             IN THE COMMONWEALTH COURT OF PENNSYLVANIA


City of Pittsburgh,                     :
and UPMC Benefit                        :
Management Services, Inc.,              :
                    Petitioners         :
                                        :
             v.                         : No. 363 C.D. 2013
                                        : Submitted: January 31, 2014
Workers’ Compensation                   :
Appeal Board (Lacava),                  :
                 Respondent             :


BEFORE:      HONORABLE DAN PELLEGRINI, President Judge
             HONORABLE MARY HANNAH LEAVITT, Judge
             HONORABLE JAMES GARDNER COLINS, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE LEAVITT                                          FILED: August 8, 2014

             The City of Pittsburgh (Employer) and UPMC Benefit Management
Services, Inc. petition for review of an adjudication of the Workers’ Compensation
Appeal Board (Board) setting aside Employer’s recoupment of an overpayment of
workers’ compensation benefits.      For a period of approximately one year,
Employer paid Robert Lacava (Claimant) total disability workers’ compensation
without an offset for the disability pension Employer also paid Claimant.
Employer recouped the overpayment of workers’ compensation by reducing
Claimant’s disability payment by $50 weekly until it was repaid. The Board set
aside the recoupment because Employer did not give Claimant the official form for
reporting his pension income, i.e., a Form LIBC-756, before effecting the
recoupment. The Workers’ Compensation Judge (WCJ) held that Claimant waived
the issue of the reporting form and that, in any case, Employer did not need to have
Claimant report his pension because Employer had full knowledge of the pension
that it was paying Claimant. However, the WCJ set aside the recoupment for a
different reason, namely, that Employer failed to prove that the recoupment did not
prejudice Claimant.      Concluding that both the Board and the WCJ erred, we
reverse.
              Claimant worked for the City of Pittsburgh as a fire captain. On June
18, 2005, he sustained a neck injury while lifting a heavy chain saw onto a fire
truck. At the time of the injury, Claimant earned approximately $78,000 annually.
Following litigation, Employer, which is self-insured for workers’ compensation,
paid Claimant Heart and Lung benefits equal to his full salary.1
              On December 30, 2005, Claimant elected to take a disability pension.
This ended his Heart and Lung benefits and replaced them with workers’
compensation benefits because his disability was of an indefinite duration.
Claimant and Employer executed an Agreement for Compensation providing for
the payment of workers’ compensation wage loss benefits in the amount of $716
per week, the maximum rate for any claimant injured in 2005. As of December 31,
2005, Claimant began receiving $3,383 per month in pension benefits and $716 per
week in workers’ compensation benefits.
              On November 15, 2006, Employer issued a Form LIBC-761, “Notice
of Workers’ Compensation Benefit Offset,” to Claimant, stating that as of
December 25, 2006, his compensation would be reduced to $603.75 weekly


1
 Under what is commonly referred to as the Heart and Lung Act, Act of June 28, 1935, P.L. 477,
as amended, 53 P.S. §§637-638, firemen who are temporarily unable to perform their duties
because of a work injury are entitled to receive their full salary.


                                              2
because Employer was taking an offset of $112.25.2 This offset represented the
portion of Claimant’s disability pension that was funded by Employer. Employer
also informed Claimant that Employer had overpaid Claimant disability
compensation for the period from December 31, 2005, through December 24,
2006, because the payments for those weeks did not include the offset. The
overpayment totaled $5,756.82.             Employer advised Claimant that beginning
December 25, 2006, $50 would be deducted from Claimant’s weekly disability
payment until the overpayment of $5,756.82 was paid back to Employer. The
offset and $50 deduction reduced Claimant’s weekly disability payment to $553.75
from December 25, 2006, through March 9, 2009. At that point, Employer began
paying Claimant $603.75 per week in workers’ compensation, and has continued to
do so.
               On December 29, 2008, Claimant filed a petition to review
compensation benefit offset, alleging that Employer’s offset calculation was
wrong. The petition also challenged Employer’s entitlement to any recoupment,
asserting that the $50 weekly deduction caused a financial hardship. Employer
filed an answer denying Claimant’s allegations.
               The matter was assigned to a WCJ.3 Employer’s evidence consisted
of expert testimony establishing the amount of Claimant’s pension contributed by




2
  The regulations require an employer to provide the Form LIBC-761 to the claimant “[a]t least
20 days prior to taking the offset.” 34 Pa. Code §123.4(b). Thus, the offset could not begin until
December.
3
  Numerous other Pittsburgh firefighters filed petitions to review compensation benefit offset,
which were assigned to two different WCJs who conducted joint hearings because the issues
were similar. The WCJs then issued individual decisions for each firefighter.


