Donna Olson v. Kenneth Apfel ( 1999 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 98-2014
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Donna Olson, for the estate of *
Gordon E. Olson, deceased, *
*
Plaintiff - Appellee, *
* Appeal from the United States
v. * District Court for the
* District of North Dakota.
Kenneth S. Apfel, Commissioner of *
Social Security, *
*
Defendant - Appellant. *
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Submitted: November 17, 1998
Filed: March 11, 1999
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Before LOKEN, JOHN R. GIBSON, and MORRIS SHEPPARD ARNOLD, Circuit
Judges.
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LOKEN, Circuit Judge.
Gordon Olson injured his back working as a school custodian. He received
North Dakota worker’s compensation benefits, including a lump-sum permanent
partial impairment award for loss of bodily function under N.D. Cent. Code §§ 65-05-
12 to -14 (Supp. 1998). The Commissioner of Social Security determined that Olson
was eligible for social security disability benefits but reduced those benefits under the
federal statute that offsets social security and worker’s compensation disability
benefits. See 42 U.S.C. § 424a. Olson’s widow sued, challenging the
Commissioner’s decision to include Olson’s permanent partial impairment award in
the worker’s compensation benefits subject to offset. Relying on Frost v. Chater, 952
F. Supp. 659 (D.N.D. 1996), the district court granted summary judgment for Mrs.
Olson, concluding that North Dakota worker’s compensation impairment awards are
not subject to the § 424a offset because they are payments for loss of bodily function,
not loss of earning capacity. The Commissioner appeals. Reviewing this issue of law
de novo, we reverse.
The offset statute reflects Congress’s concern that recovery of overlapping
worker’s compensation and social security disability benefits decreases an injured
worker’s incentive to seek rehabilitation and further employment. See Richardson
v. Belcher, 404 U.S. 78, 82-83 (1971). The statute reduces federal benefits if an
injured worker’s combined social security and worker’s compensation benefits
exceed eighty percent of the worker’s pre-disability earnings. Worker’s
compensation benefits subject to this offset are “periodic benefits [paid] on account
of his or her total or partial disability (whether or not permanent) under a workmen’s
compensation law.” 42 U.S.C. § 424a(a)(2)(A). “Periodic benefits” include lump-
sum awards received as a substitute for periodic payments. 42 U.S.C. § 424a(b).
Thus, whether Olson’s lump-sum North Dakota impairment award is subject to offset
turns on two questions: (1) whether the award was paid “on account of [Olson’s] total
or partial disability,” and (2) whether it was a substitute for periodic benefits.1
1
The offset statute eliminates the risk of “double offset” by granting an
exception to the federal offset if applicable state law contains an offset provision.
See § 424a(d). The parties agree the exception does not apply in this case.
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I. Total or Partial Disability.
On appeal, Mrs. Olson concedes that her husband’s permanent partial
impairment award was made “under [the North Dakota] workmen’s compensation
law” for purposes of § 424a(a)(2)(A). But she argues it was not paid “on account of
[his] total or partial disability” because North Dakota distinguishes disability benefits,
which are paid on account of reduced earning capacity, from impairment awards,
which are paid on account of loss of bodily function. See Kroeplin v. North Dakota
Workmen’s Comp. Bureau, 415 N.W.2d 807, 809 (N.D. 1987); Buechler v. North
Dakota Workmen’s Comp. Bureau, 222 N.W.2d 858, 861-62 (N.D. 1974). The
Commissioner on the other hand argues that North Dakota law is not controlling; as
a matter of federal law, the term “disability” in § 424a(a)(2)(A) should be broadly
construed to include worker’s compensation impairment awards, whether or not those
awards are measured by or otherwise related to the claimant’s wage loss under state
law.
At the outset, we agree with the Commissioner that this is an issue of statutory
construction governed by federal law. See Munsinger v. Schweiker, 709 F.2d 1212,
1217 (8th Cir. 1983). But that does not tell us what Congress meant by the phrase “on
account of . . . total or partial disability.” In analyzing that statutory language, we
begin by looking at the language of its predecessor. In 1956, when the social security
laws were first amended to establish the disability insurance program, the statute
provided for the total offset of state worker’s compensation payments. That initial
offset provision reduced an individual’s social security disability benefits -
(B) [if] it is determined that a periodic benefit is payable . . . under a
workmen’s compensation law . . . on account of a physical or mental
impairment of such individual.
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42 U.S.C. § 424(a)(2)(B) (1956), 70 Stat. 816 (emphasis added). Under the plain
language of that provision, Olson’s permanent partial impairment award would
clearly be subject to offset. But that provision was repealed in 1958, and the current
§ 424a was not enacted until 1965, when renewed criticism of overlapping benefits
persuaded Congress to enact the current offset. See Richardson, 404 U.S. at 82.
