E&J GALLO WINERY v. THE WCAB and DAVID DYKES
LABOR CODE SECTION 4664 APPORTIONMENT

By
Rick C. Kiger

On December 20, 2005, the State of California Court of Appeal, 5th Appellate District, issued an Opinion in the E&J Gallo Winery v. WCAB and David Dykes case. The Court of Appeal heard a Petition for Writ of Review filed by E&J Gallo Winery, which appealed the denial of the Petition for Reconsideration by the WCAB and the original Decision by the Worker’s Compensation Judge on the issue of apportionment under Labor Code Section 4664.

David Dykes, a long-term employee for E&J Gallo Winery (Gallo) suffered two accepted injuries to his low back, the first in September 1996, the second on October 28, 2002. Applicant settled his first injury at 20.5 percent permanent disability, equaling $11,680.00. Applicant was awarded 73 percent permanent disability at a November 2004 trial. The parties stipulated to the 73 percent disability rating and that there was a previous award for a 20.5 percent permanent disability. The WCJ issued a 73 percent award, which equaled 453.5 weeks for a total permanent disability amount of $104,305.00. The WCJ subtracted the previous disability amount of $11,680.00, leaving a net amount permanent disability of $92,625.00. Gallo filed a Petition for Reconsideration, arguing that the WCJ should have subtracted 20.5 percent permanent disability from the 73 percent permanent disability per Labor Code Section 4664. The Petition for Reconsideration was denied by the WCAB and Gallo filed a Petition for Writ of Review with the Court of Appeal.

Gallo contended that per Labor Code Section 4664, the explicit statutory language for apportionment required a subtraction of the previous stipulated percentage of disability from the current percentage of permanent disability. Applicant claimed that the dollar value of the previous permanent disability is to be deducted from the current dollar value of permanent disability. These two methods of apportionment, along with a third, blended method, was discussed by the Court of Appeals in their analysis of the Fuentes v. WCAB (1976) 16 Cal.3d 1 case, which was the basis for percentage deduction apportionment prior to the enactment of Labor Code Section 4664.

As stated above, the first method of apportionment (Formula A) subtracts the previous permanent disability award from the applicant’s overall level of current disability to determine the compensable level of permanent disability owed. The resulting percentage is then converted to a dollar amount per the permanent disability indemnity schedule per Labor Code Section 4658.

The second method of accounting for apportionment (Formula B) takes a different approach in that the total number of weeks for the current disability is reduced by a ratio of the percentage of previous and/or non-industrial disability compared to the overall disability. In this case, of the current 73 percent permanent is reduced by the ratio of the previous settlement award of 20.5 percent. 73 percent PD - 20.5 percent PD = 52.5 percent divided by 73 percent = 72 percent. Thus a previous award of 20.5 percent permanent disability reduces the 73 percent permanent disability rate by 28 percent (100-72=28). (70 percent minus 20.5 percent/73 percent equals 72 percent - a 28 percent reduction in the overall permanent disability rating of 73 percent). Therefore, 453.5 weeks times 72 percent results in 326.25 weeks of permanent disability at $170.00 a week equaling $55,462.00 in bi-weekly payments. No court has approved this formula.

The final method of apportionment (Formula C) as advocated by applicant's attorney takes the dollar value of the current disability less the dollar value of the previous stipulated Award.

The Court of Appeals went into a lengthy discussion in regards to Fuentes and its historical role in Workers' Compensation. They held that Fuentes is not controlling after SB899 since the Labor Code Section that Fuentes was based upon, Section 4750, was repealed by SB899. The Court of Appeals in Dykes also disagreed with the Nabors case, stating that the public policy of encouraging employers to hire the disabled, the rationale used in Nabors incorporating the Fuentes Formula A calculation, was not applicable in the current case as there was only one employer. Furthermore, the Court states that, due to the exponentially progressively higher permanent disability rates in future years, the legislature must have intended a greater amount of permanent disability to go to the applicant. The Court of Appeals also quotes Labor Code Section 3202, stating that Worker’s Compensation laws “shall be liberally construed by the courts for the purpose of extending their benefits for the protection of persons injured in the course of their employment.” Finally, the Court states that it was not equitable for an employer, whose employee had sustained multiple industrial injuries during the course of his employment with one employer, to reap a financial windfall by limiting the employee’s compensation.

However, the extent of the ruling in this case is limited to a self-insured employer with an injured employee who has received a prior disability award while working for the same self-insured employer. Therefore, where an employee has received a prior disability award with another employer, where the medical evidence shows that a part of the injured employee’s disability is not compensable or where the employer is separately insured at the time of the injury, this case is not dispositive. However, we can expect the applicant’s bar to make a concerted attempt to apply Dykes in all areas.