associated Construction this court decided Aceves v. Regal Pale Brewing Co. (1979) 24 Cal.3d 502 , 512 and footnote 4 [ 156 Cal.Rptr. 41 , 595 P.2d 619 ]. In Aceves the trial court reduced plaintiff’s recovery from the third party by “the proportionate amount attributable to his employer’s negligence.” (Aceves, supra, at p. 513; italics added.) This court reversed saying that the proper method of determining plaintiff’s recovery from the third party was to subtract both the amount of damages attributable to the plaintiff’s negligence as well as the amount of damages attributable to the employer. (Ibid.) The court noted, in dictum, that since the employer’s payment of compensation benefits had not reached a threshold equal to the damages attributable to the employer’s proportional share of fault, it should be denied a claim for reimbursement. Aceves only dealt with the plaintiff’s negligence as it affected the plaintiff’s recovery from the third party. The question of how a plaintiff’s negligence would affect his relationship with his employer was not addressed. Further, since the employer’s compensation payments did not even reach the lower threshold (the amount of damages attributable to the employer’s own fault) the issue never came before the court.
In Johnson v. Cayman Development Co. (1980) 108 Cal.App.3d 977, 981-983 [ 167 Cal.Rptr. 29 ] the Court of Appeal never addresses the question of whether the employee’s negligence should be imputed to the employer. That court, without comment, merely extended Associated Construction without considering the added ramifications of employee concurrent negligence, nor acknowledging that Associated Construction, itself, had explicitly avoided deciding that question.
Only in Jarvis v. Southern Pacific Transportation Co. (1983) 142 Cal.App.3d 246, 256-259 [ 191 Cal.Rptr. 29 ] does a Court of Appeal correctly apply the majority’s intended formula and implicitly support the majority’s doctrine of extending Associated Construction. In so doing, though, it errs. The Court of Appeal extends the majority doctrine in response to what it perceives as a potential double recovery by the third party in the reimbursement context. Yet as has been demonstrated the correct response to this is not to deny the attribution of fault to the employer; rather, it is to *350 refashion the manner by which the third party’s liability is computed. By preventing the windfall to the third party, the Court of Appeal has reduced the employee’s rightful compensation. By permitting the attribution and refashioning the third party’s liability, instead, the employee’s compensation would have been preserved and a windfall avoided.
In sum, the equitable principles that require an employer to compensate the employee for the damage flowing from all employment negligence rather than just the employer’s negligence, apply with equal force in both the reimbursement context and the credit context. In addition, I conclude that the employer should be obliged to pay a threshold sum equal to the proportion of damages attributable to all employment negligence before becoming eligible for a credit or reimbursement.
Labor Code section 3852 grants to employees injured while employed the right to recover all damages.
See also Restatement of Torts sections 901, 903, 905, 906.
See Comment, Employer Subrogation: The Effect of Injured Employee Negligence in Workers’ Compensation/Third Party Actions (1981) 18 San Diego L.Rev. 301.
This merely removes the third party and permits the isolation of that portion of damage flowing from the employment situation.
For example, assume the third party is 50 percent at fault, the employer is 30 percent at fault and the employee is 20 percent at fault. Assume also that total civil damages have been determined to be $100,000 and the total compensation benefits paid are $25,000.
Under the formula we have discussed the employer is entitled neither to a credit nor a reimbursement because the amount of worker’s compensation paid ($25,000) is less than the damages attributable to the combined employment negligence ($50,000).
The employee recovers from the third party $55,000. The employee is entitled to recover from the third party all damages not attributable to the employee’s own negligence.
The third party is responsible for all damages attributable to his own negligence, and, in addition, he is responsible for the amount by which the employer’s statutorily limited contribution falls short of his percentage share of responsibility.
Thus, the third party is responsible for $50,000 in damages plus the shortfall in the employer’s contribution ($5,000; the employer was 30 percent responsible but only paid $25,000).
Rather than increasing the employer’s threshold the third party contended that the employer’s reimbursement should have been reduced by an amount proportionate to the plaintiff’s share of negligence.
An example of such unusual arithmetic would be where the employer and employee are together negligent 25 percent and the employer has paid $60,000 in workers’ compensation. According to the Kemerer trial court, the employer’s reimbursement would be reduced by 25 percent to $45,000. This is irrational: the 25 percent was originally 25 percent of total damages, but it has applied as 25 percent of total possible reimbursement. The correct means of imputing the employee’s negligence to the employer, regardless of who intends to benefit from it, is to increase the threshold amount the employer must pay. As such, in the above example, if the employer had been 10 percent negligent and the employee had been 15 percent negligent and total damages equalled $100,000, then the employer would have been obliged to pay $25,000 to meet the threshold of all employment negligence and was, thus, entitled to a reimbursement of $35,000.
(By way of comparison, under the majority’s formula the employer would have been obliged to pay $10,000 to meet the threshold of its own negligence and would, thus, have been entitled to a reimbursement of $50,000. In either event a threshold must be created.)
For example, assume the third party was 50 percent negligent, the employer was 30 percent negligent and the employee was 20 percent. If the employer paid $55,000 in compensation he would be entitled to a $5,000 reimbursement, and the third party’s payment to the employee should be reduced by that amount. If the employer has paid anywhere from $30,000 to $50,000 the third party payment is unaffected. If the employer has paid $25,000 in compensation, then the third party must pay $5,000 in addition to the amount he owes for his own negligence, under joint and several liability.
See footnote 6.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9849963. Public record. Not legal advice.