We find nothing in the legislative history of § 424a explaining why Congress
used the term “disability” in § 424a(a)(2)(A), instead of the word “impairment” that
was used in the prior offset statute.2 There is an extensive definition of “disability”
in the disability insurance statutes that include § 424a. See 42 U.S.C. §§ 416(i),
423(d). Though ignored by the parties, the definition contained in these sections
requires a close look, because it is reasonable to assume that Congress used the term
“disability” in § 424a consistent with its definition of that term in § 423(d), which
appears just one provision earlier in the chapter, particularly when that definition was
repeated in § 416(i), a section that seems to expressly say it applies to § 424a.
However, this ready answer to the inquiry proves unsatisfactory on close inspection.
Though nominally a definitional provision, § 423(d) is in reality the provision that
delineates eligibility for social security disability benefits. See 42 U.S.C.
§ 423(a)(1)(D). Therefore, its definition of “disability,” which is repeated in § 416(i),
is necessarily narrow, to wit:
inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than 12 months.
2
Nor do we find any clues in the few cases construing the prior offset statute.
See Knapczyk v. Ribicoff, 201 F. Supp. 283 (N.D. Ill. 1962); Walters v. Flemming,
185 F. Supp. 288 (D. Mass. 1960).
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42 U.S.C. § 423(d)(1)(A). The offset provision in § 424a cannot be limited to
worker’s compensation benefits paid “on account of . . . disability” in this narrow
sense, because § 424a(a)(2)(A) expressly refers to “total or partial disability (whether
or not permanent),” thereby expressly including some disabling conditions, such as
partial disabilities, that do not entitle a claimant to social security disability benefits
under § 423. Thus, Congress must have intended the term “disability” in
§ 424a(a)(2)(A) to incorporate a broader, worker’s compensation-related meaning of
that term.3
Therefore, we turn to the broader worker’s compensation environment to
discern the meaning of “total or partial disability” in § 424a. Worker’s compensation
statutes create a no-fault regime under which employers pay statutorily defined
benefits for work-related injuries to their employees. A worker’s compensation
regime typically pays both the costs related to treating a workplace injury, such as
medical and rehabilitative expenses, and periodic benefits to compensate the injured
employee for wage loss and reduced earning capacity. Though many regimes now
include scheduled impairment awards for specific injuries, most such awards do not
depart from the theoretical wage-loss underpinning of worker’s compensation.
Rather, they reflect statutory presumptions that the scheduled injuries adversely affect
earning capacity. See Davidson v. Sullivan, 942 F.2d 90, 94-95 (1st Cir. 1991). For
example, the federal statutes providing worker’s compensation benefits to federal
employees expressly tie both scheduled and unscheduled disability benefits to the
3
Although it is rather easy to demonstrate why the definition of “disability” in
§ 416(i) and § 423(d) does not fit the use of that word in § 424a, it is hard to explain
away the fact that § 416(i) begins, “Except for purposes of sections 402(d), 402(e),
402(f), 423, and 425 of this title, the term ‘disability’ means . . . .” The apparent
answer is that the original offset provision, enacted at the same time as § 416(i), did
not use the word “disability,” and Congress forgot when it later added § 424a to the
statute to include § 424a in the list of provisions excepted from the reach of § 416(i).
What seems clear is that it would nullify the offset in many situations to adopt the
§ 416(i) definition in applying § 424a(a)(2)(A), and we decline to do so.
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injured employee’s prior monthly pay. See 5 U.S.C. §§ 8105(a), 8106(a), 8107(a).
Of course, nothing prevents a State from providing worker’s compensation
benefits that are unrelated to wage loss. See New York Cent. R.R. v. Bianc, 250 U.S.
596, 602-03 (1919). North Dakota is in fact an exception to the general rule that
scheduled impairment awards compensate for presumed loss of earning capacity.
Under the North Dakota statutes as construed by the North Dakota Supreme Court,
permanent impairment awards do not compensate for wage loss, but rather for the
adverse “personal and social” effects of a workplace injury. Kroeplin, 415 N.W.2d
at 809.4 That concept provides the basis for Olson’s contention on appeal -- because
“disability” benefits are traditionally based upon wage loss and the § 424a offset only
applies to periodic benefits on account of “disability,” North Dakota permanent
impairment awards are not subject to the offset. This also brings the Commissioner’s
contrary contention into clearer focus -- “disability” in § 424a(a)(2)(A) simply means
a condition resulting from a workplace injury that entitles the claimant to periodic
worker’s compensation benefits, like the word “impairment” in the original offset
4
The Commissioner argues North Dakota permanent impairment awards in fact
compensate for presumed wage loss. Like the district court, we disagree. North
Dakota impairment awards are identical for every worker with the same impairment,
regardless of pre-disability income. Permanent impairment awards are payable even
if the worker suffers no lost wages because he or she continues to work or receives
disability payments that compensate for reduced earning capacity. See Buechler, 222
N.W.2d at 862. North Dakota’s “reverse offset” applies to worker’s compensation
disability payments but not impairment awards. See N.D. Cent. Code § 65-05-09.1.
