In August 2002, Michael Ayala was severely injured in a preplanned attack by inmates while at his job as a correctional officer at the Lancaster State Prison

He filed a workers’ compensation claim and alleged that the injury was caused by the serious and willful misconduct of his employer, California Department of Corrections and Rehabilitation (CDCR).

Labor Code section 4553 provides that ‘[t]he amount of compensation otherwise recoverable shall be increased one-half . . . where the employee is injured by reason of serious and willful misconduct” by the employer. Ayala and CDCR agreed that the injury caused Ayala 85 percent permanent disability, but they could not agree whether CDCR engaged in serious and willful misconduct.

A WJC found that CDCR did not engage in serious and willful misconduct. However, on reconsideration, the Workers’ Compensation Appeals Board (the Board) rescinded the decision and reversed, finding that CDCR had engaged in serious and willful misconduct. Over a dissent, a Board majority found that CDCR “failed to act on a credible threat of inmate violence that was specifically reported to be planned for the day of the attack and took the facility off lockdown despite this threat even though it possessed additional information . . . that this had long been planned.”

The Board’s determination established Ayala’s entitlement to an additional 50 percent of “compensation otherwise recoverable” per section 4553. Ayala and CDCR disagreed, however, about what constituted the “amount of compensation otherwise recoverable” under that section.

While he was temporarily totally disabled Ayala was paid his full salary because he was on industrial disability leave and enhanced industrial disability leave. However the WCJ found that the compensation upon which the penalty applies was what Ayala would have been paid in temporary disability. But on reconsideration, the Board again rescinded and reversed the workers’ compensation judge’s decision, this time finding that the base compensation was what Ayala was paid on industrial disability leave and enhanced industrial disability leave.

The Court of Appeal reversed in the published case of Cal. Dept. Corrections & Rehabilitation v. Workers’ Comp. App. Bd. -E079076 (August 2023).

The Court of Appeal first noted Labor Code Section 3207, entitled “Compensation,” which states that “‘[c]ompensation’ means compensation under this division and includes every benefit or payment conferred by this division upon an injured employee, or in the event of his or her death, upon his or her dependents, without regard to negligence.” However it stated that the definition is “is as capacious as it is circular.“

“Equally unambiguous, though, is that industrial disability leave benefits are not ‘compensation,’ as such benefits are not provided by Division 4 of the Labor Code. They in fact are provided outside of the Labor Code altogether. Supplied by section 19871 of the Government Code, industrial disability leave is an alternative to temporary disability and is available to certain state officers and employees, such as those who are members of the Public Employees’ Retirement System (Gov. Code, § 19869).”

Industrial disability leave provides an employee his or her full salary (net of certain taxes), but only for 22 days; after 22 days, the pay becomes two-thirds of full pay. (Gov. Code, § 19871, subd. (a).) However, a subset of eligible workers, defined in the Government Code as “excluded employees,” are entitled to receive enhanced industrial disability leave. (Gov. Code, §§ 19871.2, 3527, subd. (b); Cal. Code Regs., tit. 2, § 599.769.)

Enhanced industrial disability leave extends the period of full pay from 22 days to one year. (Gov. Code, § 19871.2.) If a worker continues to be temporarily disabled after industrial disability leave and enhanced industrial disability leave benefits terminate, then temporary disability payments begin. (Gov. Code, § 19874, subd. (a).)

There is no ambiguity here. “Compensation,” as the term is used in section 4553, includes only items provided by Division 4 of the Labor Code, but industrial disability leave is provided by the Government Code. Accordingly, the “amount of compensation otherwise recoverable” under section 4553 does not include industrial disability leave.

However, the Board concluded that section 4553 base compensation includes industrial disability leave, mainly relying on Brooks v. Workers’ Comp. Appeals Bd. (2008) 161 Cal.App.4th 1522 .

When the Court of Appeal decided Brooks it took the view that industrial disability leave equated to leave provided by the Labor Code. However in doing so Brooks construed a different statute, Labor Code section 4656, subdivision (c)(1), than does Ayala in this case. In Brooks the issue was whether the year of industrial disability leave payments the worker received counted toward the statute’s two-year limitation or whether the limitation period started only when industrial disability leave stopped and temporary disability payments began.

To the extent that Brooks could be read as support for the proposition that any features of or limitations on temporary disability necessarily must apply to industrial disability leave because of the way industrial disability leave is defined “we respectfully disagree.”  “Compensation” under section 3207 “still requires that it be provided by Division 4 of the Labor Code, just as it always has.”