Virginia Court of Appeals denies workers compensation award during work furlough

In Utility Trailer Manufacturing Company and Liberty Insurance Corporation v. Testerman, No. 1484-10-3 (Va. App. July 12, 2011), the Court considered the issue whether a furlough from work of pre-defined and limited duration, applicable to all manufacturing employees, both those with and without restricted work capacity, justifies an award for lost wages to a worker with restricted capacity, in the absence of evidence demonstrating a causal relationship between that restriction and the wage loss. The Court concluded, with a dissent, that such an award under these circumstances is not authorized by the Act.

Due to a work related injury, the claimant was awarded benefits including permanent partial disability. Subsequently, the claimant resumed his work as an hourly employee on the manufacturing line with the same employer, commensurate with his restricted work capacity.

The employer shut down the manufacturing line for one week and furloughed all employees on that line, including the claimant, during an annual inventory count. The claimant then filed an application for workers compensation benefits for the furlough period. The claimant returned to work following the furlough at his same salary.

The Virginia Workers Compensation Commission awarded the claimant benefits during the furlough, awarding lost wage benefits because claimant's ability to compete economically with co-workers attempting to find work during a lay-off is permanently impaired.

In its analysis of the appeal, the Court of Appeals quoted with approval the statement of the rule by Larson, i.e., "Loss of employment should not be deemed due to disability if a worker without the disability would lose employment or suffer a reduction in earnings under the same economic conditions . . . ." The Court identified five factors to determine whether the same economic conditions applied to all workers:

We find they include: (1) the length of any furlough from work; (2) whether that furlough included all employees, restricted or not, of the same class; (3) the reason for the furlough; (4) whether the term of the furlough was pre-determined by the employer; and (5) whether employees were offered employment at the termination of the furlough. These factors address the fundamental issue in these cases: is any wage loss causally related to the injury?

The appellate court essentially agreed that a furlough of one week is simply of insufficient duration to reasonably conclude that the claimant's ability to obtain other light duty work was the result of his disability. The Court held only that during a furlough a condition precedent for an award to a partially incapacitated employee for lost wages (or diminution in earning power) is a causal relationship between that incapacity and that loss. Claimant did not demonstrate that his lost wages were causally related to his injury.