These features distinguish North Dakota permanent impairment awards from the
impairment benefits held to be wage loss payments subject to the § 424a offset in
Krysztoforski v. Chater, 55 F.3d 857, 859-60 (3d Cir. 1995) (Pennsylvania law);
Hodge v. Shalala, 27 F.3d 430, 433 (9th Cir. 1994) (Oregon law); and Davidson, 942
F.2d at 95 (New Hampshire law). See also 4 LARSON, WORKMEN’S COMPENSATION
LAW §§ 57.14(d) & (f) (1989), which cites North Dakota impairment awards as an
exception to the general rule.
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provision; thus, all periodic worker’s compensation benefits are subject to the offset
if they are paid on account of a workplace injury.
After considering the statutory language from as many perspectives as our
foresight permits, we conclude that the phrase “his or her total or partial disability
(whether or not permanent)” in § 424a(a)(2) is ambiguous in this regard, and that the
conflicting interpretations put forth by the Commissioner and by Olson are each
plausible and permissible. Thus, the Commissioner’s interpretation must prevail. See
Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-
45 (1984); Crane v. Sullivan, 993 F.2d 1335, 1336 (8th Cir. 1993); cf. Bowen v.
Yuckert, 482 U.S. 137, 145-46 (1987). The Commissioner’s interpretation is
consistent with the still prevalent understanding -- which apparently was universal
in 1965 -- that all periodic worker’s compensation benefits are for disabling
conditions caused by workplace injuries. The Commissioner’s interpretation is
simpler to administer than an interpretation that requires analysis of the compensation
theory underlying particular state law benefits in order to apply the § 424a offset. In
addition, the Commissioner’s interpretation eliminates any incentive for States to
evade the social security offset by characterizing their periodic benefits as something
other than wage-loss disability benefits. Finally, it is relevant (though hardly
persuasive) that Senator Edward Kennedy in the debates preceding passage of § 424a
objected that the offset would even apply to scheduled permanent impairment benefits
that are not tied to wage loss. See 111 Cong. Rec. 16151 (1965), quoted in Davidson,
942 F.2d at 96. Therefore, the Commissioner’s interpretation must be upheld.
Permanent impairment awards, no matter how characterized under state law, are “on
account of . . . total or partial disability.” Accord Black v. Schweiker, 670 F.2d 108
(9th Cir. 1982); Grant v. Weinberger, 482 F.2d 1290 (6th Cir. 1973).
II. A Substitute for Periodic Benefits.
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Having decided that North Dakota’s permanent impairment awards are
payments on account of disability for purposes of § 424a(a)(2)(A), we must address
an issue the district court did not reach, whether Olson’s lump sum award was “a
substitute for” periodic benefits for purposes of § 424a(b). This, too, is a question of
federal law. See Munsinger, 709 F.2d at 1217. Congress has not expressly defined
the term, “a substitute for” periodic benefits. The Commissioner interprets the term
to mean lump sum payments that are not intended to reimburse specific expenses
related to a workplace injury or a worker’s compensation claim, such as medical,
legal, rehabilitative, and retraining expenses. Under this interpretation, periodic
benefits include unrestricted lump sum payments that are available to replace the
injured worker’s wages.
We conclude this is a reasonable construction of the statutory language,
consistent with the purpose of the worker’s compensation offset and explicitly
supported by the legislative history of § 424a(b).5 Therefore, we must defer to the
Commissioner’s interpretation under Chevron. Olson argues that Chevron deference
is inappropriate because the Commissioner’s interpretation is not embodied in a rule
or regulation. However, we expressly rejected this contention in Emerson v. Steffen,
959 F.2d 119, 122 (8th Cir. 1992). See generally Midtec Paper Corp. v. United States,
857 F.2d 1487, 1496-97 (D.C. Cir. 1988). Accordingly, the Commissioner’s decision
that Olson’s permanent partial impairment award was a substitute for periodic
5
“Since in some workmen’s compensation cases, workers incur medical, legal,
or related expenses in connection with their workmen’s compensation claims, or in
connection with the injuries they have suffered, and since the workmen’s
compensation awards are generally understood to include compensation for these
expenses . . . for purposes of [§ 424a(b)] the [Commissioner] would not, in computing
the amount of the periodic benefit payable to an individual under a workmen’s
compensation program, include any part of the workmen’s compensation lump sum
or benefit which he finds is equal to the amount of such expenses paid or incurred by
the worker.” S. Rep. No. 404, 89th Cong., 1st Sess., reprinted in 1965 U.S.C.C.A.N.
1943, 2200-2201.
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benefits within the meaning of § 424a(b) must be affirmed. Accord Munsinger, 709
F.2d at 1216-17.
The judgment of the district court is reversed and the case is remanded to the
district court with instructions to enter judgment in favor of the Commissioner.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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