The Workers' Compensation Act provides protections and remedies for workers injured in the course and scope of their employment. Due to the humanitarian purposes of the act, the courts have held that the act is remedial in nature and must be liberally construed in light most favorable to injured workers in order to effectuate its humanitarian objective. Despite these goals, within the act lie some provisions that seemingly contradict this intended purpose. This article sheds light on the position that the statutory imposed maximum compensation rate as set forth in the Workers' Compensation Act is unconstitutional and violates equal protection principles set forth in the U.S. and Pennsylvania Constitutions.

An injured worker falling into the top income bracket as delineated by the act is entitled to indemnity benefits equal to two-thirds of their wage loss. However, there is a disadvantageous and unjust provision lying in Section 105.1: if the employee earns more than a certain amount of income per week, they are no longer entitled to the two-thirds calculation and instead have their indemnity benefits artificially capped. In 2017, the weekly indemnity benefit rate was capped at $995. In 2018, the cap was $1,025.00. This means in 2018 an injured worker who earned more than $1,538 a week was not entitled to two-thirds of their weekly income but rather the statutory imposed maximum compensation rate or cap. What this has done in essence is punish those higher-paid individuals whose work provides a societal value for which they receive appropriate compensation, but if they sustain a disabling work injury they are treated unequally and more poorly than workers who earned less.

A 50-year-old union iron worker may have spent well over 20 years building their career and mastering skills to reach an earning capacity of $2,000 per week. He now has a family, built a life, raised children and face responsibilities such as a mortgage and car payments that depend on their weekly paycheck. Then an unforeseen, devastating and disabling injury occurs. Earning $2,000 per week under a standard two-third calculation would entitle this worker to $1,333.33 in weekly disability benefits. However, as the law stands, in 2018 this worker's weekly disability indemnity benefits are capped at $1,025, shortchanging them by over $308 per week, or $1,233.32 a month in terms of disability benefits. Instead of the two-thirds (66.67 percent) rate applied to workers who earn less, this higher-earning worker's rate of compensation is diminished to 51.25 percent. Not only do they have to deal with the pain and stress that comes along with a work injury, but they now they have to figure out how to make ends meet financially. This can and does crush families.

Pennsylvania's institution and maintenance of a cap on the wage loss benefits an injured worker may receive was set by the General Assembly in 1972 in 77 P.S. Sections 25.1-25.2. The figure originates from an amount determined annually by the Department of Labor and Industry on the basis of employment covered by the Pennsylvania Unemployment Compensation Law. Each year the maximum compensation cap increases $15 to $30. This article argues that the provision of the Workers' Compensation Act that allows for this arbitrary cap violates constitutional equal protection rights as it improperly deprives higher-paid workers eligibility for benefits at the same rate provided to workers who earn less than the yearly cutoff. There is no explanation given or rational basis for the artificial “maximum” compensation rate that currently treats a worker earning $2,500 per week the same as a worker who earns $1,300. Classifications that set a basis for different treatment may be legally justified, however, so long as “those classifications are reasonable rather than arbitrary and bear a relationship to the object of the legislation, see Kramer v. Workers' Compensation Appeal Board (Rite Aid), 883 A.2d 518 (Pa. 2005). This is the essence of “rational basis” review and the current statutory maximum compensation rate provisions do not satisfy the criteria.

