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See: Philadelphia Gas Works v. W.C.A.B. (Amodei), 964 A.2d 963 (Pa. Cmwlth. 2/4/09).
In Amodei, the employer initially issued a Notice of Compensation Benefit Offset (NCBO) taking credit from net pension benefits received by the Claimant in the amount of $264.10. Several months later, the employer issued a second NCBO setting forth a weekly offset of $334.83 based upon the gross amount of Claimant’s pension benefits. Claimant filed a Challenge Petition. The WCJ granted the petition concluding that the first offset based on the net receipt of pension benefits was the proper calculation. The W.C.A.B. affirmed. Both the Judge and Board rejected employer’s argument that its gross pension offset accorded with Section 204(a) of the Act and Steinmetz v. W.C.A.B. (Cooper Power Systems), 858 A.2d 182 (Pa. Cmwlth. 2004).
The Commonwealth Court upheld the decisions of the WCJ and W.C.A.B. The Court concluded that Ferraro and Steinmetz are not controlling. In regard to Ferraro the Court explained the analysis determining that offset based on net benefits allowed for a double recovery was based on the specific facts of Ferraro. The Court explained neither case allowed them to disregard the Bureau’s regulations. Critically, the Court noted that none of the parties in the prior cases ever raised the issue of the applicable regulations and in fact the regulations had been promulgated less than two weeks prior to the ruling in Ferraro.
The Court did cite the regulations which allow an employer to offset unemployment compensation, social security (old age), and severance or pension from net benefits. The regulations further provide “the employer shall pay the employee for amounts previously offset and paid in taxes, from workers’ compensation benefits, when the offset was calculated on a pre-tax amount of the benefits received. To request repayment for amounts previously offset and paid in taxes, the employee shall notify the insurer in writing of the amount paid in taxes previously included in the offset.” Thus, the Bureau’s regulations provide an administrative procedure where an employer exercises this option and in either event the employer is entitled to a credit only for the net amount of benefits the employee receives. 34 Pa. Code Section 123.6(a), 123.7(a), 123.8(a) and 123.11(b).
Accordingly, the Court reasoned that allowing a credit for the gross amount of benefits results in a loss of workers’ compensation benefits to which a Claimant is statutorily entitled. The Court noted that on June 24, 1996 Governor Tom Ridge signed into law Act 57 which substantially amended the Act intending to combat the rising costs of workers’ compensation in this Commonwealth while protecting the rights of employees to be adequately compensated for their work related injuries. (Emphasis in Decision). The Court also cited the guiding principal that borderline interpretations of the Act are to be construed in an injured party’s favor.
Practice Pointer: Based on Amodei, we would recommend reimbursement to Claimant for taxes paid in regard to offset benefits. In Amodei, this difference amounted to almost $70.00 per week. It certainly appears reasonable to request the tax return to verify taxes paid and multiply the applicable tax rate to the offset benefits.