                                 NO.    90-077

            IN THE SUPREME COURT OF THE STATE OF MONTANA
                                       1991



JAMES GREG HIGGINBOTHOM,
                 Claimant and Appellant,
     -vs-                                                   APR 2 3 1996
STOLTZE-CONNOR LUMBER CO.,
                                                            &d SmitL
                                                      CLERK OF SUPREME COURl
                 Employer/Insurer and Respondent.        STATE OF MONTANA


APPEAL FROM:     District Court of the Workers' Compensation Court,
                 In and for the Area of Missoula,
                 The Honorable Timothy Reardon, Judge presiding.


COUNSEL OF RECORD:
            For Appellant:
                 Janice   S.   VanRiper, Helena, Montana.
            For Respondent:
                 Bradley J. Luck, Missoula, Montana; Todd A. Hammer,
                 Kalispell, Montana.
            For Amicus Curiae:
                Monte Beck, Bozeman, Montana.


                                 Submitted: February 7, 1991
                                 Decided :  April 23, 1991
Filed:
Justice Fred J. Weber delivered the Opinion of the Court.

     The Workers1 Compensation Court denied rehabilitation benefits
under   §   39-71-1023, MCA     (1987), to James Greg Higginbotham,
claimant.     Claimant appeals, contending that he was entitled to
rehabilitation benefits during the course of the review procedure
provided by statute.    We reverse.
     The principal issue is whether, under             39-71-1023, MCA
(1987), an insurer must pay total rehabilitation benefits to a
worker during the      review by the rehabilitation panel and the
Department.
     On September 14, 1987, claimant injured his back               in a
compensable work-related      injury.      Liability was     accepted by
Stoltze-Connor Lumber Co.,       his    self-insured employer, herein
referred to as insurer.       In December 1987, claimant underwent a
laminectomy    and   required    subsequent     surgical    intervention.
Claimant's physician concluded that claimant had reached maximum
healing on September 16, 1988, and gave him a permanent impairment
rating of 10 percent of the whole man.
     The insurer notified the Division of Workers' Compensation
that it had chosen Crawford Rehabilitation Services (Crawford) as
its designated rehabilitation provider on March 17, 1989.               The
rehabilitation    counselor     selected   by    Crawford    prepared    a
rehabilitation evaluation report in which he determined that
claimant could not return to the job he held at the time of injury,
but that claimant's age, education, work experience, and physical
condition made him vocationally capable of entering the job market
without   retraining as   a   surveyor's assistant or   electronics
technician.     Claimant did not return to work in any capacity.
     As a result of the determination that claimant had reached
medical stability and was released to return to the open labor
market by his treating physician, the insurer reduced his benefits
from temporary total disability benefits to permanent partial
disability benefits.      Claimant's permanent partial disability
benefits were   equal to one-half of his temporary total disability
benefits.
     Claimant wrote the Division stating that he thought the
reduced benefits were inadequate, that he was not qualified for
return to work in the options designated by the rehabilitation
counselor, that he was not guaranteed future gainful employment,
and that he desired to be retrained.    Claimant argued that he was
entitled to have a rehabilitation panel review the determination
and requested a contested case hearing.
     In the contested case hearing, the hearing examiner for the
Department of Labor and Industry described the issue as:
         The issue to be determined is whether the return to
    work options identified by Claimant's rehabilitation
    counselor are appropriate, and whether he is entitled
    to total compensation benefits.
The hearing examiner concluded that the mandatory rehabilitation
process had not been followed, that the statutes mandated a
rehabilitation panel review and a Department determination prior
to termination of total rehabilitation benefits, and ordered the
payment of total rehabilitation benefits to the claimant pending
the completion of that review.
     Upon appeal, the Workers' Compensation Court affirmed the
determination that the review procedure by the rehabilitation panel
and the Department was required under 5 39-71-1015 (3), MCA (1987).
The court reversed the order which required payment of total
rehabilitation benefits, and in part stated:
          We find nothing in any section of the rehabilitation
     provisions which imposes on an insurer any total
     disability or total rehabilitation benefit liability once
     maximum healing is reached and a job market is identified
     for a claimant by a designated rehabilitation provider.
     The only risk to an insurer under these circumstances
     is that, on appeal or at a hearing, the labor market or
     jobs identified by the rehabilitation provider are found
     to be in error. Unfortunately for a disabled worker,
     that requires proof which can only be obtained at
     additional expense, which if claimant is receiving no
     benefits will be difficult to obtain.