                                                3
Employer. In response, Claimant presented his own expert evidence in an effort to
establish a lower offset amount.
              Claimant also testified about his personal finances and how they were
affected by the offset. The record established that Claimant’s disability pension
totals $3,383 each month, or $40,596 per year.               After Employer’s offset and
recoupment, Claimant’s weekly compensation of $603.75 totals $31,395 per year.4
Claimant’s yearly income from his disability pension and workers’ compensation
is $71,991.
              Claimant testified that his household consists of himself, his wife and
his daughter. Claimant’s household expenses include, inter alia, a mortgage, a car
payment, utility bills and student loan payments for his daughter.                   Claimant
testified that he and his wife had set their household budget on the basis of his pre-
injury firefighter earnings and her earnings from her full-time job at a bank.
Claimant testified that it was “difficult” to pay the household expenses while
Employer was recouping the $50 per week, but he was nevertheless able to pay all
bills. Reproduced Record at 365a, 370a (R.R. ___). In October 2007, Claimant
received a lump sum payment from Employer of approximately $24,000 to
compensate him for scarring to his neck following surgery. In approximately April
2008, Claimant’s wife lost her job which paid $53,000 yearly. However, Claimant
refused to classify the loss of his wife’s salary as having a bigger impact on the
household budget than Employer’s recoupment of $50 per week.                         Claimant
acknowledged that he did not contact Employer to challenge or complain about the
$50 weekly recoupment after receiving Employer’s notice in November 2006.

4
 Fifteen percent of Claimant’s workers’ compensation goes to his attorney to pay his fee for the
prior Heart and Lung Act litigation.


                                               4
            The WCJ credited Employer’s actuarial evidence on its contribution
to Claimant’s pension. Accordingly, she upheld the amount of Employer’s offset.
The WCJ then addressed the other issues raised by Claimant.
            Claimant argued that Employer was not entitled to any offset because
it did not provide him with a Form LIBC-756, entitled “Employee’s Report of
Benefits for Offsets,” before notifying him of its intention to take an offset. The
WCJ found that by not raising that issue while the record was open, Claimant
waived this argument. In any case, the WCJ determined that Employer was not
required to issue a Form LIBC-756 to Claimant before taking an offset for
Claimant’s pension because Employer knew about the pension and, thus, did not
need Claimant’s report. The WCJ reasoned:

            Even if the issue had not been waived, the undersigned cannot
            perceive that the employer’s tender of a Form 756 to a worker
            is a condition precedent to its later assertion of a credit. The
            right to a set-off is established by statute (via an Act 57 of 1996
            amendment), and no condition upon taking the credit is
            established via that amendment. Nor do the Act 57 regulations
            state that tender of the form is a condition precedent.

WCJ Decision, July 30, 2010, at 7; Conclusion of Law No. 4.
            Claimant also argued that Employer’s recoupment was invalid
because it imposed a financial hardship on him. The WCJ agreed. Citing Maxim
Crane Works v. Workers’ Compensation Appeal Board (Solano), 931 A.2d 816
(Pa. Cmwlth. 2007), the WCJ concluded that a recoupment raises a “presumption
of prejudice” to the claimant that the employer must rebut before it can recover its
overpayment of workers’ compensation. WCJ Decision, July 30, 2010, at 6;
Summary and Critical Analysis No. 1.         The WCJ found that Claimant was
prejudiced by Employer’s recoupment because “the unexpected delay of [his]