The Pennsylvania Constitution is violated by this provision of the Workers' Compensation Act as it does not provide for reasonable compensation as required under Article III, Section 18 that states “the General Assembly may enact laws requiring the payment by employers, or employers and employees jointly, of reasonable compensation for injuries to employees arising in the course of their employment … and fixing the basis of ascertainment of such compensation and the maximum and minimum limits thereof.” How can the maximum compensation rate be truly reasonable when it denies higher earners of their rightful entitlement to two-thirds of their weekly income if they sustain a disabling injury? Moreover, the legislation decides the maximum compensation rate each year based on labor statistics drawn from the entire state, which in turn negatively impacts workers in geographical areas where earnings are generally higher, as are taxes and costs of living. In Philadelphia, a union trade worker will earn well over $40 per hour with overtime, versus someone performing similar work in the middle of the state. Under the act, only one family will end up impacted by the maximum compensation rate/cap. What results is a disparate impact across the state when the artificial maximum compensation cap is applied, leaving the higher paid worker with diminished benefits yet with the same tax and cost of living expenses? Suddenly the reasonable compensation in one area is wholly unreasonable in another, which this article argues is one reason why the compensation cap allowed by Article III, Section 18 is unreasonable as applied. Looking back at the earlier example, our worker's remedy as intended by the act is shortchanged by over $1,000 per month due to the maximum compensation rate/cap that effectively has diminished his indemnity benefits to an unreasonable level that cannot be supported under our Constitution.

The artificially set compensation rate/cap is also an unconstitutional deprivation of a full and fair remedy as required by Article I, Section 11. The remedies clause in Article I affords an injured person the right to civil recovery, and states in relevant part “All courts shall be open; and every man for an injury done him in his lands, goods, person or reputation shall have remedy by due course of law …”  Pa. Const. Art. I Section 11. The General Assembly's powers to enact measures must conform with the remedies clause and legislation that affects a remedy must be both reasonable and nondiscriminatory, see United Artists' Theater Circuit v. Philadelphia, 635 A.2d 612, 616 (Pa. 1993).

For injured workers in 2018 who earn $1,538 or more per week, the maximum compensation rate effectively results in disparate and discriminatory treatment compared to lower-salaried workers who at least are ensured two-thirds of their weekly income if they are disabled due to a work injury. An injured worker is already not made entirely whole by the two-third statutory calculation, but if that injured worker earned more than $1,538 per week, they lose even a greater portion of their regular income. The two-third calculation may be considered a reasonable provision if applied fairly and uniformly to all injured workers, but the maximum compensation rate cap, which affects only higher earners, is no longer reasonable as the value of an injured worker's recovery has become so diminished that it can absolutely no longer qualify as a full and fair recovery as guaranteed by the remedies clause. The humanitarian purpose of the act is being lost each day with the current state of the Workers' Compensation Act as it relates to indemnity benefits.

With any proposed change comes the question of the implications it may bring. The anticipated argument from insurance carriers is that it will increase costs and encourage workers to malinger and delay their return to work. This is completely unfounded, as injured workers are never made whole when they have to miss work due to their disability, as in majority of the circumstances they are only receiving two-thirds of their wage loss. This is a drastic change and impairment to families. Any argument to have the cap remain in place to prevent malingering in essence attempts to suggest that a worker who makes $1,400 per week is not likely to delay their return to work and thus entitled to two-thirds of their wage loss, but those individuals making over $1,538 a week in 2018 are more likely to be malingers, so their disability benefits have to be capped. This is obviously not the case, but this is the irrationality created by trying to come up with a reason to give justification to the artificially imposed maximum compensation rate. To the contrary, those higher earning individuals who see their income slashed in half under the artificially imposed compensation rate are often times left with no choice but to return to work prematurely when they are nowhere near recovered, only to end up causing worse injuries and damage, which in turn takes them back out of work for a longer period of time and drives up medical costs

Where to go from here? As it stands, a workers' compensation Judge is not empowered to declare act provisions unconstitutional. However, the issue can and should be raised through filing a review petition that challenges the disability rate. This then preserves the raised issues and arguments so it can be pursued at the appellate level. In the end, to effect change, this is a pressing matter that likely will need to reach the federal level, and hopefully soon. The maximum compensation rate as it stands is unconstitutional and causing higher earners to be significantly more impacted by a work injury.

Ruxandra M. Osgood, an attorney with Pond Lehocky Stern Giordano, is devoted to representing workers' rights since her undergraduate studies. She focuses her practice exclusively on workers' compensation.