Legal Insights

Return to Kachinski in the Labor Market Survey Process?

November 26, 2013
By: Patrick R. Byrne

Has a recent case firmly moved the labor market survey process back to the model created under the 1987 case, Kachinski v. WCAB (Vepco Construction Co.) 516 Pa. 240, 532 A.2d 374 (1987)? Not yet, but the Pennsylvania Supreme Court is certainly moving in that direction. 

In an opinion published on November 21, 2013, the Pennsylvania Supreme Court moved the labor market survey process one step closer to the old Kachinski model of actual job placement in place prior to the Act 57 amendments of 1996. In Phoenixville Hospital v. WCAB (Shoap), No. 32 EAP 2011, the Justices overturned a decision of the Commonwealth Court which modified the claimant’s benefits based on a labor market survey. At issue in the appeal was whether evidence that the claimant applied but was not hired for the jobs identified in the labor market survey was proof the jobs were not open and available. The Commonwealth Court held that such evidence was irrelevant in a petition based on a labor market survey. 

The Pennsylvania Supreme Court disagreed, holding that claimant’s testimony she applied for the positions, but did not receive a job offer because those positions were filled by the time she applied, is relevant to determining whether the positions were actually “available” to the claimant. While not dispositive in every case, the Court’s holding in Shoap establishes an additional bar to obtaining relief under a labor market survey, effectively eroding the usefulness of this important Act 57 amendment. By adding elements of the Kachinski burden of proof to labor market surveys, and requiring proof the positions remained open, “for such a time to provide claimant a reasonable opportunity to apply to them,” the Court has blurred the distinction between job placement and labor market surveys.  

The Old Kachinski System for Modification of Benefits

Under the old Kachinski system, modification of benefits required the employer to (1) produce evidence of a change in Claimant’s condition, and (2) produce evidence of a referral to an available job that was within the limitations of claimant’s disability. The burden then shifted to the claimant to prove that they acted in good faith to apply for the position. Kachinski v. WCAB (Vepco Construction Co.), 516 Pa. 240, 532 A.2d 374 (1987). Thus, these cases required proof of a specific job offer directly from the time-of-injury employer, a referral to actually apply for an opening identified with a different prospective employer, or the less common referral of a “funded employment” position. 

But with passage of Act 57, the requirement of making referrals for application with prospective employers was eliminated. Instead, Section 306(b)(2) permits employers to present evidence of an earning capacity based on a survey of suitable employment in the claimant’s usual employment area. The distinction between actual referrals and a survey of the labor market seems to have been ignored by the Pennsylvania Supreme Court. In Shoap, the workers' compensation judge (WCJ), the Workers' Compensation Appeal Board (WCAB), and the Court treated the prospective positions identified in the survey as if they were referred to the claimant in order to apply and, thus, found the results of those applications to be relevant.

In Shoap, the vocational counselor performed the labor market survey and identified five open and available positions as being both vocationally and medically appropriate for the claimant. The claimant testified that she applied for all five, and offered her written applications into evidence. The claimant was not offered a job by any of the five potential employers. Although the WCJ accepted the defendant’s medical and vocational evidence, he denied the Modification Petition based on a finding that claimant established in good faith that she followed through on all of the jobs referred to her by the employer and that none of the referrals resulted in an offer of employment. The distinction between a labor market survey and a pre-Act 57 job placement referral was lost.  

The WCAB affirmed the Judge but the Commonwealth Court reversed, holding that positions identified in the labor market survey were “not analogous to job referrals….  Job referrals are part of a Kachinski type analysis that, with limited exception, is an antiquated standard. Therefore, the WCJ's conclusion that the claimant followed through in ‘good faith’ to apply for the positions … and failed to receive a job offer is of no relevance.”

A Return to Kachinski?

On appeal to the Pennsylvania Supreme Court, claimant argued that some of the underlying principles of Kachinski remained applicable in labor market survey cases; that under the Commonwealth Court’s interpretation a claimant could not defeat a labor market survey case without employing a medical expert or vocational counselor to contest the labor market survey, rather than relying on their own testimony of good faith conduct, violating the humanitarian purposes of the Act; and that if the legislature had meant to wholly supersede the requirements of Kachinski, it could have done so explicitly. The Court also considered an Amicus Curiae brief from the Pennsylvania Association for Justice, which argued that the best test of whether the labor market survey report is accurate is to allow the claimant to apply for the positions and see whether or not there truly is a residual earning capacity. The employer argued that applying Kachinski elements of the burden of proof to the Act 57 labor market survey process was tantamount to a judicial repeal of the statute.

The Pennsylvania Supreme Court reasoned that in order for the phrase, “substantial gainful employment which exists” to be meaningful, it must encompass more than the mere existence of jobs compatible with the claimant’s restrictions. The Court held that the positions identified in the labor market survey must remain open for an unspecified period of time to provide claimant a reasonable opportunity to apply to them. The Court went on to state that evidence the claimant pursued, but failed to obtain, gainful employment with the employers identified in the labor market survey is undeniably relevant to rebut the employer’s argument that the positions demonstrate claimant’s residual earning capacity. Such evidence is not dispositive of the earning power assessment, but the claimant must be allowed the opportunity to present evidence that they did not obtain employment because the position was already filled. 

What it All Means

• The distinction between Kachinski job offers and Act 57 labor market surveys is blurred, with the Pennsylvania Supreme Court adding elements of the Kachinski burden of proof to labor market survey cases. 
• The Act 57 labor market survey is now considered to be a referral to apply. 
• Vocational experts will now have to demonstrate that the prospective positions were “actually available” to the claimant for “such a time to provide claimant a reasonable opportunity to apply to them.”

If you have any questions regarding the recent Pennsylvania Supreme Court Decision in Shoap, or Workers’ Compensation Practice in general, please contact:  

Patrick R. Byrne is a Principal in Post & Schell's  Workers' Compensation Department. He focuses his practice on the defense of a broad array of employers, their workers' compensation insurance carriers and third-party administrators. His clients include interstate motor carriers, retail and food industry distribution centers, hospitals and long-term care facilities, and temporary staffing companies. Mr. Byrne counsels clients on claims management and risk management, in addition to frequently lecturing on these and other topics in workers' compensation. He has extensive trial and appellate experience, and currently handles litigation of claims in northeastern and north-central Pennsylvania out of the Firm's Allentown Office.

To contact Mr. Byrne: 

• Office: (610) 774-0326
• Email: pbyrne@postschell.com 

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