                                         5
increased loss of income” caused him “some degree of financial difficulty”
because he is not wealthy. Id. at 6; Summary and Critical Analysis Nos. 2-3.5
               The WCJ granted, in part, Claimant’s petition to review compensation
benefit offset.     The WCJ allowed Employer the ongoing pension offset but
disallowed Employer’s recoupment of its overpayment. Accordingly, she ordered
Employer to reimburse Claimant the full amount of the recoupment.6
               Claimant and Employer appealed to the Board.7 Claimant argued that
the WCJ erred in holding (1) that Claimant waived the issue of Employer’s failure
to issue a Form LIBC-756 and (2) that Employer did not have to issue this
reporting form before taking an offset. Employer argued that the WCJ erred in
interpreting Maxim Crane as disallowing a retrospective offset to recoup an
overpayment of workers’ compensation benefits.
               The Board affirmed the WCJ. The Board agreed that Claimant had
waived the issue of whether Employer had to issue Claimant a Form LIBC-756
before taking an offset. Nevertheless, the Board went on to hold that Employer’s

5
  Claimant also argued that Employer was collaterally estopped from presenting evidence on
whether it had correctly calculated Claimant’s offset for his disability. The WCJ held that
Employer was not collaterally estopped because the prior litigation cited by Claimant had
involved different firefighters and, therefore, different factual issues. The Board, likewise,
rejected Claimant’s collateral estoppel argument and Claimant did not appeal; therefore, this
issue is not before us.
6
  Thereafter the WCJ issued an amended order for all firefighter cases she had been assigned,
including the instant one, clarifying that Employer was to apply the updated pension offset
calculations it had submitted into evidence, which in some cases was different than the offset
amounts found in the Form LIBC-761 Notice of Offset. For any case where the updated
calculations decreased the offset amount, the WCJ ordered Employer to reimburse the claimants
the amount they had been underpaid, with interest. The WCJ reaffirmed the prior decision and
order in all other material respects. In this case, the WCJ did not order Employer to pay interest
on the recoupment amount returned to Claimant.
7
  Claimant did not appeal the issue of Employer’s calculation of the offset amount.


                                                6
tender of a Form LIBC-756 was a condition precedent to recoupment of an
overpayment of benefits in every case. Because Employer did not satisfy that
condition, the Board held that the “appropriate course of action in this case is to
allow [Employer] an ongoing offset based on Claimant’s receipt of pension
benefits after the issuance of the [Form LIBC-761] Offset Notice while disallowing
any retrospective credit.” Board Adjudication at 8. Employer then petitioned for
this Court’s review.8
              On appeal, Employer argues that the Board and the WCJ erred in
concluding that Employer was not entitled to recoup the overpayment of benefits
to Claimant. First, Employer argues that it was not required to issue Claimant a
Form LIBC-756 in order to implement a retrospective credit to recover overpaid
disability benefits and that, in any case, Claimant waived that issue. Second,
Employer asserts that the WCJ erred in holding that Employer’s recoupment was
presumed to be prejudicial and, thus, not allowed.
              This Court addressed these very issues in the related case of City of
Pittsburgh and UPMC Benefit Management Services, Inc. v. Workers’
Compensation Appeal Board (Wright), 90 A.3d 801 (Pa. Cmwlth. 2014) (City of
Pittsburgh I), which involved the same employer and similar facts. There, we held
that the Board erred in holding that Employer’s failure to provide the claimant with



8
  This Court’s review of an order of the Board is limited to determining whether the necessary
findings of fact are supported by substantial evidence, whether Board procedures were violated,
whether constitutional rights were violated or an error of law was committed. Cytemp Specialty
Steel v. Workers’ Compensation Appeal Board (Crisman), 39 A.3d 1028, 1033 n.6 (Pa. Cmwlth.)
petition for allowance of appeal denied, 50 A.3d 127 (Pa. 2012). When reviewing questions of
law, our review is plenary. Land O’Lakes, Inc. v. Workers’ Compensation Appeal Board (Todd),
942 A.2d 933, 936 n.3 (Pa. Cmwlth. 2008).


