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 However, on reconsideration, the Workers’ Compensation Appeals Board (the Board) rescinded the decision and reversed, finding that CDCR had engaged in serious and willful misconduct.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 But on reconsideration, the Board again rescinded and reversed the workers’ compensation judge’s decision, this time finding that the base compensation was what Ayala was paid on industrial disability leave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 concluded that “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.

Ayala petitioned the California Supreme Court for review, supported by the Board as amicus curiae. The Supreme Court granted the petition. However it agreed with and affirmed the Court of Appeal in the case of Dept. of Corrections & Rehabilitation v. Workers’ Comp. Appeals Bd -S282013 (February 2024)

The question in this case is whether, for purposes of calculating the 50 percent premium under Labor Code section 4553, “compensation otherwise recoverable” includes industrial disability leave payments, a benefit that the Government Code makes available to certain public employees in lieu of workers’ compensation disability payments.

The Workers’ Compensation Appeals Board answered yes to this question. The Court of Appeal, however, disagreed, explaining that the board’s conclusion is plainly inconsistent with the statutory definition of “ ‘compensation’ ” as limited to “compensation under” the workers’ compensation law. (Lab. Code, § 3207.)

“We agree with the Court of Appeal and affirm its judgment.” The California Supreme Court went on to say “we are mindful of our obligation to give appropriate deference to the Board’s reasoned interpretations of the statute it administers. We have accordingly given careful consideration to the Board’s position that the section 4553 award should be calculated based on the IDL payments Ayala received.”

“But we cannot give effect to that position because it is contrary to the plain language of the statute. (Larkin, supra, 62 Cal.4th at p. 158.) The Board does not convincingly contend otherwise. Neither its decision in this case nor its amicus curiae submission to this court ever explains how the statutory definition of “compensation” as including only “compensation under” division 4 of the Labor Code can be stretched to cover IDL payments provided by the Government Code.”

“The Board’s position instead relies largely on … cases that did not purport to answer the question now before us, and whose holdings create no conflict with the straightforward reading of the statutory text we adopt today.”