I have previously posted on the Workers Compensation offset for Social Security disability benefits on October 14, 2014. This offset is intended to avoid duplication of disability benefits, or double-dipping.
This raises the question: is there a similar Workers Compensation offset for Social Security retirement benefits?
For many years Utah Workers Compensation law had an offset for social security retirement benefits, whereby Workers Compensation benefits were reduced by 50% of social security retirement benefits.
However, in 2009 Utah’s Supreme Court ruled that this particular offset violates the uniform operation of laws provision of Utah’s constitution. See Merrill v. Utah Labor Commission, 2009 UT 26, 223 P. 3d 1089 (Utah 2009).
This case is also instructive about the nature if Utah’s workers compensation statutory scheme.
The Utah constitution’s uniform operation of laws provision is analogous to the federal Constitution’s equal protection provision of the Fourteenth Amendment.
In some respects, Utah’s Supreme Court noted, judicial decision making under Utah’s uniform operation of laws provision is more exacting than the U.S. Supreme Court’s equal protection jurisprudence.
Because the state and federal concepts are similar in nature, Utah’s Supreme Court used similar reasoning as the U.S. Supreme Court in deciding the case before it.
The Court first noted the well-settled proposition that duly passed statutes are presumed to be constitutional.
But where classifications are made whereby similarly situated person are treated differently in the eyes of the law, the Court will employ an analysis similar to equal protection analysis under the federal Constitution.
In this analysis, age is not considered a suspect classification, as are race and gender. Thus, a law that classifies individuals based on age will be upheld if it is rationally related to a legitimate legislative purpose.
This is so-called rational basis scrutiny, which is the least rigorous level of scrutiny in constitutional equal protection jurisprudence. On the other hand, strict judicial scrutiny, which applies to race-based classifications, requires that a classification be narrowly tailored to serve a compelling government objective. There is a middle level of judicial scrutiny as well, which applies to gender-based classifications. This requires that a law be closely related to an important government purpose.
The rational basis scrutiny in Utah jurisprudence requires a further three step analysis, namely: 1) is the legislative classification reasonable? 2) are the objectives of the law legitimate? 3) is there a reasonable relationship between the law and its legislative purpose?
With respect to the legislative purpose of the offset, the Utah Court of Appeals had found that the law was designed to ensure adequate compensation for industrial injuries while avoiding duplication of benefits, to reduce insurance premiums for employers, and to restore the solvency of the workers compensation fund.
In order to determine whether a legislative classification is reasonable, the courts consider four factors: 1) if there is a greater burden on one class as opposed to another without a reason; 2) if the statute results in unfair discrimination; 3) if the statute creates a classification that is arbitrary or unreasonable; 4) if the statute singles out out similarly situated people or groups without justification.
Utah’s offset created two classifications: one based on those receiving social security retirement benefits, and one implicitly based on age because individuals under a certain age are not eligible for social security retirement benefits.
The Court found that the classification scheme failed to pass constitutional muster. If the classification was based on income alone, it was not reasonable to single out one source of income (i.e., social security retirement benefits) to offset workers compensation benefits, as opposed to other sources of benefits.
But the Court also found that the statute failed on the ground that there was no rational relationship between the means used by the law to achieve its objectives.
The Court found that two of the legislative objectives of the offset were legitimate. The one purpose that was found not to be legitimate was that of reducing workers compensation premiums for employers. The reason this was found not to be a legitimate reason for the offset was because the workers compensation act already provided for limited employers’ liability for employees’ injuries by making statutorily defined workers compensation benefits the exclusive remedy for industrial injuries. Injured workers cannot sue in tort, and thus are precluded for suing employers outside of the workers compensation system, for things such as pain and suffering, emotional distress and other factors.
In the overall bargain of the workers compensation system, in exchange for not having the right to sue in tort for a wide panoply of damages, injured workers are assured that if they suffer an injury on the job, they do not need to prove negligence on the part of the employer in sometimes lengthy and drawn-out court proceedings. Rather, there is a stream-lined administrative process for securing benefits for the injury (such as lost wages, permanent impairment, and medical treatment).
Because there is already limited liability inherent in the workers compensation scheme, it was not a legitimate legislative purpose for lawmakers to try and further limit employers’ liability for their employees’ injuries. This was too much gilding of the workers comp lily.
But because there were other legitimate legislative objectives, the law did not fail merely because one of the objectives was invalid. Rather, the Court went on to decide whether or not the law employed rational means in accomplishing these legitimate legislative objectives. The Court found that it did not.
The offset’s legitimate objectives were: 1) preventing the duplication of disability benefits, and 2) restoring the solvency of the workers compensation fund.
The social security retirement offset, however, did not do anything to accomplish either one of these objectives. The Court found that social security retirement benefits are not similar to the wage replacement disability benefits of the workers compensation system. In other words, these two different kinds of benefits are not duplicative.
In making this finding, the Court held that social security retirement benefits are in the nature if old-age pension benefits, rather than lost wage benefits. They are based on lifetime contributions through payroll taxes to the social security system, and are triggered by the event of reaching a particular age, and not by disability. Moreover the Senior Citizen’s Right to Work Act (a wonderful piece of legislation in my humble opinion) invalidates the notion that social security retirement benefits are in the nature of wage replacement. This law allows senior citizens above a certain age to continue working and still receive retirement benefits.
The Court noted that the objective of avoiding duplicative benefits is a worthy and lofty goal, but the means of a social security offset is not rationally related to achieving that noble aim. Simply put, retirement benefits do not serve the same purpose as wage-replacement benefits. Thus, the offset was found unconstitutional.
This material should not be construed as legal advice for any particular fact situation, but is intended for general informational purposes only. For advice specific to any individual situation, an experienced attorney should be contacted.