                                              7
a Form LIBC-756 barred its recoupment of the overpayment when the Board itself
found that the claimant had waived the issue of the Form LIBC-756.9
               We also held that the WCJ erred in construing Maxim Crane to mean
there is always a “presumption of prejudice” that an employer must overcome in
order to recoup an overpayment of compensation, no matter how implemented.
Section 204 of the Workers’ Compensation Act (Act)10 and regulations
promulgated thereunder expressly authorize recoupment of compensation that was
overpaid because it did not include an offset. Because the employer in Maxim
Crane failed to follow those regulations, the recoupment was set aside. In obiter
dicta, Maxim Crane also found that the recoupment was unacceptable because the
employer sought to recover two years of overpayments by reducing the claimant’s
weekly compensation to $0 for six months.11


9
  Because we find the issue waived, we need not address the WCJ’s holding that Employer did
not have to issue Claimant a Form LIBC-756 before it did its offset because Employer did not
need Claimant to report an event of which Employer had full knowledge, i.e., the amount of
Claimant’s disability pension.
10
   Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §71. The portion of Section 204(a)
providing for an offset for pension payments was added by the Act of June 24, 1996, P.L. 350,
No. 57. Section 204(a) states, in relevant part, as follows:
       [T]he benefits from a pension plan to the extent funded by the employer directly
       liable for the payment of compensation which are received by an employe shall
       also be credited against the amount of the award [of workers’ compensation
       benefits] made under sections 108 and 306, except for benefits payable under
       section 306(c).
77 P.S. §71(a).
11
   Maxim Crane was decided on legal grounds, i.e., that the employer had failed to comply with
the regulation at 34 Pa. Code §123.501, which squarely places the burden on the employer to
notify the claimant of his duty to report offsetable benefits to the employer. Maxim Crane went
on to explain that where an employer waits two years to satisfy this notice obligation, there will
be a presumption that recoupment will cause a hardship. This was obiter dicta because the case
was decided on the employer’s failure to follow 34 Pa. Code §123.501.


                                                8
              Finally, in City of Pittsburgh I, we addressed Muir v. Workers’
Compensation Appeal Board (Visteon Systems LLC), 5 A.3d 847 (Pa. Cmwlth.
2010).    Muir established that the regulations require the employer to give a
claimant notice at least once every six months of his duty to report offsetable
benefits to the employer. The employer does this by issuing the claimant a Form
LIBC-756. In this way, a recoupment should not need to cover an overpayment
made over a period of time longer than six months. City of Pittsburgh I also
confirmed that in keeping with the Act’s humanitarian purposes, a WCJ may
structure a recoupment in a way that minimizes its impact on the claimant.
              Here, Claimant was overpaid for approximately one year. Employer
recouped the overpayment by deducting $50 from Claimant’s weekly
compensation payment from December 25, 2006, through March 9, 2009.12
However, Claimant did not identify any hardship specifically attributable to the
recoupment or its structure.13 He stated only that it was “difficult” to pay the
household bills while Employer was recouping the $50 per week, but he was
nevertheless able to do so. In short, by the time Claimant filed his review offset
petition challenging the recoupment in December 2008, Employer had nearly
completed the recoupment, and by the time the WCJ issued a decision, the
recoupment had been completed for almost seventeen months.                      Under those



12
   As this Court noted in City of Pittsburgh I, Employer, by structuring the recoupment in this
way, risked not recouping the entire overpayment, because Claimant could have stopped
receiving workers’ compensation benefits in the meantime.
13
   Even so, this case is nothing like Maxim Crane’s dicta where the claimant would have
received $0 for six months. Here, Claimant received $553.75 during the twenty-six-and-a-half
month period from December 25, 2006, through March 9, 2009, when Employer recouped $50 a
week.


                                              9
circumstances, the issue of whether the recoupment resulted in any financial
hardship or could have been structured differently is moot.
             Our holding in City of Pittsburgh I is dispositive. Accordingly, we
reverse the Board’s adjudication to the extent it disallowed recoupment of the
overpayment and affirm it in all other respects.

                                              ______________________________
                                               MARY HANNAH LEAVITT, Judge




                                         10
            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


City of Pittsburgh, and UPMC           :
Benefit Management Services, Inc.,     :
                    Petitioners        :
                                       :
            v.                         : No. 363 C.D. 2013
                                       :
Workers’ Compensation Appeal           :
Board (Lacava),                        :
                Respondent             :


                                     ORDER

            AND NOW, this 8th day of August, 2014, the order of the Workers’
Compensation Appeal Board dated February 15, 2013, in the above captioned
matter is hereby REVERSED inasmuch as it disallowed recoupment of overpaid
benefits and AFFIRMED in all other respects.

                                           ______________________________
                                            MARY HANNAH LEAVITT, Judge