         Unfortunately, the result is that the Hearing
    Examiner abused his discretion, and indeed established
    a nonexistent standard to transform I1eligibilityI1to
    Itentitlement" for purposes of benefit payments    .
                                                     . . .
    We reverse that portion of the Order directing the
    payment of total rehabilitation benefits because the
    Hearing Examiner abused his discretion and erred as a
    matter of law, given the evidence presented at the
    hearing.
The claimant appeals from that order.


     The Vocational Rehabilitation Provisions of the Workers'
Compensation Act were substantially revised in 1987.       A review of
those sections pertinent to this case follows.
          Under   §   39-71-1011, MCA (1987), a disabled worker is
defined as follows:
     (2) "Disabled workeru means one who has a medically
     determined restriction resulting from a work-related
     injury that precludes the worker from returning to the
     work the worker held at the time of the injury.
Both parties agree that claimant meets this statutory definition
of a "disabled worker."
     Section 39-71-1012, MCA, sets forth the rehabilitation goal
and options:
          (1) The goal of rehabilitation services is to return
    a disabled worker to work, with a minimum of retraining,
    as soon as possible after an injury occurs.
          (2) The first appropriate option among the following
    must be chosen for the worker:
          (a) return to the same position;
          (b) return to a modified position;
          (c) return to a related occupation suited to the
    claimant's education and marketable skills;
          (d) on-the-job training;
          (e) short-term retraining program (less than 24
    months) ;
          (f) long-term      retraining program (48 months
    maximum) ; or
          (g) self-employment.
          (3) Whenever possible, employment in a worker's
    local job pool must be considered and selected prior to
    consideration of employment in a worker's statewide job
    pool.
This section emphasizes that a minimum of retraining is desired,
with the primary aim being the return of the disabled worker to
work as soon as possible.      It also allows consideration of
employment in a statewide pool as well as a local job pool.
    Section 39-71-1014, MCA, in pertinent part states:
         (1) Rehabilitation services are required for
    disabled workers and may be initiated by:
         (a) an insurer by designating a rehabilitation
    provider and notifying the division;
          . . .
In this case, the insurer notified the Division of its choice of
a rehabilitation provider on March 17, 1989, 6 months after
claimant reached maximum healing.
     Section   39-71-1015, MCA, with    regard to    evaluation and
return to work provides:
          (1) If a disabled worker is capable of returning to
     work, the designated rehabilitation provider shall
     evaluate and determine the return-to-work capabilities
     of the disabled worker pursuant to 39-71-1012 (2)(a)
     through (2)(d).
          ...
          (3) If the worker has not returned to work as
     provided in subsection ( 2 ) , the insurer shall notify the
     division.     The division shall then designate a
     rehabilitation panel as provided in 39-71-1016 and refer
     the worker to the panel.
Here, the insurer concluded that the claimant was capable of
returning to work.   However, claimant did not return to work and
the insurer was required to notify the Department.
     Section 39-71-1016, MCA, provides the following with regard
to rehabilitation panels:
         (1) The division shall designate and administer
    rehabilitation panels.   The purpose of a panel is to
    advise the division on a worker's eligibility for
    rehabilitation services. Each panel shall issue to the
    division a report as provided in 39-71-1017.
     Secion 39-71-1017 requires panel review and a report, stating:
         (1) The rehabilitation panel shall:
         (a) review all records, statements, and other
    pertinent information; and
         (b) prepare a report to the division with copies
    to the insurer and worker.
         (2) The report must:
         (a) identify the first appropriate rehabilitation
    option by following the priorities set forth in 39-71-
    1012; . . .
The procedure required under         1017 was not followed in the present
case.    The rehabilitation panel did not complete its report to the
Department.
        Section 39-71-1018 requires the Department to make its order
of determination, stating:
          (1) The division shall issue an initial order of
     determination within 10 working days of receipt of a
     report from a rehabilitation panel     .   .   .
          (2) Within 10 working days from the date the initial
     order of determination is mailed, a party may submit a
     written exception to the order. On its own motion or at
     the request of any party, the division shall conduct a
     hearing.   The division shall issue a final order of
     determination within 20 working days of the hearing.
                . . .
          (4) Within 10 working days after the date of mailing
     of the division's final order of determination, an appeal
     may be taken to the workers1 compensation court.
None of the foregoing was followed. The Department did not conduct
a hearing or issue its order of determination based upon the
rehabilitation panel report.
     A key provision on the issue before us is            §   39-71-1023, MCA,
which provides for total rehabilitation benefits during various
periods and states:
                (1) A worker who no longer is temporarily totally
    disabled but meets the definition of a disabled worker
    may be eligible for total rehabilitation benefits.
         (2) Eligibility for total rehabilitation benefits
    begins on the date of maximum healing or the date notice
    is given to the division by the insurer that a
    rehabilitation provider has been designated, whichever
    is later.
         (3) Benefits must be paid at the disabled worker's
    temporary total disability rate for a period not
    exceeding 26 weeks from the date of eligibility, except
    that the division may extend the period for good cause.
        . . .
                (4)   Total   rehabilitation   benefits       under   this
     section terminate when:
          (a) a worker returns to work;
          (b) a worker is qualified to return to work under
     the priorities in 39-71-1012 pursuant to a division
     order; or
          (c) an I.W.R.P. is submitted to the department by
     the department of social and rehabilitation services.
             . . .

