The ''Fuentes Rule'' - Calculating Permanent Disability Compensation

In 1976, Fuentes v. Workers' Comp. Appeals Bd. (1976) 16 Cal.3d 1, set forth the formula to use when calculating permanent disability compensation in cases where the current disability is subject to apportionment for a preexisting disability. (Fuentes, supra, 16 Cal.3d 1.) Where a permanent disability is apportioned to a preexisting disability one may calculate the dollar amount due for the compensable portion in different ways. Prior to 1972 it did not matter which way one calculated it, the result would be the same because the compensation schedule progressed arithmetically; a permanently disabled employee was entitled to four weeks of benefits for every percentage point of permanent disability that was of industrial origin. (Fuentes, supra, 16 Cal.3d at p. 4, citing former 4658.) In 1971, the Legislature changed the compensation schedules for permanent disability to make compensation increase exponentially with the severity of the disability. (Fuentes, supra, 16 Cal.3d at p. 4.) For example, although 40 is two times 20, the compensation allowed for a percentage of permanent disability of 40 percent is more than two times the compensation allowed for a disability of 20 percent. (See 4658.) This type of schedule poses a problem when calculating compensation in cases where only a portion of the overall disability is compensable; different methods of calculation yield different results. Fuentes considered the question of how to calculate compensation for a permanent disability in light of the revised compensation scheme. Fuentes discussed three methods, which it designated as formula A, formula B, and formula C. (Fuentes, supra, 16 Cal.3d at p. 5.) With formula A one begins with the overall percentage of permanent disability and subtracts the noncompensable percentage of permanent disability. Thus, in Fuentes the noncompensable percentage of permanent disability (24.25 percent) would be deducted from the overall percentage (58 percent) for a net compensable percentage of permanent disability of 33.75. An employee whose percentage of permanent disability was 33.75 was entitled to an award of $ 10,027.50. (Fuentes, supra, 16 Cal.3d at p. 5.) Formula C begins by converting the overall percentage of permanent disability into its monetary equivalent and subtracting from that the monetary equivalent of the percentage of permanent disability that is noncompensable. In the Fuentes example a percentage of permanent disability of 58 corresponded to an award of $ 20,790. $ 20,790 less the dollar value of the noncompensable portion would have left the employee with $ 14,367.50, significantly more than he would have received under formula A. (Fuentes, supra, 16 Cal.3d at p. 5.) Formula B yields a result in between the results of the other two formulas. With formula B one first determines the number of weeks of benefits authorized for the overall disability. The total number of weeks is then multiplied by the percentage of the disability that is industrially related. In Fuentes that would have meant an award of $ 12,127.50. (Fuentes, supra, 16 Cal.3d at p. 5.) Fuentes decided that formula A was the appropriate formula even though the employee would recover more under either of the other two formulas. Fuentes concluded that the "express and unequivocal language" of former Labor Code section 4750 compelled the conclusion that formula A was the appropriate method. (Fuentes, supra, 16 Cal.3d at p. 6.) The plain language of former section 4750 prohibited the employee from receiving compensation for a subsequent injury "in excess of the compensation allowed for such injury when considered by itself" and limited the employer's liability to "that portion due to the later injury as though no prior disability or impairment had existed." The employee's level of disability, considered by itself, without reference to the preexisting disability, was 33.75 percent of total. Using either formula B or formula C would give the employee more than the amount specified for that level of disability " 'considered by itself.' " (16 Cal.3d at p. 6.) "This arithmetic leads to the inevitable conclusion that neither method B nor C can be reconciled with the mandate of former section 4750 that the compensation for a subsequent injury be computed 'as though no prior disability or impairment had existed.' " (Fuentes, supra, 16 Cal.3d at p. 6.) Fuentes concluded that notwithstanding section 3202, which provides that the workers' compensation statutes shall be " 'liberally construed' " in favor of injured employees, "the policy underlying section 3202 cannot supplant the intent of the Legislature as expressed in a particular statute." (Fuentes, supra, 16 Cal.3d at p. 8.) The legislative intent of former section 4750 was to encourage employers to hire or retain persons with physical disabilities. "The Legislature recognized that employers might refrain from engaging the services of the handicapped if, upon subsequent injury, an employer was required to compensate the employee for an aggregate disability which included a previous injury." (Fuentes, supra, 16 Cal.3d at p. 6.) Only formula A was consistent with this legislative intent in that it did not require the employer to provide more compensation than would have been called for if the employee had not suffered the prior impairment. A year after Fuentes was decided the Supreme Court confirmed that Fuentes's interpretation of former section 4750 rested upon the "narrow proposition" that awards based upon a combined disability rating "contravene the language and policy of former section 4750." (Wilkinson v. Workers' Comp. Appeals Bd. (1977) 19 Cal.3d 491, 500.) The statutory basis for the Fuentes holding was former Labor Code section 4750. Although the Legislature repealed former section 4750 in 2004, it also repealed two related sections pertaining to apportionment and "recast" the substance of all three provisions in new sections 4663 and 4664. (Stats. 2004, ch. 34.) Under Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, the Court is bound to follow the decisions of the Supreme Court unless they are overruled, altered by statute, or can be validly distinguished. The Court cannot rely upon cases decided under prior law to interpret a quite different code section. (People v. Valentine (1946) 28 Cal.2d 121.) On the other hand, when the Legislature enacts a statute, we presume that the Legislature did not intend to overthrow long-established principles of law unless such an intention is clearly expressed or necessarily implied. (People v. Superior Court (Zamudio) (2000) 23 Cal.4th 183, 199; see also Fuentes, supra, 16 Cal.3d at p. 7; Theodor v. Superior Court (1972) 8 Cal.3d 77, 92.) Unless the Legislature plainly intends to change a judicial result based upon an earlier version of a statute we are bound by the prior judicial result. (People v. Eastman (1993) 13 Cal.App.4th 668, 676.)