     Under 5 39-71-1023, MCA (1987), must an insurer pay total
rehabilitation benefits to a worker during the review by the
rehabilitation panel and the Department?
     Claimant contends that as he was a disabled worker who had not
returned     to    work,    the   insurer was     required       to    notify     the
Department,       the      Department     was   required    to        designate    a
rehabilitation panel, the panel was required to meet and make its
report, and ultimately the Department was required to issue its
final order of determination.
     Claimant contends that under 5 39-71-1023, MCA (1987), he
should have received total rehabilitation benefits (equal in amount
to his temporary total disability benefits) from the date of his
maximum healing until the completion of the rehabilitation review
procedure.        He therefore contends it was improper to give him
permanent partial disability benefits from the date of maximum
healing.
     The insurer contends that under Coles v. Seven Eleven Stores
(1985), 217 Mont. 343, 704 P.2d 1048, an insurer is allowed to
terminate     benefits       prior   to    completion      of    the     mandatory
rehabilitation procedure.            The insurer contends that not all
workers are entitled to receive total rehabilitation benefits under
5 39-71-1023, MCA (1987).
     The amicus curiae points out that it takes several months for
the rehabilitation provider to complete an assessment and several
more months to complete the rehabilitation review. Amicus contends
that instead of receiving his permanent disability award of $149.50
per week from the date of maximum healing, claimant was entitled
to total rehabilitation benefits of $299 per week under 5        39-71-

1023, MCA (1987).
     On September 16, 1988, claimant was no longer temporarily
totally disabled and was therefore ineligible for temporary total
disability   benefits.     However,   claimant   then   did   meet   the
definition of a disabled worker and became eligible for total
rehabilitation benefits.    We conclude that under 5 39-71-1023, MCA
(1987), claimant became eligible for total rehabilitation benefits
on September 16, 1988, as he had not returned to work.        Under the
provisions of that statute claimant was entitled to a continuation
of total rehabilitation benefits until he received a decision from
the Department regarding his potential for rehabilitation. No such
decision was ever rendered. Under the statutory provisions, after
the insurer gave notice to the Department that Crawford had been
designated as its rehabilitation provider, claimant was entitled
to total rehabilitation benefits for a period not to exceed 26
weeks, unless extended by the Department. All of the foregoing is
required under 5 39-71-1023, MCA (1987), which also provides that
the total rehabilitation benefits must be paid at the disabled
worker's temporary total disability rate.
     We   conclude that claimant was denied the rehabilitation
procedure required under the foregoing statutes.       He did not
receive a rehabilitation panel report or a Department order of
determination.   He did not receive the opportunity to have a
hearing before the Department's final order of determination on the
issue of rehabilitation.   We hold that claimant is entitled to
total rehabilitation benefits at the rate of $299 per week from
September 16, 1988, to the date of remand of this opinion.      We
further hold that the permanent partial disability benefits which
have been paid to claimant since September 16, 1988, shall be
reclassified as a partial payment of his total rehabilitation
benefits, so that the insurer will be required to pay $149.50 from
September 16, 1988, to the date of remand, to the claimant in a
lump sum as the balance due of total rehabilitation benefits.
     We further hold that the date of remand shall constitute the
date notice is given to the Department by the insurer that a
rehabilitation provider has been designated under the foregoing
statutes, so that additional total rehabilitation benefits shall
be paid from that date as provided under the statutes for a period
not to exceed 26 weeks unless otherwise extended by the Department
under the statutory provisions.     From the date of remand the
statutory procedures in the rehabilitation sections shall be
followed.
     We reverse the Workers1 Compensation Court's order with regard
to total rehabilitation benefits, and hold      that claimant is
entitled to total rehabilitation benefits as previously described
and that claimant also is entitled to the rehabilitation panel
review and Departmental review provided in the statutes.
     Because of our holdings with regard to total rehabilitation
benefits, we do not find it necessary to address the issue of
unconstitutionality raised by the claimant.
